Reliance Steel & Aluminum Co. (RS) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Reliance Steel & Aluminum Co. Fourth Quarter and Full Year 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, Investor Relations. Thank you. Ms. Miyamoto, you may now begin.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss our fourth quarter and full year 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. Reliance achieved solid growth in 2014, and we're pleased with our strong operational execution throughout the year. Our annual sales surpassed $10 billion for the first time in our 75-year history and were up 13.3% from 2013. Operating income increased 34% on a FIFO basis compared to 2013, reflecting another strong performance by our managers in the field, and our net income of $371.5 million was up 15.5% in 2014 compared to 2013. Demand in the fourth quarter reflected the normal seasonal slowdown caused by fewer shipping days due to holiday season closures and holiday-related closures by many of our customers. However, with the exception of the energy markets, underlying demand momentum in the fourth quarter remains strong. Reliance's sequential quarter, 5.3% reduction in same-store tons sold, outperformed the MSCI Industry average decline of 7.6% in the quarter. Reliance also significantly outpaced the industry for the full year, with a 6.1% increase in same-store tons sold in 2014 compared to the MSCI Industry average of 4.2%. Our outperformance of the industry reflects our commitment to customer service, as well as our continued investments in organic growth and acquisitions resulting in increased market share. Although metals pricing was generally stronger in 2014 than in 2013, fuel pricing was constrained by historically high levels of imports, supported in part by a strengthening U.S. dollar. This, plus the effects of significant decreases in the price of scrap and other steelmaking raw materials during the 2014 fourth quarter, resulted in falling steel prices that have continued into 2015 and have negatively affected our gross profit margins. Reliance average price per ton sold was up 0.4% for the 2014 year compared to 2013, but our 2014 fourth quarter average selling price was relatively flat, down 0.1% from the prior quarter. Although we were able to maintain our average selling price through the fourth quarter, steel pricing continues to deteriorate, and we expect continuing downward pressure on pricing in the 2015 first quarter. Despite significant competitive pressures in the marketplace, we maintained gross profit margins of 25.1% and an operating profit margin of 5.9% for the 2014 year. Our consistent execution reflects our commitment to remain highly focused on managing all aspects of the business that are within our control, which continues to mitigate much of the impact from challenging market conditions. Fourth quarter net income attributable to Reliance was $92.3 million or $1.18 per diluted share. Earnings per share as reported were down 2.5% from $1.21 in the previous quarter, but up 49.4% from $0.79 in the fourth quarter of 2013. Our 2014 fourth quarter net income attributable to Reliance included certain one-time items, with benefits from a $12.7 million pretax gain related to the sale of some noncore real estate and an $11.4 million pretax gain from the acquisition of additional interest in our toll processing joint venture in Mexico. These gains were offset by certain acquisition-related charges and other miscellaneous settlement costs for a total nonrecurring net gain of $13.2 million after-tax or $0.17 in earnings per diluted share, resulting in 2014 fourth quarter non-GAAP earnings of $1.01 per diluted share, which were up 7.4% from the fourth quarter of 2013. Other items impacting the quarter that were not anticipated at the time of our fourth quarter guidance included a LIFO charge or expense of $24.5 million, which was higher than we had estimated by $14.5 million pretax or $0.11 per share. This was offset by lower-than-anticipated income tax expense of $4.8 million or $0.06 a share. Considering these items, our non-GAAP earnings per diluted share would've been $1.06, solidly in our guidance range of $1 to $1.10 per diluted share. Since our IPO in 1994, we've completed a total of 59 acquisitions, including 3 in 2014. During the fourth quarter of 2014, we completed the acquisition of Fox Metals and Alloys, a Houston, Texas-based steel distributor, specializing in alloy, carbon and stainless steel bar and plate products, primarily servicing OEMs and machine shops who manufacture or support the manufacturing of equipment for the oil, gas and petrochemical industries. Over the years, Fox has built a reputation for providing outstanding customer service and being a trusted supplier in the Houston and Gulf Coast region when critical supplies are needed on a timely basis. Fox had 2013 annual sales of approximately $50 million and fits nicely into our portfolio of complementary companies servicing the oil and gas markets. Going forward, accretive acquisitions will remain an important part of our overall growth strategy. 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, with end-market exposures that support our diversification strategy. And acquisitions are not the only aspect of our strategy to grow our business and return value to shareholders. During 2014, in addition to funding the acquisitions, we spent $190 million for capital expenditures to support organic growth initiatives. We repurchased $50 million of our common stock and paid regular dividends of $109 million to our shareholders. In February 17, 2015, our Board of Directors declared a regular quarterly cash dividend of $0.40 per common share of stock, an increase of 14%. The dividend is payable on March 27, 2015, to shareholders of record as of March 13, 2015. Reliance has paid quarterly dividends for 55 consecutive years, and we've increased the dividend 22x since our initial public offering in 1994. In October of 2014, our Board of Directors approved an extension of our existing share repurchase program to December 31, 2017. During the fourth quarter, we repurchased a total of 759,800 shares for about $50 million on an average price of $65.80 per share. As of December 31, 2014, we had approximately 7.1 million shares or about 9% of our total outstanding shares available for repurchase under our share repurchase plan. We generated $356 million of cash flow from operations in 2014, and although pleased with our overall financial position, we see opportunity to reduce our current inventory levels. Our healthy balance sheet and confidence in our operational execution provide a strong foundation for us to continue to invest in the growth of our business, while at the same time returning value to our shareholders through dividends and share repurchases, especially given our current share price. As part of our commitment to strong corporate governance practices, last month, we announced that Mark Kaminski, a member of Reliance's Board of Directors, was elected as our independent Lead Director effective January 15, 2015. Mark succeeds Doug Hayes, who will remain a member of Reliance's Board. I'm pleased to welcome Mark as our new Lead Director and thank Doug for his outstanding past service. Turning to our outlook. For the first quarter of 2015, we expect the U.S. economy to continue to improve throughout the year. Despite current pressure on the portion of our business directly servicing the energy market, estimated at about 8% to 10% of our total sales, lower fuel prices and energy costs are expected to drive overall improvement in the U.S. demand. The historically high levels of metal being imported into the U.S. are expected to continue, given the strong U.S. dollar and weaker economies in other parts of the world, which will continue to put downward pressure on steel prices. Due to the normal seasonal trends, as well as the improving demand environment, we currently expect higher tons sold in the first quarter of 2015 than in the fourth quarter of 2014, but lower average selling prices and margins, resulting in non-GAAP earnings per diluted share in the range of $1 to $1.10 for the quarter ending March 31, 2015. 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 market conditions. Gregg?

Thank you, Dave, and good morning. Overall, we were pleased with our performance in the fourth quarter. Our tons sold on a same-store basis were up 4.4% compared to the fourth quarter of 2013. Demand in most all the industries we support were relatively strong, with the exception of the energy market. FIFO gross profit margins fell to 25.1% in the quarter from 25.8% in the third quarter. Selling prices were under a great deal of pressure, particularly in carbon steel products, due to at or near record imports, a rapid decline in raw material prices and high inventory levels at service centers. We are very proud of our managers in the field keeping our FIFO margins in the 25% range given the competitive landscape I just mentioned. With regard to inventory, we reduced our FIFO inventory by $175 million in the fourth quarter compared to the third quarter and turned our inventory 4.4x in tons for the year. We are not pleased with our turn at this level and plan on doubling our efforts to improve our turn. From an end-market perspective, automotive, serviced mainly through our toll processing operations in the U.S. and Mexico, is very strong, and we believe this will continue. Energy, that being oil and natural gas, has begun to slow down due to the severe drop in oil prices. We have begun the process of reducing our expenses as well as our physical inventories to better align ourselves with the decline in demand. Aerospace 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. Heavy industries such as rail car, truck trailer, shipbuilding, barge and tank manufacturers, wind and transmission towers, as well as bridge fabrication, are all doing well. Agriculture and construction equipment have come off the peak of 2013, but we are still quite busy servicing this segment of the economy. Nonresidential 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 throughout 2015. As for pricing on carbon steel products, flat roll has been under pressure, as has plate, since the September time frame and continues to be as we speak. Pricing on structural and mini-mill products has just recently come down, mainly due to the drop in scrap prices and high levels of imports. Given the strength of the dollar and our economy, the U.S. continues to be a prime target for exports. As for aluminum, Midwest spot ingot is trading in the $1.05 to $1.15 per pound range over the past 6 to 7 months. Demand on general engineering aluminum plate is strong, with domestic lead times 7 to 10 weeks. Several price increases were announced in the second half of 2014, and yet another for shipments in March of this year, all of which have held. Demand on common alloy aluminum sheet is strong, and pricing on this product follows ingot. As far aerospace plate, demand is strong and lead times are pushing 20 weeks. A price increase was announced in the fourth quarter, followed by another increase for April. All these increases have held as well. Stainless steel nickel surcharges began the year at $0.76 per pound and are currently trading below $0.70 per pound. Demand for sheet and bar products is still strong and domestic lead times are 7 to 10 weeks. To conclude, we are proud of our accomplishments in 2014. Our balance sheet is strong to support acquisition activity, and our organic growth initiatives are coming together nicely, with year-over-year tons sold on a same-store basis up 6.1%. We believe, except for the energy business, the major industries that we support will continue to improve as 2015 progresses and we will benefit, in turn, from their growth. I will now turn the program over to Karla to review the financials. Karla?

Thanks, Gregg, and good morning, everyone. Our 2014 annual sales were a record $10.45 billion, up 13.3% from 2013, with a 13% increase in tons sold and a 0.4% increase in our average selling price. Our same-store 2014 sales of $8.5 billion, which excludes the sales of our 2013 and 2014 acquisitions, were up 6.7%, with a 6.1% increase in tons sold and a 0.6% increase in our average selling price. Our fourth quarter sales of $2.58 billion included a 4.4% increase in tons sold and a 6.4% increase in our average selling price compared to the 2013 fourth quarter. When comparing to the 2014 third quarter, our sales were down 4.7%, with a 4.9% decrease in tons sold and a 0.1% decrease in our average selling price. The sequential decrease in our tons sold was relatively consistent with the normal seasonal slowdown experienced in prior years. While sentiment regarding continued demand momentum was more positive than in the past few fourth quarters, the pricing outlook going into 2015 was weaker. This pressured our gross profit margins in the 2014 fourth quarter with a decline of 70 basis points in our FIFO gross profit margin compared to the prior quarter. Our reported gross profit margin for the 2014 fourth quarter of 24.2% was down from 26.2% in the 2013 fourth quarter and down from 25.1% in the 2014 third quarter. The weak pricing environment, along with the continued high level of imports, has increased competitive pressure in the market, especially during the fourth quarter when our competitors were trying to reduce inventory levels before mill prices declined further. Our LIFO adjustment for the 2014 fourth quarter was a charge or expense of $24.5 million or a negative $0.19 per share compared to a credit or income of $12.7 million or a benefit of $0.10 per share in the 2013 fourth quarter. And in the 2014 third quarter, we had LIFO expense of $20 million or a negative $0.16 per share. Our 2014 full year LIFO adjustment was a charge or expense of $54.5 million or $0.43 per share compared to a LIFO benefit or income of $50.2 million or $0.40 per share in 2013, a swing of $0.83 per share. When we last spoke to you in October, we estimated the full year LIFO expense of $40 million or a $10 million charge in the fourth quarter. Although mill pricing fell during the quarter, our inventory cost on hand did not trend down at the same rate, as we were not purchasing the lower-cost inventory given our efforts to reduce our on-hand inventory levels and our belief that pricing would continue to decline in the 2015 first quarter. As a result, we booked $14.5 million or $0.11 per share more LIFO expense than we had anticipated in our fourth quarter guidance. Our 2014 SG&A expenses increased by 9.2% on a 13% increase in tons sold and reflected 17.1% of sales in 2014, down from 17.8% in 2013. On a quarterly basis, it is most meaningful to evaluate our non-GAAP SG&A expenses as a percent of sales of 17.1% in the 2014 fourth quarter, 18.3% in the 2013 fourth quarter and 16.9% in the 2014 third quarter. Our increased volumes in 2014 over 2013 reduced our SG&A expense as a percent of sales. We believe we have substantial leverage in our existing cost structure to absorb additional volume, which will reduce our SG&A expense as a percent of sales. However, lower selling prices will have the opposite impact on SG&A expense as a percent of sales. We have a highly variable cost structure, with approximately 60% to 65% of our SG&A expense related to personnel costs. Given the current environment, we will be addressing costs at all of our locations, most notably at our energy-related locations. We will take the appropriate actions to reduce costs, but not at the expense of our customer service, quality or safety. And we believe that demand will continue to improve, and long term, there will be energy business. 2014 operating income was up 11.9% from 2013, and our pretax income of $546.3 million was up 14.2% compared to 2013. Our effective income tax rate for the quarter was 26.6% compared to 33% in the 2013 fourth quarter and 25.7% in the 2014 third quarter. Our full year rate for 2014 was 31.1% compared to 32.1% in 2013. The decreases in our tax rate in the third and fourth quarters of 2014 were primarily due to the resolution of various tax matters. We currently anticipate that our full year 2015 effective income tax rate will be in the range of 31% to 32%. As mentioned earlier, our quarterly results include certain one-time charges that make comparisons between 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 fourth quarter was $79.1 million or $1.01 non-GAAP earnings per diluted share, up 7.4% from $0.94 non-GAAP earnings per diluted share in the 2013 fourth quarter and down 24.1% from $1.33 non-GAAP earnings per diluted share in the 2014 third quarter. A reconciliation of GAAP earnings to non-GAAP earnings is provided in our earnings release issued earlier today. During the 2014 fourth quarter, we generated cash from operations of $193.2 million, an increase from $120.3 million in the 2013 fourth quarter. Our full year 2014 cash from operations was $356 million compared to $633.3 million in 2013. Given the improved business conditions in 2014 as compared to 2013, we increased working capital to support both higher shipment levels and higher metals pricing, which caused our cash flow from operations to decline. However, our focused efforts on reducing inventory levels in the fourth quarter, as well as reduced receivable levels due to the normal seasonal shipment decline, generated significant cash flow in the quarter. We continue to manage our receivables well, with our accounts receivable day sales outstanding rate as of December 31, 2014, at about 41.4 days, fairly consistent with our 2013 rate of 41 days. Our inventory turn rate at December 31 was 4.1x based on dollars and 4.4x based on tons, a slight decrease from our 2013 rate of 4.2x in dollars and 4.5x based on tons. Because of the competitive environment and high levels of imports in the U.S. market, we had purchased a higher-than-normal level of import product, somewhat impacting our turn rate. In addition to our $177.5 million FIFO inventory reduction in the 2014 fourth quarter, we further reduced our inventory levels in January 2015 and used the cash generated to pay down $146 million on our credit facility in that month. We invested $56 million for capital expenditures during the fourth quarter, bringing our full year 2014 spend to $190.4 million, the majority of which relates to growth activities. Our 2015 CapEx budget is $200 million. Our total outstanding debt at December 31, 2014, was $2.32 billion, up from $2.1 billion at December 31, 2013, resulting in a net debt-to-total capital ratio of 35% compared to 34.3%. We had $675 million outstanding on our $1.5 billion revolving credit facility as of December 31, 2014. As Dave mentioned earlier, our quarterly cash dividend, coupled with our ongoing share repurchase program, demonstrate our confidence in Reliance's growth prospects, strong cash flow generation and our commitment to shareholder returns. That concludes our prepared remarks. Thank you for your attention. And at this time, we would like to open the call up to questions. Operator?

[Operator Instructions] Our first question is from Michael Gambardella of JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I just have a couple of questions on the current market conditions. You talked about the obvious pressure in the carbon sheet plate market. Have you seen, currently, right now, in today's market, has the hot-rolled price that you're seeing dropped under $500 a ton?

It's somewhere -- this is Gregg, Mike. It's hovering around the $520, $530 range. Could you get it at something less than $500? I guess if you bundled sometimes you might be able to, but that's not what we do. So we're somewhere in that $520 to $530 range. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. And you didn't mention -- I don't think I heard you talk about the stainless sheet market. Could you give us a little snapshot of what's going on there with pricing?

Yes. Michael, it's Bill Sales. Demand has stayed really good. We did see a little more import activity in the fourth quarter, and there's been pressure on pricing on the stainless commodity side. I think some of that was import product that had been going in -- planned to go into other markets, but ended up coming into the U.S. because it was a better environment. So -- but the demand side on stainless has stayed really strong. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: How much pressure have you seen on pricing?

In the fourth quarter, we definitely saw some pressure on pricing. I'm not exactly sure what percentage that would be, but we think that it's still somewhat short term. Some of that was driven by -- we saw a fairly significant drop in surcharges in Q4, about a $0.16 per pound drop. We think that we're either at or close to bottom on the surcharge side based on where nickel pricing is today. So we think we're going to get some pricing momentum going forward on the stainless side.

And last year, there were 3 base price increases on stainless, and maybe it could be argued that maybe one of them got a little bit...

Diluted.

Yes, maybe even eliminated. But it was positive to see those 3 base price increases that took place last year, and at least 2 of those increases have held. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: All right. And then with -- just overall, with your entire business, looking at the whole book of business right now, I know you have natural lags in terms of how you realize the spot pricing, weeks, months later. If we would take a snapshot right now of where the pricing is in the marketplace today and your normal lags on realizing those prices, would you say that your second quarter earnings would be lower than the first quarter, all else being equal?

I don't think we would anticipate that, Mike. Second quarter, from a demand standpoint, is usually our best quarter. And it still does look like pricing would be under pressure for a lot of the products that the guys just talked about then. And we did experience in the month of January of '15, our average price per ton shipped was down about 2% compared to December, but it's also up 2.5% compared to a year ago, January a year ago. So if demand -- we're in a really kind of a strange environment here, where demand is actually pretty strong outside of the energy-related businesses, where we have seen things fall off. But despite the higher demand, prices have come down and they've come down significantly. So I think we're doing pretty well. As Gregg mentioned in his comments about maintaining our gross profit margins, we do think they're going to be under pressure in the first quarter. They will drop, no doubt, from the fourth quarter. But we're doing our best to hold on to as much of it as we can.

And remember on the timing on the pricing also, Mike, that if pricing in the first quarter would stabilize or if there were to be any increases announced with our customer base, that's when we try to go out and start getting the increases earlier rather than waiting to get that in our inventory.

And then let's not forget also about one of the things that hurt us a bit last year when you compare to 2013, we had a $100 million swing in LIFO expense. We had approximately $50 million of expense last year, $55 million when we had $45 million or $50 million of income the year before. And if pricing does drop down like that, then the typical move is that LIFO comes back and kind of helps you out a little bit anyway. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: And last question, are you seeing any negative impact from the West Coast shipping problems in terms of bringing in product that you had ordered a while ago?

Mike, this is Jim Hoffman. Actually, we're not. The way we buy product on the West Coast, the way they ship the product in, coils and plates end up in what they call bulk storage, and they're able to get that product out. The biggest problem on the West Coast is in the container. Materials in containers, they're having a hard time getting those off with the slowdown with the union issue over there. But so far, so good, on the products we bought.

Basically, none of the products that we acquire are in containers. They're all in bulk storage.

And also, we just don't buy much import, so that's the other thing. We were a little heavier than normal last year for a period of time, but we're not now.

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

Also, if I may, a shout-out to Mark Kaminski, so congrats, if he's listening in. So I've got a couple of questions here. And I guess, first of all, I'm curious to hear what your thoughts are about how much pain do you still think is left to go with respect to carbon steel prices? And also, if you feel -- how do you feel about the competitiveness of imports now today that the spreads have come in somewhat? Do you see yourselves continuing to increase the proportion of imports in your overall buys going forward?

Yes. I -- we do not think that we're going to increase our import purchases. As a matter of fact, Tony, I think it's going to back to more historically levels below 5% of our purchases. The spreads have narrowed. That's a very big positive for us. As you know, we prefer to buy domestic, and it helps us turn our inventories and all that. So we just -- the spreads have definitely narrowed, and we think that we will continue to buy less import going forward.

Okay. And then what are your thoughts about the potential for trade cases? Everybody's trying to figure out when this is coming and injury has to be present, but how confident are you? Do you think the mills have a solid case?

You probably know more about that than we do, Tony. We're not experts in that. We appreciate it if it happens. But we're hearing the same thing you are that the mills are gearing up to make those cases. What I heard as recently as yesterday that it was -- April was in their sights, but I have no idea. As Dave just mentioned, it will be a grand day when they do file those cases, but as of today, we're just hearing the same thing as you are.

And that can certainly prove damage here. One of the largest producers in this country have shut down their tubing mill because of the fact that there's so much OCTG product coming in. So if they wanted to file, they could definitely prove some damage. So we'll see.

Right. And you guys indicated, Gregg, you indicated, and I think Karla, too, that overall, you're not pleased with your inventory levels, but I wonder is it more of a general kind of industry comment? The MSCI data inventories seem to be kind of flattish to neutral on the latest data, maybe down a little bit. But how long do you think that the destocking is likely to persist overall?

I think that it'll probably more or less clean up by the end of the first half. As long as pricing is going down, there'll be some destocking, Tony. So -- and compared to historical levels that the industry's inventories aren't bad. We don't think that it's -- I guess we view it a little bit differently than maybe a lot of you guys and riding with these little moves of 2/10 or 3/10 of a month's supply on hand or something like that, but I don't think the inventories in the industry are -- we'd like them to be lower, I think all of us would, but they're not way out of whack like they used to get years ago when they would be way, way off base.

More of the problem is the imports. And I don't think -- and Karla probably would know more than me, but I'm not sure that the traders' inventories are reported in the MSCI. And the traders, they must be swimming in some cases, that's for sure. So once that cleans itself up, you'll see margins go back up and things get back to a more normal historical level.

Got it. And then just to kind of switch a little bit over to energy, are you guys seeing any signs of leakage of the effects of lower oil and drilling activity into other parts of the economy at this point?

It really hasn't affected. We would anticipate that like in transportation, tanks, railcars, it might be affected. But those -- our guys in the field have told us that those orders are placed well in advance and that, for us, we even see that it will probably well into '16, rather than 2015. Is that fair, Bill?

Right.

So we have not seen that spill into the other. And that's a very good question because we're asking that question all the time ourselves internally, but the answer is, at this point, we have not.

So it may have a longer tail here is kind of what I'm hearing you say.

That's correct.

All right. And then I've got a question, as I always try to do, on alloy plate. And you made some comments, Gregg -- we heard a couple of mills and in some other conversations we've had, the mills are talking about the overhang continuing this year, they're hesitant to project any type of price improvement, which is typical. But I think I heard you say that there's been some price increase announcements. Maybe I got that confused with some other products you may have been talking about, but could you help me understand what am I missing and where's the disconnect?

Okay, I'll let our expert, Bill Sales, elaborate on that. But there has been -- on the aerospace side, there was an increase announced in the fourth quarter, and there was another one that goes into effect in April of this year. So that's where I'm going to withdraw and give it to our expert, Mr. Bill.

Our view is we really think most of the plate overhang is behind us. We're looking at extended lead times out 20 weeks. There's kind of a new level of tightness on the supply side. That didn't mean that there's still some inventory out there particularly tied to certain programs. But I think, generally, the outlook on aerospace is bright, and we think 2015 is going to be a better year. And I think we've got -- with these price increases, it looks like we're going to have support across the board for those increases. So we're expecting to have some pricing momentum going into 2015.

Bill, is that aero heat treat? Or is that general engineering? Or...

My comments are really specific to aerospace. We think some of that could bleed over to the general engineering side, but that particular market is still very competitive. And as you know, a lot -- there's a much larger supply base there.

Right. Are you seeing -- in that side of the market, what would you say about imports? Are they accelerating? Are they stabilizing or declining in that part of the market?

Yes. I think they're fairly stable. I think we've seen some of the bigger import players are not as active but, unfortunately, that kind of gets offset by some new players that kind of come into the market. So I'd say, overall, import activity there is relatively stable.

What about the Chinese and their recent activity? What are you seeing there?

Yes. We are seeing some new players out of China, and so that's -- we're seeing some pickup there where we've seen some dropoff from some of the other import guys.

The next question is from Sohail Tharani of Goldman Sachs.

I want to ask you on the energy side, do you -- I mean since the Jorgensen and since then you have done quite a bit of acquisitions. So your product mix is now much wider even in the energy market besides just the specialized charge you used to do. And I was just wondering in the market, we know that OCTG has dropped off very quickly. But if I look at your other products, including the Jorgensen product that runs through your boxes, is there a long lead time should we think of that's sort of coming slowly through the year and you might be okay in the first quarter in some of those products and [indiscernible] got a little bit of more decline as we go through the year?

We've seen -- Jim can comment also more specifically. But we've seen our real pure energy businesses, even in the month of January, their revenues have dropped down, what, Jim, 28%, 30%.

It depends on the company.

Depends on the company. Now Jorgensen has not because that's -- it's a smaller part of Jorgensen's business for sure.

Sohail, this is Jim. If you go company by company, some of our companies will be affected not as severely as others. For instance, one of our larger companies, the product that they sell goes into product above the wellhead, if you will. So those existing rigs and wells that are out there, they'll continue to pump oil and gas, and the products they use are for maintenance and those types of things. Other companies we own, smaller ones, they're almost -- 80% of their product goes downhole and those are the ones that will be affected the most. When they cut the drilling back as far as they have. Some of our customers have basically cut their spending back 35%, well, that affects these smaller companies a lot. But we react to it. We see these things coming. We've had a plan in place since, basically, October on what to do. And we've taken significant headcount out in those companies. So we've been through this before. It's just another one. But we have to go very company-specific to give -- how long is it going to be down, your guess is as good as mine. I personally think it's just on hold.

But we expect to see the hit in Q1 of '15. We could see a little more after that, but we're going to see the impact mainly in the first quarter.

I was just going to say the most important thing is that we have been through this numerous times in different environments where you have a significant dropoff in your sales. So the best and most important thing for us to do, and we do it very, very quickly is we adapt our expenses, which is typically our headcount, and we go immediately after our supply chain and make sure that our inventories get cut back as quickly as possible. That's where you'd get hurt. So where everything that we can control in that environment, I think, Jim, in particular has done a very good job with his people in making those actions.

Okay. Jim, what's your comment -- I don't know if I missed a part of the call, how are you seeing the demand in January in sulfide, in February compared to last year?

Overall, we didn't really say in the prepared remarks, Sohail, so you didn't miss it. But I can tell you that January compared to a year ago, our sales dollars are up a little less than 2%. Our tons sold, tons shipped this January compared to January a year ago were down a little less than 2%, and I would point out there that I think the MSCI average is down 3.4% from January to January. And our average price per ton shipped is up 2.5% compared to last January, but it's down 2% compared to December. So when you look at kind of the trend, the pricing has come down. A 2% drop from December to January is kind of a big deal.

And also, if you remember, Sohail, last year for Reliance, our first quarter volumes were very strong especially in the month of January. I think we were all -- a year ago, when we were talking to you guys, we were all pretty surprised at our January shipments have been as high as they were. In the first quarter last year, our tons sold were up like 8.2% compared to the year prior, I think well ahead of the industry averages then. So it's a tough comp.

Yes, it's a tough comp. And actually, I think we were reasonably pleased with how January looked given everything that we know and we hear that's going on in the marketplace.

And last thing, what was your LIFO expectation in the first quarter guidance?

Yes. So typically at this point in the year, it's so early. We don't have an actual number really baked in. But certainly, prices are trending downward at this point. So we would anticipate there to be some LIFO income based on current expectations, but remember, we're measuring against December 31, 2015 prices compared to January 1, and that's quite a ways out right now. But we did -- we're looking I think at about $5 million of LIFO income for the first quarter at this point.

So that's baked into your guidance, is it correct?

Correct.

The next question is from Matt Murphy of UBS.

Just a question on the return of capital. So you upped the dividend. I'm just wondering how you feel about repurchases as a result. Do you see a slower pace now that you're paying more through dividend? Or is it your -- if you like the stock at 65, you like it more at 55 in terms of repurchasing.

Well, yes, yes. Yes, definitely. We did repurchase $50 million of stock in the fourth quarter, as you know. And as you pointed out, that was at 65 and some change and it's pretty darn attractive to us right now. So we still have authorization out there, and on an opportunistic basis, we would expect that we'll continue to look at that.

Sure, okay. And then I guess just with respect to other uses of capital, does the current business environment make it easier or harder to do deals?

In terms of M&A type deals?

Yes.

It makes it a little more difficult because most people in our industry like to think about if they're really contemplating a succession and ownership for their business, they like to do it when their numbers are looking the absolute best that they could look. And most of the deals we've done over the last, really, since 2010 have been related to the energy side, and that's been the bulk of the deals that have been out there. Now we did get -- and because energy was a good story to tell. Last year, we also did a very nice transaction, a good-sized transaction also on the aerospace side. But aerospace was a good story to tell, and we think that it continues to be a very good story. The regular general line service centers, there just hasn't been that much activity. I mean, certainly, we did the Metals USA transaction a couple of years ago, but that was a different situation because it's a public company and you can kind of make deals happen when there's a public company target out there. But the private companies, they're not going to sell unless they're ready to sell. And I think when the environment is a little more difficult and we haven't had full recovery particularly in nonres since 2009. And so many of the businesses, I mean it's a majority of our business, it's the majority of the business in the whole industry and when -- nonres hasn't come back, so there hasn't been a really outsize performance in the industry and people have been reluctant to put their companies out there when the numbers aren't real terrific. Now we try to convince them that we're not going to price them based upon what they're doing today or what they did yesterday that we'll look at kind of how they perform through a cycle. But still, there's still the feeling that we won't get top price unless we're showing you very good numbers. So long answer to your question that it kind of holds down activity, I think, when things are a little more uncertain.

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

So you mentioned that you had yet to see the adjustment in long products and certainly the sharp decline in scrap only happened recently. Can you talk us through what has happened to your margins and volumes and general activity when you see sharp scrap prices adjustments?

Well, are you talking about long products like mini-mill and beams?

Correct, yes. You have a decent amount of exposure but you don't do a lot of flat-rolled carbon, right, you do mostly -- within carbon, you're more long products. And even plate, which tends to trade a little bit more with scrap depending, but just want to get a perspective from how this tends to affect your business.

Well, the effect is, is that it does have a downward pressure on our pricing, no question about it. And with that, I think you were the first to report actually that there was going to be a $100 a ton drop in scrap, which everybody was talking $40 to $50. And when I heard your $100, I started to scratch my head. But lo and behold, about 3 days later, it was $105. So I don't know who your sources are, but whoever they are, my hat's off to them. That was good. But nonetheless, that $100 certainly added impact on the long products, which had held off. We saw prices on steel dropping from September, expected, in particular on plate and flat-rolled products, and we did not see any price pressure from the producers until January. And then we saw a decline in January and another decline in February, but they held off quite -- for 3, 4 months longer than the sheet and plate market. But to get right down to the nuts and bolts, whenever you see a decline of $100 a ton, which leads to $40, $50 a ton decline on -- from the producers on our products, it does put the pressure on price. The good news is, is that it lowers the spread between domestic and foreign. So that would, in theory, and I think we'll start to see it, okay, going forward, there's going to be less of the scrap coming in because of the spread being less. The only thing that can offset that is the strong dollar.

Yes. And to Gregg's point, Timna, our prices -- our customers are going to expect some lower pricing. We still have the higher cost inventory. So there's a bit of an impact on margins for a temporary period. As Dave mentioned earlier, we have a little LIFO to potentially offset that at Reliance. And the good news is we haven't seen that big of a price drop for quite some time, but demand -- overall demand is better now than the last time we saw a price drop like that.

Okay. So just to recap. So you can -- you might see temporary situation where if your customers catch wind of it that they want the lower price before you can replace that inventory, but that should be temporary. And so I just want to get a flavor for that how quickly you can adjust and if that's the 4.4 or on long products, it's more quick turns. And then along those same lines, is there anything else you can do to keep your dollar margin high? Because it seems like, and correct me if I'm wrong, your percent margin stays the same and it's consistent, but if you have a lower selling price, can you do something to offset the hit or -- and keep the dollar amount high?

Yes. Actually, Timna, when -- with a price decline like $100 a ton, we're not going to maintain the same margin percent at least during that period of adjustment. So how long does it last really will kind of depend upon whether or not price is stabilized at that level or we -- or the market thinks there are going to be further declines.

And right now, very honestly, we're hearing chatter that scrap would go down another $20, $30. Whether or not that's going to pan out, I guess we'll have to wait for your report to let us know.

The next question is from Aldo Mazzaferro of Macquarie.

You made a comment earlier that the cycle seems strange, David, at this point where you have demand looking relatively good in sectors other than oil and then pricing being hit. And it strikes me that kind of would suggest the dollar strength is really behind what's going on in pricing. And I wonder, you've been through a lot of cycles, but really, just from the last 10 years, the steel cycles have reached the highest highs and the lowest lows relative to, say, even 30 or 40 years. And how do you think we sit here? I mean I think you're going to say the demand side looks better than it was, certainly, in the last big downturn, but the dollar is obviously a bigger issue. And I'm wondering whether you see the dollar as a major root cause of what's going on or whether you see other things on the demand side that might be creeping up on us.

The dollar certainly has something to do with it, but I guess we concentrate -- we kind of look at more the dollar allows a lot of other things to happen when it gets stronger. And one of those big things that probably is more directly involved is it invites more import. And to the extent that scrap and other steelmaking raw materials are down, you combine that with the strong dollar and we end up with kind of a scenario that we're in today. And by the way, we much prefer this scenario, this environment where demand is good. Pricing might be weak with some of our products. And in some of our aluminum products, our nonferrous products, it's a different story. But that's kind of the beauty of having a diverse product base like we have here. But certainly, the majority of our business is carbon. There's pressure out there. It's related to the strong dollar, it's related to weak scrap, it's related to all the imports coming here because there's really nowhere else to go. And we're not economists, I'm certainly not an economist so I don't know what the root cause is. But if we get some recovery in other parts of the world in terms of economics, then I think that would be the beginning of some recovery with respect to raw material prices and also just improved steel and other commodity prices.

And I think we said consistently through 2014 that, based on the demand levels, if it would not be for the high level of imports we were seeing in the U.S., we thought pricing would've been higher last year and currently.

We've seen some products coming through United States that was actually designed to go into other parts of the world, but the demand in those parts of the world was sluggish. So they can -- certainly, the dollar has a profound impact effect on that. So it was destined for someplace else and it happened to be United States. One of the things that the dollar versus [indiscernible] also is the companies that manufacture. And export, it's a little bit more difficult for export.

Yes, to a certain extent.

Exactly.

Great. Do you think it is fair to say then that if the dollar stops appreciating here and you get -- you have a much narrower spread now between domestic price and the land and import price of most products, do you think the ink says that we just go forward with a reset at a lower price with a relatively same spread eventually as you get through your inventory adjustments and then you focus more on using your free cash flow to take advantage of the stock price and the acquisition opportunities?

Yes. I think so, Aldo. And the other -- really, the only other thing that's going to change that is strength in the economies outside of ours, and there's a lot of factors that go into that. But yes, I think you're absolutely right.

And I don't know if I could ask one more. In terms of your nonres exposure, Dave, can you remind us again, is it -- it's around the 20% of sales exposure? And I wonder if you could also just point out maybe if there's some big subsectors of the nonres market that you might be a little more exposed to than others.

Our exposure overall to nonres, Aldo, is probably closer to 30% than 20%. It's a bigger piece of it. When it's going well and relative to some of the other industries, big industries that we serve, we said in the past that it's been as high as about 1/3 of our business. But I think that now because it hasn't fully recovered than a lot of our other areas have, it's probably 30% or maybe a little less than 30%. In terms of concentrations -- we are, by the way, seeing some real improvement in our nonres business. When you look at our businesses that are really tied to that almost 100%, they had a pretty darn good year last year, best year they've had for quite some time.

As far as exposure, we're exposed on nonres throughout all of North America. I mean we've got a position in nonres everywhere. The strongest parts of the country here in the U.S. is the Northeast, the West Coast. California's strong, in particular, Northern California. There's a lot of building going on up there with some of the high tech companies that we're participating in. The Texas market has been strong, and I don't think that's going to stop just because of what's happening with oil. Those projects have been in place and funded for quite some time. We're going to see those LNG plants continue to be built and they consume a tremendous amount of steel, huge projects throughout the Gulf. So our companies, as Dave just mentioned, our companies that are in the nonres in 2014 had a better year than they've had since 2008.

The next question is from Phil Gibbs of KeyBanc.

Just had a question as far as the carbon steel import dynamics and when you think that import levels will start to moderate. I mean is it going to be March? Or are we going to be in May before we really start to see a move down in your mind?

Well, that's purely a guess on our part, okay, because we just -- it depends on what you read and who you talk to. But we think because of some of the spreads being narrowed, that there's going to be less of that coming into the country. But we'll just have to keep our eyes on the numbers. Our expectation -- I don't think it's going to slow up from what we're receiving, okay, in March, April. I think March, April is already on the water coming in. But you could see it begin to slow down from a receiving point of view sometime in that May, June, latter part of the second quarter, which means the offerings would start to become less as of today and March.

And given the fact that the service centers right now in the short term appear to be engaged in some destocking activity like yourself and what you did in January, are there a lot of service centers right now doing more business than usual with other service centers as they look to fill holes without necessarily going to the mill? Is that contributing to the fact that lead times right now at the mill level are short?

I can speak to -- I'll let Jim answer that, but I'll answer that as far as Reliance is concerned, okay? And if there's anybody on this call from Reliance, I hope you're listening because we did that quite a bit in the fourth quarter and for that obvious reason and did it affect the mill? I'm sure it did. But you can probably elaborate on it, Jim.

Yes. We do a lot of -- we actually do a lot of business. I think it's our fifth largest sector in other service centers. So when they start destocking somewhat, they start filling the holes with coming to some of our companies. So we do a lot of this year in, year out that it hasn't increase. I'm not sure if it has increased a significant amount. But like Gregg said, there's a lot of activity within the family of companies buying inventory from one another versus going to the mills. So we can get our -- some kind of inherent plus to have so many service centers under our umbrella. So we help each other out in these times.

Okay. I appreciate that color. And just had a question on what you're expecting in general for volumes, maybe organic or same-store volumes in 2015.

Yes. We haven't commented on that. Certainly, we're expecting, with the demand momentum we've seen for overall tons shipped by us, same-store to be a little better than they were in 2014. Generally, we think we would grow at GDP plus a little more based upon the investments that we're making in the company.

Yes. From a volume standpoint, we're a little more positive with regards to shipping out more than we did last year. The headwind, of course, is the pricing and that's on the carbon steel side.

And last year, same-store, we were up 6.1% in tons sold on same-store. But I think the best quarter we had was the first quarter, which was extremely unusual, so I wouldn't expect that our first quarter this year, we're going to blow the wheels off of last year.

Yes. First month of the first quarter, we were off, January a year ago.

How did the weather-related issues compare to last year right now? Because I know that there's been some hits in different parts of the country.

It's certainly less severe than a year ago, but we have lost some shipping days in January and February because of what's going on in the New England area and the Midwest. But assuming that, that doesn't continue right up until the end of the quarter, we should probably get materials shipped just later than when we had originally tried to ship it or wanted to ship it. And it does also have an impact on our expenses because people are still working and we're not shipping that product, and we have to move snow around and that kind of stuff.

So that overall, if you remember last year in the first quarter for Reliance, certainly, there was some of that impact but not like many other companies reported. And we're not expecting a big impact this year either.

I forget what percent of our business comes out of the affected areas, but it's pretty small with respect to the company as a whole.

The next question is from Sohail Tharain of Goldman Sachs.

Just want to ask you, Dave, how are you feeling, on a longer-term basis, the pricing, especially on the carbon side? You used a normalized number for internal benchmarking and also for acquisition. I'm just wondering, how do you see it? If you think that -- obviously, it's a cyclical industry, but with iron ore, coking coal prices where they are, it looks like -- at least iron ore can stay there dollar FX. Have you sort of adjusted your normalized price versus the last 3, 4 years of run where the steel price is well above 600 most of the time on the hot-rolled coil side.

We didn't adjust up.

No, no. And it's really -- right now -- we're kind of used to dealing in a market where there's price fluctuations. And right now, we happen to have some pretty good sized carbon price fluctuations. Is it a new norm? I don't think we're saying that $500 a ton material is new norm because we really don't expect the economies in the other parts of the world to stay where they are. And when they improve, then I think we could generally expect that, that would rise kind of the base price, so no. And the other thing, Sal, is most of our business is a quick turnaround business. So we're not making bets long term on where we think the price would be and trying to go out to customers and fix a price based upon what we think our cost is going to be. That's not our business. So we would certainly like to think that prices are higher, but they're not right now and we're reacting currently to the pricing levels. And if they stay low, we'll continue to react. And as Gregg mentioned earlier, we react through inventory management and expense control. And if prices start to go up again, then -- and which hopefully would mean demand would continue to be better, we'll react as well.

And when we value acquisitions, we're not valuing them based upon their projections long term or near term. We're looking at how they've done historically through both a peak and a valley, so to speak, so we try to look over the cycle. So that methodology should provide for corrections to interim pricing fluctuations.

Got you. And one last thing on the acquisition side, if you were to go, is there a particular product segment or geography you're looking for? I know you've just spent quite a bit of [indiscernible] qualitative acquisition in the energy side for the last few years. But what area do you think makes sense, obviously, because of the events of valuation and so forth, that what is -- what would you like to add if you have the opportunity?

If we had a plate in front of us, I think -- and you're right, we haven't seen it for years, we like to increase our energy exposure and also our aerospace exposure, and I would say it's at the top of the list right now because we have been successful in increasing the energy side to a point, and we're very happy with what we've done. And if there's an opportunity there that looks really good, we'll certainly look at it. Aerospace is an area and aluminum, in particular, that would be very attractive to us. So certainly, we'd like to pursue that. But we'll look at every opportunity that's out there on its own merits and kind of related to what we have in those products and those areas. So we wouldn't want to exclude anything. But if we had our choice, I guess we'd probably focus on some aerospace aluminum.

Yes. We've also been adding a little more on kind of higher value-add processing side. And so that's also still attractive to us.

And on aluminum, Dave, is this just the aerospace and specialty aluminum or even on the commodity aluminum?

The preference -- you asked the question what we would prefer. So what we would prefer would be the higher value stuff.

Yes, the more specialty stuff.

Your next question is from Sam Dubinsky of Wells Fargo.

Just a couple of quick ones. Just a follow-up on the acquisition question. You historically tend to buy high-quality companies, but some of your levered competitors are probably going to model through the cycle in a pretty stressed financial shape. Would you ever consider making a lower quality acquisitions if the price is right and you see synergies? And I have a follow-up.

We look at those things now, Sam. We do spend time and evaluate them. Would we ever consider it? Yes, we would consider it. It's not highly likely that we would actually pursue it, but we do spend some time looking at opportunities like that and really trying to figure out what will it do to us, how long will it take to fix it. And if it's attractive enough, then I think we would probably pursue it. But it depends -- that has a lot to do with the size of the transaction, too. And we don't really want to do a dilutive deal. We've said that for 20 years now that our intent is not to do dilutive transactions, and that's still true today. We don't want to do a dilutive -- we want them immediately accretive.

Great. And just a follow-up on the energy question. You mentioned that -- I think some of your customers' revenues is down 30%. Is that mostly volume? Or is that a combination of volume and price?

I think that -- I threw that number out there on Jim's behalf, but it was -- I was just looking at certain of our company's sales this January versus sales last January.

We've had major customers tell us that their capital expenditures budgets have been cut up to 30% -- 35%. So we just anticipate the activity to be down. And the pricing on the other side -- somebody asked about long products, if you look at -- in the energy sector, there's a lot of SBQ bar goes in there, and we haven't seen a price decrease there yet. That's been flat at a nice level. I'm not saying that it won't go down. But as of right now, they're busy. The SBQ bar guys, they sell a lot into the automotive sector and that's doing very well right now. So from a pricing standpoint, on SBQ bars or heavy-wall tubing, we haven't seen the reductions we have in flat-rolled products.

So it's definitely volume-orientated, not price.

Okay. And then my last question, just housekeeping. What's your tax rate and CapEx in '15?

Yes. So we're estimating our full year tax rate for 2015 between 31% and 32% and our CapEx budget for 2015 is $200 million. Once again, we think our maintenance CapEx is probably around $80 million or so, the remainder being growth type projects. And those things, each of those projects we'd look at during the year just because we put the budget in place, we're not starting to spend $200 million today. Each of the individual opportunities will be looked at, at a time we're ready to initiate the project and spend the dollars.

The next question is from John Tumazos of John Tumazos Very Independent Research.

First, do you expect your steel, ordinary steel revenue in 2015 will match the 2013 levels, which were, I guess, last year was up $800 million for 2013?

The ordinary steel. So you mean just carbon steel revenues?

Yes, sir.

So our -- I guess our pricing in 2014 overall compared to '13 was up only 0.4%. We're probably anticipating that prices will go down a little more than 0.4%. So on a consistent volume, it would be lower. But we do anticipate volume to be up, which should make up for it.

So your mix is so specialized that you don't expect to see double-digit price declines at your levels.

No, absolutely not, John.

Second question. As we read some of the statistics on monthly steel imports, 4.3 million short tons or the stainless category exceeding 150,000 tons in particular months, or the tubular volumes still being strong when the rig counts dropping over 5% a week, do you think those import numbers are accurate? And do you think that customers are taking title that they have steel? Or are there depots that's near some dock where the foreign company is holding the steel, dreaming someday there's a customer or some trader on their behalf is holding the steel. And some of the monthly stainless numbers are almost as big as the stainless market.

Bill, do you have an idea on the stainless?

John, we know kind of what we read in terms of the import and then to the extent we see offers...

No. I think we did see a fairly significant surge in stainless in Q4. We think a big part of that was material that was really destined for another part of the country, but there were some pending trade cases and that got redirected to the U.S. And so I mean we see the same numbers. And could there be some of that that's not going right to a customer, that's not going right into the market? Maybe. But they seem to be fairly consistent with the activity level that we see out there.

And haven't we, Gregg, on the carbon side, been aware that there's some unsold material that hit the docks?.

Yes. And it is being held by that traders. Yes. so it's not the producers, the traders. And on the tubing side, I think the majority of what we're seeing come in as OCTG. And OCTG in our company represents about $100 million in revenue, so it's a small portion.

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

I just have a quick follow-up on M&A. A quick question on M&A, just what opportunities do you see out there for toll processing on the M&A side?

Our toll processing opportunities lately have, really, for growth have not as much been on the M&A side as they have been on the organic side where we put a fair amount of CapEx money into expanding facilities. We intend to build a new facility in Mexico. So I think from an M&A standpoint, I'm not aware that we've seen a lot of opportunity out there.

We haven't. And Lord knows if we had seen it, you'd see it, Dave.

We have no further questions at this time. I'd like to turn the floor back over to Mr. Hannah for any closing remarks.

Okay. Thanks again, all of you, for your support and for participating in our call today. And we would like to remind you that in March, we'll be in New York presenting at Macquarie's What's Next for Nonres conference. And hopefully, we'll see a lot of you there. Thanks again.

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.