Commercial Metals Co (CMC) 2004 Q4 法說會逐字稿

Good afternoon everyone, and welcome to the Commercial Metals Company first quarter 2004 earnings conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Chairman, President and Chief Executive Officer of Commercial Metals Company, Mr. Stanley Rabin. Please go ahead, sir.

Good afternoon, everyone. We'll follow the traditional format that as in the past, and that is, I'll make some introductory comments. Bill Larson then will make most of the presentation. I'll give the outlook then, and we'll take your questions.

I'd also would like to mention that, with us today, he won't be part of the presentation, but Murray McClean, for those of you who pay close attention to our company, just a month ago, we promoted Murray to Executive Vice President and Chief Operating Officer. Murray has been with our company 19 years. He was born in New Zealand, spent a lot of his career in Australia, came to Dallas several years ago. How many?

Four.

Four years now. And those of you in Boston and New York, in our immediate follow-up visit will get to meet Murray in the next couple of days.

What I'll do is make a few comments about the year, a few comments about the quarter, and then Bill will take over. I just would emphasize that the press release, which has I think become the norm for most companies, focused much more on the fourth quarter than it did on the year overall. But in terms of the year, it was one phenomenal year. There are lots of descriptions we could use about the year and about the fourth quarter and they're all fantastic and fabulous.

I think most importantly, in terms of general accomplishments, we increased our global presence. We gained strength through acquisitions, we maintained our diversification, and we took advantage of favorable trends. We reached the new earnings plateau. Two of our quarters, as Bill has put it, were our best two years ever. And this was with a huge LIFO expense of $74.8 million pretax. And it was this diversification strategy that as much as anything allowed us to take advantage of the positive environment, and as I'll comment later, makes us extremely confident about the future as we go forward.

So we demonstrated broad earnings power, as we -- a strong balance sheet, and equally important, we continued the divisional management transition that we began a couple of years ago and are well on the way and very pleased with how that's going, and again, our financial condition is excellent.

Again, the fourth quarter itself was just terrific. Again, the second consecutive quarter in which we earned more than we had in any previous year in the history of the company. And the earnings were extremely broad based, and this has also been extremely pleasing. And again, we had a very large increase in the LIFO reserve in the fourth quarter. Nearly, $39 million, so more than half of the LIFO reserve increment occurred in the fourth quarter. Bill, you want to just go ahead and take over now?

All right. Thanks, Stan. Good afternoon, all. Some housekeeping items to begin with, let me you call to your attention the detailed Safe Harbor Statement included our press release and in our August 31, 2003 10-K, in summary says that in spite of management's good faith, current opinions on various forward-looking matters, circumstances can change and not everything that we think will happen always happens. In addition, we've given guidance regarding our outlook for first quarter of fiscal 2005 and a general overview of the coming year in our press release. Subsequent to this call, in our meetings in New York City in Boston this week, we will not be commenting further and we will not be under obligation or update our outlook.

In accordance with Regulation G of the Securities and Exchange Commission, you are aware of non-GAAP financial measures. Some of these have derived fairly straight forward from our financial statements or they're in common business use can be the subject of our discussions today and in our investor visits, our website has additional information at www.commercialmetals.com, but there are other items that may be outside our ability for discussion and you may need to be patient with us if we defer comment.

All righty. Well, you know with the constant reporting of exceptional quarterly results of steel companies domestically and abroad, it may be easy to become dulled and the true picture of what has happened not resonate. We reported net earnings for fiscal 2005 of 132 million. The previous record earnings was in 1999 of 47 million, so we exceeded our previous record by almost three times.

The magnitude of this acceleration to another earnings plateau has been accomplished just once in the last 38 years of the company, and that was back in 1974 when we were only a shadow of the company we are today. Inflation adjusted our best year, which was 1974, we totaled with 77 million compared to the 132 million we achieved this year. We were prepared to take advantage of excellent markets and we did so.

Our previous capital investments returned magnificently. I'm thinking specifically of our large mill expansions at SMI Alabama in Birmingham and SMI South Carolina in Cayce, as well as our Coil Steel Group in Australia. Our current year expansion into Poland has been a grand slam home run and we're confident that our other significant investment, which was the Laughlin Company is only shortly away from very credible results.

Interestingly, our LIFO charge for this year alone would have equaled our previous best-reported annual earnings. None of this of course would have been accomplished without our greatest asset, the men and women of Commercial Metals. We extend our thanks and congratulations to all 10,000 of them located in nine countries and 150 locations worldwide. They participated in the success of the company through our long-standing incentive compensation and benefit programs and deservedly so. We're financially strong and ready to continue capitalizing on the current markets. Our debt coverage ratio are multiples beyond minimum requirements.

If you look at our sales, the domestic mills appear to be sloughing off, as they were only able to achieved a 50% increase in sales, which puts them in last place in the segments, but, gosh, what a phenomenal quarter combining pricing and volume across the segments. And this translated into record fourth quarter operating profit for most of our segments.

Our fabrications segment was hit by a substantial LIFO charge of some $13 million in the fourth quarter, but their time to lead us in earnings is coming. Marketing and distribution completed four consecutive quarters of records. We've referenced LIFO fairly frequently here early on. The reserve currently stands at $92 million. During this fourth quarter, LIFO decreased net earnings 25.3 million or $0.83 a share. And that compares to last year's fourth quarter of 850,000, not million, 850,000 or $0.3 per share. You might recall that in the third quarter, we had given guidance that we thought that the net earnings hit because of LIFO in this quarter would have been 16 million, so we were almost 9 million above that in -- when those numbers finally settled down.

Year-to-date, earnings were hit with LIFO charges of 48.6 million after tax, or a $1.63, and that compares to last year's 6 million or $0.21 per share. Our gross margins in the fourth quarter were constant to slightly lower than the third quarter. Mainly owing to these LIFO charges.

Depreciation and amortization for the fourth quarter was 18.716 million. That then makes the year to-date depreciation and amortization 71,044. million. Our outlook for depreciation and amortization for fiscal 2005 is around $79 million.

You'll note on the P&L, our SG&A expense for the fourth quarter compared to the fourth quarter of last year rose to some 37 million. The main categories would be the acquisitions of CMCZ in Laughlin, followed by general salary expense and our incentive compensation for both bonuses and profit sharing. For the year, SG&A rose 124 million. Again, it's the same four usual suspects. The increases with the acquisitions of Poland and Laughlin as well as incentive compensation expense, profit sharing, and salaries.

Of our interest expense, Poland represented in the fourth quarter 1.125 million and year-to-date, Poland's interest expense was 3.083 million. I mention this because as you'll recall, the debt in Poland is segregated and is of recourse only to the assets in Poland and not to any other subsidiary or to the parent company.

My outlook for interest expense for the first quarter is about 8.5 million. And our EBITDA, the interest coverage ratio exceeded 10 times. Our current ratio is strong at 1.8. Our accounts receivable days outstanding are improving. Our debt ratios are in great shape. Everything looks pretty good.

On August 31st our book value per share was $22.56. Our average diluted shares for the fourth quarter were 30,364,525. That then makes the average diluted for the year 29,844,339. The actual number of shares outstanding at August 31 was 29,277,964. Our capital expenditures in the fourth quarter were 20.8 million. That then makes the year-to-date CapEx 54 million without consideration of the acquisition cost of Poland or of Laughlin.

Our budget looking forward for fiscal 2005 would be 130 million in capital expenditures. The largest two projects of which would be a continuous caster at SMI Texas and a shredder for the Polish operation. During the fourth quarter, we repurchased 143,847 shares. That, then leaves our remaining authorization at August 31 as 972,305 shares.

Okay. Thanks, Bill. In terms of the outlook, first let me talk briefly about some macro factors. Then, then some of the general markets that we -- that are important to us. And then specifically how we - we expect the various segments to do during the first quarter.

From our vantage point, there has been some impact from the -- globally from the high price of petroleum products, but overall, we're still looking at a good global economy. From our vantage point, the U.S. economy remains good and that it's maintaining its strength and that the important construction market has improved and will continue to do, we think do even better. Australia is quite good, particularly on domestic business.

Not China. Asia continues to grow. China still remains an extremely important market. It is -- it has moderated its economy. There is -- we believe it is accomplishing, its soft landing. It's obvious to us, as we recall that the defalcation in the market and perceptions of China that the current economic data that we're seeing are significantly better than some of the perceptions. We're not sure where the third quarter GDP will come out but we think it will still be close to 9% for China.

So overall, the macro conditions are good and we have a very good profit outlook, and the mix will change as a result of where we are in the cycle, but that, again, reflecting the tremendous diversification that, that we've accomplished is for us a real plus.

So we have projected LIFO net earnings for the first quarter of $1.70 to $1.90 per diluted share. This would make our earnings certainly sustainable, that our steel domestic mill margins will hold. The steel markets that we're in, the prices are firm. Domestically, you know, we've had prices are holding. The only exception we've had was in 20-foot rebar lengths where there was a $20 a ton decrease, but overall, prices are in excess of $500 a short ton.

The copper too should do pretty well at the mill and related operations in Poland, we will have or would anticipate something of a seasonal decline but still good results. Fabrication is definitely on the upswing, and that's where we should get the shift in profits, much better profits from fabrication in the first quarter, and then going forward beyond that.

Recycling, still strong. Ferrous markets have firmed again recently. Ferrous scrap markets, they were up domestically. Well, they've been up internationally for several months. They were up domestically in October, the anticipation in fact is that they will be up further in November.

The nonferrous markets, keep those in perspective. You know there was quite a shake out in one day about a week ago in the copper, aluminum, nickel other nonferrous markets and copper itself dropped $0.16 a pound in one day but keep in mind, copper had had a substantial increase prior to that, it has since steadied and today it's sitting close to $1.30 a pound which historically is a good price for copper and reflects strong demand for copper.

So recycling should continue to do quite well. Our market and distribution order books are firm. LIFO is always a bit of a puzzle or challenge, but certainly, you know, we would not anticipate anything of the kind of significant magnitude like we had last year, and that would, in turn, require further upswing in prices. And of course given what's happened with the markets, we think LIFO accounting is more prudent than it's ever been. So our outlook remains quite favorable and we'll be happy to take your questions.

Thank you, gentlemen. [Operator Instructions] Our first question comes from Barry Vogel of Barry Vogel and Associates. Your line is open. Please go ahead.

Congratulations, gentlemen.

Thank you, Barry. You're still first.

I'm glad. I'm glad. Okay. Two questions. First of all, Bill Larson, what was the average price you paid for those 143,000 shares that you said you repurchased in the fourth quarter?

31.88.

Can I ask you why you did that, you know when you weren't buying stock aggressively in the low 20s?

Barry, we always buy stock aggressively when it's opportunistic. You have to remember, though, that over this last year, there have been a lot of blackout periods because of the acquisitions of Poland and of Laughlin and the opportunity to be in the market just has not been as many days as it has been in prior years.

Does that mean with your confidence level much higher than it was a year ago and 972,000 shares are still available under your current authorization, that when you're allowed to go back into the market after the blackout period here that you will probably be buying shares in this area?

We will be consistent with past practice.

Okay. Second question, Stanley, is the fabrication. When did you find out -- I mean, all along you've had these bad contracts in your backlogs. You know what made you all of a sudden -- you know, what triggered, you know the very poor performance, you that was stated in the fourth quarter in fabrication, and secondly, you know, what kind of turn around are you now looking for in fabrication you know relative to historical trends?

Barry it was from my stand, it was not a very poor performance. Again, the LIFO charge was a little bit in excess of $13 million. So, I mean, that accounts for the reported result, but the fabrication businesses have been doing consistently better on a LIFO basis. And now so we would just anticipate you know certainly better results and strong results.

Well, the reason you are on LIFO is not to pay taxes to the Federal Government, am I correct?

No. It's the match, Bill you want to give the...

No, it's the matching of revenues against expense, but the evidence of LIFO only occurs when there are rising prices and this is what you're seeing, Barry in the backlog as well as the tonnage. The prices are going up. The quantities are going up. And it's only a matter of time and we have discussed this at our other public meetings that the fabrication operations will have their day in the sun when prices level and then they will max when prices just begin to fall. So that's why, you know, we are very confident that it is not a question of if. It's just a question of when.

So looking at fiscal '05, and of course you know you are looking at you know you are just actually making an earnings guidance for the first quarter and I don't blame you for not making an estimate for the year with all the volatility in your groups. Would you say it's safe to assume, that if you. I won't back out the LIFO reserve because it's a fact of life that the $7 million figure for the fabrication segment could go up 3, 4, 5 times in fiscal '05?

Well, I will just tell you, we've had this conversation before, that historically, the fabricators have been known to earn anywhere from 50% to 75% of what our mills earn. And that was before Laughlin. So I would say the capabilities currently, given reasonable market conditions, are that, you know, the fabs could once again reach that same level.

OK. So you're looking for certainly for this year, you would be optimistic that you could have a very significant gain in operating profits for that segment?

This is clear this is what we're saying, Barry.

OK. Thank you. Congratulations. I will see you at breakfast.

Thanks, Barry.

Thank you and we will take our next question is from Michael Gambardella of J.P Morgan. Please go ahead sir.

Hi, Stan. Hi, Bill. How are you?

Fine. How are you doing?

Good. I have a question on what you are seeing on imports for long products. Are you seeing much of an increase of rebar coming in from Japan?

There's been some increase, Mike, from Japan. Certainly rebar imports, the last three months or so, reported have been high. But seem to have hit I'd say this last month -- I don't have the figure in front of me. It was 220,000 metric tons, I think, was a little bit above that, may be was, was the number. The bulk of that still is coming from countries like Turkey. And given that the dollar is starting to weaken again, and I would not anticipate you know a surge of exports from Japan. In general, we would expect imports to decrease over the next several months, particularly as you go into the winter.

How about from China? Are you seeing anything different from China?

No. We have seen some Wire Rod exports. We participated in some one - as you all know where an importer, including of rebar -

Right.

And a whole variety of products. But they have not been significant exporters of rebar to the United States. And it's a duty issue. Murray?

133%.

Yeah, yeah. They are much more likely what we have seen from China is a pick-up of exports to other countries in Asia.

On the fabrication business - your construction in general, are you seeing any evidence of you know a switch to alternative materials?

No, no. We are not. I mean, that business has been good, across the board pretty well. You know rebar, fab, joists, posts it was just a construction related products. A plethora of items where you know we have been saying for some months that the level of business seems to have been even you know generally better than the construction data would suggest. The construction data have been improving in a number of cases, including even in office buildings.

Great. OK.

We're not -- you know, of course we've had certainly just like we had to squeeze in fabrication from our mill prices going up, and other mill prices going up, but the fabrication prices have been moving up, as you know, as well.

Sure.

And have been accepted this the marketplace. But -

OK. Thank you.

Sure.

Next we will hear from Sal Ferani (ph) of Goldman Sachs. Please go ahead.

Hi, guys.

Hi, Sal.

How are you?

Fine.

Just a quick question on European prices. Some of the European big men steel makers have announced recent price increases for the first quarter of 2005. Do you guys, that's the(inaudible) quarters and they also have increased the prices in the fourth time in the quarter? Are you guys seeing high prices for your products over there as well?

No, I think more a flat to maybe even slightly lower on rebar. Wire Rod prices are higher than rebar prices in our markets.

When you said that China, because of duty, you are seeing Chinese stuff being diverted to other countries. Are you seeing more pressure in the market in the Europe from Chinese imports?

No, we are not. As I say, what we have specifically seen and been part of has been increased business in Asia.

OK. Thank you very much.

And we will now move on to Charles Bradford of Bradford Research. Please go ahead, sir.

Good afternoon.

Hey, Chuck.

Could you talk a bit about scrap and what you are seeing in the market? I mean, there a lot of charges going around by the some of the mini-mills about manipulation and all kinds of funny things? What do you think is really happening in scrap and what do you see scrap prices doing in the next couple of quarters?

Chuck, as we used to say in the Bronx, that's a bunch of you know what. There is no manipulation going on. There are no scrap dealers at these levels, no sane scrap dealers that I know of, who are holding material, waiting for a higher price, when we've got the highest prices in history. And you know scrap's moving as far as we can tell a lot. Being on both sides of it, a lot of the gyrations in the market itself, as far as pricing, have been occurring because the mills have been trying, you know, the prices will go up, then the mills will try and bring the price down the next month or two months later. They may succeed but they'll bring it down too much so then the price goes back up. It's a free market. There's no manipulation.

And the international markets, has been as I said earlier, has been quite strong again the last couple of months, went above $300 a metric ton. So, you know I hate to disagree with some of my colleagues in the steel industry, but there's no manipulation that I'm aware of. And like I say, at these are price levels, it's to me it's just unfathomable that any scrap. I mean, these are business people, mostly your scrap processing owners and managers. And they're not waiting for $400 scrap.

What are you currently see as far as steel product prices if you were to compare U.S. with Europe or Asia? Because I know you're in more than just -- your trading is not just long products. What are you seeing in flat products?

This is a chance for you to listen to Murray McClean. And if you can't understand his accent, I'll translate. Murray?

Flat products, they certainly are firm here in the US we know they're still highest prices in the world but over in Asia the prices are still holding up well there. Even in China. And in Europe with the question before, there are increasing prices for flat products in this last quarter, the calendar year, that's true, rather than long products. So overall, flat product prices are still very firm and at very high levels. We think probably close to the peak and then Europe obviously going to a seasonal period with the winter months coming up that overall, really firm.

Thank you.

Sure.

And I did understand the accent.

Okay.

Thank you.

[Operator Instructions]. I'll move to Michael Christodolou of Inwood Capital. Please go ahead sir.

Hi, gentlemen. Couple of questions. Stan you just mentioned a $300 scrap number. Is that a shredded scrap composite number you were quoting?

That was the international price that to which I was referring. Domestically, in October, it probably -- I would have to convert it. That's a metric ton. So a short ton would be about 10% less, so say 270, 280 a short ton. That's got freight in there. Domestically, probably October averaged 290, a long ton. So again, take off like say and that's got a little bit of freight in there, 260 a short ton.

I was just calibrating with this shredded scrap index I look at, which is 283 last week up from 250 a couple weeks ago up from 150 a year ago. So that's about the same thing?

Yeah. That's a composite you were talking about?

Yeah. I think that's a domestic composite.

Yeah.

Okay, great. And second question, Stan, could you refresh us on your mill level pricing and surcharge policy as opposed to a certain competitor on the east coast that's heavy on the surcharges?

We have no surcharges. That's a decision we made from the beginning.

Has that -- I mean, how appreciative are the customers with that? Clearly that will pay dividends overtime. Are you seeing a little additional volume because you're a little less than the guy with the surcharges?

Well, the comment I've been making for a number of months now, if we made the right decision and there's an advantage of doing that from a customer standpoint, it would really -- realistically only show up when things loosened up a bit because the market has been strong, demand has been strong. So customers have just been anxious to get material. And particularly, you know, if someone was asked -- no I think. Someone was asking a little bit earlier about substitution and kind of price acceptance, but people I've talked with in the construction industry, they have just been anxious, particularly if they have penalties on performance to just get, you know, get the steel and get on with their projects. So, you know, we think it's -- we think we did the right thing.

Yeah, another question, just a broader industry question. What's your sense of the field inventories of rebars, structural products and other long products out there within the service centers and whatnot? I understand you made the comment that no sane scrap guy is holding scrap in this environment. And you know kind of what we hear is inventories are really lean throughout the channel just because the working capital component is so high. I'm just trying to get a sense for that because as prolific as the market has been, I mean if things are tight and the demand is still there, this ride could go on some more.

Well, I think the future is quite good, but I think near term, steel consumers and intermediaries like service centers are much more comfortable than they were three months or six months ago in terms of inventory levels relative to their own business. So I think it's a much calmer situation, if you will, right now on the inventory situation. So --

Are you saying they are more comfortable because they have brought them down?

No. I just think they bought much more heavily.

Okay.

Including imports. You know, the significant thing about imports is to a great extent, there might be a few exceptions was, that the prices have been relatively high. It hasn't been a question of, you know, of selling $100, $150 a ton below the market to get the buyers to accept imported material.

Right. Okay. And last question, does the company have a call option on that minority interest in CMCZ?

No. We don't. But realistically, one would have to suspect that we are just about the only reasonable purchaser.

Exactly. Very nice quarter, gentlemen. Thank you.

Thank you.

We will now move to Ivan Sacks of First Dallas Securities. Please go ahead sir.

Well, I'll echo the sentiments of the other people, but I have a question for you. What results would you have had to deliver in order for the stock to go up? That's my first question.

Apparently we don't know yet.

I don't know what you could have done. Anyway, as far as like the Texas road building, you know like the construction Bill, is that anywhere closer? That's the one thing that I have to ask - if I just ask you quick three quick questions. Can you answer them in order, please. What is making the demand, I know it sounds like a simple question, but let we know about China and everything else, but could you speak to different demand sectors for the overall steel sector, be it nationally as well as internationally, and then if you could speak to our famous provider, which is that's the employment figure, if it goes up about six consecutive months, only then would we say, we had a peak. If you could speak to those three points. I'd appreciate that. Thanks.

Employment? All right. First of all as far the Texas highway program, is good. I mean the level of activity is good. Will it -- could it be and will it be even better? Yes, we think it will be. And of course long term, Texas is a very -- I would call it a very innovative highway bridge type agency, and they are thinking long term, and you know, of course many more toll roads to keep the infrastructure going, also this major corridor project, which is part of the long range thinking. So it's hard not to be optimistic about the long-term future of the highway program in Texas. And in near term, it's certainly good as well, and I say, it ought to get even better.

For political reasons, the national program, they could not, I think Congress, and then with some threat of a veto if they went too high in the overall budget, Congress could not agree on a bill. So what they've done is, they've kept extending the previous program. The last time they did that, I think about two months ago, as for another eight months. But presumably, when the election is over, and Congress reconvenes, they'll come up with a new five-year highway bill, which in all likelihood, will be a higher figure than the previous one.The whole debate in Congress was how much higher should it be.

I think we covered a lot of the market conditions globally. As I say, certainly long term, the very optimistic -- the new dynamic that I think has come into the steel market is the tremendous growth of very large emerging countries, particularly China, also India. India really seems to be getting its act together, has tremendous potential if in fact it does.

Former Soviet Union countries like Russia, Ukraine, economically are doing better. And that's a new dynamic in the sense of the magnitude, but there's never been anything like it. I've lived through the reconstruction of Japan and South Korea and a whole bunch of other emerging countries, but you're talking just China and India, 2.3, we think, million people combined. China probably has a per capita consumption of steel, last figure I saw was 179, I think it was kilograms, less than half of what's typical for an industrial country. Is there any reason they shouldn't get there? None that I can think of. So it's a very optimistic scenario long term and you will hear me as we go forward in presentations refer to a new dynamic and that's what I'm talking about. Ivan, I don't know you asked about employment --

That's Bill's question. He's always asking in terms of like, when we know we are at the peak. And he has always given me that the indicator that gives me somewhat of a comfort knowing that we are not at the peak yet.

Yeah. That's the high-rise office building. What I heard is that , you don't build mid and high-rise office buildings unless you have people to put in it. And you'll know when unemployment falls, when employment goes up, six months may not be a bad benchmark at all and then you will see the construction start picking up, and that will tend to be towards the end of the cycle when the high rises start going up.

The only thing is we don't know how to count employment anymore. There's a strong argument to be made that the conventional way of calculating employment and jobs added is not adequate. There are much better ways of calculating it because so many people now are either have started their own businesses or independent contractors, so that's why I think a year after the fact you'll see significant revisions in the employment level.

Right, well thank you very much, guys. I appreciate it.

Sure.

Thank you. We will now take our next question from Frank Dunau of Adage Capital Partners. Your line is open. Please go ahead.

Hi guys, I have a question.

Hi, Frank.

Good, what is it that I don't understand about your business, that in the trading operation, you can get a LIFO charge as large as 13 million?

I have two experts here who will answer you.

Well the first is that the type of business that they do, which is back-to-back, meaning before they purchase, they have substantially sold, but in the interim, you know, we do take delivery and do have possession of it. I think your question is probably aimed at, you know, are there times when we are in transit with substantial amounts of inventory and one of those just happened to be at August 31st and the answer is yes. In fact, one of our trading divisions, the steel import division here in Dallas, you know has a substantial amount in transit, which is really good news. I mean the bad news is you end up taking a LIFO hit, but the good news is that further down the line, it means that the order books are strong and that that material will be sold fairly shortly. So that's pretty much the answer.

Also, in our import business on - comment was that on nonferrous side, when we include stainless and nonferrous there, as an example where we had some substantial increases in prices because of nickel, so some of that just flowed through as LIFO.

All right. So conversely, do you then at times book inventory gains through those operations? I mean making money on the stuff in transit?

Not until it's sold.

Okay. And just one last comment, which has nothing to do with you but since people have already talked about it. I find it amazing that the people who complain about high scrap prices, I don't know why they're complaining. I think they're probably the biggest beneficiaries of it.

Since we mentioned earlier, the same people who are whining about China, for instance, are reporting record earnings. I think whatever the scrap guys are doing, whatever the Chinese are doing, we ought to be applauding them and asking them to continue it.

That's right, yes. I was going to stay away from that one, Frank, but you know, if China is manipulating their currency, I don't think they are, but if they are, we never made more money, nor did most of our competitors, then I mean, the important thing is for China to be thriving.

Right. Okay. Thanks.

We have a follow-up question from Sal Ferani of Goldman Sachs. Go ahead, sir.

I just want to confirm the comment you made on the pricing. Currently you said that you are getting an overall price of about $500 per ton as compared to lets say 455 you have it in the fourth quarter? Is that correct?

Yeah, current selling price is, you know broad, yeah.

Okay. And was there any LIFO last quarter for the fabrication unit? There wasn't, was there any?

No, there was, that's what I was saying earlier.

No, no, I mean I'm talking about the third quarter.

Oh, the third quarter.

Yeah, yeah, I'm sorry.

Bill will -

There had to be some.

Probably it was negligible, I mean it was not like that.

Yeah, I don't think it was that much, I'll...

So technically speaking, 13 million you got, if it wouldn't have been there, you did very well on the division, if you take the LIFO out.

Yeah.

Okay. Thank you very much.

Sure. We'll get that. We'll have that number on the third quarter.

And gentlemen, it appears we have no further questions at this time.

Okay. Well, thank you very much for your usual provocative questions, we'll see some of you the next several days. Those of you from other places, we'll see you in the not too distant future. You notice I stayed away from baseball because we have investors in New York and Boston and Houston and St. Louis, so I don't want to get in trouble with anybody. So I'll hide my own feelings. The fact that I was born in the Bronx has nothing to do with who I'm rooting for.

But it's very safe to say the Texas Rangers will not win the World Series this year.

And the Houston Astros have become very popular in Texas, but anyhow, thank for your participation, I will see you soon.