Ryerson Holding Corp (RYI) 2018 Q4 法說會逐字稿

Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ryerson Holding Corporation Fourth Quarter and Full Year 2018 Earnings Webcast and Conference Call. (Operator Instructions)

It is now my pleasure to turn today's program over to Jeff Horwitz with Ryerson Investor Relations. You may begin your conference.

Good morning. Thank you for joining Ryerson Holding Corporation's Fourth Quarter and Full Year 2018 Earnings Call. I'm here this morning with Eddie Lehner, Ryerson's President and Chief Executive Officer; and our Chief Financial Officer, Erich Schnaufer. Kevin Richardson and Mike Burbach, our 2 North American Regional Presidents, will be joining us for Q&A.

Before we get started, let me remind you that certain comments we make on this call contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to, those set forth under Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. In addition, our remarks today refer to several non-GAAP financial measures that are intended to supplement but not substitute to the most directly comparable GAAP measures. A reconciliation of non-GAAP financial measures discussed on today's call to the most directly comparable GAAP measures is provided in our fourth quarter 2018 earnings release filed on Form 8-K yesterday, which is available on the Investor Relations section of our website.

I'll now turn the call over to the Eddie.

Thank you, Jeff, and thank you all for joining us this morning. Things are good at Ryerson, and they are fixing to get better. 2018 was an important year for Ryerson as we improved the business in all facets and made important moves to increase our earnings potential moving forward.

During 2018, we made the most of the opportunities afforded to us in the market as we've navigated supply chain disruption exceedingly well while maintaining our focus on providing great customer experiences across our value-added network and intelligent service centers.

In addition, Ryerson completed 2 acquisitions in 2018: Fanello Industries and the Central Steel & Wire Company. It is easy for me to say that both of these organizations have exceeded expectations thus far because of the hard work and smart work done by my teammates. The Central Steel & Wire acquisition was the largest acquisition completed by Ryerson since 2005, and the synergies between Ryerson and CS&W had been exceptional.

During 2018, we made further investments in our digitalization road map as we continue to build out our infrastructure, allowing us to better map industry supply chains. The tools we are implementing enable our talented and experienced team members to provide ever better solutions to our customers with speed, scale, value add and expanded capabilities.

In 2018 and early 2019, we made important additions to our senior leadership team in the areas of operations and information technology as we move to the next stages of our business model development and execution. Because of the dedication, hard work and say-yes culture that has taken root at Ryerson, we are now in a position to effect a meaningful shift in enterprise value from debt to equity in the coming years. My sincere thanks goes to our customers who we never take for granted and to our shareholders and suppliers for their continued support.

To my Ryerson and CS&W colleagues, I share with you my deep appreciation for an outstanding job in 2018 with great optimism for what we will accomplish together in 2019 safely and productively.

Given these intrinsic improvements in our business, we have established clear financial targets to the organization centered on profitable market share growth, margin expansion, asset efficiency, expense management and free cash flow generation. Our 3-year next phase targets are available in the Investor Relations section of our website, and we will continue to enhance our reporting on our key drivers and performance metrics to provide Ryerson stakeholders with a high level of clarity as to our progress toward these next-phase targets. In short, over the next 3 years, we expect to meaningfully reduce debt while gaining profitable market share, thus enabling shareholder value accretion.

Turning to the current economic environment. Industrial metals price drivers declined during the second half of 2018, and this decline accelerated and deepened in the fourth quarter of 2018, particularly for carbon steel and stainless steel. Spot prices appeared to bottom in January of 2019, and we currently expect stabilization and a price appreciation forming in carbon and stainless, while common alloy aluminum current pricing has drifted lower on increased supply finding its way into the market. Overall, the current pricing environment has improved notably from views and commodity numbers reported in December of 2018 and January of 2019.

Demand conditions appear favorable, moving through the early part of 2019 despite some severe winter weather that stymied shipping routes at the end of January through mid-February. Notwithstanding these weather-related shipping interruptions, demand-driven activity looks promising as we move toward the latter part of the quarter.

Turning more specifically to end markets, demand on a same-store basis in 2018 compared to 2017 was strongest in commercial ground transportation, metal fabrication and machine shops and consumer durable equipment sectors, while shipments were lower in the HVAC and construction equipment sectors.

Central Steel & Wire continue to enhance Ryerson's commercial, processing and operational strengths during the fourth quarter. The acquisition generated revenues of $169.3 million with volumes down only 1.1% sequentially with fewer shipping days and average selling prices down 4%, affected by weaker commodity prices.

CS&W adjusted EBITDA, excluding LIFO, generated in the fourth quarter was $5.7 million or $14.6 million for the second half of 2018. As part of Ryerson's post-close optimization plan, CS&W realized approximately $13 million of expense savings on an annualized basis as of the fourth quarter of 2018. Further, Ryerson realized approximately $10 million of cumulative proceeds since the acquisition from real estate sales for operations that were consolidated into existing Ryerson facilities.

Central Steel & Wire's improved working capital management increased free cash flows by approximately $40 million in the second half of 2018. Beyond the improvements experienced directly at CS&W, Ryerson's service centers in the Midwest are benefiting from shared inventory and new customer relationships between these 2 historic brands. CS&W's financial performance is ahead of schedule so far as we continue to drive toward our 3-year mid-cycle objective of $600 million in revenue and $50 million in adjusted EBITDA excluding LIFO.

Looking ahead to the first quarter of 2019, customer feedback has been positive, and we anticipate favorable end market demand conditions moving through the first half of 2019. Coupled with improved pricing and gross margin prospects at the time of this earnings release and despite a slowing of commercial activity in December and January due to declining on-hand inventory values, severe winter weather and forward-looking macroeconomic uncertainties, our outlook for 2019 industry conditions has brightened.

With that, I'll turn the call over to Erich who will discuss the highlights of our fourth quarter and full year 2018 performance.

Thanks, Eddie, and good morning. Beginning with the full year results, Ryerson generated revenues of $4.4 billion, up 31% from 2017 as average selling prices increased 15.6% and tons shipped increased 13.4%.

On a same-store bases, revenues were $4.1 billion with prices up 16% and volumes up 4.1%. Gross margin was 17.2% in 2018, relatively unchanged compared to last year's gross margin of 17.3%. Gross margin, excluding LIFO and purchase accounting adjustments, rose 150 basis points and 19.4% in 2018 as average selling prices rose by $262 per ton compared to average cost of materials sold, which grew by $219 per ton.

Net income attributable to Ryerson Holding Corporation was $106 million or $2.81 per diluted share for 2018 compared to $17.1 million or $0.46 per diluted share for 2017. Adjusted net income attributable to Ryerson Holding Corporation was $40.4 million for 2018 or $1.07 per diluted share compared to $13.8 million or $0.37 per diluted share in the prior period, nearly triple our earnings year-over-year.

Adjusted EBITDA, excluding LIFO, increased almost 70% to $308 million in 2018 compared to $184.1 million in 2017. As a percentage of sales, adjusted EBITDA, excluding LIFO, increased from 5.5% to 7%. On a same-store basis, Ryerson achieved adjusted EBITDA, excluding LIFO, of $293.4 million or 7.2% of revenue.

We continue to be an industry leader in expense leverage as warehousing, delivery, selling, general and administrative expenses as a percentage of sales was 13.9% in 2018, which is an improvement from 14.3% in 2017, demonstrating the company's ability to realize expense leverage with higher volumes.

Turning to the fourth quarter results. Ryerson generated revenues of $1.2 billion, an increase of $349 million compared to the fourth quarter of 2017 with tons shipped 22.8% higher and average selling prices 16.5% higher. On a same-store basis, Ryerson generated revenues of $991 million with average selling prices up 18.7% and tons shipped up 3%.

Ryerson achieved adjusted EBITDA, excluding LIFO, of $50.5 million in the quarter, an increase of $9.9 million compared to the fourth quarter of 2017. Adjusted EBITDA, excluding LIFO, was $44.8 million in the fourth quarter of 2018 on a same-store basis.

Sequentially, adjusted EBITDA, excluding LIFO, decreased by $38.2 million with average selling prices flat and tons shipped down 7.2%, affected by fewer shipping days, seasonal trends and buyer hesitancy in the face of rapidly declining commodity price drivers as well as steep equity and bond price declines during the fourth quarter.

Net income attributable to Ryerson Holding Corporation was $0.6 million or $0.01 per diluted share for the fourth quarter of 2018 compared to 0 in the fourth quarter of 2017 and $77.5 million or $2.06 per diluted share in the third quarter of 2018.

Adjusted net income attributable to Ryerson Holding Corporation was $6.2 million in the fourth quarter of 2018 or $0.16 per diluted share compared to a net loss of $3.4 million or a loss of $0.09 per diluted share in the fourth quarter of 2017. Adjusted net income attributable to Ryerson Holding Corporation was $6.3 million in the third quarter of 2018 or $0.17 per diluted share.

Ryerson's gross margin was 17.2% for the fourth quarter of 2018, an expansion of 40 basis points compared to the year-ago period and 50 basis points compared to the third quarter of 2018. Included in cost of materials sold was LIFO expense of $0.9 million and purchase accounting adjustments of $2.2 million for the fourth quarter of 2018, LIFO expense of $8.1 million for the year-ago period and LIFO expense of $32.1 million and purchase accounting adjustments of $4.7 million for the third quarter of 2018.

Gross margin, excluding LIFO and purchase accounting adjustments was 17.5% for the fourth quarter of 2018 compared to 19.6% in the third quarter of 2018 and 17.8% in the same quarter last year.

Turning to the balance sheet. Ryerson's 2018 inventory days of supply was 73 days or 71 days on a same-store basis, consistent with our performance in 2017. Our supply chain teams responded well to falling prices in the fourth quarter by reducing our inventories to mitigate margin compression heading into the first quarter of 2019.

Ryerson achieved a significant milestone in 2018 with positive book value of equity of $75.9 million as of December 31, 2018, compared to an equity deficit of $7.4 million as of December 31, 2017. Ryerson's improved equity value in 2018 was a product of improved operating performance and the gain on bargain purchase from the acquisition of Central Steel & Wire of $70 million.

We maintained ample liquidity throughout 2018. As of December 31, 2018, borrowings were $536 million on our primary revolving credit facility with additional availability of $392 million. Including cash, marketable securities and availability from foreign sources, Ryerson's total liquidity increased to $441 million as of December 31, 2018, compared to $338 million as of December 31, 2017.

Ryerson generated $57.4 million of cash from operating activities in 2018 driven by net income generation. By comparison, cash used in operating activities was $2.5 million in 2017. Capital expenditures were $38.4 million in 2018 compared to $25.1 million in the prior year. We expect to incur a similar level of capital expenditures in 2019 as we continue to invest in value-added processing and material handling equipment. In December 2018, Ryerson repurchased $50.5 million of our 11% senior secured notes followed by an additional $11.6 million in January 2019, reducing annualized cash interest payments by approximately $4.5 million.

The high-yield debt markets presented us with an opportunity to buy back our notes below the May 15, 2019, call price of 105.5%, reduce our cash interest payments and utilized a portion of our ample availability under our credit facility. We are committed to reducing our long-term debt leverage while maintaining sufficient liquidity to promote growth and manage through any market conditions.

Now I'll turn the call back over to Eddie to conclude.

Thanks, Erich. Ryerson's performance in 2018 was exceptional as the strategic initiatives implemented over the past 4 years have taken root and we have begun to see their impact in our financial results. While acknowledging the benefits of a higher pricing environment in 2018, our ability to execute in that environment generated improved earnings as well as a stronger balance sheet and positive operating cash flows that we reinvested in our business through CS&W, Fanello, our digital infrastructure and value-added capital expenditures.

Looking ahead, we are committed to our next-phase targets to continue to profitably grow the business, reduce our leverage and generate high returns for our shareholders. With that, let's open the call to your questions. Operator?

(Operator Instructions) Your first question comes from the line of Martin Englert with Jefferies.

So you commented in the release and your prepared remarks as well you are seeing year-on-year strength in demand. Can you provide a little bit of detail regarding expectations for sequential improvement Q-on-Q into 1Q here?

Yes, Marty. I'm going to turn it over to Mike and Kevin. I will just tell you, so far, so good. We hit a rough weather patch the end of January through about mid-February. And even in spite of that, shipments so far are up year-over-year, so we'll take that and we'll feel good about that. And I'll let Mike and Kevin give you some more color.

Martin, it's Kevin Richardson. Sequentially, what we're looking at is probably is in the 5% range. And I'd say most of our customers are really optimistic certainly about the first half despite the uncertainty around trade policy and for sure, more optimistic than what we were hearing or seeing in the fourth quarter. And the other thing I would point out is just another sign of things still being really pretty strong is that the labor markets are as tight as we've seen in 10 years probably.

Martin, this is Mike Burbach. I would echo what Kevin has said. I would clarify a little bit the 5% he's talking about is on a per-day basis. So if you look at it quarter versus quarter, it'll be something larger than that given the disconnect between Q4 and Q1.

And touching on -- FIFO gross margins were 17.5% for the quarter. You commented metals prices are stabilizing to improving. It would seem that product-specific ASPs may decline sequentially Q-on-Q. Would you largely expect a similar kind of FIFO gross margin in 1Q versus where we're at in the fourth quarter here? And then also, if you could touch on what you budgeted for LIFO.

Yes, Marty. March is still a -- March is a big part of the equation. But so far, through the quarter, we've seen margin stabilize and start to turn higher. I mean nickel really fell significantly in the fourth quarter, carbon fell significantly in the fourth quarter. So we saw margin compression peak through Q4 and into say, the first half of Q1 stabilized and then -- and started to actually expand about mid to late February. So with the recovery in nickel, aluminum is pretty much trading with [a band] at this point and carbon futures are within our range for the year. Last year, we referenced that our target was 650 to 750, so, so far, we look pretty smart there. We'll see how that plays out. All things considered, the margin environment is getting better as we head into the latter part of Q1 and looking out into Q2, even with some carbon contract resets that will be coming in Q2, spot pricing is firming and moving higher.

And as far as LIFO goes, we would expect LIFO income in the first quarter of somewhere in the range of $15 million to $20 million.

And one last one, if I could. There's already been a significant amount of working capital release. Could you discuss your expectations for 2019 given the lower-priced environment, coupled with the drawdown within Central plus any additional planned asset sales?

Yes. So the way it looks to us right now is, in Q1, prices are firming and moving higher. We're moving into the, I'd say, better demand quarters of the year. There's probably a little more uncertainty in the second half in terms of what we're going to see around demand and price. We certainly expect it to be a positive cash flow generating year that we're going to use to pay down debt. And I think what we're seeing is more strength in Q1 and Q2 than we anticipated based on the overall market sentiment and the headlines that we saw in Q4. I mean, December was a wicked shimmy. I mean, we took advantage of the opportunity to buy back our debt, but prices fell really fast, inventory started [eating] value. We did an analysis in December, for example. And in 2017, the per day shipments throughout the month of December really didn't change at all. But in the first half of December of '18 compared to the second half of December of '18, shipments were down about 13%. So things got really quiet in the second half of December, for example, and that carried over a little bit into early January. Things look a lot brighter right now. So the way we see the year developing is probably build inventories in Q1, cash flow would be neutral to a use in Q1 and then we see a cash flow release for the balance of the year, Q2, Q3 and Q4.

Your next question comes from the line of Nick Jarmoszuk with Stifel.

The first one is, can you talk about the -- with the potential end of 232 on Canadian and Mexican steel, whether you see this as being a margin-enhancing opportunity for you guys in the future?

Yes. I mean, I think if we get a trade agreement executed and if the policy plays out the way it's been reported, we see that as being a net positive. We didn't -- we never thought that 232 tariffs were going to be a permanent condition within North America so when those get mediated and they eventually go away, we think it's a net positive for the industry, all things considered.

Okay. And then second, with the amount of repurchases both in 4Q and 1Q, could you talk about what the free cash flow policy going forward will be in terms of additional repurchases and also what your target leverage number is?

Yes. I'm going to ask Erich to comment as well. I would say, look, we've invested a lot of capital in growth over the last 4 years. We're certainly pivoting at this point to debt reduction. We're going to go in a deleveraging walk, call it, a march. And over the next several years, we're going to make significant strides in paying down our debt. We believe we'll have the cash flow to do that. And we also believe that we'll have a window at some point to do an attractive refi, but the markets will have a lot to say about that. And as far as repurchasing our debt, it's really based on conditions. I mean, we were afforded an opportunity, based on some market distortions that occurred in December and early January of '18 and '19, and we seized on those opportunities with excess liquidity so we feel good about that. Erich?

Yes. And what I would just comment on is again, when we saw our bond prices fall well below the 105.5% call price, that was just an opportunity we couldn't pass up. We had plenty of liquidity. As we were generating cash in the fourth quarter, we found it to be a very advantageous option for us to begin to take down some of that debt and move it over to our much lower interest rate credit facility borrowings. Going forward, again, we've taken down our debt leverage. We continue to do that quarter-to-quarter. Even during 2018, with the acquisition of Central Steel & Wire, we were able to maintain our debt leverage and bring it down to 3.7x at the end of the year. Our longer-term targets are to take it down to 2x leverage.

(Operator Instructions) Your next question comes from the line of Chris Terry with Deutsche Bank.

Just a couple of questions from my side. Just on the 20% target, you've been sitting, I guess, around the 17% level. What's your updated thinking on the time line to achieve that?

This is Eddie. When we look back over the last 3 years and we look at our gross margins on an ex LIFO basis, obviously, we look - we report them on a LIFO basis, but we look at our margins inside the business on an ex LIFO basis. So we go back and look at our 3-year average '16 -- 2016, 2017 and 2018, our gross margins, excluding LIFO, have been right at about 19%. And I've mentioned this in the past and that is if you look at Ryerson's history, going back to 2007, 2008 and you look at our margins in 2-year intervals, you can see a consistent step-up in what we call the intrinsic ex LIFO gross margin level at Ryerson. And right now, we're in that interval of 18% to 20%, so the midpoint for us is 19%. And the way we look at inventory holding gains and losses, anything to the left of 19% would be in inventory holding loss, anything to the right of 19% would be an inventory holding gain as we believe that the intrinsic margin capability of the company right now is 19%. So when we look at 20%, and we look at the 3-year targets that we put out in the 8-K a week ago -- a little over a week ago, we think that 20% is really within our sights, and we get there in terms of a product mix shift. We get there with the synergies on CS&W and the other strategic initiatives and the enablers that we're building inside the company as we continue to develop our business model.

And then just digging into the end markets a little bit further. Can you just talk a bit more specifically about the pockets of strength and where there may be some weaknesses? Just a bit more granular detail on the end market.

Yes. I'm going to kick this over to Mike and Kevin. I would just say that some of the bigger metrics that we correlate to very well on the macro side, Chicago PMI was very strong in February. We're surprised of the strength of that [print]. Industrial production still looks good. Capacity utilization in the steel industry of 82% still looks good. If we bring that down from the macro to the micro, conversations that I've had with customers are positive and favorable, and that certainly holds for the first half of 2019. And again, we'll see what the second half brings, we really don't know and I'm not sure anybody else does either. Mike, Kevin?

Kevin Richardson. The only thing I would add to that is most of our customers are talking about low to mid-single-digit growth this year. And I would say, on the high end of that would be construction equipment, commercial ground transportation and HVAC. And then on the lower end will probably be the energy market and most of the other end markets would be in between those 2 bookends.

Okay. And the last one for me, just going back to the 4Q '18 results. The margins reduced during that quarter. Just looking for a little bit of color on why this is the case given carbon and stainless pricing declined during the month, averaging [friction] levels. The margins were -- I guess, what I'm trying to say, the margins came down even though we had flat pricing. Just looking for a little bit more color on some of the moving parts there.

Yes. Sure, Chris. I mean, typically, what you see, as you see prices get out in front of average inventory cost. So going through the second half of the year, you saw pricing gains, as we represent them in average selling price, you'll see those start to plateau, right? And you'll see the rate of increase in those start to slow relative to the underlying cost of goods sold as that marches up because there's a lag between when we actually purchase the inventory and when we receive the inventory and recognize that cost. There tends to be, let's call it, a 75-day lag. And so there's typically going to be that lag. I think the real instigator, if you will, was a significant step-down in the price of nickel and carbon in Q4 and that spot pricing plateauing even though contract pricing was still stout. Spot pricing started to weaken in Q4, less people bought. We turned inventories very, very well. At the same time, that margin compression continued in the second half of the year which has led to that stabilization and a view of expanding margin as we move through the balance of the quarter and through Q2.

Your next question is from the line of Joel Tiss with BMO.

I wonder if you can give us just one level down, kind of the drivers of the free cash flow generation improvement over the next 3 years but just kind of some buckets around what we should be looking for.

Yes, sure. So I'd say that as an overall theme, it's a higher baseline revenue run rate and it's better earnings potential in the company following the actions that we've taken since 2015. If you look at some of the bolt-ons we've done, certainly, CS&W is going to be a 2x factor in that. There's synergies to be released from Central. And then there's their growth on top of it, which increases that baseline revenue run rate and increases that earnings power. So we think, in general, it's a better baseline run rate for revenue and EBITDA as we continue to execute around our business model and really, with the initiatives that we have that we enabled so we continue to build. And you're familiar with what we've done and what we continue to do in building the plumbing and building that application environment around digitalization and how we map supply chains and go to market. So that continues to gain traction, 5 bps at a time, 10 bps at a time. It's generated positive churn for us on the commercial side in the business in 2018. So we expect that to continue as we get into 2019, 2020 and '21, and we think that, that earnings power in the company and the revenue-generating ability of Ryerson, at this point in history, gives that line of sight that we can meet those targets over the next 3 years, assuming the economic assumptions that we had in the investor presentation deck that we released last week and that we've discussed at the conference last week when we were together. I'd ask Kevin and Mike to add any color to that.

This is Mike Burbach. I think Eddie's got the big points here, but I think the other things that we continually strive to do is leverage the network that we have to take our working capital down, share inventories, also leverage the capital investments we've made in recent years. We've had quite a bit of additional capabilities to fabricate and do complex things for our customers. So when you take all these things that are in place today that we've been adding in the last few years, leverage the technology, the systems we have to share these resources, all of that's going to lead to an increased growth without adding a whole lot of working capital to do it.

And the gross margin, that's contemplated or whatever, that's in the plans 3 years out, is that much different from where it is today?

Yes, well, really, so we didn't put out a hockey stick projection. When we look at our next 3 years, we show market share going from about 5.2% to 6%. We show gross margins going from 19% to 20%. And within that, as we get expense leverage as that revenue grows and we generate additional expense leverage, the numbers really fall out from that. But in terms of our baseline assumptions, if we get demand that's relatively close to where it is today -- and we even have modeled in even maybe a return to what we'll call normalized average selling prices, so not necessarily $1,950 per ton we're seeing today but something in the historical range of $1,750 to $1,800. We believe that gives us the ability to generate that type of earnings power and that type of cash flow generation to significantly delever the balance sheet over the next 3 years. Joel, when we look at our check-downs. So we go through a series of check-downs, and admittedly, it's hard to quarter-to-quarter because of the volatility. But when we look at our check-downs for 2018, we can say profitable growth, check; expense leverage, check; asset efficiency, check; margin expansion, check; free cash flow, check. So we expect to be able to do that in 2019, '20 and '21, barring conditions that we can't really foresee at this point.

Oh, okay. Yes, when you said check-downs, it reminded me of my bonus for the last couple of years. And can you talk about the work that's left to do on the Central Steel & Wire, like some of the integration work that you guys are going to be focusing on in 2019? And then I'm...

Yes. It's been a great team effort. I mean, really, a team effort all the way around the organization. I've got Jim Claussen here with us today who's the President of CS&W. I'm going to let Jim talk about it for just a minute. But we put together 6 very simple thermometers that we use to track the progress of CS&W over the next 3 years, and we're running ahead in every category. So we look at restructuring and deal cost that were a part of the transaction, the [AT] cycle expansion, inventory takeouts, expense takeouts, asset sales and what we're getting in the supply chain synergies. And then we look at revenue retention. We're running ahead in all of those categories relative to a 3-year time line. So yes, I'm going to have Jim expound upon that a little bit more and talk more specifically about things that he and the team at CS&W are doing with Ryerson to bring about these synergies.

Yes. Thanks, Eddie. Really, Eddie hit on the big topics there, continuing to leverage the CS&W brand and the strong product profile to provide our customers with some exceptional experiences, retain the revenue, share best practices to -- across the platforms to drive safer and more efficient operations and then really use the analytic tools we now share to optimize supply chains and drive down working capital. So really looking at the benchmark synergies across Central Steel & Wire and Ryerson and bring those closer together.

So let me give an example of how it's working and it's working really, really well and it's just a tremendous tribute to the entire team. When you look at the Central network and you look at the Ryerson network, one of the synergies that's been better than we thought, better than we modeled is Ryerson and CS&W using one another to map their assets and their inventory to facilitate a much broader product package to the marketplace. I'd say more so in the Midwest, but it's also filtered out into a greater expanse around the country. Mike Burbach has said very well that the product mix compatibilities were better than we thought. I'm going to actually -- going to have Mike talk about that a little bit in terms of what we've seen with long products versus strip mill plate versus plate mill plate and some of the really, really good product mix synergies that we've gotten that were beyond our expectation going in. Mike, do you want to comment on that?

Yes, absolutely. So yes, I think Ryerson and Central have been competing in the same space for decades, 100 years-plus. And I think what's stunned us to some degree was as we got into the weeds a little bit, we found that each company had its niche and ability to be exceptional in some products more so than others. And so looking at the opportunities here, there's been all kinds of opportunities for both companies to leverage the strengths of each other. And so Central historically might have been stronger in the Midwest in certain long products or maybe in some call it, plate-type items, but Ryerson also had similar strengths in different products. And so we can leverage those supply chains, we can leverage the capabilities that both companies maybe weren't as strong in, but the overlapping part has been minimal. And so we've been able to find a way to leverage each other's strengths to each company to get their customers' products and services that they might not have been able to do before the acquisition, so -- and we're at the tip of the iceberg at this. Right now, we see more opportunities to keep pushing us, making it easier for our customers to get these services and we're pretty excited about it.

Yes, we've been pleased -- yes. No, we've been really pleased with the brand value of CS&W and how that complements the brand value of Ryerson.

(Operator Instructions) Your next question comes from the line of Matthew Fields with Bank of America Merrill Lynch.

So just a little bit of arithmetic on my part. It looks like you paid about $103.6 million for bonds in the fourth quarter. Is that right, on average?

$103.3 million. You probably included the accrued in there, I think, but $103.3 million.

Okay. How much did you pay in January for the $11.6 million you bought back?

Overall, we're at $102.9 million for the 62 million that we purchased.

Okay. So in January, you actually bought them back a little bit cheaper.

That's correct.

Okay, great. And if you're going to issue that redemption notice for the 5/15 first call at 105.5%, which you seem to have that price on your mind, that's about 40 days from now. Is that something that we should expect in the high-yield market here?

Well, we're looking at the market. We're looking at our options as far as where is the coupon going to be 40 days from now versus on the call date. We have not specifically set a firm time line. This is when we're going to refinance the bond. But as market conditions bring us an opportunity, we'll take advantage of an opportunity.

Matthew, what I would say is if you go back and look at history, we tranche down in 2012, we tranche down at $900 million in 2016 during a very difficult time. We tranche down to $650 million. Our expectation is we'll find a window and we don't know when that window will come. We think it's going to come. But we expect that, that next window is going to afford us an ability to tranche down again at a lower coupon. So it's going to be very market circumstances driven. And we think based on our improving performance, the things that we've outlined in this call, we think we're going to get an opportunity to do that. But we really want to tranche down and we want to tranche down at a lower coupon.

100% agree with you. My question is, why wait? You're paying 2 months-plus of extra interest at 11% when you could sort of do 0.25 point on top of your first call price and a tender, get rid of that 2 months of higher interest cost.

You're definitely in the market -- you're doing some of the math but I (inaudible). Hey, listen, you just bought a ticket to the pep rally.

Listen, our traders around here are saying that the first bid is the best bid. And when the music's on, you got to dance, right?

Like I said, man, you've got -- you're in the pep rally, okay? You're in the pep rally. We'll see -- we'll come back to you. We'll see what the market says, Matthew.

Your next question comes from the line of Nick Jarmoszuk. (Operator Instructions)

Okay. Well, thank you, and we look forward to being with you next quarter.

This does conclude today's conference call. You may now disconnect. Have a great day.