Good day, everyone, and welcome to the Globe Specialty Metals 2014 Second Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is Jeff Bradley, Chief Executive Officer; and Joe Ragan, Chief Financial Officer. At this time, I would like to turn the call over to Mr. Ragan. Go ahead, sir.

Good morning, and thank you for joining the Globe Specialty Metals Second Quarter of Fiscal Year 2014 Conference Call. I'm going to read a brief statement, and then hand it over to our CEO, Jeff Bradley. Statements made by management during this conference call that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Globe's most recent SEC filings and the exhibits to those filings, which are available on our webpage. In addition, this discussion includes EBITDA and adjusted EBITDA, which are non-GAAP measures. Reconciliations of these non-GAAP measures may be found in our most recent SEC filings. Now for Jeff Bradley, Globe Specialty Metals CEO.

Good morning, everyone, and thanks for joining us on what I'd expect will be a very positive call this morning. We just completed the last quarter of the calendar 2013, and we are pleased with the results. We're also positive about the demand we're seeing in many of the markets we serve. Let me now go through the results for the just ended December quarter. Higher silicon alloy volumes and higher silicon metal prices led to increased sales of $178.4 million, up more than $5 million from the first quarter. Shipments increased by more than 4,500 tons to 66,616 tons, at 7% increase over the previous quarter level. We're also encouraged with the profitability increases we're experiencing. Adjusted earnings per share increased 63% from the previous quarter. Adjusted EBITDA was 23% higher, and gross margins increased from 13.5% to 16.8% this quarter. All these profit metrics were driven by our cost savings initiatives and the improving demand for many of the products we sell. Our silicon metal and silicon alloy facilities continue to operate well in the quarter. 2 of our facilities had all-time quarterly production records, and we had solid performance from the other plants as well. At the end of the quarter, on December 27, we entered into a new collective bargaining agreement at the Bécancour Canadian silicon metal facility, ending the 238-day lock out. The new agreement achieved certain imperatives that we had, including the conversion of the pension to an effective defined contribution plan, more flexible offering parameters and various cost-saving measures. When we acquired this facility, we forecasted that this facility would move from the middle of the international cost curve to the front. With these changes, we expect to be on our way to achieving that. The trade action that we won in Canada…

Thanks, Jeff. We'll go to the slide deck now. Slide 1. During the second quarter, the company executed well in all areas of the business. Sales volumes increased 7% sequentially. Gross margins increased 330 basis points, and EBITDA margins increased 230 basis points sequentially. Adjusted EBITDA came in above expectations at $26.2 million for the second quarter. These results produced $0.13 diluted earnings per share for the second quarter, 63% higher than the first quarter of fiscal 2014. Cash flow from operations remained strong at $23.3 million for the quarter. We continued to operate the plants well during the second quarter, realizing operating efficiencies driving both gross margins and EBITDA margins sequentially. On the next slide, sales increased 3% sequentially, while operating income increased nearly 50%, illustrating the significant lift to our operating leverage in the business. Results were strong down the financial statement, with the slight increase in SG&A expenses due to increased compensation expense. Next slide. We had several special items that occurred during the quarter, but I will highlight 3 of them shown on the slide. We recognized a bargain purchase gain on our purchase of the Siltech facility in South Africa. This represents the value of the net assets purchased greater than the purchase price paid. We also acquired a supply contract from one of our vendors that created significant value for Globe, but was required to be treated as an expense during the current period. Finally, we completed our contract negotiations at the facility in Québec, which resulted in the curtailment of certain benefits that had previously been accrued. The result of these, and the other adjustments noted on the slide, was an adjusted EBITDA for the quarter of $26.2 million, up 23% sequentially for the quarter. On our next slide, on a reported basis,…

[Operator Instructions] Our first question comes from the line of Luke Folta from Jefferies.

So I guess, going through some of these items, adjustments that, that are in the release, the variable compensation charge, I mean, we're pulling these out of adjusted results, the -- it's sort of, I think, $3.9 million or something like that -- yes, about $3.9 million. Are you saying that some of that, all of that should have been in the first quarter? And that's why it's being adjusted out of this quarter? How should we think about that?

Yes, Luke. If you look in our proxy, we have a 20% of committed capital threshold before we actually pay any of that variable comp. And we didn't think we were going to hit it. So what happened was we did actually make that threshold. Prior to that, we thought that we weren't going to make the threshold. So that $3.8 million, was actually from prior periods, that would have been Q1 and prior periods as well, Q4 and Q3 of fiscal 2013.

Okay. So, if -- pulling that out of the SG&A number for the quarter should give us what the normal, including that cost for this quarter, the normalized costs.

That's right. We kept a quarter's worth in the adjusted EBITDA, and that's 75% of it.

That makes sense. And then also, can you -- what's this -- what's the contract acquisition cost item exactly?

So we had the opportunity to purchase the contract from one of our vendors. And it allowed us to actually distribute some of our products, which we had committed previously to sell to them. So there was a very positive NPV from that transaction. So that actually represents the amount paid in both cash and expense.

Okay. Okay. All right. And then for the share repurchases. The share count moved up slightly sequentially. So I'm guessing that those happened mainly towards the end of the quarter. Can you give us a sense on where the quarter end share count is?

Quarter end share count.

I think which -- I am just -- the share count didn't decline by the amount of shares repurchased during the quarter.

That's right, it did not. And that's because it's on a weighted average basis. So you were doing the math. We started that at the end of December. So our weighted average basis, it didn't have the full 400,000, impact. I don't know that we've disclosed the actual share count outside of the Q, which we haven't filed yet, right? But then that's where we disclose that. So Luke, you'll have to wait until we put that out publicly.

Okay. All right. And then just one more and I'll get back in line. The Siltech acquisition seems pretty interesting. Looks like all in, less than $9 million for 45,000 tons of capacity. Can you just give us the background there, and why was that facility idle to begin with? And kind of -- why is it going to work going forward? Is it better power contracts, or is it just, something kind of changed in the way you're going to run this thing?

Yes. Luke, I mean, if you look at the history of our company, I think we've done very well on the acquisition side. You can go back through all the acquisitions that we and Alan have done, Siltech and Canada, Alden, Alloy. Alan's done a fantastic job of really finding value. And we are just going to run this plant the way we run our company and the rest of our plants. We're going to run it very lean. When you look at the amount of people they have running this plant when it was taken down, we will have probably somewhere in the neighborhood of half the amount of people running this facility. We look for a better production -- a lot of that is going to be tied to the raw materials. We looked at the production numbers that they were getting from the facility when it was taken down and even prior to that. And at one of the furnaces, we have a very similar sized furnace in the company. And we looked at the numbers we're getting off our furnace versus the numbers they were getting off of their furnace. And we get significantly more production off of our furnace. They were -- we do a much better job on fume. So really, when you put all that together, the operational side, the people side, we're going to be able to operate a much lower cost facility than their former owners, and we're really excited about it.

How your power cost is going to be a lot lower than what they had been historically. Is this a new contract?

We haven't finalized all of that yet. So as time goes on and then we get close to opening the plant, then we'll be able to share some of that with you.

And the next question comes from the line of Ian Corydon from B. Riley and Company.

Just to start with a follow-up on Siltech. Do you expect of able to operate that plant at its stated capacity?

Yes.

Great. And then on the silicon metal contracts, how much is your capacity is on contract for this year? And then I know you said a meaningful amount is indexed. Can you be any more specific there?

No Ian. Let me just say that, first of all, we are full. All the furnaces are running. Based on the commitments we're getting right now from the customers, we expect to remain full for the entire year. And we have considerably more price exposure this year than we've had in past years. Approximately 2/3 of our business this year will be exposed to the index market and the spot market and, index really is spot.

Got it. Makes sense, given the trajectory of prices. And Joe, which charges ran through gross margin? Is that just the lock-out costs? Or any of the other charges in gross margin? Or SG&A -- or its cost of goods, sorry?

The curtailment gain also ramped through gross margin.

Got it. Last question, can you just give us an update on what kind of maintenance outages you expect during the calendar year?

Ian, we have only finalized the outages through the fiscal year, which is the end of June. We have a couple of outages in this first half, and then I expect we'll have a couple more in the second half.

And our next question comes from the line of Michael Gambardella from JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I have a follow-up question on your 2014 contract sales. Because I was also taken a bit back by your comment that the majority of them are tied to the spot market. Is that something you guys tried to do? Or is that the kind of feedback from the customers that they wanted to go on the spot side?

Mike, when I said spot, spot is a broad term. A lot of the contracts we have are indexed. Index is on silicon metal and index is on ferrosilicon. And the indexes are updated, depending on the index is weekly or monthly. So many of the contracts reset monthly, and many of them -- and then we have some of the contracts that will reset quarterly. Each of the contracts is different. One contract might be the price at the end of the month, one might be in average. So when we use the word spot, we really mean spot, plus all the index business. And it's really just a testament to how we feel about the markets we serve. We're very optimistic about the markets this year. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: So that was not something that the customer wanted because [Multiple Speakers] preferred?

Mike, in most of the cases, yes, it is the customer. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. So the customer was opting to keep prices for the year more to a spot like pricing as opposed to the normal fixed-price for the year?

Yes. And that's not that uncommon. I mean, a lot of -- a lot, Mike -- yes, it isn't that uncommon, We have -- I'll call it, a group of customers in the silicon metals space that traditionally always just like to be at market. They don't want to bet the market up or down. And on the ferrosilicon side, it's the same thing. Their buying philosophy is “always be at market”. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: And I'm just kind of curious because in the past, it was largely fixed price for the year. And now, if the customer prefers to go to more spotlight pricing, that must imply that the customer feels pricing in the market, whether they're right or wrong, but must imply the customer feels pricing going on this year?

Well, if you look at the mix in the past, I believe we've historical said that it's been about close to 50-50. So this year, it's a little bit more than 50-50. And I don't agree. I don't think the takeaway is that customers believe the pricing is going to drop. I think it really gets back to the customer mix we have. And I really can't disclose the customer mix we have today. But it just really gets back to buying philosophy. And so -- but I would not, I would absolutely not interpret it at all that the customers believe the pricing is going to drop. And yes, we actually -- we absolutely do have say in it. So it was a decision on our part to also put more of the business exposed to price this year. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. Then 2 other things, just a little bit longer-term. One, could you just give us your thoughts about the status of the Chinese material around the world? And then also, recently, there is an announcement that kind of surprised us with a new plant being proposed to be built in Québec for 100,000 tons. And I'm just curious, you guys had announced that you're going to build a new plant and then backed away because the economics didn't look that favorable. I am just curious -- what are your thoughts about first the Chinese material floating around the world and the trends there? And then second, this new announcement on the new 100,000 tons of capacity up in Québec, Canada?

Right. We filed a dumping against China up in Canada and as you know, we won that case. So there's no more Chinese material coming into Canada. There's no Chinese material -- there hasn't been Chinese material coming into the U.S. for a long time. That opened up about 25,000 tons of silicon metal business to us up in Canada. So that was a positive. There was another, I just saw some news the other day, that looks like the Australians are going to be filing a case against China as well. And the good news is, markets are improving all over the world. The European market is definitely getting better. There are duties on Chinese silicon in Europe. The Asian markets are good. There's been a lot of Chinese silicon metal, ferrosilicon capacity shutdown. Finally, the government is really pushing to get these companies more efficient, more environmentally friendly. So that's helping. So I don't look at it as there is a lot of Chinese floating around the world, the Chinese do market a lot of material. When you look at -- if you look at silicon metal, it's about 2 million ton market. The Chinese export, 400,000, 500,000 tons, and that's been the case for a while. But I think, as you see, as time goes on, you will see more capacity come up around the world because all of the markets are growing, the silicons market grows at GDP plus. It's about 50%. And aluminum is tied to auto, and globally, auto is growing. Solar is the fast-growing market. So all of these silicon metal consuming markets are growing. And ferrosilicon, the same way, and silicon alloys. Commenting on the Canadian facility, and again, that was just an announcement. I guess we will have to wait and see if that actually happens. I don't think the permits are in place for that. It's going to probably take -- once we get the permits, 3 to 4 years to get a plant up and going, if they actually do. But it goes back to what we've always said that demand continues to grow, there is more capacity that will eventually be needed. And also, when you look at that company, they operate plants in Europe. Power prices in Europe are very high and I think forecasted to go higher. When you look around the world, one of the best place for the manufacturers is United States. And so, it's not that surprising because we've talked about this.

The next question comes from the line of Garrett Nelson from BB&T Capital Markets. Garrett S. Nelson - BB&T Capital Markets, Research Division: On the ITC antidumping case, I think in your last 10-Q, you said you anticipate a final ruling possibly in calendar second quarter. Is that still the case?

Could you repeat that, please? Garrett S. Nelson - BB&T Capital Markets, Research Division: Yes. On the ITC antidumping case. I think in your last 10-Q, you said you anticipated a possible final ruling in the calendar, second quarter this spring. Is that still the case?

I don't remember second quarter. I think we publicly said it will be some time at this year. Garrett S. Nelson - BB&T Capital Markets, Research Division: Okay. And then on the quarter. Could you add some color on the improvement in your cost of goods sold? It looks like your cost of goods sold per pound fell from about $1.11 last quarter to $1.03. Were there specific facilities that drove that cost improvement?

Yes. We had, again, we talked about these cost savings initiatives. We've also talked about the production at the plants. I've said in my comments, that we have 2 plants that set all time quarterly production records. So a lot of it gets back to just how well the company is running, how well the plants are running. And we've invested a lot of capital of the past 3, 4, 5 years. And we're really starting to see a return on that investment. And then you couple that with all these cost savings initiatives that we're driving, and we're seeing the results. Garrett S. Nelson - BB&T Capital Markets, Research Division: Okay. And then on your share repurchase authorization. How much remains on that buyback authorization?

Well, we've only disclosed what we've bought to date. So we've got a little less than $70 million. $65 million to $70 million left.

The next question comes from line of Tom Van Buskirk from Sidoti & Company. Tom Van Buskirk - Sidoti & Company, LLC: I had a couple of questions. One, on the alloy side of the business. It seem like there were some mix issues there. There you have an average selling price of around $0.90, which seems kind of low if you look at that versus where ferro was in the quarter. So I just wondered if you could explain a little bit about what was going on with that? And then the other question was on SG&A. Are you changing the way you report that now? You seem to -- for a while there, there were a couple of items, like the remeasurement of the stock options and then this other variable compensation piece that have been backed out of SG&A, and looking at the last comparison in the slide deck, it actually looked like you are lumping that in. So are we changing the way that we should think about that? And what should we use as a run rate going forward?

Tom, on the silicon alloys side, a lot of pieces in that silicon alloy number and that for, competitive reasons, we do not disclose. We've got the ferrosilicon business, we've got the magnesium ferrosilicon, we've got the calcium silicon inoculant. So a lot of it has to do with mix. But we're seeing the same thing there that we're seeing on the silicon inside, the market trends are very positive and demand is very good. Tom Van Buskirk - Sidoti & Company, LLC: Okay. And then on the SG&A?

On the SG&A, we have included that stock option remeasurement piece, generally. The new item is this variable comp item. And on a normalized basis, that will take the SG&A between $14 million and $15 million a quarter.

And the next question comes from Phil Gibbs from KeyBanc Capital Markets.

Just had a general question on the tone heading into this year relative to last year. We know prices have moved up here on an index basis the last few months. But what's really different out there in the marketplace from a demand perspective? And then how would you view the inventory situation within the supply chain relative to last year?

So what is different? We see Europe coming back. Europe is not down on seals anymore. Europe is a very large market for silicon alloys and silicon metal. And then if you breakdown all of the markets that we serve on the silicon side, it'd be chemical silicons, aluminum, solar, all continue to improve on the ferrosilicon side. The specialty steels and just overall, the market trends are very good. Europe is coming back, and that's helping a lot.

Do you think could help us with, Jeff, on just the inventories? And where inventories a bit high...

Inventories for the customers, or I mean customer inventories...

Yes, customer inventories.

We don't get a lot of feedback from the customer. But really, today, I don't think anybody keeping much inventory. Based on all the feedback we get, based on the demand and the way the customers are taking material, it doesn't appear that there is much inventory out there. In fact, I would say there's probably very little inventory out there.

Well, when you say Europe is getting better, how do you view that helping you? Meaning, more and more export material to the extent that you do in the Europe or your exporting less in the United States or how do you view that as a...

I suppose is just when you have -- I mean, when we have more demand in Europe, you have more opportunities for our company. And then the U.S. is a net importer of silicon metal and silicon alloys. So as you have the Europe, the European market is getting better, you naturally have more demand there, which takes pressure off exports into these markets and creates more opportunities for us to export to Europe.

Okay. And then lastly, if I could. You have maybe a little bit more line of sight in the South America than maybe some of the other companies that we tend to track. Anything there that you're seeing because I know you operate in countries like Argentina that would give you really any insight into those economies, and how the emerging markets volatility is impacting you guys down there?

So we do not export anything from the U.S. into South America, where we have opportunities. Our Argentina plant, the majority of the business in Argentina, which is silicon alloys is exported to Europe. So we're seeing positive trends out of Argentina because of what I'd just stated that Europe is getting better, that material is going into the specialty steel industry, and we're shipping some of that to Asia as well. So we're optimistic about the outcome for Argentina this year as well.

[Operator Instructions] And our next question is a follow-up from the line of Luke Folta from Jefferies.

So I guess, just to circle back on Siltech. When you announced that you acquired the facility, you talked about being able to take advantage of better markets in Europe, Asia and the Middle East. But I would think, I mean, is there anything to prevent you from selling that -- the silicon alloys into the U.S. market to the extent that Russia and Venezuela are kind of pushed out with antidumping duty. It seems like there could be an opportunity for that facility?

We obviously have the opportunity to sell a material anywhere. As you stated, the intended markets for South Africa would be Europe and Asia. The other thing I forgot to mention earlier was that we do a lot of specialty silicon alloys as well. So we see nice opportunities to start moving specialty ferrosilicon out of their plant as well into Europe and into Asia.

But is there any antidumping duties on South Africa in terms of silicon alloys at this point?

I do not believe so, no.

And our next question comes from the line of Ian Zaffino from Oppenheimer. Tom Narayan - Oppenheimer & Co. Inc., Research Division: It's actually Tom for Ian Zaffino. On the -- most of the -- all the contracts for calendar '14, you guys finished at the end of '13, right, the negotiations for that?

Yes. Tom Narayan - Oppenheimer & Co. Inc., Research Division: And in that, like, how much did -- and I know like 2/3 of spot. But how much of that was kind of impacted by the antidumping investigations and all that happened? I mean, is that something that was in the contract negotiations or is that more of something that we should expect to see as the -- in the spot rate this year?

Not really sure what you mean. Tom Narayan - Oppenheimer & Co. Inc., Research Division: Well, when you guys negotiated that, I mean, was that -- did that impact the negotiations and in terms of pricing, you got on the non-spot pricing for the calendar, for this year, for '14?

Yes, I'm not totally clear what you mean. I mean, we negotiated all the contracts directly with customers. And I think it's just based on the competition and what the pricing is out there and strictly, that's what it's based on. Tom Narayan - Oppenheimer & Co. Inc., Research Division: Okay. And I always had difficulty finding how these things are priced?

How what? Tom Narayan - Oppenheimer & Co. Inc., Research Division: How the alloy and metal, how the silicon's priced. Their actual pricing is always difficult to find. Can you comment in how the pricing is been like of late?

Well, there are indexes that track the ferrosilicon market, published indexes out there. And if we go back the past -- 6 months, past year, I think, pricing has been moving up.

And at this time, I'm showing no further questions.

Okay. Thank you, all. We really appreciate your interest. And as I said earlier, when I opened up the call, we're really excited about this current quarter and about the balance of the year. We feel really good about the market trends we're seeing across the company. Excited about getting the Siltech plant up and going, excited about getting the Canadian operation running at full capacity. So it's going to be a really good year. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a good day.