Reliance Steel & Aluminum Co. (RS) Q3 2014 Earnings Report, Transcript and Summary

Brenda Miyamoto - Vice President of Corporate Initiatives David H. Hannah - Chairman and Chief Executive Officer Gregg J. Mollins - President, Chief Operating Officer and Director Karla R. Lewis - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Assistant Secretary William K. Sales - Senior Vice President of Operations James D. Hoffman - Senior Vice President of Operations

Sohail Tharani - Goldman Sachs Group Inc., Research Division Michael F. Gambardella - JP Morgan Chase & Co, Research Division Philip Ross Gibbs - KeyBanc Capital Markets Inc., Research Division Anthony B. Rizzuto - Cowen and Company, LLC, Research Division Gayle B. Podurgiel - Crédit Suisse AG, Research Division Matthew Murphy - UBS Investment Bank, Research Division Timna Tanners - BofA Merrill Lynch, Research Division Sam Dubinsky - Wells Fargo Securities, LLC, Research Division Aldo J. Mazzaferro - Macquarie Research Andrew Lane - Morningstar Inc., Research Division

Greetings, and welcome to the Reliance Steel & Aluminum Co.'s Third Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Brenda Miyamoto, Vice President Corporate and Initiatives for Reliance Steel. Thank you. Ms. Miyamoto, you may begin.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss our third quarter 2014 financial results. I'm joined by David Hannah, our Chairman and CEO; Gregg Mollins, our President and COO; and Karla Lewis, our Executive Vice President and CFO. Today, we are also joined by 2 of our Senior Vice Presidents of Operations, Jim Hoffman and Bill Sales. A recording of this call will be posted on the Investors section of our website at investor.rsac.com. The press release and the information on this call contain certain forward-looking statements, which are based on a number of assumptions that are subject to change and involve known and unknown risks, uncertainties or other factors, which may not be under the company's control, which may cause the actual results, performance or achievement of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include but are not limited to those factors disclosed in The company's annual report on Form 10-K for the year ended December 31, 2013 under the caption Risk Factors and Other Reports Filed with the Securities and Exchange Commission. The press release and the information on this call speak only as of today's date, and the company disclaims any duty to update the information provided therein and herein. I will now turn the call over to David Hannah, Chairman and CEO of Reliance.

Good morning, everyone, and thank you for joining us today. We're very pleased with our operational performance during the third quarter of 2014. The stronger demand and improvements in pricing that we experienced in the first half of the year continued into the third quarter, and our FIFO gross profit margin remains solid despite the historically high levels of imports and competitive pressures in the market. As a result, our sales for the 2014 third quarter were at record levels for a single quarter, and our non-GAAP earnings per diluted share of $1.33, near the top of our guidance range, increased solidly from the same quarter last year and showed continued earnings momentum over the prior quarters, even given the larger LIFO charge that we anticipated in our guidance for the quarter. Additionally, our operating income on a FIFO basis for the 2014 9-month period is up 27% on a 14% increase in net sales compared to the 2013 9-month period, providing further evidence of our strong earnings momentum. The typical seasonal trend is for third quarter volume to decrease compared to the second quarter, which is reflected in the MSCI industry data showing shipments down 2.2%. However, our third quarter total tons sold increased to 0.4% compared to the prior quarter. We believe this reflects our continued growth in market share from our ongoing investments in our existing businesses as well as our acquisitions. The ongoing slow but steady improvement in customer demand across most of our end markets, most notably in energy and aerospace as well as the continued modest improvement in non-res construction also contributed to our increase in tons sold. For the 9-month period ended September 30, 2014, our total tons sold were up 16% compared to the first 9 months of last year. Same-store tons sold were up 6.5% compared to the same period in 2013, reflecting the improved demand environment from a year ago and well ahead of the MSCI year-to-date industry average about 4.4%. The overall pricing environment continued to improve during the third quarter with a 2.9% increase in our average selling price per tons sold over the prior quarter, driven by strength in most of our products. Overall pricing has now increased sequentially for 3 quarters in a row, resulting in our 2014 third quarter average price per tons sold being 4.3% higher than the same quarter last year. However, for the first 9 months of 2014, the average selling price per tons sold is still down 1.6% compared to the first 9 months of 2013. We are pleased with the recent pricing trends especially in light of the historically high levels of imports currently in the marketplace. However, going into the fourth quarter, we have begun to see weakness in mill pricing for certain carbon steel products as well as downward movement in nickel prices. Third quarter net income attributable to Reliance was $95.5 million or $1.21 per diluted share. Earnings per share as reported were essentially unchanged from the previous quarter as well as from the third quarter of 2013. 2014 third quarter net income attributable to Reliance included charges related to a previously disclosed Texas antitrust litigation matter of $13.5 million pretax as well as certain acquisition-related charges and other miscellaneous settlement cost for a total nonrecurring charges of $15.3 million pretax or $0.12 earnings per diluted share. Reliance has settled and been dismissed from the antitrust matter, and we do not anticipate any further charges related to this matter. Our 2014 third quarter non-GAAP earnings, which exclude the aforementioned Texas antitrust litigation charge and other nonrecurring items, were $1.33 per diluted share, up 2.3% from the previous quarter and up 8.1% from the third quarter of 2013. Our 2014 third quarter non-GAAP earnings were at the high end of our guidance range of $1.25 to $1.35 per diluted share due to the higher sales volumes, improved pricing, solid FIFO gross profit margins and effective expense control despite the higher-than-expected LIFO expense. Including acquisitions that were completed in 2013, most notably the Metals USA acquisition that we completed 2 weeks into the 2013 second quarter, our consolidated net sales of $2.71 billion in the third quarter of 2014 were up 10.7% from $2.44 billion in the third quarter of 2013. We believe that this demonstrates that our acquisition strategy supports our ability to profitably grow Reliance regardless of economic and cyclical headwinds. We completed 2 strategic acquisitions on August 1, 2014. We acquired Northern Illinois Steel Supply Co., a value-added distributor and fabricator of a variety of steel and nonferrous metal products, primarily structural steel components and parts. Net sales for NIS were approximately $20 million for the 12 months ended December 31, 2013. NIS has a unique business model combining traditional and metal distribution capabilities with extensive in-house fabrication services, often on an emergency basis. This acquisition fits our growth strategy of adding companies that offer higher value-added services. In addition to NIS, we acquired Aluminum Services UK Limited, one of the largest independent raw material service providers to the aerospace and defense industries. All Metal Services provide comprehensive materials management solutions to leading aerospace and defense OEMs and their subcontractors on a global basis, supporting customers in more than 40 countries worldwide. Net sales for All Metals were approximately $280 million for the 12 months ended December 31, 2013. This acquisition is especially attractive given the current and anticipated growth of the global aerospace industry. Going forward, acquisitions will remain an integral part of our overall growth strategy. We continue to -- we expect to continue to be a consolidator in our highly fragmented industry by making strategic acquisitions of well-managed metal service centers and processors within market exposures that support our diversification strategy. Reliance continues to operate from a position of financial strength. Our operating cash flow for the third quarter was $53.3 million and $162.8 million for the 9-month period ended September 30, 2014. We're pleased that our solid financial position and strong cash flow provides us the flexibility to concurrently execute our growth strategies and return capital to our shareholders. On October 21, 2014, the Board of Directors declared a regular quarterly cash dividend of $0.35 per share of common stock. The dividend is payable on December 18, 2014 to shareholders of record as of November 11, 2014. We paid regular quarterly dividends for 55 consecutive years, and we've increased the dividend 21 times since our IPO in 1994. I'm also pleased to report that our Board of Directors approved an extension of our existing share repurchase program through December 31, 2017. We have authorization under this plan to repurchase approximately 7.9 million shares of our common stock, representing about 10% of our outstanding shares. We believe our current share price is not indicative of the company's long-term intrinsic value, and this action underscores our confidence in our business prospects. Given our strong balance sheet and liquidity, we believe opportunistic share repurchases could be an appropriate use for the company's capital resources. Now turning to our outlook for the fourth quarter of 2014, we expect the U.S. economy to maintain a slow but steady recovery. Due to normal fourth quarter seasonality associated with fewer shipping days resulting from the holiday season as well as extended holiday-related closures at many of our customers' facilities, we expect lower tons sold in the fourth quarter of 2014 than in the third quarter. We also expect that pricing will decline somewhat in the fourth quarter given current weakness in many carbon steel products as well as decreasing nickel prices. As a result, for the quarter ending December 31, 2014, we currently expect a solid operational performance with non-GAAP earnings per diluted share to be in the range of $1 to $1.10 compared to $0.92 non-GAAP earnings per diluted share in the 2013 fourth quarter. We believe this reflects a healthy earnings level given the typical fourth quarter trend of our earnings per share, which are typically down about 18% to 20% from third quarter levels. As we've noted in the past, Reliance has a broad range of products, significant customer diversification and a wide geographic footprint. We've achieved industry-leading operating results on a consistent basis, and we remain confident in our ability to continue our track record of success going forward. I'll now hand the call over to Gregg to comment further on our operations and our market conditions.

Thank you, Dave, and good morning. We were pleased with our performance in the third quarter, especially given the fact our tons sold on a same-store basis were actually up from the second quarter, which is different than the usual seasonal pattern. September's average daily sales were the highest this year without the contributions from our acquisitions in the 2014 third quarter and the highest in quite some time. LIFO gross profit margins were about flat at 25.8% compared to 25.9% in the second quarter. Given the fact, the imports, particularly in carbon steel products, were at/or near historical highs. We were very proud our managers in the field exercised the discipline needed to maintain our gross profit margins. We have, however, increased our purchases of imported steel when it made good business sense. Our inventory turn year-to-date slipped at 4.5x in tons shipped versus 4.6x in the first half due in large part to extended lead times on materials purchased offshore and the timeliness of delivery. This can have a negative impact on inventory turn. From an end-market perspective, automotive service, mainly through our tool processing operations in the U.S. and Mexico, is very strong, and we believe this will continue. Aerospace also continues to remain relatively strong, and we expect demand to improve in 2015. Overall build rates in the commercial airline segment continue to grow, and the future here looks bright. Energy, that being oil and natural gas, is doing quite well, and we expect this trend to continue well into 2015. Heavy industries, such as railcar, truck trailer, shipbuilding, barge and tank manufacturing, wind and transmission tower and bridge fabrication are strong. Agricultural and construction equipment are still reasonably busy, but we expect demand for agricultural equipment to decline somewhat, and construction equipment to improve in 2015. Non-residential construction continues on its path of steady recovery with demand still well below peak levels. We are optimistic that this important end market will continue to grow the balance of the year and throughout 2015. As for pricing on carbon steel products, flat roll has been under pressure, as, has plate due primarily to excessive imports. Domestic producers, we believe, had done a good job by not overreacting to this situation but have lowered prices modestly since September. Wide plant screens and minimal products had held the line price-wise despite the increase in imports. As for aluminum, the Midwest spot in good -- continues to trade in the $1.10 a pound range and has for several months. Demand on general engineering aluminum plate is strong with domestic lead times moving out from 8 weeks to 10 to 13 weeks. Three price increases have been announced since June, and all had held. Demand on common alloy aluminum sheet is strong, and pricing on this product follows ingot. Stainless steel nickel surcharges dropped to $0.78 per pound for November, down $0.10 from October. On the other hand, 3 base price increases have been announced by domestic producers since April, all of which have held. Demand is very strong in flat roll, and lead times are out 12 weeks to 14 weeks. To conclude, we are proud of our accomplishments in the first 9 months of the year. Our balance sheet is strong to support acquisition activity, and our organic growth initiatives are coming together nicely with year-to-date tons sold on a same-store basis, up 6.5%. We believe the major industries that we support will continue to improve, and we will benefit, in turn, from their growth. I'll now turn the program over to Karla to review the financials. Karla?

Thank you, Gregg, and good morning, everyone. Our record third quarter sales of $2.71 billion included a 6.4% increase in tons sold and a 4.3% increase in our average selling price compared to the 2013 third quarter. Compared to the 2014 second quarter, our sales were up 3.4% with a 0.4% increase in tons sold and a 2.9% increase in our average selling price. The increase in our average selling price is due to general pricing trends in the third quarter as well as the slight change in our product mix with our 2014 acquisitions having higher average selling prices than our company-wide average. Our 2014 third quarter same-store sales of $2.20 billion, which excludes sales of our 2013 and 2014 acquisitions, were up 9.6% compared to the 2013 third quarter with a 6.6% increase in tons sold and a 3.2% increase in our average selling price. Same-store sales compared to the 2014 second quarter were up 2.8% with a 2.3% increase in tons sold and a 0.4% increase in our average selling price. Our same-store average selling price reached year-ago levels for the first time in the 2014 third quarter. As mentioned previously, on a FIFO basis, our gross profit margin remained relatively consistent with the prior quarter despite its competitive environment. However, our reported gross profit margin for the 2014 third quarter of 25.1% was down from 26.3% in the 2013 third quarter and down from 25.7% in the 2014 second quarter. The decline is primarily due to a significantly higher LIFO adjustment during the quarter. Our LIFO adjustment for the 2014 third quarter was a charge or expense of $20 million or a negative $0.16 per share compared to a credit or income of $27.5 million or a benefit of $0.22 per share in the 2013 third quarter, a swing of $0.38 per share. In the 2014 second quarter, we had LIFO expense of $5 million or a negative $0.04 per share. We had anticipated LIFO expense of $5 million in the 2014 third quarter. However, because pricing held at higher levels than we had anticipated through the third quarter, especially for carbon steel products, we have revised our estimate of our full year 2014 LIFO adjustment to a charge or expense of $40 million, up from our prior estimate of a $20 million charge. Prices for certain products has softened in the beginning of the fourth quarter, and although, we expect further downward pressure on prices throughout the remainder of 2014, we continue to believe that overall metal prices at the end of the year will be higher than at the beginning of the year and higher than we had expected at the end of last quarter. Our 2014 third quarter SG&A expenses increased from both the 2013 third quarter and the 2014 second quarter mainly due to our recent acquisition and higher shipment levels. Our 2014 third quarter SG&A expense also includes $13.5 million related to the previously disclosed Texas antitrust litigation matter, which we recently settled for $23 million. Excluding the onetime charges included in the non-GAAP earnings reconciliation provided in our earnings release, our 2014 third quarter SG&A expense as a percent of sales would have been 16.9% instead of the reported 17.5%, down from 17.6% in the 2013 third quarter and 17.0% in the 2014 second quarter. The downward trend in our SG&A expense as a percent of sales in 2014 compared to 2013 is due to our higher pricing in shipment levels, coupled with a leverage in our existing cost structure to absorb additional volume. Operating income for the 2014 third quarter was $151.3 million or 5.6% of sales, down from $163.1 million or 6.7% of sales in the 2013 third quarter and down from $175.7 million or 6.7% of sales in the 2014 second quarter. Our lower operating income was primarily due to our higher LIFO expense and onetime charges in the 2014 third quarter. Our effective income tax rate for the quarter was 25.7% compared to 32.7% in the 2013 third quarter and 36.6% in the 2014 second quarter. The decrease was mainly due to the resolution of certain tax matters in the 2014 third quarter. Our effective income tax rate in the 2014 second quarter was inflated due to a taxable gain on the sale of Metals USA's noncore roofing business during that quarter, and we anticipate that our full year 2014 effective income tax rate will be about 33%. As mentioned earlier, our results for the 2014 third quarter include certain onetime charges that make comparisons to prior periods difficult. As such, we are presenting non-GAAP net income and earnings per share amounts to allow for a more meaningful comparison. Excluding these items, non-GAAP net income for the 2014 third quarter was $105.1 million or $1.33 non-GAAP earnings per diluted share, up 8.1% from $1.23 non-GAAP earnings per diluted share in the 2013 third quarter and up 2.3% from $1.30 non-GAAP earnings per diluted share in the 2014 second quarter. A reconciliation of GAAP earnings to non-GAAP earnings is provided in our earnings release issued earlier today. During the 2014 third quarter, we generated cash from operations of $53.3 million, a decrease from $229.1 million in the 2013 third quarter. The decrease from the 2013 period is mainly due to higher levels of working capital to support our higher volume and higher pricing levels experienced in 2014 as compared to 2013. Our accounts receivable days’ sales outstanding rate as of September 30 was about 41.0 days, fairly consistent with our 2013 rate of 41.3 days. Our inventory turn rate at September 30 was 4.2x based on dollars and 4.5x based on tons, a slight deceleration from our 2014 second quarter rate of 4.3x in dollars and 4.6x based on tons. Because of the competitive environment and high levels of imports in the U.S. market, this purchased a higher-than-normal level of import product, somewhat impacting our churn rate. Until import levels have declined to more normal historical levels, we anticipate carrying a slightly higher level of imports that typically have longer lead times and larger order sizes. We do, however, expect our inventory turn level to decrease and inventory turns to increase during the fourth quarter but not to our inventory turn goal of 5.0 turn. We invested $47.5 million for capital expenditures during the third quarter, bringing our year-to-date expense to $134.4 million, the majority of which relates to growth activities. Our 2014 CapEx budget is $220 million. However, we currently anticipate that our total 2014 spend will be less than $200 million. Our total outstanding debt at September 30 increased to $2.32 billion, which resulted in a net debt to total capital ratio of 35.1%, up from 33.3% at June 30, mainly due to debt incurred to finance our August 1 acquisition of All Metal Services and Northern Illinois Steel Supply. As of September 30, we have approximately $775 million available on our $1.5 billion revolving credit facility. This allows us to continue our growth strategy as well as to consider increasing shareholder returns through both higher dividends and share repurchases. That concludes our prepared remarks. Thank you for your attention. And at this time, I'd like to open the call up to questions. Operator?

[Operator Instructions] Our first question is from Sohail Tharani of Goldman Sachs.

Just wanted to get some more color on the All Metals Services acquisition. It seems like this is your first foray in that market in Europe. And what are the opportunities to grow that? I mean this is quite $250 million revenue. Could it be $1 billion in 5 years from now? Are there added bolt-on acquisition opportunity? And also, how do you look at the margins? Are these better than your current FIFO margins of 27%?

Sohail, this is Dave. Yes, the All Metals acquisition, it's the first U.K.-based company of significance, you might say, that we've acquired. When we acquired the company years ago, that's only maybe 1/4 of the size of All Metals called metalweb. All Metals is the leader in the aerospace side. They're much like our company here, AMI, in the U.S. with regard to aerospace. They are kind of the equivalent over -- on the European continent, and they do a fine job in terms of margins. From a gross profit margin side, their margins typically run a little bit less than ours over here. But from a pretax profit margin side, they're equivalent. So they do a really fine job. We do expect growth in that, and I might kick it over to Bill Sales, who's in the room, and they report in to Bill, and he's, as you know, our aerospace guy.

Yes, Sohail. We think there's good growth there. AMS, they're also very active in Asia and in other parts of Europe, and they've got a great reputation. We're excited about that acquisition, and we do think there's definitely growth opportunities there.

I think you probably, too, have been hearing us talk about if we could pick where we'd like to grow, aerospace has always been on that list, or at least over the recent years, it has. And All Metals was probably the only -- the largest of what was left as an independent company. Other aerospace players tend to be quite a bit smaller. So we were very, very pleased with this deal.

Were you competing against somebody? Or was it one-on-one sale?

Yes, we're always competing against somebody, it seems. But yes, there were some other people that were certainly interested in the deal and -- but I think we had the acquisition from the get-go, and we've known the owners -- the former owners for decades.

For a long time, Sohail.

Okay. Great. And one more question on the share repurchase you mentioned.

Yes.

I mean, your view is that your stock is not reflecting what your value as a company and acquisition opportunities out there, but if it comes to -- between the 2, do you think that it -- you may even lever up to do some purchases or stock purchases over here?

No. I think, you're right, Sohail. Right now, we don't see it as an either/or type of a situation. We think we can do both. We can continue to acquire and buy back stock on an opportunistic basis. If we were looking, going forward, at one or the other, certainly, acquisitions, we believe -- and we've told you this before that we believe acquisitions are better for the long-term growth of the company. But right now, it seems to be a pretty good opportunity to buy some of our shares back, and we're just prepared to do it when it makes sense going forward.

The next question is from Michael Gambardella of JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: A question on recent acquisition over in the U.K. How much sourcing of material does that company do within Europe?

Mike, it's Bill Sales. They do a fair amount of sourcing in Europe. When you look at their purchases on the mill side, they're a little bigger on the European mills than we have been over here in the U.S.

Don't do these, and other things come into play over there, which make it...

Kind of keep more advantageous.

Advantageous to use the European mills. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: When you make an acquisition over in Europe or outside the United States, you don't have as much purchasing power from the mills as you do here in the U.S. How do you counteract that?

Well, a lot of those of mills in Europe are still owned by the same mills that we buy from over here. As an example, Kaiser -- I mean ALCOA, ARC, Constellium, who are big European mills, but we also do business with them over here.

We also -- our AMI Metals company also has some facilities over in Europe, so we've got to combined purchasing now of AMI and All Metals in that area.

Absolutely. Yes, we didn't buy a company, but we opened a facility for AMI in Belgium quite a few years ago now. And also more recently, we opened a branch in the U.K. for them, so we do -- right, Karla's point is very valid that we now have some additional volumes to put our purchase from those European mills.

Right. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. And then just another question on your purchasing power. Have you seen any erosion of your purchasing power in the U.S., particularly in the carbon sheet business with consolidations? Or has that not really come into play with your purchasing now?

Our purchasing power has grown year after year after year after year as we've acquired more carbon steel companies such as, most recently, the Metals USA acquisition in middle of April of last year. So no, our purchasing power today is stronger today than it has been ever. Our volumes are much greater. Our relationships with our domestic mills are very, very strong, so we're not complaining about our purchasing power from the asset producers.

The next question is from Philip Gibbs of KeyBanc Capital Markets.

Gregg, you had talked a little bit about some push-out lead times for general engineering plate. What are you seeing on the aerospace side there?

Bill is probably more apt to answer that, but our lead times on the aerospace side are about even where they were last quarter that we had this conversation, so they're 10 to 12 weeks on E-3 [ph] plate. General engineering is.

10 to 13.

Yes, 10 to 13 weeks, which is an increase of over 8 weeks that we had just a quarter ago, so general engineering is quite strong. Aerospace plates quite strong. We're doing well on the aluminum business. Wouldn't you say, Bill?

I would, yes. And Phil, we've seen that kind of improve if you go back to the first quarter. On general engineering, we were, as Gregg said, 7 or 8 weeks. We've seen that move out to 10 to 13. On the aerospace side, we are running around 9 weeks at the beginning of the year, and we're in that 13- to 15-week time frame now.

Okay. Is there any change in your thought as to when that piece of the market may tighten again? Or what are you seeing there?

In terms -- I mean, we think that 2015, we're going to see continued improvement. We're very positive on the outlook for 2015. On the aerospace side, the plate overhang, and that gets a lot of discretion. We see that continuing to diminish, and we think it's going to carry into 2015, but we see that becoming less and less of an issue. So you combine that with really a stronger outlook for 2015. The one thing, Phil, there on the -- as we work through that overhang, there's still a fair amount of capacity out there, so we think there's going to be some improvement there, but it's not going to be a huge improvement. We think there'll be a little less pressure on the margin side as we work through that overhang, but it's not going to...

Aren’t going to throw us in allocation.

It's not going to throw us into allocation.

Where have you seen a lot of the improvement in energy? It sounded like you pointed at more of an inflection here in the third quarter. Is it some holes breaking through here? Or is it just a demand as the rig counts come up? I mean, where specifically in energy do you see it?

Phil, it's Jim Hoffman. Basically, across-the-board. The technology and drilling right now, they don't really reallow in rig count to be an indicator any longer. It's more about the feet of drilling and the technology, in the United States anyway, consumes a lot more metal. So I think that's a trend you'll continue to see as far as Reliance. So that's glowed tremendously, and it's just strong across the country. If you read the statistics in 2005, United States is importing about 60% of their oil and gas. This year, latest number I saw was in the middle 20s, and I predict that by 2018 for us to be a net exporter. So there's a just a lot more activity in the United States and throughout the world, but I would say the technology has really helped Reliance with the amount of product we can sell into that industry.

The other thing on energy, too, Phil -- some of you on the call that have -- that were in meetings with us over the last quarter, I think we had indicated that energy, while still one of the top performing parts of our business in terms of returns, was producing less net income dollars or net operating profit dollars than it had in the prior year -- in the first half of 2013, and that flipped around during the quarter. So this third quarter that we just had in our energy-related companies was very positive. Pricing, I think, was positive also. And the profit contribution was -- is now in excess of what it was last year at this time. So we really like what we saw in the energy side, and we think that, that momentum should continue on through this year and the next.

On the alloy water pricing side, we've experienced 3 price increases from the domestic producers this year. All 3 of which have held. And third quarter, as Dave just pointed out for our energy sector was extremely strong.

And the other thing, the lead times have stayed out as well.

Okay. Terrific. And I just have a housekeeping one for Karla. I do appreciate all that color on the end markets. Karla, what was your expectation for LIFO in the fourth quarter?

Yes, going into the fourth quarter based upon our updated annual expense of $40 million, we expect to book $10 million of LIFO expense in the fourth quarter.

The next question is from Tony Rizzuto of Cowen and Company.

I want to make a comment, and then I've got a couple of questions. First of all, very, very good to hear the commentary on the share buyback. I mean with your shares turning at very depressed levels. My sense is that investors want to see a step-up and a greater commitment here, so I think that's important, and balancing it obviously with your other growth initiatives too, et cetera, but I think that'd be important. My question -- my first question is just a follow-up on energy a little bit. A very positive commentary, and I gather you guys are benefiting from a mix standpoint, but we're starting to hear about capital budgets may be being reined in a little bit. I know that a lot of that analysis work is not really going to be done until December, January. But what happens, do you think, if oil remains at these levels? How do you think that might affect your business there in energy?

Yes. Tony, this is Jim. It's really difficult to predict the energy sector in short term. The price of oil coming down -- and that was affected by a lot of different things. Everything from the strong dollar to the geopolitical issues in Libya and Iran and Saudi Arabia, Russia. Some of it's tied to the lower demand in China and India. So all of those. Those are just difficult to predict. So short term, I'm not sure. I mean it's running around $80. $80 today, maybe $82, bumped up a little bit. It could -- yes, there's some people who say it could go to $75. But as far as Reliance is concerned, we've been through this before. We've owned companies like EMJ and Continental Alloy, so we understand it does have peaks and valleys, and we're prepared for it. We just deal with it the way we've dealt with it in the past through expense control, and we don't speculate on inventories. So we are able to react fairly quickly to that. But as far [indiscernible] as concerned, it's still strong. I mean, there's discussion out there that they know who you're talking to, but they were predicting really big spending in 2015. So if they reign it in a little bit, it's still a pretty good level. I'm not sure what they're going to do. And like you said, we won't really know until December, but we're still staying positive.

All right, Jim. And then Gregg, you mentioned about non-res and your level of confidence that continued recovery into 2015 as well. I'm wondering if you guys could provide some granularity, and talk a little bit about maybe some of the metrics that you're seeing or that you track internally. In the past, you talked about quoting activity levels picking up, and obviously, we're seeing some pretty positive data points coming out of Steel Dynamics and Nucor in terms of their shipment volume, and Deck and Joist [ph], hearing a lot of e-commerce activity. Perhaps, you can give us a little more color in terms of what you guys are tracking, and maybe talk about it geographically and all the things that -- to make us feel a little bit more -- or give us a little bit more color in terms of how you see that market changing and improving.

Well, we always watch the quoting process, Tony. We ask our guys that on a monthly basis. The quoting activities have been pretty strong. I'm not going to say out of this world, but it gets stronger and stronger every quarter. From a regional basis, our activity in the northeastern market is very strong. In the California market also. In the Texas market, very good. So we're seeing it pretty much across the board now. We're participating some project tons both in the Midwest, West Coast and Northeast. The activity that we're hearing from Steel Dynamics and Nucor and whatnot is very positive. Typically, we are behind that about 6 months, so we're anticipating that some of that business that they're doing, which is primarily direct business on large projects, that we'll be seeing benefits to that going forward. We've got -- there's projects in Minneapolis on arenas. Also, a large sports arena in Atlanta. Large building projects in New York, as well as Chicago. We have all the activity going for the campuses in Northern California with the Apple and Google operations. All of which are really positive for us, and that's just to name a few. And once this oil, this natural gas -- okay, liquid natural gas projects gets going, which has not done so far, we, at least, we haven't seen it, we expect that, that's going to really bolster the non-residential construction area, which we consider that to be as well. So just all indications are positive.

Tony, just a couple of things. We've always said -- we've kind of watch our order book, and we look at these exterior things, too, and as Gregg mentioned, when it becomes meaningful to us is when it turns into sales dollars. And just 2 things to kind of put some substance behind what Gregg was talking about. We have 2 big pretty much pure non-res-related, heavy structural-type companies, one in the East Coast and one in the West Coast. And in sales dollars, the one in the East Coast is actually up 16% over last year through 9 months. And the one on the West Coast is up 13% in sales dollars compared to the 9-month period last year. So those are -- that's some of the real evidence that we've had that things have actually gotten better, and we expect the trend to continue.

That's very helpful color, guys. And I just have one final question. I'm sorry to ask so many questions. Just to look at the carbon products and imports. And have you guys changed your strategy in terms of how you look at imports as a percent of your overall buys? I know in the past, for a long time, you guys talked about imports kind of being less than 5% of your overall buys, but is there a change going on? Is it just a more unique situation? Now how do you see it playing out? And what kind of spreads are you guys seeing given all these issues with logistics and freight that we continue to hear about in the U.S.? If you can you give us some idea of some of the spreaded differentials you're seeing right now in the marketplace, that would be helpful.

Okay. Well, from our spread standpoint, it can go anywhere from $100 to $150 a ton, okay? We always treat our domestic producers, as you know, Tony, okay, with a great deal of respect, but they've been very busy. So to provide us with competitive bids when they really don't need to because their order book is pretty good, we understand that. They tell us in advance, so we have been buying more. We're somewhere between 5% and 10% of our purchases are now foreign, when, typically, they've been 5% or less. So they're definitely up. The relationships with our domestics are still extremely strong because we provided them the opportunity to participate in that. but because of their order book, they've decided to decline, which is fine with us. We're good with our -- we have great relationships with the people, the trading companies that we deal with offshore. But to answer your question as far as our strategy is concerned, it's not necessarily that our strategy has changed. It's just that the domestics have chosen not to participate as much in certain products, and we've gone offshore because we're not going to lose market position because we're going to have to overpay for it. So we're going to do what we have to do to maintain our competitive situation throughout all of our companies on all products.

And I think, Tony, what Gregg just said is really important because I do believe based upon some of the comments that we've had and some of our meetings and calls that there is a misinformation or there is a perception that maybe because we like to support our domestic suppliers that we were at a disadvantage, and that's just not true. So what he's saying now is that the competitiveness of our -- with our relationships with our domestic mills has changed because of their business levels. And in order for us to maintain the competitive pricing, we've gone offshore a bit more than we have before. As Gregg mentioned, it's probably close to the 10% number than the 5% number.

Correct.

It's important for everybody to know that we're going to stay competitive. We're going to do what makes sense, and there's really no change in strategy. The strategy has been consistent.

The next question is from Gayle Podurgiel of Crédit Suisse. Gayle B. Podurgiel - Crédit Suisse AG, Research Division: A lot of my questions have been asked but maybe one, just kind of looking at the U.K. acquisition. Was this more moving to the U.K. doing an acquisition overseas about end market exposure? Or are there read-throughs here in terms of what the U.S. acquisition landscape looks like versus other international options or U.K. asset valuations or that sort of thing? And then that kind of segues into a question about what the general acquisition landscape looks like for you guys right now.

Yes, it had nothing to do with any lack of opportunity over here in the U.S., Gayle. As I think I mentioned earlier that AMS was the largest of the independent aerospace-dedicated service centers that was out there. And we've known those -- the owners for a long time. We've known that business for a long time. We've competed against that business for quite some time. But because of their positioning in the U.K. and being close to the European continent, they've had much more penetration into the aerospace market, the European aerospace market and, to a certain extent, the Asian aerospace market than we have where we've been -- despite the fact we have facilities there, they were much larger in that area. So it had to do with just expanding our aerospace exposure to broaden it really worldwide. Bill, you have...

No, exactly. It was definitely an opportunity focused on aerospace not because there's lack of opportunities and other acquisitions.

And we continue to see opportunities that come up here in the U.S. We're continuing to always evaluate those. I think we still think there's a little pent-up demand. If the economy, we believe, it continues to improve, we think we'll start to see more of the traditional service center companies come to market potentially for sale. But there continue to be opportunities for us to look at here in the U.S. on a continuous basis. Gayle B. Podurgiel - Crédit Suisse AG, Research Division: Okay. Great. And just one follow-up to Tony's questions, which is can you talk at all about how much import volumes you sold changed versus Q2 and Q3? Or sold or booked import volumes?

I'm not sure I understand that.

I think we -- typically, we're around 5% or less of our total buying. How that flows through to sales, we're not certain, and that's -- we're really talking more on the carbon side right now, the majority of our products, so that's less than 5%. It started to go up a little bit on the buy side in Q2 and Q3, so we think about 10% of our current buying activity is import-related. Exactly how does that flow through on the sales? It's probably pretty consistently, I would guess.

About 10% of our sales.

Yes, you would expect.

Yes.

The next question is from Matt Murphy of UBS.

Just wondering on the import purchases. Are these kind of one-offs? Or is this something that you would see doing even if we see the U.S. market kind of loosen up into late this year and next year?

I think our import purchases are okay. All we did is we're dealing with the same traders. We just increased our purchases by basically from 5% to 10%. Dealing with same trading companies, maybe some different products because the spreads are a little bit bigger in some products than they are with others. Will that continue going forward? It certainly will continue as we have material on order coming through into the fourth quarter, and some of it flowing into the first quarter. What -- will it be back down to 5% or less? All that depends on the nature of the business with the mills, okay? The mill, our domestic producers, they get the opportunity first right of refusal, if you will, from us. And depending on their order book, if they choose to participate, God bless them and so be it. And if they don't, we'll then we'll do what we have to do to maintain our competitive nature in the marketplace, so it's really dependent upon the mills.

But the fact that the mills are busy and pushing us is a positive for Reliance in the service center industry because that means that demand is stronger than it had been previously, so we actually like the fact that the mills are busy.

What we don't like -- we just don't like the fact that there's so d*** much import material -- import in the country. That's a little bit of a problem, and that's part of our concern.

Yes, I mean the other thing I look at is MSCI inventories, and I guess on this quarter, your inventories kind of ticking up a bit, and the goal to maybe bring turns down a bit into the end of the year. I mean, what do you think the risk is that in a sort of broader service center industry, inventories have maybe overshot a little bit?

I think that they're up a little bit, but if you look at historical standards, they're still pretty low, okay? And our inventory -- we're certainly looking at our inventory levels closely as we do constantly but even more so towards the end of the year, and I don't think we're the only company that looks at it like that. I think most of the people that report to the MSCI take the same position that we do and get their inventories down as low as possible by year end, so...

Yes, I would say, too, as Gregg said, that I think our industry is in a pretty d*** good shape from an inventory standpoint. We used to have some bubbles, and then it would break, and then we'd blow them all back up in the industry, and they would -- it was of a mess. But after having gone through 2001 '02 and '03 and then again in 2008, '09, I think that there's much more discipline out there across the industry. And relative to demand and where we and the industry believe demand is going, I think we're in pretty good shape.

Especially, I think historically with the amount of import coming into the U.S., someone's buying, and just like with us. We're buying a little more, so it causes your inventory to go up a bit. So the same is true industry-wide, and I think with the level of imports we have, the MSCI numbers are very healthy.

Okay. That's helpful commentary. And Karla, maybe just one housekeeping on the SG&A. That 17.5% of sales, I know part of it was the tick-up due to M&A. I mean, how much of the increase this quarter do you think is temporary versus something we're going to see going forward?

Yes, so if you strip out -- we have some onetime charges, mainly the settlement of the antitrust litigation down in Texas. That was about, by itself, was $13.5 million. So if you strip out our -- in the quarter, so if you strip out our onetime charges, we were at 16.9% of sales, which is trending downward from 2013 levels, and as we continue to hopefully improve our volumes and pricing depending what happens there, but we would expect that percent to continue to trend down.

The next question is from Timna Tanners of Bank of America Merrill Lynch.

I just want to take a step back and ask about gross margins. And listening to this call, we're talking about how prices are strong, improved demand, you have better pricing power than you did. And so maybe there's something I'm missing, but if we look at the first 3 months of this year -- 3 quarters, sorry, average 25.4% gross profit margin, 26% last year. And why do we think -- just maybe again, maybe this is a simple answer. I don't know. But why do we think that gross margins have been falling despite kind of these improvements?

I think some of that has to do with some of the acquisitions that we've made. The Metals USA, for example. We're a little bit lower than -- and they've gone up, and we're very pleased with their performance. But they're still below the Reliance 26% margin area, and they're a sizable company, $2 billion revenue company, so they definitely had an impact on the gross profit margin. Our same-store, if you eliminate that, we're in line with where we've been in the past. And I have to tell you in the competitive market, Timna, that we're in today, with all these imports that we've been talking about all morning, I think 25.8%, 25.9% of gross profit margins is outstanding for the business that we're in.

Yes. So Timna, I think we can't make light of the competitiveness out there, which Gregg just mentioned, so -- and I think you and others have been writing about that, too. We've been telling you that for a while that it's pretty tough. And so we have come down on a LIFO basis by 0.5 percentage points first 9 months of this year, the first 9 months of last year, which we just think a lot of it's a factor of the environment when our people in the field are outselling, they're looking at it from a FIFO basis, and they've been able to actually improve FIFO gross profit margins for the 9 months up to 25.8% from 25.4% last year. So we think that's been very positive, very strong out there. But we are a LIFO reporter, and so we have had some LIFO expense. We're still within our 25% to 27% range that we talked about. In a competitive environment, we would expect to be closer to the lower end of that. So certainly, we'd like our margins to be better. But given the environment, we're pretty proud of where our gross profit margins are.

Okay. And maybe this is also the mix shift, like you said, because we had a lot of imports back in 2001 and you guys had much better margin, and I think that was just a differential mix shift. But in light of this competitive environment, what do you think it's going to take to see margins get toward the higher end or the middle end of that 25% to 27% range that you've historically been in?

I'll answer and then Gregg will confirm it, I think. I think the big catalyst still, Timna, is the volume that we've gained from non-residential construction when it kicks back in. We're still below historical levels, where we don't expect to get back to peak levels, I would say, at least anytime soon, but we do expect to be substantially better than where our volumes are now. And indications, as Gregg was talking earlier, we're looking at what -- and listening to what the mills are saying and doing, and that's very encouraging for us. So when we get the non-res back, that'll help pricing, that'll help demand, that'll help revenue dollars. And it extends even -- from a pricing perspective, it supports pretty much all carbon pricing, so -- and those volumes are pretty big, so we would expect that, that's the big catalyst to get back in there. And when prices go up, of course, we are in LIFO, like Karla said before, so they'll take a little bit away. But as Karla mentioned earlier about on a FIFO basis -- and the only reason we like to point that out is because that is the way that our people operate on a day-to-day basis. And for comparison purposes to other service centers that aren't on LIFO, we have to keep that in mind. But rising prices tends to -- you would expect, and I know we expect the same thing that you do, Timna, that, that should increase gross profit. And the reported gross profit percentages are down. But on a FIFO basis, again, the way that we operate, we're up from 25.4% to 25.8%, our gross profit dollars on a FIFO basis are up 15.5% on a 13.8% increase in sales over the 9-month period this year versus last year. So we do think that we're taking advantage as much as possible now of the better pricing, which is actually causing some reduction in our reported gross profit margins, it causes some LIFO expense, but it's also giving us more gross profit dollars.

Yes, and it is better pricing, but we're still down on a 9-month basis, which is the period we're talking to you about. Prices -- our average selling price was still down mainly because of our input costs, the market out there. And the other thing with -- to get to the 26% gross profit margin, pricing is a big factor that Dave was talking about, and fewer imports in the U.S. market would also help prices come up, so I think that would be another big factor for us to get closer to that 26%.

As Dave pointed out, and I won't elaborate any further other than the fact that the non-residential construction consumes so much steel in all products, whether it be mini-mill products, beams, structural steel tube, hot roll, the whole gamut. So normally, what we see our best margins when non-residential construction is doing well. And it's getting better, but it's not where we would like it to be.

Got it. Okay. And my only other question if I could was on -- we've seen that flat roll prices have been under pressure, of course, in the last couple of weeks with imports. But can you give us a little more color if that's also the parallel effect on long products and structurals and beams as you see it? And then on aluminum, you had mentioned last time that you haven't seen much of the benefit yet of rising prices. Have you got your inventories in line with where the prices are? I'm starting to see that pass-through, right? Just wondering if the benefit of rising aluminum and stainless prices, just generically, have been able to show up in your estimates yet or your results.

On the carbon side, and I'll let Bill address the aluminum and stainless side. Don't bother thanking me now. But on the carbon side, we are seeing some of the import pricing impact, the mini-mill and long products, the beams and whatnot, but not to the extent -- the pressure is not to the extent that it has been on the flat roll side. The mills have reacted a little bit, okay? But I have to give the domestics a lot of credit, okay? They've done a very good job in not overreacting where they don't need to be, and you know what, my hats are off to them because that's pretty tough because when you're running at 70%, 75% capacity in some products, which they are, the tendency to want to get up to 80% by lowering your price is certainly there. And they've really tried to control themselves and have done a good job, and we've encouraged them to do that as well. So we're buying some of that product from offshore as are a lot of people, but there's not been an overreaction. And for that, we're grateful.

Yes, Timna, on the aluminum and stainless side, I think we have seen an increase in our average pricing, and we've got our inventories in good shape, obviously, with what's going on with nickel pricing and the impact on stainless. I mean, our guys are really focused on getting their stainless inventories in good shape, and so -- hope that answers your question. But I think we really have been focused on the inventory levels, and we're in good shape there.

The next question is from Sam Dubinsky of Wells Fargo.

Just a follow-up on imports. How much do you think U.S. prices need to fall for imports pressure to mitigate? And also, do you have any opinion on the recent Russian trade case? And I have a couple of follow-ups.

I still am trying to figure out -- this is Gregg. About this Russian filing, okay, I'm not sure that I really understand it. So rather than comment on something that I really don't -- I'm not comfortable with, I'd like to kind of side step that particular issue.

I don't understand that, either.

Dave can make a comment on that. How far can prices fall? I think that right now hot roll is like -- to just take one product, hot roll is somewhere around the $640 mark. I think that the mills are trying to really keep it from -- keep it right in that range, $640 a ton or above. So I don't look for the prices to be falling substantially going forward. I think they're pretty much -- they might dip a little bit more, but I think that they're going to pretty much be relatively stable. And Dave, you're the Russian expert.

Yes, not really. Those are things that we don't spend a lot of time thinking about. But from what I've read and what I've heard, it's a positive thing. I don't think we're going to see the impact immediately. It will take some time, but any time that -- we've wondered why in the world so many Russian imports were coming into this country, especially with all the things going on over there between Russia and Ukraine, and I guess this was just the government's way to address another piece of that whole Russian [indiscernible] to their question. So it adds tariffs to somebody who's been putting a fair amount of cheaper metal in our country, and that's a good thing. But I don't think it's going to change things overnight.

Okay. Great. And then just in terms of end demand, I think energy and agricultural end markets are fairly controversial, I mean, in 2015. And I know you guys are bullish on one and more cautious on the other, but could you just remind us what percent of your revenue is energy-related? And what percent is ag-related?

Yes, so energy is about 10% of our revenue dollars. Ag, we don't have a good number on that. I would say probably...

In the low single.

Yes, low-single digits. Maybe a little south of 3%, probably.

Okay, great. And then my last question is I know there've been increases in transportation cost in the industry. I know your market tend to be more local. But are you seeing any of these issues, either getting raw materials or shipping product? How do you -- what's your outlook on transportation?

We haven't had any trouble. We own a lot of our own trucks, and we have our own drivers, and we like it that way because we actually see our drivers as salespeople, too. So we've always seen that and kind of control that, so we have not had issues. We're a large enough customer of all of our suppliers to get maybe preferential treatment when it comes to getting our trucks out of mills and what have you, so we really haven't seen any problems.

You even haven't seen it on receiving raw materials? It's still been pretty much stable?

Yes, yes.

Let me make one comment on ag, if you don't mind. It seems like ag is getting a bad reputation. And I have to tell you, our agricultural equipment guys that are doing a lot of work for those companies, all the well-known companies that we all know, are working really extremely well with them. There's the mining industry, has been affected, definitely. The ag equipment is -- it looks like it's going to go down a little bit, at least that's the forecast from some of the OEMs, okay? We understand that. But depending on what space you're in, okay, it's still doing quite well. And the equipment that's going to be produced that go into on construction industries, okay, they're forecasting a 20% increase, some of the OEMs, for that in 2015. And that's going to offset a lot of what you see in the mining sector. So from Reliance's point of view, because we do business in a broad range of those products, we're upbeat for 2015 in that industry, which consumes a lot of plate, a lot of hot-roll coil and sheet, okay, as well as mini-mill products and beams and structural, too. So I know it seems to be getting a lot of bad press, but from our point of view, and speaking from our guys in the field that are doing business in that industry, we're positive for 2015. So I just want to go on record and make that clear.

Yes, so just to be clear, you're saying that even though the ag segment is going to be a little bit weak, it's not completely terrible and maybe down a little bit? And then there other areas offsetting that as construction equipment? That's how your -- that's sort of your basic quick take there?

That's it. You hit the nail right on the head. God bless you.

The next question is from Aldo Mazzaferro of Macquarie.

Just a -- I mean a lot of my questions have been answered. I just had 2 quick ones on the -- I really think it's a great thing that you're buying imports more flexibly because I think it helps your margins longer term, gives you better view on the market. But do you assume any risk on the potential for a retroactive trade case that might result into tariff on some of these imports? Like, how do you protect yourself against that eventuality?

Yes. We're not the importer of record, Aldo, in our imports. Gregg mentioned we have a relationships with trading companies, and we work through them. So that's one of the reasons why we do not like to be importer of record.

But those guys, do they make arrangements with you that if there is a tariff, you might participate in helping them pay it? Or do they just cancel the trade? How does that work if there's a...

No, we...

Their risk.

Yes, that's their risk. We -- if something happens, that's on the trading companies, the domestic trading company, it's not on us.

All right. I would bet you're not buying any of that Russian hot-rolled coil that's going to have a 100% tariff.

I hope not. For those of our people listening, I hope not.

And so a totally separate question for Karla. Regarding the stock buyback, right, the plan that was extended, that plan had not expired yet, right? It was still in place.

It's actually due to expire at the end of this year at December 31, Aldo. So at our Board Meeting last week, we proactively went ahead and extended the plan so that we can have the opportunity to repurchase on an ongoing basis.

Right. And it doesn't seem like you bought stock in the quarter. Is there any way you...

Yes, the last time we were in the market was actually in 2008, but we certainly are, especially as Dave mentioned in his comments with the -- our stock price, where it is today, we certainly are looking at the best pieces of our capital and opportunistically taking advantage of having a program in place whenever it makes sense to do so.

Right. And you have a window also around the timing you report earnings where you can't buy stock in front of that or behind that? Is that...

Correct, yes. We've been blacked out in the market pretty much the whole month of October and...

We also get blocked out when we're doing material transactions, so any -- if there's any inside information that keeps any of us out of the market, it also keeps the company out of the market.

And our final question comes from Andrew Lane of Morningstar.

Just one question for me. As you mentioned in your prepared remarks, you're trending well below your previous CapEx guidance of $220 million, which you've now adjusted to a level below $200 million. Has some of the underlying projects been pushed back into 2015? And if so, should we expect a larger CapEx number in 2015? And then also, along these lines, would you be able to highlight any particular projects that'll receive the lion share of the spend over next year or so?

Our CapEx, we have not cut back or pushed back, okay, into 2015, any projects. The projects that we have ongoing for the equipment that we are buying, okay, is very much needed, okay? Sometimes, the reason why we -- I don't think we've ever gone overbudget, okay? And it's not because we're being ultra conservative or over bearish on our numbers, it's because projects change, okay? Sometimes, we think we need -- a manager thinks he needs a large piece of equipment. We were looking at -- I was just looking at one yesterday, as a matter of fact, $15 million. And the $15 million, which is in that $220 million budget, I just can't get over that. It's got to be reduced significantly. So we've been discussing that over the last few months. And basically, yesterday, that isn’t going to happen, period, so...

Another good example of being kind of under the budget is we had -- and we've been looking for a piece of property in the East Coast to build a facility because we couldn't find anything that existed, and so we had a pretty sizable number in there to buy land and build a building. And lo and behold, we ended up finding a facility that was not on the market but came on the market, and we were able to acquire that for substantially less money than what we had anticipated spending.

About 1/3 of what we had, and then that was another $15 million that we add in that particular project. And for the building, I think we paid $6.5 million.

There's also a timing impact, too. So for instance, if we were going to build a new building or purchase a large piece of equipment, let's say that the total spend was going to be $10 million. We put that whole $10 million in the 2014 budget. But if we don't make our first payment, place the order or start construction until October or November, we're not going to probably pay the full $10 million in 2014. Even though we're still moving forward with that capital expenditure, the timing of the payments could fall into 2015 for certain projects.

And as far as the 2015 budget, we're -- we don't have those figures in yet. We won't have until the end of the year. But I would guess even with the recent acquisitions that we've made, they will not -- our budget will not be over $220 million.

I would now like to turn the floor back over to Mr. Hannah for any additional or closing remarks.

Great. Thanks again for all of your support and for your participation in today's call. We'd like to remind everyone that in November, we'll be in New York City presenting at the Cowen & Company Global Metals, Mining and Minerals Conference and then later in the month at the Goldman Sachs Global Metal and Mining and Steel Conference. We hope to see many of you there. Thanks again, and have a great day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.