Good morning ladies and gentlemen and welcome to the Reliance Steel & Aluminum 2007 Fourth Quarter Fiscal Year Conference Call. At this time, all participants have been placed on a listen-only-mode and we will open the floor to your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, David Hannah. Sir, the floor is yours.

Great, thank you. Good morning and thanks to all you for taking the time to listen to our report and our financial results conference call for the fourth quarter and the fiscal year ended December 31st, of 2007. Gregg Mollins, our President and Chief Operating Officer, and Karla Lewis, our Executive Vice President and Chief Financial Officer are also here with me today. This conference call may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which Reliance Steel & Aluminum Co. has no control. These risk factors and additional information are included in the company's Annual Report on Form 10-K for the year ended December 31st, 2006 and other reports on file with the Securities and Exchange Commission. A transcript of today's conference call including Regulation G and reconciliations will be posted on our website at www.rsac.com/investorinformation. We're very pleased to report our results for the year ended December 31st, 2007. Net income amounted to a record $408 million, up 15% compared with net income of $354.5 million for 2006. Earnings per diluted share were a record $5.36 for the 12 months ended December 31, 2007. That's up 11% compared with earnings of $4.82 per diluted share for 2006. Sales for 2007 were a record $7.26 billion, an increase of 26% compared with 2006 sales of $5.74 billion. For the 2007 fourth quarter, net income was $79.9 million or $1.06 per diluted share compared with net income of $74.6 million or $0.98 per diluted share for the 2006 fourth quarter and compared to net income of $93.6 million or $1.22 per diluted share for the 2007 third quarter. Sales for the 2007 fourth quarter were $1.71 billion. That's an increase of 9% compared with 2006 fourth quarter sales of…

Thank you, Dave and good morning. We are very pleased with our record sales and earnings in 2007. Our managers did an excellent job in what proved to be a very difficult operating environment. We completed five acquisitions that were immediately accretive, with the annualized revenues of over $600 million. In addition, our internal growth initiatives continued to move forward supported by a capital expenditure budget in excess of $120 million in 2007. The MSCI trade association reported service center volumes were down approximately 7% for the year, and our same-store sales were down less than 2% which suggests an improvement in our market share. Our fourth quarter posed some operational challenges that we met head on. Service centers continued to reduce inventories which caused added pressure on margins. Average daily sales were pretty steady in October, November and the first half of December, but trailed-off quite a bit the last two weeks of the month due to seasonal closures. We reduced our inventories over $100 million during the fourth quarter and ended the year at 4.4 turns. We're committed to improving our turn in the future. As for 2008, we feel good about our position in the regions and industries that we support. Our inventory is in good shape and prices on most of our products are going up. As a spot buyer and seller of metal, we pass these price increases through as quickly as possible and expect to see an improvement in our gross profit margins. In spite of all the rhetoric about a recession, and whether we're in one now or will be shortly, we're optimistic about what lies ahead in 2008. Many of the industries, we support are doing well. These include aerospace, energy, railcar, ship building, barge, ethanol plants, agricultural equipment, non-residential construction, infrastructure,…

Thanks Gregg, good morning. The increase in our 2007 annual consolidated sales of 26.3% compared to 2006, resulted from a 17.3% increase in our tons sold and an 8.5% increase in our average selling price per ton sold. Please note that our tons sold and average selling price per ton sold amounts exclude the sales of Precision Strip because of the toll processing nature of its business. Our 2007 acquisitions along with our 2006 acquisitions of EMJ on April 3rd, 2006 and Yarde Metals on August 1st, 2006, contributed significantly to the increase in our 2007 sales levels. Same-store sales, which exclude the sales of our 2006 and 2007 acquisitions, were $4.1 billion in 2007, up 2.1% with a 1.8% decrease in our tons sold and a 5.7% increase in our average selling price per ton sold. Demand from most markets was relatively strong in 2007, but down somewhat from 2006 levels. In 2006, we experienced significant strength in the non-residential construction and aerospace industries. Although we experienced various degrees of pricing volatility in all the metal products that we sell, with the most significant volatility in stainless steel products, overall 2007 pricing levels were above 2006 levels. Our 2007 fourth quarter sales were down 5.9% from our 2007 third quarter sales, with a 6.6% decrease in tons sold and a flat average selling price per ton sold. The decrease in tons sold was mainly due to the normal fourth quarter seasonal slowdown experienced in our industry as many of our customers close during the holidays. The decline is in line with the prior years. Our 2007 fourth quarter gross profit as a percentage of sales was 25.1%, compared to 24.8% in the 2006 fourth quarter and 24.3% in the 2007 third quarter. On an annual basis, our gross profit…

Okay, is the operator there? Question And Answer

Yes. Ladies and gentlemen the floor is now ready for questions. [Operator Instructions]. Our first question is coming from Paul D'Amico from TD Newcrest. Your line is live.

Hi good morning guys.

Good morning.

Good morning.

Questions are probably for David, David in the beginning you gave some good color on the different end markets, I appreciate the menu list there. And I don't know if you got the numbers available now, but given the acquisitions in '07... and you post the split by product category for 06 and '07. I was trying to track and I just want to see if I am close. Given the acquisitions are taking place, looking just at the carbon split, specialty I assume is still about 40% total sales exposure, or is that dramatically different now?

What was that specialty you said?

Yes, first I'd like to know about the specialty in terms of consolidated sales exposure. And then second, on the carbon split, just trying to get some parallel with the end market exposure, flat-rolled versus plate versus pipe.

Okay.

To get a split there, in terms of the differences for the 07 acquisitions?

Okay. Our... in terms of flat-rolled, it's not really that big of a deal for us. In total it's... our coated is 3, 4... in total it's about 8% of our revenue dollars, the biggest piece would be in coated. So that would be like galvanized sheet and coil, that's just shy of 4% of our revenue.

Okay. So still... it's less than 10?

Yes, and they are really, in general, there hasn't been much... since the Jorgensen acquisition going on two years, there hasn't been a big shift in our percentages by product. So flat-rolled is still... of the 46% net carbon flat-rolled is about 8% of that. The largest piece for us is steel, carbon steel plate, and that's about 11%. And then bar and tube is about... bar is about 10%, and tubing is about 9.5%. Those are the next two biggest pieces, and then structural steels are about 7%, little over 7%.

Okay, so very consistent still, all right?

Yes.

Yes, and we did our... in 2006, for carbon in total we were 49% of sales, which was 46% as Dave mentioned in 07. And that 3% differential really went to stainless steel products.

I appreciate that. And just last thing to follow-up on that, in terms of the menu list of the end market exposures, just roughly is there any one that sort of stands out or two that stand out versus others through 07 or you anticipate through 08?

In terms of just pure size our largest exposure is still to the non-residential construction market, and we still believe that that represents somewhere in about a third of our business 30%, 33% of our business. And as we've said before, we don't know exactly because of many of our sales are to fabricators and job shops, and we really don't know what they're doing with the metal that we sell them. But based upon on the type of metal we sell and those customers where we do know what they're doing, it looks like our non-res exposure is somewhere in that 30% range. The other important markets to us still haven't changed. Aerospace is still around 10%, bounce a little higher than that, sometimes a little lower than that maybe, if it could go down 2% or up 2%, but that's still a very strong market for us still despite the fact it's backed off of 2006 levels. And we all have to remember that 2006 was quite an extraordinary year for all of our products. Pricing was moving in the right direction on all products, right direction by the way for us is up. And we like it when prices go up. And also demand was very strong across all of the market segments that we sell into in 2006. So, being off of 2006 levels in 2007 is not a bad thing in our eyes, because that's coming off of a very, very strong year.

Got it.

Okay.

I appreciate it. Just last follow-up, in terms of the non-res, when you were [ph] speaking about in the market commentary, non-res is still decent but not as strong as 07?

Yes.

Are you talking about volumes and/or pricing? And if so can you quantify kind of difference that you are seeing?

Well, volumes... pricing is up, and we expect that it's going to stay up, and probably go up. As Gregg mentioned in his comments, but our volume is... in terms of the strength of the market, volume is still reasonably good, it's just not as good as it was in 2006. 2007 wasn't as strong, and we just are uncertain about 2008 in terms of volume. But we anticipate that it's going to be down a little bit more this year from 2007 levels.

All right, thank you guys.

Good, thanks.

Thank you. Our next question is coming from Evan Steen from Eos Partners. Your line is live.

Hi there guys, nice quarter.

Thank you.

Just first is, could you just rehash, sometimes you give same-store sales for the quarter and then just I have trouble keeping up with the same-store sales on a tons and ASP basis for Q4 alone?

Okay.

Well, we don't give the absolute numbers for the quarter, so we only give the changes compared to other quarter. So, what quarter did you want the comparison to?

For Q4 just a revenue tons, excuse me... and average selling price on a same-store basis?

That's going to change in Q4.

From Q3.

No, no, no year-over-year.

Year-over-year.

Year-over-year, sorry.

Hold on here, we're shuffling papers here.

Okay. While you're getting that, you mentioned that CapEx was going to be at record level. I think earlier you had indicated for the year it would be 165, so you came in $40 million short, so if I took 160 and added 40 that gets me to about 200. I am curious if that's what was going on and also what areas you're focusing on in terms of where the capital is being spent?

Our largest capital expenditure budget... this portion of the budget this year is going into plants. We're buying out some leases that we're currently in from companies that we have purchased in the past. And it makes sense for us to buy out those purchases now. We're also spending... there was some catch-up at the Earle M. Jorgensen Company. Their capital expenditure budgets in the past were maybe not as funded as much as they should have been. So, there was some catch-up there, and Jorgensen represented about 25% of the $200 million that we plan on spending this year.

And Jorgensen as you know their strength... the strength in the market they serve is primarily in the oil and gas and energy side which is the one market I think that's stronger now than it was before.

And we actually expect it to be even better in 08 than 07.

So that's the reason why they're getting a lion share of the... the largest share of the capital expenditure budget is to really take advantage of some opportunities we see there to expand their business and view the market conditions there.

We're actually planning on building three facilities for Jorgensen and maybe not completely finished in 08, it's certainly well underway.

And we have some other of our operations in some structural steel products where we are expanding facilities. We've outgrown existing locations and there is opportunities to do more and do it more efficiently. So we're expanding plants, and we're also building some new plants, some of which we actually acquired the land last year. And we'll go ahead and start construction on buildings as soon as we get permits this coming year.

We have a major project up in Portland, Oregon for American Steel that we're building them a new plant and then we're also going into Las Vegas.

And that would be for PDM Steel.

Correct.

Okay, got you. Okay. And then lastly you guys are always active in the acquisition front, over I think the last year, you said the opportunities were as great as ever. Just curious your thoughts on that and also your thoughts you made, I think you first international small one, acquisition last year, just how you feel about further increasing your international exposure as well?

There are still many opportunities in the acquisition side, and we're well positioned to take advantage of that as Karla mentioned with the low debt levels... relatively low debt levels that we have. And... the ready availability on our existing lines. The opportunities are out there, we're going to be very selective as we have been in the past. I think all of the acquisitions that we've done are bigger and better companies today than they were when we acquired them. And that the reasons for that is because of the management teams that are in place in those companies and some of the resources that we can bring to them that they maybe they didn't have access to when they were independent as a smaller company. So, we do intend to continue acquisitions. I'd be very surprised if we don't continue to do acquisitions in 08. I mean, it's something that we've done regularly for many, many years even before we were a public company or became a public company in 1994. So, it's part of what we do, and part of our challenge is to make sure that all of you understand that we're able to grow the company in a market like 2007 when most, if not all of our other industry competitors are not having record years. We can take those difficult conditions and turn them into a record year because of our operations of our existing businesses, but also because we've been very successful on layering on acquisitions. And that's something that we're going to continue to do. So, that's an important part of our strategy, and there is still a lot of that to come. With respect to the international piece, we did acquire a company last October called Metalweb in the UK. They…

Okay. And then lastly just circling back on that same-store revenue tons and ASP for Q4?

Yes, fourth quarter 07 revenues were about $1.7 billion, and that included the 10.4% increase in tons sold, that was fourth quarter of 06, and about a 1% decrease in average selling price per ton.

Okay, great. Okay, thank you very much.

Thank you. The next question is coming from Philip Gibbs from KeyBanc Capital Markets. Your line is live.

Hi, it's Mark Parr.

Hello, Mark.

Hey Mark.

Hey good morning. A couple of questions, what's your LIFO assumption in the first quarter guidance?

At this point, for the year we're estimating about $60 million of LIFO expense with the carbon steel increases, and not really sure on stainless and aluminum. But the $60 [ph] million for the year would give us $15 million expense for the first quarter.

Okay. And Karla, I think I heard you say there were some headcount reductions in Q4?

Correct.

And I'm wondering, if you could talk a little bit about the potential margin impact 1Q versus 4Q both on cost of sales and SG&A?

I mean SG&A to the extent volumes come back in the first quarter of 08, we would expect to potentially bring back some people in that. And we typically look at SG&A as a percent of sales. We're not expecting any significant changes from where we were last year on that. And then on margin, we did say we expect to improve a little bit from last year's rate of 25.3% for the year, we didn't say what we expected to go to. We expect it to improve and would expect that to progress throughout the year. It wouldn't all come in, in the first quarter.

Okay, all right. And I was wondering, Dave, you had talked a little bit about the... about the fact you're going to continue to see acquisition activity in 08. I was wondering how would you compare the current pipeline compared to say where we were six months ago, the quality of the assets you're seeing valuations, could you give us an update on that?

Sure. In terms of the pipeline, I don't think it's changed much at all from what it was six months ago. Maybe compared to a year ago or 18 months ago, it might be a little less active, but still pretty active compared to whatever normal would be. But I don't think in the last six to nine months there has really been too much change. In terms of the quality of the assets, again I don't see any big change. We did see last year... earlier in the year primarily in the first half a lot of stainless related businesses for sale and --

Gee, I wonder why...

Yes, so that's calmed down. I won't sit here and tell you that, that's still going on, certainly not at the same pace that it was in the first half of last year. We also saw a lot of line pipe type, oil related businesses, smaller businesses for sale in the early part of last year and even mid-year in those products. And --

Probably two out of the three opportunities that we looked at we had something to do with oil related.

Energy, yes. One of those two things. And so that... the type of company has shifted, I wouldn't say the quality has shifted. In terms of valuations, our own look or feel for valuations has not changed and it hasn't changed in quite sometime. We're still valuing businesses based upon normalized pre-tax income as we see it. And I don't think sellers' expectations have changed that much. I think earlier in the year last year they may have had a little more lofty expectations, but not anything that prevented deals from getting done.

Okay. If I could just ask one follow-up question, this is a... this issue just seems to be becoming more relevant for 08 because of the situation with credit availability. And I've been hearing other companies actually Olympic Steel right before you guys was talking about, how lack of credit at some of the smaller companies is really creating market share opportunities. I was wondering if... do you think that that impacted you guys at all in 07, or would you think that that could impact you more significantly this year?

If it's going on, and I don't know that it is, very honestly, Mark. I don't think there is... if the credit availability... you're talking about at our competitors' levels?

Oh, yes not for you guys. Yes, I guess the example that we were talking about this morning was Kerry Steel I believe is in liquidation.

Yes we heard that, yes. Yes I don't why or what's going on there. I know that that I think there... aren't they in Michigan?

Yes.

And Detroit, so it's... if you are related to the auto industry or the appliance industry or the building, the residential type products at this point in time, then you're going to be singing a different song than we are singing here at Reliance. We don't have exposure to those areas. So I would... I don't know if that's a lack of credit or just bad business conditions that's putting those guys out, maybe it's both. But I don't think we've seen anything that's telling us our market share is going to grow because our competitors... our local competitors across the country can't get money to run their business, but we don't see that. If it happens I guess it would be good for us.

I mean in general because the industry had been pretty favorable for everyone in the last couple of years, most companies had credit levels at fairly low levels. So, we haven't seen it yet. But as Dave said if conditions worsen we could start to see that, but there is nothing significant affecting our competitors that we are out [ph].

Yes just the issue maybe more on the carbon side, because your prices are up so aggressively and...

Yes.

Continuing to move up.

Yes, I wouldn't use Kerry Steel though Mark as a model, okay, okay, because their profitability in that automotive market, which Dave was alluding to... I am sure had major impact on the liquidation, not just the fact that steel prices were going up.

Okay.

One of the things we do keep a watch on with the credit market like it is and also Mark with prices rising like they are is what's going on at our customer level. Because for the customer to buy the same ton of steel, in April it's going to cost them considerably more than it did last December. So, we do watch that. We don't see any indications or problems there either. And just as a guide that the same type of condition occurred back in 2004. And it was even steeper and more of an increase. And we didn't have any problems with customers during that period. So, we don't anticipate it this time, but we are keeping our eye on things.

And in the '04 period we were coming out of low levels... low profitability levels for people in the industry. So they made it through that period, hopefully they will be okay during this period.

Exactly.

Right.

Okay.

They're buying what they need for the job itself, okay and I'm sure if anything that... they're just spreading out their purchases and buying more often.

Yes.

Okay. So, they can be careful of their cash flow position.

I really appreciate all the color. Thanks very much and congratulations on the great results.

Thanks again, Mark.

Thanks Mark.

Thank you. The next question is coming from Michelle Applebaum from Applebaum Research. Your line is live.

Hi.

Hi Michelle.

And just before I ask my question, I was going to mention when we were talking about Kerry, I think one of the things that makes Kerry kind of unique was that... they always seem to be inclined position trade. So that... I think they made big bets under actions, and not as many bid today, there are fewer and fewer guys who are willing to do that given the volatility?

Yes.

Is that all... is that mix [ph]... my impression is, there aren't lot of Kerry's waiting to topple over or am I wrong about that?

You're right. We don't see that either Michelle.

Okay, okay, is it... my sense was that they were almost old fashioned type of company where they were trading and positioning, so it seems like fewer companies do that today?

Yes.

Yes, you're right.

Okay, my question is the same question I ask every quarter, which is how does the backlog of acquisitions look right now?

It looks good. There is still a lot of activity. There is new stuff that pops up everyday... well not every day, but every week at least we find or we hear from someone that was... we were not aware of and that continues. And just once again we're not interested in everything that pops up. Sometimes it's kind of on the fringes of the service center business, and we're trying to stick to our knitting, stick to the things that we know that the... if there is an issue in the future operationally that we know how to go in and fix those things, the service center industry, we think we know. And there is plenty of opportunity in that area. So, we're not out to broaden out into some other opportunities that might just been related to service center. So, when I say the service center industry I mean the service center/processor industry.

And you typically go through and tell me how many and what's the revenue that you did everything on your list?

Yes, I've thrown that list away Michelle. I have not updated that list in the last two quarters. So, I can't give that to you, because I mean honestly I just haven't done it

There probably hasn't been anything that we can change.

Yes there is no there is no significant company that's come or gone off that list. So

So, still in terms if you were to make a guess in terms of the dialog with guys out there, still $15 billion to $20 billion of potential revenues that are in the various phases throughout the industry, not necessarily Reliance targets, but that would fit your criterion?

Well I don't I think that's probably a little aggressive because to get to 20... to get to the upper number there, you probably have to throw in some pretty good sized companies that are owned by some private equity people, and I think we've said before we weren't interested in those and that's still the case. So, is it something that's out there that is possible for someone, even us, to do? Yes. If you take the list of the top 100 service centers that comes out every May, I guess it is. And again I'll remind you that a lot of the deals that we see aren't even included on that list. So, that's why many times we were surprised because $100 million, $200 million in revenue company will popup and they are not on any list anywhere. So, anyway we do get surprised occasionally. But if you add up all the revenues except ours on that list I guess you'd say it's all possible.

Okay. And you've said that you wouldn't buy certain companies owned by PE guys or any company?

No, I think certain ones... certainly there is some stuff out there that we'd be interested in. And there is certain things that we wouldn't be interested in, at least today; you know things change in the future. Things get fixed. We have not and we don't intend to get involved in buying big companies that need fixing. And it's... we think our time is better spent on other things that would be much more accretive than taking that kind of a risk, but we're perfectly willing to pay more for something that's functioning well later on rather than pay less and be consumed with trying to fix something.

Okay, I kind of get that. There was a we're in the most extreme supply driven pricing cycle that I've ever seen. And there was one once before in '86, '87, it was a similar... you know, the dollar collapsed and the Reagan administration started enforcing quotas that we had, and so imports dropped off, partly for economic and probably for non-economic reasons. And the public service centers back then, and there weren't many, and you weren't and most of your peers weren't, but there was margin squeeze because the mills were tightening... were able to tighten more than the service centers were able to tighten. But I think... I am trying to figure out what risk there are that that's going to happen again? It kind of back then was pretty specific to bigger automotive customers. So, I am just wondering what's the risk that we have acceleration. It would appear from reading multiple middle price increases, for instance, in the last three weeks. I think we've had 210 to 15 in Europe, just both for second quarter that we have room for 30% higher prices in the U.S. going into the... by the time we finish the second quarter, and if that happens what's the risk that you're not able to pass that through?

Michelle, this is Gregg. Because we're a spot buyer and a spot seller there really is very little risk with that, okay, we're going to pass those increases stream as quickly as possible. The only time that I've ever seen in my personal career, okay, that that was similar to where we are today is in 2004. And in 2004 we had the highest margins I think our company has had in ever maybe, okay. So our customers as you know are very, by comparison, they're smaller customers. They buy $1,300 per order, significant increases for them would be, let's say, $1,300 is $1,450. It's not the end of the world for us. We're not the only thing that we're frightened out is as I mentioned earlier is that if we get too high will imports come in, but it seems to that every increase that is announced here domestically in United States, there is increases that are announced elsewhere in the world that are even higher than those increases. So, the spread is still pretty good which is great, but if there is government projects, bridge work or infrastructure type things, it could be delayed because they probably will be delayed.

And they were in 2004 when prices shut-up. There were many big projects that are more critical so they were delayed and that's the risk that Gregg is referring to.

So, our customer base, many people question us, when we go to Wall Street, your customer base is so small fabricators machine shops systems that aren't you better of doing business with the OEMs and what not. We don't feel that way. Okay. We don't feel that way at all. It's just the opposite as far as we're concerned. Because those fabricators in smaller job shops and whatnot, if they lose business with Caterpillar let's say. They have to make it up some place and they are very, very good and being able to do that. And when they replace that business with other business they still buy their metal from Reliance.

And because I'm the conservative CFO, and Gregg mentioned the 2004 environment being similar to this, high margins. We are not telling you that we're projecting those types of margin for 2008.

God bless you, Karla.

And 2004, was in our mind, the price increases there were also more supply driven as apposed to demand driven. We really didn't see any meaningful, which is Gregg's point that is similar to today. We didn't see any real significant demand improvements until really for carbon products until the latter part of '05.

Yes.

And so, the huge increases in '04, we think were supply driven as well. And to Karla's point earlier that was more fragile period, because as a percent of where they started from it's a much bigger increase than what we're looking at today even if it continues to go up which we think it will for quite a while.

And even in that 86, 87 timeframe that you were mentioning Michelle, the producers were much more fragmented, I mean, now we have three producers that basically control about 70% of the market in every product that's made in steel. So, the discipline that's here today, as you will know, is quite different than what it was in the 80s.

Well, but I think in that environment the producers kind of squeeze the service centers pretty badly, if you go back and look at the margins, and today that risk would be even greater, but again that was specific to people more involved with the automotive business.

Right.

Yes.

They were buying on contract and selling on contract?

Yes.

And some of it was hedge issues. And you actually did have that in '04 with some of the part suppliers where they had no purchase commitments. They were short on the purchase side, and longer term price commitments and that it actually been a very positive arbitrage up until '04, when it worked against them. So, I understand it's very different this time, and I understand that your markets, in particular, have less purchase power, you've just stayed away from the big buyer. Which brings up another question, with your largest competitor gone private sort of and kind of readdressing some issues, are they... are you seeing them from a... are you seeing any impact at all from the change in management at Ryerson, positive or negative?

That's a good question. And I ask our people in the field that quite often. And very honestly at this point in time, we have not seen any material change. We expect that that will happen in some point in time, but I still think that there is a push on reducing their inventories, okay, what you'd expect with the PE company that acquired them. But we haven't seen... I would expect that at some point in time, and hopefully in the not too distant future that there would be more pricing discipline within that particular company, but at this stage of the game we've not seen it.

And just Michelle, I want to... before I forgot, because I will forget if I don't interrupt you and said, just to be clear you mentioned hedging and... we don't do that, that's not... we're not smart enough to hedge, and try to figure out what's going to go on in the future. So, just to make sure that everybody knows, and I know, you know that we don't hedge, we don't try to outsmart the market. No, we are not traders.

So, if you're not smart enough to trade then why do we ask you what's your forecast of steel prices?

I have no idea, why you'll ask us that.

Okay, I was just wondering. It sort of made me scratch my head. I will let someone else take a turn. Thank you.

Thank you.

Thank you. The next question is coming from Timna Tanners from UBS. Your line is live.

Yes hi, I really appreciate the great color. I just had two questions, one is I wanted to make sure, I understand on the guidance for just a comments on demand, does that really affect your outlook for volume more than margins or is it a little bit of both?

It's a little bit of both.

Little bit of both, yes.

So, you are confident in your ability to passthrough higher costs, but is there something that is it because of the volumes go down that you might be losing some economies of scale or maybe I am just confused?

I think, if you are comparing to the fourth quarter, Timna, we're certainly looking for on an operational basis... and we run the company on an operational basis... we're looking for a meaningful increase in our gross profit, but it doesn't translate dollar-for-dollar, because we are anticipating a LIFO impact on the first quarter, as Karla mentioned, of $15 million pre-tax, which is somewhere around like $0.13 a share. So, we are looking for improved... now improved volumes compared to the fourth quarter, we are not comparing to the second quarter of last year or I mean or the first quarter of last year. So, we do expect volumes to be up now compared to the first quarter of last... I don't know that we... we don't have that, so. But the... yes, well that's a whole another piece of paper that we don't have in front of us. But it's both. To answer your question it's both. It's volume. It's improvement in volume. It's improvement in revenue dollars, it's improvement in

Gross profit.

Gross profit. It's improvement... the operating expense is being somewhat consistent with what they have been. They've been pretty consistent as a percent of sales.

Fourth quarter was higher because of the seasonal impact of revenues.

And the other thing, Timna, looking back at 2007, we've talked about competitive pressures and some of the pricing volatility, we saw some margins different than we would have anticipated based on the factors going on during those times.

Which was primarily inventory reduction right across the board.

Which we think for the most part has happened, but some companies are still working on that. So we are just a little more cautious, I guess, about the amount of gross profit improvement that we might see because of those things.

Okay. Okay that really helps thanks a lot. And then just to understand the philosophy or the way that you approach your buyback. You mentioned 2007 was the first time you had bought back since 2000, and then in 2008 so far you've already bought back more than all of 2007. So, when you look at buybacks, do you say where are the stock price, do you say what are the alternative investment opportunities, do you say how is our balance sheet look, can you talk us through a little bit about how you approach the decision to buyback shares?

We actually look at all of those things, Timna, as you might expect. And we look at what our money, what our cost of money is. We look at, if we were to make an acquisition valuing a company the way that we would typically value a company, what type of accretion that we get from that acquisition and how does that compare with the accretion we might get in our earnings per share by taking the same amount of money and buying our stock back at different prices. And an interesting note is that if we assume on larger transactions, I think we've told everyone that we target maybe a 12% pre-tax return on investment for a large transaction off of a normalized pre-tax income number. We can buy our stock at $50 a share and have double the accretion that we would get compared to buying a company getting a 12% pre-tax return. So, if we can get double the accretion then that's meaningful that's something. Now we also know that buying a stock back is not a forever kind of a thing, you're not running the Company, it's like cutting expenses, and you can't do it forever. So, we would prefer to continue to find acquisitions and grow our business internally and through those acquisitions. But when there is an opportunity out there to repurchase some of our stock, we will do that on an opportunistic basis. We will look at our balance sheet leverage. We will look at maybe the deals that are out there that we're already working on or that we think just might pop up in some reasonable time, because if we have to make a choice between buying our stock back and an acquisition we would choose an acquisition. But given our leverage position currently that's not a choice that we have to make because we can do both. So

Yes, we really look, I mean, we were able to repurchase the stock, because our cash flow were so strong, it didn't have any increase in our leverage position and we still had plenty of availability to continue with our growth activity. So, we will definitely look at that. Its not a... we're very selective, and look at a lot of the factors whenever we evaluate this.

Okay. Thanks a lot.

Thank you. The next question is coming from Timothy Hayes from Davenport & Company. Your line is live. Timothy Hayes - Davenport & Company: Hi, good morning.

Good morning.

Good morning. Timothy Hayes - Davenport & Company: I just have one question; Karla, could you repeat what the sequential change for same-store sales per tonnage and ASP, please?

Yes, compared to the third quarter we had a 6.6% decrease in tons sold and average selling prices were flat. Timothy Hayes - Davenport & Company: Very good, thank you.

Thank you. The next question is coming from Bob Richard from Longbow Research. Your line is live.

Good afternoon, and thank you for taking my call.

Sure, Bob.

Hey, I appreciate your comments on the... or your color on the end markets for aluminum being strong, and with the understanding that an increased base price is better for the aluminum sector or to your aluminum space than not what is your outlook on base aluminum prices for 08?

Our outlook is that we really don't think that the... I think Midwest spots at $1.33 a pound was yesterday. We don't think that's going to be sustainable going forward, we... our thought processes is for ingot to be somewhere in the neighborhood of the $1.10 to $1.20 a pound.

And supply is kind of driving the issue now right with outages in Africa?

Yes.

It's probably more of speculators in the supply side. You get the speculators and the traders in there and they can build a case. So, we don't know that the reaction to this power issue is

Real.

Is real, yes.

Okay. Thanks very much, and great quarter.

Thanks Bob.

Thank you.

Thank you. There are no further questions in the queue.

Okay, great. Thank you all for taking your time to listen to us and we look forward to another challenging and exciting year and we'll talk to you in April. Thanks again, bye-bye.

Ladies and gentlemen this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.