Good day, everyone, and welcome to the Nucor Corporation First Quarter of 2020 Earnings Call. [Operator Instructions] Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words, we expect believe anticipate and variations of such words and similar expressions are intended to identify those forward-looking statements which are based on management's current expectations and information that is currently available. Although, Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. More information about the risks and uncertainties related -- relating to these forward-looking statements may be found in the Nucor's latest 10-K and subsequently filed 10-Qs which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information future events or otherwise. For opening remarks and introductions, I would now like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead sir.

Good afternoon and welcome to our first quarter earnings call. I want to begin today by taking a moment to honor the heroes surrounding us during these unprecedented times. Thank you to the doctors, nurses and healthcare workers drawing close when the natural tendency is to pull away. Thank you to the EMTs and first responders like my own daughter, who are serving on the front lines battling to save lives. Thank you to the U.S. postal workers; UPS and FedEx drivers and to the truck drivers delivering our food and medicines. I'd like to also thank the Nucor team members who have continued to work in order to support our country's essential systems and processes. And finally, I want to offer our thoughts and prayers and sympathy for those who have lost loved ones or who currently have someone fighting this terrible disease. Joining me in honoring these heroes at our call today are the members of Nucor's executive team including; Jim Frias. our Chief Financial Officer; Craig Feldman responsible for raw materials. Ladd Hall responsible for Flat-Rolled Products; Ray Napolitan, responsible for Engineered Bar Products, as well as Nucor's Digital initiatives; MaryEmily Slate responsible for Plate, Structural and Tubular products; Dave Sumoski responsible for Merchant Bar products; Chad Utermark responsible for Fabricated Construction Products; and Al Behr our most recently named Executive Vice President. And to our teammates listening in, your health and safety is our most important responsibility. Thank you for those of you who continue to work from home and those of you who are working to safely produce the products our customers need to continue to support essential projects across our nation. We will get through this pandemic by living our culture every day staying focused and taking care of one another. Currently over 40…

Thanks, Leon. I join Leon in offering my thoughts and prayers to everyone impacted by this terrible virus and also my tremendous gratitude to the heroes working on the front lines to stabilize and end the pandemic. The Nucor team has responded to this challenge, the way our company's met every difficult period we've faced over the years by focusing our talents and commitment on building an even stronger Nucor for each other, our customers, our shareholders and the communities in which we work and live. The resiliency and sustainability of Nucor's business model is built on these powerful attributes: our team-oriented culture built on a foundation of trust, a highly variable and low-cost structure, our market leadership positions across our highly diversified product portfolio, our robust cash flow generation through the cycle and a strong balance sheet. Nucor's balance sheet strength is evidenced by the fact that we hold the highest credit ratings of any steel producer headquartered in North America with an A- long-term rating from Standard & Poor's and a Baa1 rating from Moody's. We believe our financial strength is a key strategic advantage. It has been a critical underpinning of Nucor's ability to consistently grow long-term earnings power and reward our shareholders through seven U.S. recessions and nine steel industry cyclical downturns since we began steelmaking in 1969. Nucor's paid and increased its regular base dividend for 47 consecutive years. We expect to continue this practice through this difficult period as well. With regard to our first quarter performance, I echo Leon's comment that we had a good first quarter in terms of operating profitability. Our cash provided by operating activities exceeded $200 million for the first quarter even after we funded $160 million in profit sharing earned by Nucor teammates, as well as working capital…

Good afternoon and welcome to our first -- Thank you, Jim. Before we move to Q&A, let me just comment on the substantial charges we took related to our Duferdofin investment during the quarter. We acquired our 50% interest in Duferdofin-Nucor during the summer of 2008. Soon after the transaction closed we were faced with a dramatic shift in the regional economic outlook and the scope and severity of the global financial crisis became clear. We, our partners, and the Duferdofin teammates quickly turned to the task of positioning the business for sustainable success in a new environment. Over the years Duferdofin has made considerable progress at enhancing its capabilities and improving its efficiencies. But even as great strides were made within the business the regional economic environment has only become more challenging. With the advent of the coronavirus pandemic with particular severity in Northern Italy and some further changes in regional market dynamics, it's become clear to us that the investment was worth substantially less than its carrying value on our balance sheet. Operator we're now ready to take your questions.

Thank you. [Operator Instructions] And our first question today comes from Chris Terry of Deutsche Bank.

Hi guys and I hope you're safe and well. A couple of questions from me. Just wanted to start on the CapEx just high level. So, the reduction to less than $1.5 million this year does that mean 2021 and 2022 et cetera? The total $3.5 billion of growth opportunities that you were seeking is that still the number? So we should look at that as basically a deferral or have you changed the next few years as well? Thank you. That's my first question.

Yes, this is Jim Frias. I'll start with that question and Leon if you want to add something you can. But quite frankly, what we're doing is taking an approach that gives us flexibility. So, depending on what our outlook is as we progress through the year we may end up spending more than $2 billion next year or less than $2 billion next year. We have flexibility to choose how quickly we put things back up to full ramp in terms of those CapEx projects. So, in 2021 it's too early to call. We'll make a decision on that by the end of the year.

Okay. And then just trying to square some of the cash items. I think you commented that you expect to still get over $1 billion in free cash flow. I wonder if you could comment on your cash tax rate which I think is quite a bit below your P&L tax rate and just some of the working capital improvements. I know you talked about 2009-2015, but just wondered if you could give some details behind the free cash flow number. Thanks.

Yes. Just to clarify I think I meant to read cash from operations not free cash flow in that portion of the script and that net working capital would add to cash from operations by roughly $1 billion. But let me walk you through some of the pieces when you come up with computing what our cash from operations will be and then after CapEx what free cash flow would be. So, you have to start with an earnings number. I'm not going to give you a forecast running through the year. We really don't know what earnings should be but certainly we're going to make money this year. Then you would add to that our depreciation and amortization, that's roughly $720 million. We think working capital the point that Leon was making is going to generate more than $1 billion of additional cash from operations this year. And then finally we are going to get a tax benefit that depends partly on how much money we make but the full potential is $350 million this year because of the accelerated depreciation, we're getting on projects that will start up this year. This has nothing to do with the deferred projects excuse me. And then over the next three to four years that tax benefit is likely to be $700 million to $750 million. So, does that cover it for you Chris?

Yes, that's helpful. Thank you. And then the last one for me a number of companies have commented that non-res construction market is the one area of relative strength within the context of the demand for 2Q and heading forward. I just wonder, if you could comment on whether you believe that it's because there's a backlog, or because that industry will stay robust. Just hard to sort of differentiate between the three to four-month backlog that other companies have talked about? Thanks.

Chris, as we looked at construction, it's sort of a dichotomy in today's pandemic. And so what I would tell you is, I'm incredibly proud of our Vulcraft/Verco and Building systems teams all of which have set record profitability in the first quarter. But as we moved into Q2, their backlogs continue to grow and so there's a lot of resiliency in this market. And so, we're optimistic, but also looking to be very deliberate in how we spend, and as Jim mentioned, our flexibility towards capital allocation as we move forward. But that is the area that has shown great resiliency as we move through this current climate.

Great. That’s it for me. Thank you very much.

Thanks, Chris.

Our next question comes from David Gagliano of BMO Capital Markets.

Great. Thanks for taking my questions. So I just want to clarify something here. The press release reads to me, I think, it says that Nucor has decided to freeze spending on certain capital projects currently in process and then delay capital projects that have not begun. But the remarks it just sounded to me like, they indicated that the projects for 2020 start-up are actually basically still on pace to happen. And it sounds like 2021 and beyond pipeline really haven't been any decisions made as of yet. So my questions are, specifically, what projects are being deferred and frozen and for how long? And then, secondly, where does the $500 million reduction in 2020 CapEx come from specifically?

Okay, David. Thank you. I'll begin and Jim maybe some commentary at the end. So as we look at the projects that we've talked about for probably the last 18 months around that $3.5 billion of investment all of the long products, the micro mills in both Sedalia, which is running, Frostproof are going to move forward. The bar mill expansion, as Jim mentioned in his comments, in Kankakee is moving forward and now beginning to commission. Our Marion upgrades are up and running. So really the pause that we're taking on capital expenditures come both in Brandenburg and the plate mill as well as the Gallatin expansion. And both of those are a pause in timing, not strategy. We are very committed to producing plate and believe we're going to have a differentiated product offering in both Brandenburg and Gallatin and offering things that no other EAF producer can currently offer. So as we move forward, as Jim mentioned, it's too early to view the -- to any one landscape, but those projects will come back. It's just a matter of timing and when we execute them.

Yes. David, if I could add to that. I would say that the other thing is there are a number of projects that are small that we never broadcast what they specifically are, that we are -- we're spending on where it makes sense. Some we're pouring out for long for its completion that it didn't make sense to stop them. Others were early days, where we could stop them without causing a disruptive effect on equipment suppliers, or on our divisions that were executing those projects. The other thing I'd say is that, with these bigger projects we are continuing to spend on things that we think are critical path items such as engineering and permitting, so that if there is some delay we can minimize that delay if we gain confidence and decide that we want to push and accelerate capital spending again, try and get these projects online sooner rather than later.

Okay. That sounds good.

The other thing I would say in the long haul is maximizing flexibility.

Okay. Understood. I appreciate. That's helpful. So just a couple of quick follow-ups. On plate mill and the Gallatin expansion, how much of the $500 million reduction is attributable to pausing those two projects specifically? And then, the second question is, the timeline in the previous presentation showed the Gallatin expansion mid-2021. And then the plate mill, obviously, the biggest project I think in the history of Nucor late 2022 start-up. What should we be thinking about sort of the time line now for both those projects? Thanks.

David, I'll begin with the latter question first and maybe Jim can comment to the specific or not. But as we think about Brandenburg as well as Gallatin, one of the things right now is, really too early to predict when we'd start back. What I would tell you in Brandenburg's case, the engineering is going to continue moving forward. And so, even if we pause for three or four months, that really won't have a material impact on the start-up because we'll be able to make that up as we move through construction, because quite frankly, our engineering will be that much further along. So, it really is a dependent factor on when do we unpause and when do we continue to move forward. And so, a little early to tell but we'll have more color on that in clarity as we move into the quarter.

Thanks. The other thing I'd say is, we don't really want to break down the detail of where the savings are coming from. But certainly Gallatin and as well as the plate mill in Brandenburg are big contributors to that reduction in CapEx.

Okay. Great. And then just last piece, the Gallatin start-up time line, it was mid-2021. Now, what do you think it's going to be?

Look, we haven't revised that yet David again quite frankly because we just don't know how long that pause may be. It could be another month and we're executing and we didn't delay it all. But we'll have to just wait and see as we assess the length and the depth of this pandemic and oil crisis.

Okay. That’s helpful. Thank you, very much.

Thank you.

Our next question comes from Seth Rosenfeld of Exane BNP.

Good afternoon. Thank you for taking the questions. If I may with regards to the steel products business, I wonder if you can give a little bit more color with regards to the fabrication backlog and how you see those develop over recent weeks. And when you think about how your steel products business intersect with the mills, should we think about that as being an increasing bit of a buffer as perhaps third-party sales in the mill divisions fall in Q2? Do you expect to increase your internal sales going into downstream fabrication steel products? And then lastly maybe some color with regards to margins and how you expect it to progress going into Q2 assuming a reduction in scrap input costs for steel products? Thank you.

Okay. Thank you, Seth. If we don't get all three parts of that question, let me know. Chad Utermark, why don't you start out on the first part of the question regarding backlogs in our products businesses?

Yes. Thanks, Leon. In both our joist and deck and Nucor buildings group as well as rebar fabrication, our backlogs are strong. They're actually up year-over-year. This is led by a large commercial and warehouse projects data centers. And quite frankly, COVID-19 has had a very small impact. We have had some regional delays and stop work orders, but we would expect as states come back online for those projects to start again. This continued solid and steady non-res construction market I think leads us well into Q2 and Q3. Now historically, when there's economic downturns, our businesses will lag six to nine months and we'll see a little bit of a pause. With this self-induced economic downturn, I think time will tell whether that impact will be the same. But we are -- we have a strong backlog right now. We're pretty excited about Q2 and Q3.

Thank you, Chad. Jim, did you make -- want to comment?

Yes. The internal tons consumed we think of that as an important strategic advantage our position there because roughly 20% of our steel typically goes into those downstream businesses. In 2019, that was roughly four million tons if we just count our holding and subsidiaries. If we include fuel technologies which we own half of it would have been 4.5 million tons in 2019. In the first quarter, just counting the Nucor wholly owned subs, it was 1.15 million tons. So again, a significant amount of the steel that we sell gets to go to businesses that we own and that's a key component. It will not change dramatically in the second quarter. We don't buy very much steel from outside sources. We pretty much self-supply wherever we can already. So, there's not going to be a shift in that mix as we go forward. And I can't remember the third part of your question.

Yes. Was your last part of the question Seth around scrap pricing is that -- I mean is...

I misspoke. Sorry, it was around margin assumptions within steel products into Q2. Not whether are you to scrap, but with regards to the steel input cost if you have an assumption with regards to steel margins -- sorry steel product margins in the Q2 please? Thank you.

This is Chad, Seth. Yes, our margins are strong and we don't anticipate those falling much. Obviously, you know what's going on in the scrap market and steel pricing. And again demand drives our business and right now demand is healthy.

Great. Thank you, very much.

Thank you.

Our next question comes from Timna Tanners of Bank of America.

Good afternoon and thanks for the color. Hope everyone is healthy. Wanted to just see if I could get a little more color on how you're talking about now that you're into April so one-third of the way through Q2. It sounds like most of the impact will be more on the flat-rolled side then. And there's been -- like you mentioned in the release kind of cryptically that there's been some closures some supply off so just wanted to know if you could provide a little bit more of a snapshot of how to think about the product so far into the quarter. Is it mostly flat-rolled hit then with some plate and SBQ and then long products are holding up volume wise, or can you provide a little more color?

Sure. Thanks, Timna. And as we look at it yes, the flat side of our business particularly the hot band has probably been impacted along with the engineered bar for the oil and gas segment. So those are the two areas of our business portfolio that have probably been the most impacted. As we think about the longs and construction segments those continue to run in fairly high utilization rate 75-plus in some areas and even stronger in some others. And so but even as we think about the sheet side our value-added product in the cold-rolled and galv are at 80% or better in most of our plants and some running near capacity. So again, it's a little bit of a mixed bag, but overall the automotive and engineered bar would be the most directly impacted for us.

Okay. Thanks. Then if I could, I want to take it a little higher level and just think about what kind of containment you could see in terms of overhead. So it sounds like you're not as panicked about this downturn as you -- as comparing it to the great finance -- the global financial crisis as you mentioned. But in 2008, 2009 you cut SG&A by $300 million and I'm just wondering if times are particularly challenging, could we expect something comparable in terms of SG&A cuts, or can you provide a little bit more framework around how much you think overhead could be trimmed? Thanks.

Yes. I'll begin and maybe ask Jim to think through some of the tail-end of your question regarding the SG&A. But Timna, I want to make sure we're very clear. There's no Pollyanna-esque about our approach and where we see the markets today. The pandemic facing our lives is bigger than just our industry and steel. It's affecting the global markets worldwide. It's affecting families and businesses, small and big. And so part of the reason you've heard us take a very deliberate moves and pausing Brandenburg, which again strategically makes all the sense in the world and we will move forward on is to really understand just how significant and how long this pandemic and oil crisis may stay with us. And so when Jim alluded to a comprehensive review of every project, we've looked across the spectrum of the enterprise on every capital dollar being spent to maximize our financial levers and the liquidity position as we move forward. Jim, any specifics on the...

Yes. I think when you think about SG&A a big component of that is profit sharing and other incentive comp. And when we make less money we have less profit sharing and less incentive comp. Now as you may recall we went into 2009 with a significant overhang a very expensive figure. We're not carrying that load this time. So we're entering this down cycle with a better position in terms of the assets we're carrying in our balance sheet. And so profit sharing probably, won't go down by quite the same amount. Remember profit sharing is the bonus that goes to our employee global level of Vice President. The 10% of pre-tax profit is going to pool and get split amongst all those employees every year. But all of our incentive comp plans will be flexing down and that's where most of those savings will come. And the other thing is as we've sheltered in place across our company even though we're still operating. We are sheltering in place. We have most of our teammates work from home. We're not on the road of making the calls on customers or visiting vendors or doing a lot of the activities that we normally do. So a lot of our SG&A spending will come down too. I don't have a hard number to give you but we are being very thoughtful about saying, okay, let's reduce spending everywhere. Our maintenance teams are doing everything they can to reduce our reliance on contractors as an example of one of the places we're trying to reduce spending. And that's not SG&A that's an operating expense. But we're looking to reduce spending wherever it makes sense in a way that doesn't hurt the business. But at the core of Nucor's philosophy and culture is to value the team. We're not laying off the Nucor teammates at our stables, our fab businesses. That's not part of how we're saving costs.

Okay. Great. Thanks, guys.

Our next question comes from Andreas Bokkenheuser of UBS.

Thank you very much. Just a quick question from me. Just to provide a little bit of a framework around the current oil price. How do you guys think about it just given where oil price levels are and in terms of any benefits it may provide you in terms of lower costs going into the second quarter, but potentially also if you expect any demand destruction for it? And then maybe if you could add a comment as to what extent you're hedging any oil if you are in fact doing that and it's not -- any clarity on that as well would be great. But just kind of like your overall thinking about well when you think of oil at $20 like. How do you think about the impact on your business? Thank you very much.

Yeah. Andrew, I'd love to tell you I have a really great picture of clarity. And as you watch every analyst today and yesterday and probably tomorrow about what the oil prices will be in a month. It's really anybody's guess. What I would tell you of the certainties the things that, I do know, Nucor has broad product offering enables Nucor to thrive in the businesses that we're very strong in the construction side of our businesses. We're not overly weighted to oil and gas. About 10% of our overall product is into the direct oil and gas business. And so while it's certainly been a dramatic hit in the length of time we're going to see that impact and how long it takes to fully recover, I don't want to be -- even begin to speculate. But what I do know is our teams are incredibly ingenious in how they continue to operate their mills. And serve the customers in the sectors that are still doing well in the HVAC ag heavy equipment other sectors that we continue to supply direct business as well as our service centers in.

Yeah. Let me add to that Leon with just an idea from our cost perspective. Oil itself is not a primary cost driver for Nucor. Our biggest cost is raw materials. Our next biggest cost is energy. But that's mostly electricity. Obviously, we have a lot of mobile equipment. And we have an overworked fleet at some of our businesses that delivers product to our customers. But oil gasoline diesel fuel costs, they're not insignificant if you just think about that number. But as a percentage of overall costs they're fairly insignificant. And we don't hedge those excuse me I meant to mention that as well.

Okay. That's very clear. Thank you very much.

Thank you.

And our final question today comes from Phil Gibbs of KeyBanc Capital Markets.

Hi. Good afternoon.

Good afternoon, Phil.

Just a question on the raw materials side, one what's the May outlook for scrap as of right now best you can tell? And then secondarily when should we expect your DRI operations to begin production? I know Trinidad was shut down and there was press about Louisiana being shut down as well.

Certainly, I'll begin and then maybe ask Craig Feldman to jump in and maybe add some thoughts. As we think about the scrap from a -- look there's some tightening. Obviously, we're watching what's happening internationally. But also domestically, we think May will be up. As we think about obsoletes that will really be a demand driver but also on prime the availability of prime with the auto plant shutdown and access to that is an element where we have some great flexibility as our DRI plant in Louisiana comes back online. And in fact it's producing prime as of today and I'll let Craig add some more detail to that. But as we get into this market and really the tightness around prime and the value-added products that we serve our customer base with the DRI is going to be a great benefit and a benefactor as we move forward. Craig, do you want to add anything?

Sure. On the scrap market itself, yeah, there's a lot of availability internationally and we participate in a fair amount of that both the scrap and substitutes including pig iron. And as Leon alluded to you could certainly see some constraints on the prime scrap domestically. But I think that finds its own level fairly quickly. You could see a lag in supply of prime scrap obviously with the automotive producers shut down. But as they come back online the availability will increase. And I think that'll find a pretty good balance relatively quickly. And I guess, the other point, I would make is we really do have a unique flexibility within our sourcing strategy our raw material strategy. We can flex between pig iron sourced on the seaborne market our own two DRI plants our DJJ scrap yards. So we really do have the ultimate ability to shift and flex in that regard. And then, the other part of your question, I guess is related to the DRI plants. The -- turn -- as you alluded to turns out. It's still down subject to a government order. Although, we are waiting a decision we do expect to resume operations fairly quickly there. And I know the team there is eager and ready willing and able to jump in and get back to work as soon as that government order is lifted. Finally, as it relates to Louisiana, we opted early in the month to idle. And as Leon said, we're producing prime today. The team has done a wonderful job of bringing that plant back up safely and back in operation today. And I would also just point out that the reliability that they've improved on the last several months prior to this pause I know the Louisiana team is anxious to get back to producing at a high level as they were prior to the brief pause. And again the flexibility that that DRI gives us in the marketplace as something that really positions us very uniquely.

Thanks, Craig.

And Leon, the comments that you made on infrastructure, specifically in your prepared remarks, is that something that you're advocating as a good idea just because obviously it would benefit the steel industry, or is that something you feel like is gaining support for some eventual outcome in the next 12 months? Because obviously this can has been kicked for a couple of decades.

Yeah. Look I think it's both. I like my predecessors with John Ferriola and Dan are going to be a tireless advocate for fair trade in the United States, but it's bigger than that. One of the things that the global overdependence of the supply chain into China has done to the American people is it's opened our eyes not just in manufacturing and steel but in pharma our overdependence in medical devices and PPE and equipment. It is time for our nation to be a nation that builds and makes things in the United States again. And quite frankly with more than 25 million Americans out of work today, a strong $1 trillion, $1.5 trillion, $2 trillion infrastructure bill will put hundreds of thousands if not millions of American workers back to work. It is something we need in this country desperately Phil.

I appreciate that. And then lastly, I think you also mentioned in your prepared remarks that you're taking some time at Hickman to progress on advanced high-strength steels with your customers. Is this downturn specifically allowing you to accelerate those efforts? And trying to just gauge how that's being received and when we might be able to see some commercial success. Thanks.

Yeah. Look, short answer is yes. It is allowing us to do some of those things. The team at our Hickman facility has done an amazing job of bringing that cold mill complex up and online. We're continuing to progress the galvanizing line that again will be the first EAF producer to produce a generation three steel for the auto industry. The fact that we serve all the major OEMs as a Tier 1 direct supplier gives us great access so those trials are ongoing. I couldn't be more excited and optimistic about the work that our team has done in positioning Nucor for the future supplier of choice in that sector.

Thanks very much.

Thank you, Phil.

That concludes the question-and-answer session today. At this time, I'd like to turn the call back over to Mr. Leon Topalian for any additional or closing remarks.

I'd be remiss in not taking a moment to thank Ladd Hall for his nearly 40 years of service to Nucor. Ladd on behalf of the 27,000 men women of Nucor, we would like to thank you Sally and your entire family for your dedication, service and sacrifice to our company. And while our nation faces this crisis and times of uncertainty, there are a number of things that our investors, customers and team can be certain about: Nucor has the greatest manufacturing team assembled anywhere in the world, and we have the financial strength and discipline not just to survive this crisis but thrive coming out of it, allowing Nucor to steward our valuable shareholder capital and to serve our customers as the North American supplier of choice. Thank you for your interest in our company.

And this does conclude today's call. We appreciate everyone's participation today, and you may now disconnect.