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Article by DailyStocks_admin    (08-25-08 07:07 AM)

The Daily Magic Formula Stock for 08/23/2008 is Nucor Corp. According to the Magic Formula Investing Web Site, the ebit yield is 15% and the EBIT ROIC is 25-50 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

Overview

Nucor Corporation was incorporated in Delaware in 1958. The business of Nucor Corporation and its subsidiaries is the manufacture and sale of steel and steel products, which accounted for the majority of the sales and earnings in 2007, 2006 and 2005. The earnings in 2005 include other income of $9.2 million in settlement of claims against third parties related to environmental matters.

Nucor is North America’s largest recycler, using scrap steel as the primary material in producing our products. In 2007, we recycled approximately 21 million tons of scrap steel.

Segments

Nucor reports its results in the following segments: steel mills and steel products. Net sales to external customers, intercompany sales, depreciation expense, earnings before income taxes, assets and capital expenditures by segment for each of the three years in the period ended December 31, 2007 as well as geographic information for the two years ended December 31, 2007, are set forth in Note 21 of Notes to Consolidated Financial Statements of the 2007 Annual Report, which note is hereby incorporated by reference.

Principal Products Produced

Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders, fabricated concrete reinforcing steel, grating and expanded metal, cold drawn wire and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck, light gauge steel framing and wire mesh are manufactured from cold-rolled and cold drawn steel.

Markets and Marketing

In the steel mills segment, hot-rolled and cold-rolled sheet steel are produced to customer orders. In addition, other hot-rolled and cold-rolled steel are manufactured in standard sizes and inventories are maintained. In 2007, approximately 92% of the steel mills segment production was sold to non-affiliated customers; the remainder was used internally by the steel products segment. Hot-rolled steel and cold-rolled steel are sold primarily to steel service centers, fabricators and manufacturers throughout the United States. In 2007, approximately 50% of our sheet steel sales were made to contract customers with the balance of sales made in the spot market at prevailing prices at the time of sale. These contracts permit price adjustments to reflect changes in prevailing raw material costs and typically have terms ranging from six to twelve months.

In the steel products segment, steel joists and joist girders, and steel deck are sold to general contractors and fabricators throughout the United States. Substantially all work is to order and no unsold inventories of finished products are maintained. The majority of sales contracts are firm fixed-price contracts and are normally competitively bid against other suppliers. Longer term contracts may permit price adjustments to reflect changes in prevailing raw materials costs. Reinforcing products are sold on a construction contract bid basis. Product applications include highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums and high-rise buildings. Cold finished steel, steel fasteners, steel grating, wire and wire mesh are manufactured in standard sizes and inventories are maintained. Cold finished steel and steel fasteners are sold primarily to distributors and manufacturers throughout the United States and Canada.

Products from both segments are marketed mainly through in-house sales forces. The principal competitive factors are price and service. The markets that Nucor serves are tied to capital and durable goods spending and are affected by changes in economic conditions. Considerable competition exists from numerous domestic manufacturers and foreign imports. Unfairly traded steel imports have devastated the U.S. steel industry and its workers. We have continued the aggressive trade case work in which we have engaged over the years with our participation in the current statutory five-year sunset reviews of existing duties. In late 2006, the United States International Trade Commission chose to remove the duties that were in place on many of the countries involved in dumping these products into the United States. As a result, more foreign steel may continue to enter our borders with negative effects on our business. We will continue to fight illegally dumped foreign steel in support of free and fair trade through the legal process. In 2007, Nucor aggressively supported the adoption of a Chinese Currency bill that would identify the mercantilist practices of currency manipulation that result in distorted trade, an insurmountable trade deficit and the loss of manufacturing jobs in the United States. Several bills were generated in the House and Senate, but none were put into law. Our effort was broad, reaching across multiple industries, and ultimately drew attention to the domestic manufacturing job loss issue. In 2008, we hope that newly proposed legislation will unite Congress in an effort to maintain and enforce laws ensuring free and fair trade. Nucor actively supports several organizations that promote free and fair trade and that oppose currency manipulation.

Backlog

In the steel mills segment, Nucor's backlog of orders was approximately $2.74 billion and $2.52 billion at December 31, 2007 and 2006, respectively. Nucor's backlog of orders in the steel products segment was approximately $1.51 billion and $572.4 million at December 31, 2007 and 2006, respectively. This increase in backlog of orders is due to the numerous acquisitions in the steel products segment in 2007. The majority of these orders will be filled within one year.

Raw Materials

The primary raw material for the steel mills segment is ferrous scrap, which is acquired from numerous sources throughout the country. With the escalation of scrap steel prices in 2003 and 2004, years in which prices increased 25% and 74%, respectively, Nucor successfully implemented a raw material sales price surcharge in 2004. This surcharge has helped offset the impact of significantly more volatile scrap prices and allowed us to purchase the scrap needed to fill our customers’ orders. The average scrap and scrap substitute cost per ton remained at historically high levels in 2006 and 2007, increasing slightly from $244 per ton in 2005 to $246 per ton in 2006 and increasing 13% to $278 in 2007. The primary raw material for the steel products segment is steel, which is almost entirely purchased from the steel mills segment.

The steel mills are also large consumers of electricity and natural gas. Nucor uses cash flow hedges and natural gas purchase contracts to partially manage its exposure to price risk of natural gas that is used during the manufacturing process. Historically, U.S.-based manufacturers have enjoyed competitive energy costs that have allowed them to compete on equal footing in what is becoming more and more a global market. In recent decades, our government has allowed a growing over-reliance on natural gas for the generation of electricity, while delaying or halting the construction of new coal-fired and nuclear power plants. At the same time, our government has prevented access to some of the most promising areas for natural gas exploration. As a result, natural gas prices have increased from less than $2.00 per mmbtu in the 1990’s (NYMEX Henry-Hub pricing) to a peak of more than $15.00 per mmbtu in December 2005 and to a calendar 2008 average price currently exceeding $8.00 per mmbtu. Since an increasing share of electricity is now generated using natural gas, higher natural gas prices are also increasing costs for consumers of electricity. Nucor actively supports several organizations that are promoting a more rational energy policy. We believe this is critical for not only our future business success, but also for the future of the U.S. economy. Supplies of raw materials and energy have been, and are expected to be, adequate to operate our facilities.

Strategy

Nucor has historically focused on greenfield growth and on optimizing existing operations in order to keep them state-of-the-art and globally competitive. Capital expenditures are currently projected to be approximately $800 million in 2008, an increase of more than 50% from 2007. While more than $300 million of the 2008 capital spending is allocated to our greenfield projects, the remainder is an estimate of what we will spend to maintain the productivity and efficiency of our existing facilities. In recent years, our focus has expanded to include growing profitably through acquisitions and through joint ventures that leverage new technologies.

Recent Acquisitions, Joint Ventures and Greenfield Projects

Nucor’s acquisitions over the past few years have strengthened our position as North America’s most diversified producer of steel and steel products. This diversity has been a significant factor in Nucor’s profitability.

The annual capacity of Nucor’s downstream value-added products has more than doubled since late 2006 to just under four million tons. We have done this with our very successful acquisitions of Verco Manufacturing Company in steel decking; Harris Steel Group Inc. in rebar fabrication, cold finished bars and metal grating; LMP Steel & Wire Company in cold finished bars; Magnatrax Corporation in metal buildings; and Nelson Steel, Inc. in wire mesh. We are looking forward to growing the already strong returns generated by these businesses.

We continue to increase our presence in the steel mills segment through greenfield projects such as our special bar quality (“SBQ”) mill in Memphis, Tennessee, which will have an estimated annual capacity of 850,000 tons. Complementing our mills in South Carolina and Nebraska, the Memphis mill positions Nucor to provide the most diverse, highest quality and lowest cost SBQ offering in North America. We are encouraged by the strong level of marketplace interest in what Memphis will be able to provide our customers. Production start-up is on schedule for the second quarter of this year.

Another greenfield project is the Castrip ® facility under construction in Blytheville, Arkansas. Nucor began operations of its 100% owned Castrip facility in Crawfordsville, Indiana, in 2002. This facility uses the breakthrough technology of strip casting, to which Nucor holds exclusive rights in the United States and Brazil. Strip casting involves the direct casting of molten steel into final shape and thickness without further hot or cold rolling, allowing lower investment and operating costs, reduced energy consumption and smaller scale plants than can be economically built with current technology. This process also reduces the overall environmental impact of producing steel by generating significantly lower emissions. In 2007, the Castrip facility in Indiana continued setting monthly production and shipping records. In 2005, we selected Blytheville, Arkansas, as the location for our second Castrip production facility. The Arkansas Castrip facility is expected to begin operating in the second half of 2008. We continue to explore potential new joint ventures utilizing the Castrip technology.

Raw Materials Projects

Recently, we expanded our vertical integration strategy to include upstream control of raw materials. Nucor’s raw materials strategy includes the goal of controlling approximately 6,000,000 to 7,000,000 tons per year of high quality scrap substitutes for consumption by the steel mills.

Implementation of Nucor’s raw materials strategy is off to an excellent start with 2007’s very successful start-up of Nu-Iron Unlimited, our direct reduced iron (“DRI”) plant in Trinidad. In its start-up year, Nu-Iron established itself as one of the world’s most productive DRI facilities, producing over 1.4 million metric tons of DRI. We expect to produce 1.8 million metric tons in 2008, and the Nu-Iron team is working on plans to expand this capacity. The Trinidad site benefits from a low cost supply of natural gas under a long-term contract and from favorable logistics for receipt of Brazilian iron ore and shipment of DRI to the United States.

In 2002, Nucor entered a joint venture with The Rio Tinto Group, Mitsubishi Corporation and Chinese steelmaker, Shougang Corporation, to construct a commercial HIsmelt ® plant in Kwinana, Western Australia. The HIsmelt process converts iron ore fines and coal fines directly to liquid metal, eliminating the need for a blast furnace, sinter/pellet plants and coke ovens. Additionally, the HIsmelt technology offers an alternative supply of high-quality iron units as a scrap substitute. Nucor has a 25% interest in the joint venture that owns the HIsmelt commercial plant. Construction was completed and the start-up of operations began in 2005. This plant has an initial annual capacity of 800,000 metric tons, which is expandable to over 1,500,000 metric tons.

In February 2008, Nucor announced the acquisition of SHV North America Corporation, which owns 100% of The David J. Joseph Company (“DJJ”) and certain affiliates, for a cash purchase price of approximately $1.44 billion. Since scrap is our largest single cost, this strategic investment provides an ideal growth platform for Nucor to expand its direct ownership in the steel scrap supply chain and further its raw materials strategy. DJJ operates over 30 scrap processing facilities with an annual capacity to process 3.5 million tons of ferrous scrap. Additionally, DJJ brokers over 20 million tons of ferrous scrap, internationally sources scrap, pig iron, and scrap substitutes, and brokers ferro-alloys and over one half billion pounds of non-ferrous metals. The DJJ Mill and Industrial Services business provides logistics and metallurgical blending operations and offers on-site handling and trading of industrial scrap. The DJJ Rail Services business oversees the largest private fleet of rail cars dedicated to scrap movement and offers complete railcar fleet management and leases for third parties. All of these businesses have strategic value to Nucor as the most diversified North American steel producer. We expect this acquisition to be completed in the first quarter of 2008.

Employees

Nucor has a simple, streamlined organizational structure to allow our employees to make quick decisions and to be innovative. Our organization is highly decentralized, with most day-to-day operating decisions made by our division general managers and their staff. Only 80 employees are located in our executive offices. The majority of Nucor's 18,000 employees are engaged in its steel mills and steel products businesses and are not represented by labor unions.

Additional Information Incorporated by Reference

Additional information on Nucor's business is incorporated by reference to Nucor's 2007 Annual Report, pages 10 through 21.

CEO BACKGROUND

Peter C. Browning (66)

Lead Director of Nucor (effective May 2006); Former Non-Executive Chairman of Nucor (from 2000 to 2006); Former Dean, McColl Graduate School of Business at Queens University of Charlotte (from 2002 to 2005); Former President and Chief Executive Officer (from 1998 to 2000), President and Chief Operating Officer (from 1996 to 1998) and Executive Vice President (from 1993 to 1996), Sonoco Products Company, a manufacturer of industrial and consumer packaging products; Former Chairman, President and Chief Executive Officer (from 1990 to 1993), National Gypsum Company, a manufacturer and supplier of building and construction products; Director, Wachovia Corporation, Lowe’s Companies, Inc., The Phoenix Companies, Inc., Acuity Brands, Inc. and EnPro Industries, Inc.

Clayton C. Daley, Jr. (56)
Vice Chair and Chief Financial Officer, The Procter & Gamble Company, a consumer products company (from 1998 to present); previously Senior Vice President (from 1998 to 1999) and Vice President and Treasurer (from 1994 to 1998), The Procter & Gamble Company

Daniel R. DiMicco (57)
Chairman (effective May 2006); Former Vice Chairman (from 2001 to 2006); President and Chief Executive Officer (effective September 2000); previously Executive Vice President (from 1999 to 2000) and Vice President (from 1992 to 1999), Nucor Corporation; Director, Duke Energy Corporation

Harvey B. Gantt (65)
Principal Partner, Gantt Huberman Architects, PLLC

Victoria F. Haynes, Ph.D. (60)
President and Chief Executive Officer, Research Triangle Institute, an independent, non-profit corporation that performs scientific research and develops technology (effective 1999); Former Vice President and Chief Technical Officer, Goodrich Corporation, a specialty chemicals and aerospace company (from 1992 to 1999); Director, Archer Daniels Midland Company and PPG Industries, Inc.

James D. Hlavacek, Ph.D. (64)
Chairman and Chief Executive Officer, The Corporate Development Institute, Inc.; Managing Director, Market Driven Management, a management development firm

Bernard L. Kasriel (61)
Partner, LBO France, a private equity fund (effective September 2006); Former Vice Chairman of Lafarge, a leading global building materials provider of cement, concrete, roofing and gypsum products based in Paris, France (2006); Former Chief Executive Officer, Lafarge (from 2003 to 2006), Vice Chairman and Chief Operating Officer (from 1995 to 2003), Managing Director (from 1989 to 1995); Director, Lafarge, L’Oreal and Arkema

John H. Walker (50)
Chief Executive Officer, Global Brass and Copper, Inc., a manufacturer and distributor of copper and copper-alloy sheet, strip, plate, foil, rod and fabricated components (effective 2007); Former Chief Executive Officer and President, The Boler Company, the parent company of Hendrickson International, suspension manufacturer for heavy duty trucks and trailers (from 2003 to 2006); Former Chief Executive Officer (from 2001 to 2003) and President and Chief Operating Officer (from 2000 to 2001), Weirton Steel Corporation, a producer of flat rolled carbon steel; Former President of flat rolled products, Kaiser Aluminum Corporation, a producer of fabricated aluminum products (from 1997 to 2000); Director, UAL Corporation and Delphi Corporation

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. The steel mills segment produces carbon and alloy steel in bars, beams, sheet and plate. The steel products segment produces steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. The raw materials segment produces direct reduced iron used by the steel mills; brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.

In February 2008, Nucor completed its acquisition of the stock of SHV North America Corporation, which owns 100% of The David J. Joseph Company and related affiliates, for a purchase price of approximately $1.44 billion. DJJ now operates as a wholly owned subsidiary of Nucor Corporation and is headquartered in Cincinnati, Ohio. The principal activities of DJJ, which has been the broker of ferrous scrap to Nucor since 1969, include the operation of scrap recycling facilities (processing); brokerage services for scrap, ferro-alloys, pig iron and scrap substitutes; mill and industrial services; and rail and logistics services. DJJ has been included in Nucor’s raw materials segment.

Since scrap is Nucor’s largest single cost, the acquisition of DJJ provides an ideal growth platform for Nucor to expand our direct ownership in the steel scrap supply chain and further our raw materials strategy. In the second quarter of 2008, Nucor acquired substantially all the assets of Metal Recycling Services Inc. (“MRS”) for approximately $57.0 million. Based in Monroe, North Carolina, MRS, which is managed by DJJ, operates a full-service processing facility and two feeder yards. In April 2008, DJJ acquired substantially all the assets of Galamba Metals Group, which will operate under the Advantage Metals Recycling, LLC (“AMR”) name, for approximately $112.6 million. AMR operates 16 full-service scrap processing facilities in Kansas, Missouri and Arkansas. The acquisition of these scrap processing assets provide a partial hedge to our steel mills against scrap market volatility.

Steel production was 11,874,000 tons in the first half of 2008, compared with 11,103,000 tons produced in the first half of 2007, an increase of 7%. Total steel shipments increased 9% to 12,068,000 tons in the first half of 2008, compared with 11,067,000 tons in last year’s first half. Steel sales to outside customers increased 5% to 10,597,000 tons in the first half of 2008, compared with 10,119,000 tons in last year’s first half. In March 2007 Nucor acquired a large customer, Harris Steel Group Inc. (“Harris”), causing a shift from outside sales tons to inside sales tons. If Nucor continues to acquire downstream businesses, the percentage of our steel production sold to inside customers may continue to increase.

In the steel products segment, steel joist production during the first half of 2008 was 272,000 tons, compared with 265,000 tons in the first half of 2007, an increase of 3%. Steel deck sales were 255,000 tons in the first half of 2008, compared with 232,000 tons in last year's first half, an increase of 10%. Cold finished steel sales increased 35% to 279,000 tons in the first half of 2008, compared with 206,000 tons in the first half of 2007. Sales of fabricated concrete reinforcing steel increased from 204,000 in the first half of 2007 to 411,000 tons in the first half of 2008.

The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 94%, 75% and 87%, respectively, in the first half of 2008, compared with 88%, 77% and 76%, respectively, in the first half of 2007.

Results of Operations


Net sales for the first half of 2008 increased 52% from last year’s first half due to a 21% increase in average sales price per ton from $704 in the first half of 2007 to $850 in the first half of 2008 and a 26% increase in total tons shipped to outside customers.

The 31% increase in sales for the first six months of 2008 in the steel mills segment was primarily attributable to the $164 per ton (25%) increase in average realized prices from the same period last year. In addition, steel sales to outside customers increased 5% from the first half of 2007 to the first half of 2008.

The 63% increase in the steel products segment’s sales for the first half of the year resulted primarily from an increase of approximately 45% in shipments. The higher volume of shipments is mainly attributable to the acquisition of Harris in March 2007 and Magnatrax Corporation in August 2007. Subsequent to its acquisition by Nucor, Harris has continued to grow its rebar fabrication business by acquiring other rebar fabrication companies, which also contributed to the rise in shipments. The increased sales for this segment were also due to a 13% increase in average sales price per ton.

In the raw materials segment, approximately 76% of outside sales in the first half of 2008 were from the brokerage operations of DJJ and approximately 22% of the outside sales were from the scrap processing facilities. Prior to the acquisition of DJJ, there were no outside sales of raw materials.

The “All other” category includes Novosteel S. A., a steel trading business of which Nucor, through Harris, owns 75%. The 159% increase in sales for the first six months of 2008 over 2007 is due to Nucor owning the interest in Novosteel for six months in 2008 compared to approximately three months in 2007, combined with an increased sales price per ton.

Net sales for the second quarter of 2008 increased 70% from the second quarter of 2007. Average sales price per ton increased 24% from $742 in the second quarter of 2007 to $917 in the second quarter of 2008, while total tons shipped to outside customers increased 38% over the same period last year. Net sales increased 43% from the first quarter of this year due to a 19% increase in average sales price per ton over the first quarter of 2008 and a 20% increase in total tons shipped to outside customers.

Net sales for the steel mills segment increased 47% over the second quarter of 2007 due to the $225 (33%) increase in the average sales price per ton. Steel sales to outside customers also increased 10% from 4,890,000 tons in the second quarter of 2007 to 5,394,000 tons in the second quarter of 2008.

The 49% increase in the steel products segment’s sales for the second quarter was due to a 30% increase in shipments, primarily attributable to acquisitions, as well as a 15% increase in the average sales price per ton.

In the second quarter of 2008, approximately 78% of outside sales in the raw materials segment were from the brokerage operations of DJJ and approximately 21% of the outside sales were from the scrap processing facilities.

Gross Margins For the first half of 2008, Nucor recorded gross margins of $2.11 billion (18%), compared to $1.54 billion (19%) in the first half of 2007. The year-over-year dollar increase was the result of increased average sales price per ton for most products, the 5% increase in steel shipments to outside customers and the significant acquisitions made by Nucor in the last 18 months. The decrease in our gross margin percentage was due principally to the following factors:


•

The cost of raw materials, including scrap and energy, continued to escalate. In the steel mills segment, the average price of raw materials used increased approximately 43% from the first half of 2007 to the first half of 2008, primarily due to the increased cost of scrap, our main raw material. The average scrap and scrap substitute cost per ton used in the first half of 2008 was $396, an increase of 44% compared with $275 in the first half of 2007. Energy costs increased $5 per ton over the prior year period. In the steel products segment, the average price of raw materials used increased approximately 17% from the first half of 2007 to the first half of 2008.

•

As a result of these increased raw material and energy costs, Nucor incurred a record LIFO charge of $283.0 million in the first half of 2008, compared with a charge of $91.0 million in the first half of 2007. (LIFO charges for interim periods are based on management’s estimates of both inventory prices and quantities at year-end. The actual amounts will likely differ from these estimated amounts, and such differences may be significant.)

•

DJJ’s business of collecting and processing ferrous and non-ferrous materials for resale typically operates at lower margins than Nucor has historically experienced as a manufacturer of steel and steel products.

•

Pre-operating and start-up costs of new facilities increased from $25.0 million in the first half of 2007 to $45.0 million in the first half of 2008. In 2008 and 2007, these costs primarily related to the HIsmelt project in Kwinana, Australia, the construction of the SBQ mill in Memphis, Tennessee, the start-up of our building systems facility in Brigham City, Utah and the Castrip ® project in Blytheville, Arkansas.

For the second quarter of 2008, Nucor recorded gross margins of $1.21 billion (17%), compared to $764.2 million (18%) in the second quarter of 2007. The year-over-year dollar increase was the result of increased average sales price per ton for most products, the 10% increase in steel shipments to outside customers and the significant acquisitions made by Nucor in the last 18 months. The decrease in our gross margin percentage was due principally to the following factors:


•

In the steel mills segment, the average price of raw materials used increased approximately 56% from the second quarter of 2007 to the second quarter of 2008, primarily due to the increased cost of scrap. The average scrap and scrap substitute cost per ton used was $456 in the second quarter of 2008, an increase of 57% compared with $291 in the second quarter of 2007. Energy costs increased $5 per ton over the prior year period. In the steel products segment, the average price of raw materials used increased approximately 32% from the second quarter of 2007 to the second quarter of 2008.

•

Nucor incurred a record LIFO charge of $214.0 million in the second quarter of 2008, compared with a charge of $66.5 million in last year’s second quarter. The LIFO expense in the second quarter of 2008 was greater than the total LIFO expense for all of 2007.


•

DJJ’s business of collecting and processing ferrous and non-ferrous materials for resale typically operates at lower margins than Nucor has historically experienced as a manufacturer of steel and steel products.

•

Pre-operating and start-up costs of new facilities increased to $22.1 million in the second quarter of 2008, compared with $13.8 million in the second quarter of 2007.

Nucor’s raw material surcharge has helped offset the impact of significantly more volatile scrap prices and allowed us to purchase the scrap needed to fill our customers’ orders. Changes in scrap prices are based on changes in the global supply and demand for scrap, which is tied to the global supply and demand for steel products. Demand for scrap and other raw materials has risen sharply in recent years in response to increased demand, both domestically and internationally, for a wide range of products made from steel without a corresponding increase in the global supply of those raw materials. Our surcharges are based upon changes in widely-available market indices for prices of scrap and other raw materials. We monitor those market indices closely and make adjustments as needed, but generally on a monthly basis, to the surcharges and sometimes directly to the selling prices, for our products. The majority of our steel sales are to spot market customers who place their orders each month based on their business needs and our pricing competitiveness compared with both domestic and global producers and trading companies. We also include in all of our contracts a method of adjusting prices on a monthly basis to reflect changes in scrap prices. Contract sales typically have a term ranging from six months to two years. Although there will always be a timing difference between changes in the
prices we pay for raw materials and the adjustments we make, we believe that the surcharge mechanism, which our customers understand is a necessary response by us to the market forces of supply and demand for our raw materials, continues to be an effective means of maintaining our margins.

Marketing, Administrative and Other Expenses The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased 11% in the first half of 2008 over the first half of 2007, and increased 16% from the second quarter of 2007 to the second quarter of 2008. Profit sharing costs, which are based upon and generally fluctuate with pre-tax earnings, increased approximately 34% in the first half of 2008 over the first half of 2007, and increased approximately 62% from the second quarter of 2007 to the second quarter of 2008. Profit sharing costs also fluctuate based on Nucor’s achievement of certain financial performance goals, including comparisons of Nucor’s financial performance to peers in the steel industry and to other high performing companies.

Gross interest expense increased from the first half of 2007 to the first half of 2008 due to an increase in average debt outstanding of approximately 175% accompanied by an increase in average interest rates from 4.7% to 5.0%. Nucor has issued $2.3 billion in notes since the beginning of the fourth quarter of 2007. During the first six months of 2008, Nucor issued and repaid $800 million of commercial paper. The interest rates on the $2.3 billion in notes are higher than the rates on the majority of Nucor’s pre-existing debt. Gross interest income decreased from the first half of 2007 to the first half of 2008 due to a 23% decrease in average investments combined with a decrease in the average interest rate earned on investments. Average investments decreased due to cash payments for acquisitions in 2007 and 2008 and repurchases of common stock during 2007. The decrease was partially offset near the end of the second quarter of 2008 by proceeds received from the issuance of stock and debt.

In the second quarter of 2008, gross interest expense increased over the prior year primarily due to the tripling of average debt outstanding. Gross interest income decreased mainly due to a decrease in the average interest rate earned on investments.

Minority Interests Minority interests represent the income attributable to the minority partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (“NYS”), Novosteel S.A., and Barker Steel Company, Inc., of which Nucor owns 51%, 75% and 90%, respectively. The six-month and quarter increases in minority interests were primarily attributable to the increased earnings of NYS, which are due to the strength of the structural steel market. Under the NYS partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes.

Provision for Income Taxes Nucor had an effective tax rate of 33.9% in the first six months of 2008 compared with 35.3% in the first six months of 2007. The effective tax rate in the second quarter of 2008 was 33.7% compared with 35.3% in the second quarter of 2007. The rate decrease was primarily due to an increase in the rate benefit from foreign operations. The IRS is currently examining Nucor’s 2005 and 2006 federal income tax returns. Management believes that the company has adequately provided for any adjustments that may arise from this audit.

Net Earnings and Return on Equity Net earnings and earnings per share in the first half of 2008 increased 36% and 41%, respectively, to a record $990.5 million and $3.36 per diluted share, compared with $725.9 million and $2.39 per diluted share in the first half of 2007. Net earnings as a percentage of net sales were 8% and 9%, respectively, in the first half of 2008 and 2007. Return on average stockholders’ equity was approximately 30.8% and 29.2% in the first half of 2008 and 2007, respectively.

Net earnings and earnings per share in the second quarter of 2008 increased 68% and 70%, respectively, to a record $580.8 million and $1.94 per diluted share, compared with $344.9 million and $1.14 per diluted share in the second quarter of 2007. Net earnings as a percentage of net sales was 8% in both the second quarter of 2008 and 2007.

Outlook The outlook for the third quarter remains positive, as we expect continued strength in our sheet, plate, beam and bar businesses due to the solid global demand for steel. Although our downstream businesses will be challenged by rising steel prices, we expect continued good results from this segment.

Nucor’s margins and overall profitability are affected by the global balance of supply and demand for steel, steel products and raw materials. Our margins have been much stronger since 2002 and 2003 when most domestic and global steel companies reported operating losses and many filed for bankruptcy. We believe our variable cost structure allowed us to survive those severely depressed market conditions as scrap prices fell dramatically and our incentive pay system reduced our hourly and salary payroll costs helping to offset lower selling prices. We recognize that the steel business is cyclical in nature and expect to see future changes in the balance of supply and demand impact our margins and profitability. We also recognize that the global demand for steel has been growing at close to 6% annually since 2000 reflecting the building of infrastructure in Brazil, Russia, India, China, the Middle East, Eastern Europe, Africa and other parts of Asia. We believe this growth in steel consumption is likely to last for at least several years as more of the world population becomes industrialized.

CONF CALL

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you. Good afternoon and thank you for joining us for Nucor's third quarter excuse me, second quarter conference call. We appreciate your interest very much in Nucor.

Our team will review Nucor's second quarter of 2008 performance and we'll update you on our disciplined implementation of Nucor's growth strategy. Our successful execution of Nucor's multi-pronged strategy continues to deliver strong returns for our shareholders with more attractive growths still ahead of us.

First and most important, I'd like to say thank you and job well done to all the 21,000 members of Nucor's team for delivering record second quarter earnings of $581 million and a record first half earnings of $991 million. This performance also set a new quarterly earnings record for Nucor of any quarter, breaking our previous record of $522 million earned in the third quarter of 2006 by 11.3%.

As always, you are working safe, you are working smart, you are working hard and you are working together to take care of our customers, and I thank you. You have proven again that Nucor's most significant competitive advantage remains our people, our employees, our teammates, the right people; the right people working together as a team.

I also want to extend a warm welcome to the newest addition to our Nucor family. Earlier this month, we completed the acquisition of a 50% equity stake in Duferdofin-Nucor. We are very proud and excited to be partners with the men and women of Duferdofin. Together we established Duferdofin-Nucor as the premier supplier of beams in Southern Europe and Northern Africa. Again, we welcome you to the Nucor family.

In reviewing our progress this quarter, two very important observations stand out to me. First, the Nucor team again generated strong earnings in the period of sharply higher raw material cost. And second, our team continues to build on our multiple platforms for growing earnings and shareholder value. Second quarter and first half of 2008 saw unprecedented escalation in the cost of scrap and other iron units. From December 2007 to June 2008, our monthly scrap and scrap substitutes usage cost increased by $223 per ton. It increased by $66 per ton from December 2007 to March 2008, and then increased by another $157 per ton from March to June of this year.

Additionally, first half of 2008's results included a LIFO inventory charge of $283 million pre-tax, the $69 million in the first quarter and $214 million in the second quarter. And over the same period of record scrap prices, the Nucor team achieved higher metal margin spreads and record earnings. That is repeating. Over the same period of record scrap prices, the Nucor team achieved higher metal margins spreads and record earnings. Our success in managing the increased costs in metallics was driven by the healthy supply demand balance in North American steel markets, and continued effective utilization of Nucor's raw material surcharge out of steel mills. Also our mills have done an excellent job of capitalizing our strong global steel demand with strong export sales.

Now let's talk about my second observation. Our team's ongoing focus on building Nucor's long-term earnings power. Half way through our fifth consecutive year of exceptionally strong earnings and returns to our shareholders, it is clear that our multi-pronged growth strategy is paying off. But while we're encouraged by this progress, our team is not satisfied. In fact, we're seeing acceleration in a number of profitable growth opportunities available to us. That realization was the rationale for raising $3 billion in capital in the second quarter.

Nucor's disciplined execution of our multi-pronged growth strategy has positioned our company with a number of attractive growth platforms. In the first half of 2008, we have a number of exciting success stories to share with you as we continue to build upon these platforms. Prior to February, the David J. Joseph Company has already proven to be an outstanding and extremely profitable growth platform for Nucor in scrap and other upstream businesses. I congratulate the David J. Joseph teammates for their impressive earnings contribution for the second quarter. Very strong performance was posted across the board in DJJ's processing, brokerage, logistics and those services businesses.

Repeating what I have said many times before, when the David J. Joseph Company came aboard, the best of the best in the scrap business joined the Nucor team. And most importantly, DJJ's talent management team was already at work as a growth platform for Nucor in the scrap business.

In the second quarter, we completed acquisitions of two scrap processing companies. Our total annual scrap processing capacity now approaches 5 million tons with more on the way.

Our initial international growth platform was established this month with the consummation of our Duferdofin-Nucor joint venture in Italy. This partnership brings together a strong management team with Nucor's technical expertise in the beam business. And the ventures three times [ph] steel mills are strategically placed to serve growing markets for structural shapes in Southern Europe, North Africa and the Middle East.

With the start up later this year of the second rolling mill at the Sicilian plant Duferdofin-Nucor has the potential to be a 2 million tones per year producer of structural steel. Working with our partners we are looking forward to a bright future of profitable growth and European beam business.

In May, we signed a memorandum of understanding with Sidenor S.A. to purchase a 34% share of a proposed new joint venture for the production of long products and plate in the Balkans, Turkey, Cyprus and North Africa. Sidenor is the largest steel producer in Greece with additional steel making assets in Bulgaria and the former Yugoslav Republic of Macedonia. This venture would follow the model established with our Italian joint venture. And that is to enter into international steel production through joint ventures with culturally compatible partners where Nucor can leverage our operating know-how and intellectual property. Our team sees this as just the beginning of Nucor's presence in the European market.

In May, Rex Query was promoted to the new senior management position of President of Nucor Europe. An 18-year veteran of our company, Rex is a proven Nucor leader. And we're looking forward to developing additional attractive growth opportunities in Europe.

Our downstream side of our business, Harris Steel continues to be a powerful growth platform for us in the rebar fabrication market. In June, Harris reached an agreement to acquire Ambassador Steel. This acquisition will be a major step in expanding Nucor's national footprint, rebar fabrication, and building a market leadership position at rebar fabrication complements our position as North America largest producer of rebar. Market leadership and vertical integration to value added steel products are critical underpinnings to Nucor's proven ability to generate attractive long-term profits.

Just one additional note on our downstream businesses; if you take a look at our steel mill and steel products divisions, the DC or division contribution per ton numbers in terms of how much operating profit per ton we're making whether it would be in the steel mill or downstream, are almost identical in terms of the DC per ton. So our strategy of not only growing within the steel business but the downstream is providing is very, very strong margins and high profitability up and down our vertical integration strategy, whether it be in scrap, steel mills or in downstream fabrication businesses.

Considering our both strong profit performance and our accelerating growth opportunities, my confidence has never been greater about Nucor's ability to continue rewarding our shareholders with attractive returns.

I will now ask our CFO, Terry Lisenby to share with you his thoughts on our results and financial position. Terry?

Terry S. Lisenby - Chief Financial Officer, Treasurer and Executive Vice President

Thanks, Dan and good afternoon to everyone. Nucor's second quarter earnings of $1.94 per diluted share were ahead of our quarterly earnings guidance of $1.75 to $1.80. Second quarter earnings per share were also a record level, exceeding the previous record of $1.70 in the third quarter of 2006. This better than expected earnings were achieved despite a LIFO inventory charge of $214 million for the quarter. The second quarter 2008 charge exceeded our full year 2007 LIFO charge of $194 million. And at the close of the quarter, Nucor's LIFO inventory reserve was $865 million. That compared to LIFO inventory reserves of $582 million at year end 2007 and $387 million at year end 2006.

Nucor's operating performance continues to benefit from our diversified product portfolio. A number of our product lines contributed strong profits in the second quarter including bars, beams, sheet, plate, DJJ's scrap operations, cold finish bars, deck, building systems, fasteners, grading and wire mesh. Second quarter results again highlighted the value of Nucor's position as North America's most diversified steel producer.

Dan mentioned our capital raising work in the second quarter. In May, Nucor completed a stock offering that raised approximately $2 billion and a debt offering that raised approximately $1 billion. This capital along with our strong balance sheet and cash flow positions Nucor to capitalize on the attractive investment opportunities for our shareholders. In 2008, the opportunities to profitably invest our shareholders valuable capital have accelerated. As always, Nucor will be both disciplined and opportunistic in pursuing profitable growth that rewards our shareholders with attractive returns.

Looking at our balance sheet, Nucor is in a position of strength to continue executing our growth strategy. Cash totaled approximately $2.8 billion, debt totaled $3.3 billion and our debt-to-capital ratio was 28%. Nucor holds the highest credit ratings of any North American metals and mining company awarded by Standard & Poor and Moody's. Strong credit rating gives us strategic flexibility in growing our business and significant cost savings and managing our business.

Cash provided by operating activities for the first half of 2008 was $828 million, up from $738 million for the year ago first half. This year's cash flow has been impacted by the higher working capital requirements resulting from unprecedented increases in scrap costs and steel selling prices. Increased receivables and inventories reduced operating cash flow by almost $1.2 billion. This was partially offset by increased payables, which provided cash of $493 million. Of course, any future declines in scrap and steel prices would reduce our working capital requirements.

Capital expenditures for this year's first half were $502 million. Over half of those outlays were in our Greenfield projects. The Memphis SBQ bar mill, the Decatur sheet mills galvanizing facility, the Arkansas Castrip plant and the Utah building systems facility. Full year 2008 capital expenditures are expected to be approximately $800 million.

On July 1, we completed our acquisition of 50% of the stock deferred within Nucor for a purchase price of approximately $658 million. Our investment values to joint venture at around 6.3 times adjusted EBITDA for 2007. This is Nucor's first steel making investment overseas. We expect our initial international growth platform to generate very attractive long-term returns for our shareholders.

Our outlook for the third quarter is positive, with earnings expected to be in the range of $1.80 to $1.85 per diluted share. We expect continued strength in our plate, beam, bar and sheet businesses due to strong global demand for steel. Although they will continue to be challenged by high steel prices, we expect continued solid performance from our downstream businesses. We see more exciting growth and even better days ahead of us, and thank you for your interest in Nucor. Dan?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Terry. Ham Lott will update us on Nucor's downstream steel products businesses. Ham?

Hamilton Lott, Jr. - Executive Vice President

Thank you, Dan. Good afternoon to everyone. I want to congratulate and thank all of our fabricated construction products teams for their hard work and success in managing through a challenging period of unprecedented increases in our steel costs.

Nucor produces four major fabricating construction products. They are steel joists, steel deck, pre-engineered metal building and fabricated rebar. Each product group was profitable in both the first and second quarters.

Vertical integration has been a highly successful strategy for Nucor for four decades, generating attractive long-term returns for Nucor's shareholders. A critical factor driving this success is the fact that each Nucor's steel products division is managed as an expected to be a profit center. While our downstream businesses provide Nucor's steel making operations with a profitable base load of volume through the economic cycle, the mills must earn this business. They earn it through quality, service and competitive pricing.

Another key to our success in downstream steel products is our ability to build market leadership positions. To that point, Harris Steel continues to be a powerful growth platform for Nucor and the rebar fabrication business. Last month, Harris announced an agreement to acquire Ambassador Steel Corporation for a cash purchase price of approximately $185 million. Based in Auburn, Indiana, Ambassador is a fabricator and a distributor of rebar. In 2007, Ambassador shipped 422,000 tons of fabricated rebar and distributed another 228,000 tons.

With the completion of this acquisition, Harris Steel's rebar fabrication business will have more than double since being acquired by Nucor in March 2007. And Ambassador does more than just significantly grow the size of our business and that sort of expands our footprint through the Midwestern U.S., Gulf Coast region and into the South Eastern United States. The transaction is expected to close during the third quarter. We are looking forward to welcome the Ambassador team into the Nucor family. Dan?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thank you, Ham. I'd ask John Ferriola's team to update us on Nucor's steel making operations and our scrap, bar, beam, plate, and sheet business. John?

John J. Ferriola - Chief Operating Officer of Steelmaking Operations

Thanks, Dan. Good afternoon. Thank you for your interest in Nucor. Second quarter of 2008, total steel shipments of 6.1 million tons set a new quarterly shipment record for Nucor. Shipments were up over 3% over the previous record set in this year's first quarter and were up 13% in the second quarter of 2007. First half of 2008, total steel shipments of 12.1 million tons were also on record and increased 9% from last year's first half.

In addition to strong volumes, our mills achieved higher metal margins. Spread between our average steel mills selling price and our average cost of metallics for the second quarter increased to $451 per ton. That's a widening of $61 per ton in the first quarter's metal margin spread of $390 per ton. Above average spread improvement was realized by our sheet mills. As we noted on last quarter's call, flat-rolled market has seen a much healthier supply demand balance in 2008. These results demonstrate the Nucor's teams long standing ability to profitability manage volatility in our key raw material, scrap.

I would like to congratulate and thank teams at all of our steel mills, for once again getting the job done for our customers and our shareholders, and especially for getting it done safely.

Nucor's raw material surcharge has been an invaluable tool in managing the volatility in scrap pricing we have seen not just currently, but on a number of occasions going back to late 2003. In fact, our surcharge mechanism was first utilized in January 2004. Over the past four and a half [ph] years, every ton of steel sold by Nucor steel mills has included the surcharge as a component of the total transaction price. This includes all of our contract business which contains either a surcharge or a scrap buyback clause.

We have read with interest recent press reports discussing assets by several of our sheet market competitors to retroactively apply raw material surcharges to their existing contracts. Those news articles have further noted customer resistance for those assets. That in turn has prompted investors ask Nucor whether we have encountered any such issues. For us, the answer is simple. It is a non-issue. It is business as usual for the first U.S. flat-rolled producer, who only write contracts with either the surcharge or buyback clause.

While speaking of raw materials, we announced in May a new growth platform for our company. Nucor has applied for a permit to build a state-of-the-art iron making facility in Louisiana. Phase one of our proposal of course of building 3 million tons per year Greenfield blast furnace facility on the Mississippi River. Nucor Steel at Louisiana would employ the latest technology for emission controls and energy efficiency. The project's first phase would require an investment of about $2 billion. A potential second phase would build a second 3 million tons per year blast furnace for an additional investment of about $1 million.

Nucor steel in Louisiana is a not a certainty, permits has to be issued and our Board has to approve the selection of the site and the capital investment. While the Louisiana site is the only one in the U.S. under consideration, we have other site outside the U.S. still under active consideration.

Regardless of the ultimate site selected, this pig iron project will be a major step forward in implementing our raw material strategy to control 7 million tons per year, high quality scraps substitutes. It will build upon the success of our 2 million metric tons per year EOR facility in Trinidad. And Phase 1 would allow us to reduce our current open market purchases of pig iron.

Even at the substantially lower pig iron pricing prevailing when we first began our planning, the economics for this project were very compelling. We look forward to updating you on our progress on this exciting project.

I will now ask Mike Parrish, Joe Stratman, Ladd Hall and Keith Grass to update us on Nucor steel mill scrap businesses. Mike Parrish will lead off with his report on our Bar Mill Group. Mike?

D. Michael Parrish - Executive Vice President

Thanks, John and good afternoon everyone. Congratulations and thank you to everyone in our Bar Mill Group team for delivering a record second quarter and first half earnings. In addition to strong performance from our steel mills, record quarterly earnings were achieved by our coal finished bar, wire and fastener businesses. 2008 is our fifth consecutive year of record first half earnings for the Nucor Bar Mill Group. This growth record is driven by our team's focus and continually improving both our cost position and the value we provide to our customers.

Our shipments for the second quarter and first half of 2008 also set records. Year-over-year second quarter volume increased 21% and first half volume increased 9%. I am very excited to announce that our Memphis Special Bar Quality or SBQ mill has begun start up of its mill shop. On July 1st, Memphis completed its first heat and within the week, we expect to begin testing and ship our first semi-finished product to customers. In addition, the rolling mill was schedule to start up in the fourth quarter. Customer interest in our expanding SBQ product line is very high, and our Memphis team is eager to begin supplying our customers with the high quality product.

Third quarter outlook for the Bar Mill Group remains positive, strength in the non-residential, energy and agricultural markets will continue to offset the ongoing weakness in the residential and automotive sectors. Shipments and margins should be comparable to the second quarter, as we see steady demand, lower imports and favorable export opportunities.

Finally, I want to thank again our bar mill teammates for their strong commitments to working safely, as they continue to excel, taking care of our customers and our shareholders.

I will now turn over to my colleague, Joe Stratman for his report on our plate and structure mills. Joe?

R. Joseph Stratman - Executive Vice President

Hertford County, Tuscaloosa, Berkeley County and Nucor-Yamato. Through their excellent work, taking care of our customers, our plate and structural mills were able to report very strong profits for the second quarter in the first half of 2008.

Starting with the plate business, both the Hertford county and Tuscaloosa mills, set new first half production and shipment records. Along with these productivity gains, our plate group reported higher earnings for the second quarter and first half of 2008, compared to year ago periods.

Continual improvement remains a focus at our plate mills. A major achievement this quarter was Tuscaloosa's successful commissioning of the new temper mill on their cut to length line. The improved product quality of this line provides our plate team greater flexibility to manage product mix between the Hertford and Tuscaloosa mills thereby allowing each mill to concentrate on the products it runs most efficiently. This is just another example of how Nucor is optimising our existing facilities, and thereby executing on one of our key growth strategies.

As we enter the third quarter, global demand for plate remains very healthy. Our order books are full. Our order entry rates are stronger than last year. Particularly, robust consuming sectors include energy, transportation; infrastructure and construction equipment. Plate market conditions also continue to be favorably impacted by low service center inventories, limited import offerings and continued strong export opportunities.

Again I want to congratulate and thanks our teams at Hertford County and Tuscaloosa for your excellent results and achievements in the first half 2008.

Turning to an update of our structural business, I want to congratulate our teams at Nucor-Yamato and Berkeley of setting new quarterly and first half earnings records for the Structural Steel Group. The Nucor Yamato team also set monthly records for melting, rolling and shipping tonnages in the month of June, and our Berkeley beam metals set new monthly production records in the month of May. Thank you to both teams for your record settings performances.

We also continue to expand Nucor's product offerings with Nucor-Yamato becoming the first mill in the Western Hemisphere to produce 44-inch wide flange structural shapes. Theses beams are of particular interest to the highway bridge market. The product launch is off to a great start with Nucor-Yamato's first commercial run of these beams which was in May being completely sold out.

In addition, we successfully commissioned the Castrip, Arkansas vacuum tank degasser in April of 2008. This equipment not only is required for our Castrip product, but also provides synergies for new Nucor-Yamato's production of jumbo beams. We expect our first commercial production to occur in the fourth quarter rolling cycle with some product coming to market this summer. Looking ahead, the beam market remains very strong in the third quarter with order entry rates and backlogs ahead of last year at this time.

Energy and infrastructure projects continue to drive the robust market condition. Reduced imports are also contributing to a good balance between supply and demand. With extremely healthy international demand for beams, we also continue to receive export quotation requests from such areas as Mexico, Canada and Central and South America.

In closing, I want to remind all of my teammates of our most important priority and that is to work safely. 2008 is off to a record-setting start and we continue to see a very bright future for the plate and structural groups.

I will now turn it over to my teammate, Ladd Hall for his report on Sheet Mill Group. Ladd?

Ladd Hall - Executive Vice President

Thanks, Joe. Good afternoon. In the second quarter, our Sheet Mill Group's profits continue to improve compared with this year's first quarter and last year's second quarter. I too want to congratulate and thank our teams of Crawfordsville, Hickman, Berkeley and Decatur on these results. Our team was very encouraged by the strong performance in a period of sky rocketing prime scrap cost. Our raw material surcharge and scrap buyback agreement continue to be invaluable tools in managing these costs.

As John mentioned in his comment, we've been utilizing them since the beginning of '04. We feel that they are also an important aspect in improving the transparency of pricing for our customers. Both our metal margin spread and our volumes benefited from a better supply demand balance in the U.S. flat-rolled market so for this year.

Second quarter Sheet Mill Group's shipment increased over 12% versus last year's second quarter. In addition to a strong demand from our customers in the energy and Ag market, we continue to pursue profitable export opportunities. As I mentioned in our last quarter's call, our export strategy is focused on building long-term relationships with good international customers.

For the third quarter, continued sharp increases in the price of prime scrap rate will be a challenge. But that is a challenge our sheet mill teams have successfully addressed on a number of occasions over the past four and a half years.

Worthy of note also is that our Castrip facility in Indiana was cost affordable every month in the second quarter. This is a great accomplishment and we have high expectations of this continuing in the future. Congratulations to the entire Castrip team. I also want to mention what a great job our new iron team is doing at our DRI plant in Trinidad. After an extended shutdown in May, where we made the major improvements at the plant, we are up in producing DRI at record levels.

Using higher percentages of DRI at our sheet and plate plant have helped moderate our input cost and improve our quality. We are excited to see that our new iron team continues to excel and find new and better ways to get more quality tons out, and we expect that to continue.

On the demand side, overall end user demand in the U.S. continues to be stable. The demand picture varies by segment. The Sheet Mill Group is very fortunate to have a strong presence in energy, pipe and tube, ag, and heavy equipment markets. With most of our mills on the water, we are extremely well positioned to capitalize on attractive export business.

On the supply side, import remain low and looking ahead press reports indicate that the number of blast furnace maintenance outages are scheduled for the second half of the year in United States.

Build in our first half results, our team is looking forward to another successful year in 2008. Even better, we continue to work hard on a number of exciting projects to substantially increase our long-term earning power. These include Decatur new galvanizing mines that starts up in the fourth quarter of this year, our second Castrip facility in Arkansas will start up next year, our planned Mexican expansion and our new pig iron venture.

Our team is succeeding by keeping safety as our number one priority, developing new value added products, producing outstanding quality, providing an exceptional service, and delivering on time to our customers the product they want at a competitive price. I'll now turn the time to Keith Grass, our EVP of DJJ. Keith?

Keith Grass - Executive Vice President of David J. Joseph Company

Thank you, Ladd. The David J. Joseph organization generated exceptionally strong profits in the second quarter. Our team was very pleased to perform at this level during our first full quarter as a member of the Nucor family. I want to thank the DJJ-Nucor teams for their excellent integration work over the past quarter.

Those teams are now working together to explore the numerous opportunities in front of us. This is just the beginning of Nucor's profitable growth in the scrap business as we work together as one team. Both our scrap processing and brokerage operations benefited from this year's historic rise in pricing in the extremely active markets.

Margins reached record levels at our processing facilities as we're able to capture a significant portion of the market increase. Plant was also up as the higher prices stimulated obsolete flows into our plant particularly into our shredding facilities.

Both the domestic and export markets were very active and although we're primarily a domestic focused organization, we do participate in the export market at Tampa [ph] and Houston. Pricing also remains at highs, a significant benefit to us basically the amount of non-ferrous metals which generate through our shredding facilities.

In summary, it was a record breaking quarter for our scrap business. It's important to remember that DJJ is not just a scrap company. We have a number of other highly attractive profit centers. Our rail and logistic services businesses posted strong results for the quarter. DJJ owns the largest rail car fleet in North America dedicated to transporting scrap. With both vigorous demand for our services and excellent turn time on our fleet, our transportation related assets earned strong returns for us.

Most importantly as Dan noted in his comments, DJJ will be a growth platform for Nucor in the scrap business. That work began in the second quarter with our acquisitions of Galamba Metals Group and Metals Recycling Services. These purchases bring... purchases bring Nucor's total annual scrap processing capacity to approximately 5 million tons. The integration of these companies into DJJ is going well. We continue to evaluate numerous other potential acquisitions of scrap processing companies that have expressed an interest in becoming part of DJJ and Nucor.

At the same time we're also exploring Greenfield expansions into some very interesting market regions. I look forward to reporting to you on our progress in coming quarters. And I will now turn it back to John Ferriola.

John J. Ferriola - Chief Operating Officer of Steelmaking Operations

Mike, Joe, Ladd and Keith, thank you for your updates. We expect continued very strong performance from Nucor's steel mills and scrap businesses in the third quarter. Dan?

Daniel R. DiMicco - Chairman, President and Chief Executive Officer

Thanks, John. I've been a member of the Nucor team since 1982. I have never been more excited than I am today about our company's opportunities for profitable growth. Nucor's best years are still ahead of us. We thank you for your interest in Nucor and at this time, we will be delighted to take your questions.

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