reliance steel & aluminum 2008_Q1_Conference_Call_Transcript

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Conference Call Transcript
RS - Q1 2008 Reliance Steel Earnings Conference Call

Event Date/Time: Apr. 17. 2008 / 10:00AM CT

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Apr. 17. 2008 / 10:00AM CT, RS - Q1 2008 Reliance Steel Earnings Conference Call

CORPORATE PARTICIPANTS
David Hannah
Reliance Steel & Aluminum Co. - Chairman and CEO
Gregg Mollins
Reliance Steel & Aluminum Co. - President and COO
Karla Lewis
Reliance Steel & Aluminum Co. - EVP and CFO

CONFERENCE CALL PARTICIPANTS
Brett Levy
Jefferies & Company - Analyst
Timna Tanners
UBS - Analyst
Chris Olin
Cleveland Research Company - Analyst
Mark Parr
KeyBanc Capital Markets - Analyst
Sal Tharani
Goldman Sachs - Analyst
Bob Richard
Longbow Research - Analyst
Yvonne Varano
Jefferies & Company - Analyst
Michelle Applebaum
Michelle Applebaum Research - Analyst
Tim Hayes
Davenport & Company - Analyst

PRESENTATION

Operator

Good morning, ladies and gentlemen, and welcome to the Reliance Steel & Aluminum 2008 first-quarter financial results. (OPERATOR
INSTRUCTIONS). It is now my pleasure to turn the floor over to your host, Chairman and CEO, David Hannah. Sir, the floor is yours.

David Hannah - Reliance Steel & Aluminum Co. - Chairman and CEO

Good morning and thank you for taking the time to listen to our conference call for the first quarter ended March 31, 2008. Gregg Mollins, our
President and Chief Operating Officer, and Karla Lewis, our Executive Vice President and Chief Financial Officer are also here with me today.

For the 2008 first quarter, net income was $107.4 million, compared with net income of $111.7 million for the 2007 first quarter. Earnings per
diluted share were $1.46 for both the 2008 first quarter and the 2007 first quarter. There were fewer shares outstanding for the 2008 first quarter
due to our share repurchases during that quarter, as well as in the 2007 third quarter. 2008 first quarter sales were a record $1.91 billion, an
increase of 4% compared with 2007 first quarter sales of $1.84 billion, and up 12% from the 2007 fourth quarter.

For the 2008 first quarter, our volume decreased 1% and average prices increased 5% compared to the 2007 first quarter. Our volume was up 9%
and average pricing was up 3% compared to the 2007 fourth quarter. For the 2008 first quarter, carbon steel products were 47% of our revenue



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dollars, aluminum was 19%, stainless steel was 18%, alloy was 9%, toll processing was 2%, and the remaining 5% was miscellaneous, including
titanium, copper and brass.

In general, the first quarter turned out a bit better than we anticipated. As we mentioned during our call in February, the prices of most of the
metals we sell were going up, with the largest increases taking place in carbon steel products. Those prices have continued upward since
February, faster and higher than we expected, and that contributed to our strong first quarter results. We passed the increases on to our customers
as fast as or faster than we received the higher cost material, leading to an increase in our gross profit margins, as reported on a LIFO basis, from
25.1% in the 2007 fourth quarter to 25.8% in the 2008 first quarter. On a FIFO basis, our gross profit margins increased to 26.7% from 25% in
the 2007 fourth quarter.

Also in February, we indicated that we were less comfortable with regard to predicting demand, given the uncertainty in many parts of the
economy and all the negative rhetoric in the media and by the politicians. As you can see by our results, demand for our products remained fairly
healthy, and that also contributed favorably to our beating our earlier guidance. I must say that our people did an outstanding job in improving our
margins from the prior quarter while increasing our share of the market at the same time.

We continued to manage our working capital well with our receivables in good shape, and our inventory turn increasing to 4.6 times for the
quarter, or averaging about 2.6 months on hand. Cash flow from operations was strong for a first quarter when we typically see a sizeable
increase in working capital due to a seasonal pick up in business conditions compared to the prior quarter. Our regular quarterly cash dividend
rate was increased 25% to $.10 per share effective with our first quarter 2008 dividend paid on March 28. We have raised our dividend 15 times
since our 1994 IPO.

On April 1, 2008, we acquired Dynamic Metals International, LLC based in Bristol, CT. Dynamic was founded in 1999 and is a specialty metal
distributor of primarily maraging steel. Dynamic’s 2007 revenues were approximately $11 million. Dynamic will operate as part of our
subsidiary, Service Steel Aerospace Corp. headquartered in Tacoma, WA. This strategic acquisition expands our existing Service Steel
Aerospace specialty product offerings in a new market area.

Looking forward through the 2008 second quarter, we expect prices to be up or flat for most of the metals we sell. Demand, once again, is more
difficult to predict. While we do not expect any significant increases or decreases in demand in any of our market segments, there is still a good
deal of uncertainty regarding economic activity. We, therefore, are anticipating demand at levels comparable to the first quarter, and expect
continued improvement in our gross profit margins because of the increase in prices. As a result, we currently estimate earnings per diluted share
for the 2008 second quarter in a range of $1.50 to $1.60.

We look forward to the challenges of the current business environment and are confident in our ability to continue our industry leading
performance through the effective and efficient operational management of our existing businesses, continued internal growth, and additional
accretive acquisitions. I will now turn the floor over to Gregg for some additional comments on our operations and market conditions. Thank you.

Gregg Mollins - Reliance Steel & Aluminum Co. - President and COO

We are pleased with our record sales in the first quarter. Our managers did an outstanding job navigating through a very difficult pricing market
that is truly unprecedented. We were also very pleased to see improvement in our gross profit margins to a more normal range at 25.8%. We are
working diligently to pass price increases on to our customers at the time of announcement. As all of you know, for the most part, we buy and
sell on the spot market so
we were expecting an increase in our margins as prices continue to rise.

We did get a slight improvement in our inventory turn to 4.6 times from 4.4 turns in 2007. The Earle M. Jorgensen Company and Yarde Metals
turned their inventory over 4.5 times in the first quarter; a record for both of them. We expect them to be closer to five turns in the near future.
From a demand perspective, our same store tons sold, as compared to the first quarter of 2007, fell 1.4% while the MSCI reported member
volumes down 4.8%. So we are pleased with our volume in the quarter. We still see strength in many of the key industries that we support.
These include aerospace, energy, electronics, wind towers, barge and ship building, rail car, agricultural equipment, non-residential construction,
infrastructure and heavy equipment. The industries that remain weak are domestic auto producers, appliance and residential construction.
Fortunately we do very little volume in these three areas.

The most significant change in the quarter was the increase in our cost of goods for most of the products we sell. Carbon steel prices will reach
record levels in the second quarter, far surpassing the 2004 levels. Sky rocketing raw material costs, low service center inventories, low imports,



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high freight rates and a weak dollar, are all impacting the cost of steel. Carbon plate, as an example, will have gone from $820 a ton in January
2008 to over $1,200 a ton in the May to June 2008 time frame. Hardly a week goes by without a producer announcing surcharge increases. We
have never seen a steel environment quite like the one we are in today.

As for aluminum, Midwest spot ingot is up $.21 a pound since January 1, 2008. Demand for commercial grade aluminum is flat, at what we
believe are reasonable levels. Aerospace, in spite of the delays of the Boeing 787, is still quite strong. Stainless demand is off from a year ago,
but many of our customers were hedging their inventories in anticipation of higher surcharges in the first half of 2007. This year, nickel
surcharges have continued their roller coaster ride, but not at the same levels we experienced in 2007.

To summarize, demand in most of the major industries we support is still pretty good. Pricing, particularly in carbon steel, is at record levels with
no signs of backing down any time soon. We will continue to focus our attention on superior customer service, managing our gross profit
margins and turning our inventory. We look forward to another good year at Reliance.

I will turn the program over to Karla. Karla?

Karla Lewis - Reliance Steel & Aluminum Co. - EVP and CFO

Our 2008 first quarter consolidated sales were a record $1.91 billion. Same-store sales, which exclude the sales of our 2007 acquisitions, were
$1.75 billion in the 2008 first quarter, up 0.6% from the 2007 first quarter, with a 1.4% decrease in our tons sold and a 2.2% increase in our
average selling price per ton sold. (Please note that our tons sold and average selling price per ton sold amounts exclude the sales of Precision
Strip because of the “toll processing” nature of its business.)

In the 2007 first quarter we experienced strong demand levels from most markets that we sell to. Although demand has continued at what we
consider to be healthy levels in the 2008 first quarter, demand levels have declined from the 2007 first quarter levels. We believe that demand
could decline further as 2008 progresses, but we do not currently expect any sudden and significant changes in our current volumes. The increase
in our average selling price per ton sold is due mainly to the significant increases in carbon steel prices that were effective in the 2008 first quarter
and the further increases that have been announced for the second quarter.

Our 2008 first quarter gross profit was $492.3 million. Our gross profit as a percentage of sales in the 2008 first quarter was 25.8% compared to
25.7% in the 2007 first quarter and 25.1% in the 2007 fourth quarter. In the 2008 first quarter, LIFO expense was $17.5 million, or $.15 earnings
per diluted share(1). We currently estimate our full year 2008 LIFO expense to be $70 million based on the significant increases in carbon steel
costs in 2008, which we expect to be somewhat offset by flat to lower costs for stainless steel and aluminum products at the end of 2008
compared to beginning of the year levels. In the 2007 first quarter we recorded LIFO expense of $18.75 million, or $.15 earnings per diluted
share(1). LIFO expense is included in our cost of sales.

Our 2008 first quarter warehouse, delivery, selling, general and administrative expenses increased $26.1 million, or 10.2%, from the 2007 first
quarter and were 14.8% as a percentage of sales, up from 13.9% in the 2007 first quarter and 14.3% for the 2007 year. On a same-store basis, our
SG&A expenses increased $18.5 million, or 7.6% mainly due to increased fuel and energy costs along with higher personnel related expenses.
Operating profit(2) in the 2008 first quarter was $192.4 million, or 10.1%, compared to $200.8 million, or 10.9%, in the 2007 first quarter. Our
operating profit margin decline was mainly due to our higher expense levels in the 2008 first quarter.

Interest expense decreased $3.5 million in the 2008 first quarter compared to the 2007 first quarter mainly due to lower borrowing rates and lower
outstanding balances. Our effective income tax rate for the 2008 first quarter was 37.6%, up slightly from 37.5% in the 2007 first quarter but
consistent with our 2007 full year tax rate. Our accounts receivable balance increased $142.3 million and our inventory levels increased $50.6
million at March 31, 2008 from our year-end 2007 amounts. Our working capital needs increased in the first quarter coming off of our normal
fourth quarter seasonal slowness and because of the increased pricing levels for carbon steel products. Our days sales outstanding rate was
approximately 40 days for the 2008 first quarter, consistent with our year-end 2007 rate. As evidenced by our strong DSO rate, we have not seen
a deterioration in our customers’ payment patterns at this time, but we are closely monitoring this. Our inventory turn rate improved to 4.6 times
in the 2008 first quarter from 4.4 times in 2007.

In the 2008 first quarter we used our borrowings and cash flow to fund our capital expenditures of approximately $36.0 million and stock
repurchases of approximately $114.8 million, along with our increased working capital needs. We generated cash proceeds of approximately
$16.1 million in the 2008 first quarter from the sale of our Encore Coils business. Our outstanding debt at March 31, 2008 was $1.1 billion, which
included $262.0 million borrowed on our $1.1 billion revolving credit facility. Our net debt-to-total capital ratio of 33.1%(3) was up somewhat



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from our year-end 2007 rate of 32.4%(3). The significant availability on our credit facility and relatively low leverage position provides adequate
liquidity for us to fund our working capital needs and growth activities, including our $210 million capital expenditure budget for 2008. Please
note that we can quickly and significantly reduce our 2008 capital expenditures if needed.

In January 2008 we repurchased approximately 2.4 million shares of our common stock at an average cost of $46.97 per share under our Stock
Repurchase Plan. This is in addition to the approximately 1.7 million shares that we repurchased in August of 2007 at an average cost per share
of $49.10. These repurchases resulted in approximately 5% fewer shares outstanding in the 2008 first quarter compared to the 2007 first quarter.
As of March 31, 2008, we had repurchased approximately 15.2 million shares of our common stock under the Plan at an average cost of $18.41
per share. We currently have 7.9 million shares available for repurchase under the Plan. Book value per share was $28.81 at March 31, 2008, up
from $28.12 per share at December 31, 2007.

Thank you and we will now open the discussion for questions.

Regulation G Reconciliations
(1) LIFO expense/(income) is included in cost of sales. The per diluted share effect is calculated as follows (in thousands, except for
share and per share data):

2008 2007
Three months ended March 31:
LIFO expense/(income) $ 17,500 $ 18,750
Tax rate 37.6% 37.5%
Net LIFO expense/(income) $ 10,920 $ 11,719

Weighted average shares outstanding – diluted
73,548,014 76,452,752
Per share effect $.15 $.15

(2) Operating profit is calculated as follows (in thousands):

2008 2007
Three months ended March 31:
Net sales $ 1,908,170 $ 1,841,890
Cost of sales 1,415,891 1,369,438
Gross margin 492,279 472,452
Warehouse, delivery, selling, general and administrative
expenses 281,692 255,552
Depreciation expense 18,156 16,147
Income from operations $ 192,431 $ 200,753

(3) Net debt-to-total capital is calculated as total debt (net of cash) divided by shareholders’ equity plus total debt (net of cash).

This conference call may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of
factors over which Reliance Steel & Aluminum Co. has no control. These risk factors and additional information are included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007 and other reports on file with the Securities and Exchange Commission.

QUESTION AND ANSWER

Operator

(OPERATOR INSTRUCTIONS). Brett Levy. Please announce your affiliation, then pose your question.



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Brett Levy - Jefferies & Company - Analyst

Jefferies & Company. Can you guys talk a little bit about the working capital build that you expect as prices move up in the second quarter and
what you expect on a working capital basis for the full year?


We haven't quantified it in a dollar increase, but certainly we would expect some increases due to the carbon pricing. What we really monitor are
our days sales outstanding for our receivables, which have been in good shape. And then on inventory, we really focus on our inventory turn. We
were up to 4.6 times in the first quarter, which is an improvement. We hope to continue to improve that. We're not planning on anyone buying
heavy, so we should see good results in that. So the dollars will be up, but we should be collecting those dollars and paying down the debt that we
need to fund the increased pricing on the inventory. So we will have a little more borrowings on our line, but nothing that we think significant or
certainly not troublesome, especially given the significant availability that we have on our credit facility.


The real key there is the improvement in our inventory turns. And our working capital increase, during any first quarter, is usually the most
significant increase because business tends to tail down in the fourth quarter, so we see a pretty good increase in receivables and then in
inventories is also to support those higher sales levels.

Actually, the increase in working capital that we just had in the first quarter of '08 was less than we would have expected, but helping that was the
improvement in our inventory turns. And we would expect that to continue in a manageable way.


All right. And then, just to get a final level of granularity, you guys turn inventories a little bit more than once a quarter each year, which means
intuitively, you're long carbon for the better part of a whole quarter. I'm just wondering why margins wouldn't be up more. Is the carbon business
turning faster than that? You just think if carbon prices go up $200 this quarter, you would think that next quarter should be awesome.


First off, with carbon products, we tend to turn them faster than our specialty products. So carbon inventories are turning something much better
than five times, if you add up all of our carbon businesses. So you are looking at about 2.5 months worth of inventory on hand, on an average
basis for carbon.

So the other -- the key in improving your margins is actually, Brett, passing the increases through before you receive that high-priced material.
And with the magnitude of these recent increases, it's more difficult to pass through $170, $180 a ton increase today. We feel very confident that
we can get some of that. Whether or not we can get it all on a 100% of our customers, that's not going to happen. And so we are predicting some
improvement in gross margins. Also, the LIFO impact, as these things turn through your inventory is a bigger deal.


Alright, and then the last question revolves around expansion. It looks as if you guys are doing some sort of organic expansions, i.e., building
rather than buying. Can you just talk a little bit about where your priorities lie in terms of whether you are looking more to spend money to build
or buy to expand?




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I don't think we have any preference one over the other. It depends upon the opportunities that are out there. We have had more green-field type
expansions in the last couple years really than we've had in quite sometime, because there has been some opportunities presented by some
industry conditions that have allowed us to do that.

I think you will see going forward that we will always have much more activity on the acquisition side than on the green-field expansion type
side. But that we will, where opportunity presents itself, go out and establish ourselves in new areas in a green-field type manner. But it's going to
be quite a bit smaller.


Yes, because we can get more accretion and more of an impact typically from the acquisition.


Right. Normally the organic growth that we've had, as Dave described, over the last few years, has been because we have not been able to find a
company that we were compelled to acquire in those particular regions. And so the obvious thing to do was to open up in those regions ourselves
when we didn't have a good acquisition opportunity.


Thanks very much, guys.

Operator

Timna Tanners. Please announce your affiliation then pose your question.

Timna Tanners - UBS - Analyst

Hope you are doing well. Just wanted to clarify some of the points that you went over, specifically talking about demand and your outlook. And
in your guidance, as I understand it, you are talking about expecting flat demand and margins to improve, prices flat to up for most metals. We
are a bit surprised that you wouldn't have had -- you are making comments about end market demand being fairly solid and still rising, but also
making comments about concerns. Can you articulate a little bit more what those concerns might be? Do you see, with prices heading as high as
they are, some pushback for some industries despite some strong fundamentals that might have more of a difficult time passing on those higher
costs?


I think, Timna, first off, I think our comments were that demand has been steady. We didn't see it rising. We didn't -- I think we said that we
didn't expect, we have not seen, in actually in quite some time, except for the seasonal turndown in the fourth quarter of last year, demand has
been just pretty steady and that's what we expect going forward.

The second-quarter outlook for us was -- normally you would expect second-quarter demand because historically it does go up; business
improves in the second quarter. Maybe we are reading too many analyst reports, or other things that are out there talking about the poor demand.
But the fact of the matter is, we are just being cautious, and we are not anticipating that demand in the second quarter is going to increase the
same amount that it normally does, simply because there are some tough spots in the economy out there.

Now, I think you've talked about in some of your stuff and everyone else has talked about the potential for slowdowns in certain other areas,
particularly non-residential construction because of its relationship to residential and certain other areas. We don't see any slowdown happening at
the time.



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On the other hand, we don't see anything taking off either. We think demand is going to be relatively steady through the second quarter. And we
just don't feel comfortable reaching out and predicting but that demand is going to increase in the next quarter like it normally does, simply
because of all of the different economic uncertainty things that are going on out there.


Okay. That's reasonable. I'm also wondering if you can comment on the potential for added volumes, perhaps. Because you mentioned that you
didn't expect a decline in your volumes despite any weakness that you might see later on or at least maybe that's what I interpreted from Karla's
comments. Is that potentially from the opportunities from taking market share from smaller distributors that might be having credit problems?
Can you talk about that opportunity a bit?


Well, I think, yes. We've consistently been able to improve our share and we feel that through service and quality, that we should be able to do
that on a regular basis. The market now for metals also is very tight, so it is -- there may be some opportunities for us to, because of the size of the
Company, to acquire metal from producers that maybe some other people can't get their hands on. So it's a combination of things, but I think
we've consistently been able to report volume changes that are better, even if it is -- we are down but we're down less than the industry as a
whole.

Also, I think the industry numbers are impacted quite a bit by the downturn in the auto and appliance and some of the other things that Gregg
mentioned, and we just don't deal in those markets.


Got you. Finally, do you have any comments on the availability of import? Has that changed any of late?


It's actually gotten a little tighter. The very few offerings that are actually out there, Timna, a) their pricing is not attractive, and b) the quantities
that they are offering are significantly lower than historical levels. So imports are virtually, as far as we are concerned, they are gone.


Okay, thank you.

Operator

Chris Olin. Please announce your affiliation then pose your question.

Chris Olin - Cleveland Research Company - Analyst

Cleveland Research. I wanted to take the nonresidential construction question on a different angle. Can you talk a little bit about -- we get the
sense that maybe beam and rebar and any other long product demand, has been pretty strong in the second quarter related to existing projects, but
then you start getting to the point where potentially higher raw material costs drive cancellations from your major customers. Can you talk a little
bit about what your actual visibility is out there and are you hearing about cancellations, etc.?


As a matter of fact, we are not necessarily hearing about cancellations, but we certainly, our customers are talking about delays, which should
come as no surprise.



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Any project that doesn't have a time limitation needs to be met, they are basically discussing with us that they are going to probably take it off the
table for a period of time and see where this levels out. I think what we're telling them is that they have to make their own decisions, but where
we are coming from, we just don't believe that this is a bubble that's going to burst anytime soon. So how long they have to delay projects just
depends on the customer and the job. But yes, when you are talking about $1000 a ton or $1200 a ton plus for plate, when it was $800 four
months ago, certainly delays are being considered. There is no question about that.


When would this -- let's say the delays actually happen, when would this start hitting your volumes? Would it be more of a third quarter, fourth
quarter, 2009 type of impact?


That's -- it's very difficult to answer.


The $1 million question.


It depends on the jobs. But we would anticipate that there would be some delays in the third quarter and fourth quarter.


Okay. And then, real quick, can you talk a little bit about what you are seeing from the quot;smaller distributorsquot; out there? Is there any kind of a
rational pricing or rational landscape that could prevent you from pushing these price increases through I guess even further?


No. We buy on the spot, we sell on the spot, and we've been through this many times before, certainly not at the levels that they are now. But we
explain to our customers; we provide them with documentation that supports the raw material increases, the energy-related costs, scrap being sold
at levels that have never happened before, and they recognize the fact that we have no control over what the prices are. And our salespeople - we
explain to them -- and I think this is the most important thing for our customers to understand -- is that what's more important to them is the
availability of the metal.

And we are a very large buyer of all the products that we sell, and, as Dave mentioned a minute ago, we have availability to product at probably
more availability than most people in our industry have through the major mills in North America.

So we just explain to them what we are going to do is make sure that they have metal. We're going to protect them by not selling to opportunistic
buyers, and we're going to have metal for them when they need it.


Thanks a lot.

Operator

Philip Gibbs. Please announce your affiliation and pose your question.



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Mark Parr - KeyBanc Capital Markets - Analyst

It's Mark Parr with KeyBanc. I didn't get to talk to an operator ahead of time, so I guess Phil set up the call, so, anyway.

Once again, you guys did a great job. Congratulations on the results. And I will say that I appreciate your perceived need to remain conservative
in this economic environment. I just want to ask the same question I asked on the last call because I think Karla -- Karla, it was either you or
David mentioned market share gains in your commentary, and I was wondering if you could talk about that in the context of just pure internal
programs versus some of your smaller competitors maybe running into some credit availability issues.


It's really hard to tell, Mark. I'm not, and I don't know if Gregg is aware, but I'm not aware of any of our smaller competitors that are singing the
blues because they are being squeezed from a credit standpoint or unable to pass through increases. The smaller service centers are all in the same
boat that we are in, and it might actually be more critical for them to get those increases passed through as soon as possible to their customers
because they are smaller and they do need to turn their cash, and I don't think the circumstances that they have are really any different than ours.
We are just two different sized businesses. I don't think they are under any more pressure or it's any easier for them with respect to get the
increases through.

The increases need to go through. If you don't get them through, then you're going to be selling material for less than what it's costing you to
replace it; and that's not good for us if we do it that way, and it's certainly not good for the smaller companies either.


I know that in the past 12 months you have mentioned on calls that the competitive environment had ticked up and you were seeing more
competition or less discipline. Could you give us an update on what you have seen here over the last several months as a result of all the increase
in pricing on the carbon side; and also an update as far as competitive market conditions in the aluminum and stainless markets, please.


You know, Mark, we have seen more discipline in the pricing market, across all the regions that we're in, in the first quarter. I think everybody's
a little shell shocked about what these prices have done, in particular in the carbon side.

To go drop back just a minute to your question about our improvement in market share, through the last few years, last year, we spent about $124
million in capital expenditures. We have opened new plants, obviously, over the last few years. I think part of the reasons why our improvement
in market share has taken place is because we've got state-of-the-art equipment in almost every operation that we have, and our quality is second
to none. Our level of service out in the field is also second to none, and you add all those together when there has been several large companies in
our industry that have not poured in the capital into their property, plant and equipment that certainly our Company has. And eventually, that
takes -- that provides us with a good opportunity.

As far as stainless and aluminum is concerned, I don't know what to say there. I think there's some softness -- I don't think; there is a little bit of
softness in stainless. I think some of that has to do with hedging for the first half of last year in anticipation of those major surcharge increases.
The other thing is appliances. Stainless is massive in appliances, as you well know, and the appliance business is certainly not what it was a year
or two ago in today's environment.


And just to be clear, what Gregg means when he says hedging last year, he meant that because the prices of stainless, because of the nickel
surcharges were going up so fast and so high at this time last year, that people were buying as much as they could possibly buy, they were
building inventory. Because they knew that if they bought it today, it would be cheaper than buying it tomorrow. So that's the clarification on
hedging.



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Okay. If I could just ask one more question. On the -- if you could give us an update on the aerospace market. I know you had said that was one
of the markets that you characterize as strong. Could you talk about is the aerospace market strengthening? Is it staying? Is it growing the same
rate? Is it growing at a faster rate? And also, what's the market looking like in heat-treated aluminum plate? And thank you again. Congratulations
on all the progress.


Mark, the aerospace business, you have to recognize at Reliance, our major market in aerospace is in the defense and military part of aerospace.
When you get into the commercial end of the business, we do very little commercial business with Boeing. We do with Airbus. But the majority
of our business in that area is with the regional jets and the private jets. Embraer, Bombardier, Gulfstream, Cessna, Beech; those are the private
jet makers and regionals that we're doing business with quite a bit.

This 787 program, as it applies to Reliance, from the aluminum standpoint, is really more of a nonevent, for us. Now, when you get into titanium,
which is a little less than 1% of our sales, it does have an impact there because obviously the 787, it will probably use about twice the amount of
titanium than any other jet will use. And so we are anxious for that program to get off the ground for that very reason in that product.

But, from our standpoint, what's happening with the 787 is not a big deal. Now, from the heat-treat aluminum plate standpoint, what we've seen is
the Alcoas, the Kaisers, etc., what they are not being able to ship into Boeing for the 787 program, they have made that up because of armor
requirements with the government. So it really -- our conversations with Alcoa and Kaiser, which we are extremely close with them, is that
they've been able to pick up the slack on the 787 with armor requirements. So heat-treat, plate and sheet, there was a recent heat-treat sheet
announcement just on Monday, a 5% increase on the price of heat-treat sheet. But we're not seeing discounts or -- it's still -- heat-treat plate is still
pretty tight.


Okay, terrific. Thanks again, Gregg.

Operator

Sal Tharani. Please announce your affiliation and then pose your question.

Sal Tharani - Goldman Sachs - Analyst

Goldman Sachs. Can you just give us some color on which part of your business -- you already mentioned which one you have seen weakness,
but where you see further vulnerability businesses or the end markets which are strong right now? Is it aerospace or non-res where you think will
be the next sort of a faster weakness, you will see grow faster than the others?


I think, Sal, our anticipation is, is in the major markets that we sell to, the strongest is probably the energy, oil and gas markets. And that is
actually getting stronger and it got stronger last year and it continues to gain strength so far this year, and we expect that that's going to continue.

Everything else has been pretty steady. Aerospace, for us, as Gregg just mentioned is -- we think steady on the strong side, and there's different
pieces moving in different directions there, of course. With respect to -- our major exposure there is in the aluminum products. And with respect
to the Airbus activity, that should be improving as the year progresses. And with respect to the Boeing side of things, then, as Gregg pointed out,
we are mostly military and defense there, and we expect that that's going to continue at a pretty steady pace. So the other major markets that we
sell to, the farm equipment and heavy machinery and that seem to be pretty steady.




FINAL TRANSCRIPT

Wind tower.


Wind tower seems to be pretty steady. The one that maybe is most vulnerable, and we've talked about this I think on a few calls, the last few calls
that we've had, is in the non-residential construction side.

As Gregg also mentioned earlier, we don't see anything at the moment that's being canceled. There are projects that we expect will be delayed, if
they can be delayed simply because of the pricing. So we have that exposure onto the non-res side, which is really an issue caused by the rise in
prices and maybe the postponement of certain projects.

And then we still have to remember that there is a part of non-residential that's connected to residential, so some of the lighter commercial-type
projects. And while we haven't seen a big drop-off in that, that is also an area where we would expect that in due time, we are going to see less
activity. Because if they are not building communities or people aren't moving into newly built communities, then you don't need all of the
support structures around those communities. And logic tells us that that part of the business might slow down.


And Sal, one of things that's working to our advantage is the weak dollar. So a lot of the companies that are manufacturing big pieces of
equipment that they've never been able to export in the past or cost effectively are able to do that now. And with what happened with ethanol --
what is going on with ethanol, I should say, there's a lot of agricultural-type equipment that is being purchased by farmers throughout the United
States. And so our plate business -- this wind tower business is absolutely huge. Obviously, the mills participate in that more on a direct basis.
But we also participate in quite a bit of that ourselves. So the companies that are manufacturing goods that could be exported, they're doing it just
the same way as the mills that are producing more metal that they could sell domestically, they are exporting. So the weak dollar is actually
helping -- is used to our advantage.


Okay. And on the inventory side, we certainly see the public sector data which appears to be -- continues to decline. But how are you seeing it at
the end user side? Are they also running very lean?


Yes. From an inventory at our customer level, yes. The customers have really, for quite some time, just been buying what they need. They've
been pretty cautious all along. We don't see our customers building inventories.

This environment is different than many that we've seen in the past, if not all that we've seen in the past, in that the opportunity to buy more
inventory than you need is not really there, whether you are a service center or whether you are one of our service center customers.


And Sal, that really plays to the advantage at Reliance. We pride ourselves in having the shortest lead times in the industry. We pound that every
day of our lives. And so when customers are living hand to mouth, they are more inclined to call you at 4:00 in the afternoon with a need for
tomorrow, and they need that metal tomorrow; otherwise, they're not going to have anything to keep their people in their shops busy. And we are
able to provide them processed material and delivery it to them the next day, and do it consistently. So whenever metal goes up and customers are
only buying what they need per job that really works to our advantage.


However, you said that on stainless-steel, you are seeing some hedging.



FINAL TRANSCRIPT


I think, his comment with respect to hedging on stainless, Sal, was really --


Last year.


Last year. It meant that we had customers and also service centers last year at this time because of the rapid and large price increases that were
building inventories. So, certainly that's not happening now.


Got it. And also on the stainless-steel side, the nickel surcharge you have been able to pass everything in terms of surcharge and now they have a
chrome surcharge, an energy surcharge.


Yes. We look at the all-in cost of the metal and we expect to get our gross profit margin on that total cost.


We don't separate as a line item to surcharge. We roll the surcharge into the base price of the stainless, and then market up from there. So yes, we
are able to pass along those prices, and as evident by last year. Last year, nickel surcharges hit a high of $2.28 a pound in July. And throughout
that entire cycle, when they began in about the $1.20 a pound neighborhood all way up to $2.28 a pound surcharge only, we were able to pass all
those surcharges on.


Okay. And I also heard that some of these service centers may have -- like you guys always push the prices up as soon as the company
announces the price or the mill announces price increase and maybe a month later they announce that next month the price it will go up. You
generally try to get your prices up ahead of that, but I heard that some of the service centers may have been selling at their sort of current cost. Do
you think if that's the case, and when they go back to place their inventory, you may want to gain more market share from these people?


What happens there, Sal, is that when they are selling, given the fact that metal is so tight, when we raise our prices and they sell at their existing
cost, they run out of inventory. When they run out of inventory, then they come to us. And that's why our margins go up. We're not going to sell
off of existing cost. We are going to sell off of replacement cost, and that's what we do. Does that mean we loose some business here and there?
Yes, it does, but we are very, very disciplined on our gross profit margin management. And we're not going to take what we consider to be
business that is not intelligently priced.


And there seems to be a lot of discussion or speculation that there is a bunch of little service centers out selling at below replacement cost, and
I've got to tell you, we just don't see that. It's not an issue that we are fighting every day. You always have some players out there that have lower
prices pretty much through all different market conditions. But I don't think it's any different now than it is normally; is it, Gregg?



FINAL TRANSCRIPT


No, not really, Dave. And as a matter of fact, they keep talking about small service centers. There are some large service centers that have that
problem.


Yes, and that can be, as you know, last year, we were going through something like that, and that can be actually more disruptive than these little
guys.


Right.


So. But we haven't really -- it's not really an issue that is at the top of our list as being a problem, Sal.


Your second quarter is generally your better demand than the first quarter, in general?


In general, that's true.


Okay. And lastly on the pricing, you mentioned flat to slightly up. I just want to make sure. Is that being very conservative because prices are
rising, as you said, almost every week? And carbon is still 50% of your business?


You have to remember, Sal, that only -- a little under 50% of our business is carbon and then there's breakout within the various carbon products
within that. So we are a little conservative on our ability to pass -- when we will be able to pass those increases through. But I do expect carbon
increases; but on stainless and aluminum, we're thinking flat, possibly down or down by the end of the year.


Okay, great. Thank you very much.

Operator

(OPERATOR INSTRUCTIONS). Bob Richard. Please announce your affiliation, then pose your question.

Bob Richard - Longbow Research - Analyst



FINAL TRANSCRIPT

Good morning and thanks for taking my call. I appreciate the color you gave on working capital. Just as a point of interest, of your $950 million
in inventory at the end of the quarter, can you give me just a rough breakdown on what the product types those are, like between carbon and
aluminum and stainless?


Yes.


Hold on just for a second.


So for the 900 -- it's going to be tough because -- it's kind of similar to our breakout. Probably about half is in carbon and then a quarter let's say
in stainless. Actually, probably about 15 to 20% in stainless and about 10% in alloy and then the remainder at aluminum.


It's very similar, Bob, to the distribution of our sales by dollars. So somewhere a little less than half. I think 47% was carbon last quarter. And it's
very consistent with that.


That's helpful. Thank you. I guess we could take this conversation off-line, but I guess with the previous caller, your sales price is up -- only up
3% from fourth quarter, if I heard you right. And with what aluminum and plate pricing has done quarter over quarter, I guess I'm kind of
surprised that it didn't improve more. And with -- I guess we'll take a look at what it does in the second quarter. But I would have expected your
average price to come up even more than what it did.


Well keep in mind we've got a lot of different products out there. And as Karla just pointed out, we've got a little less than half of our mix is
carbon steel products. The biggest increases have been mostly in the flat-rolled side. Flat-rolled, only about 8% of our business. We've got some
stainless products where the average cost actually came down during the quarter. Titanium, the prices have come down consistently and when
you throw all of these things into the pot and mix them up, that's kind of how it all comes down.

Now, the increase in the carbon side, if you look at that separately, we also would expect that it's going to be a bigger number, but we are giving
you an overall number based upon really the mix of our entire book of business.


The major price increases in the carbon area are taking place -- are hitting our inventory in the March, April, May timeframe, June. So those are
the huge increases that we've got; the first two months out of the year, they were going up, but they weren't going up as ridiculously as they have
the past couple months.


I appreciate your color there, and I'm -- not to beat a dead horse, but aluminum was up pretty good quarter over quarter too. What are your
expectations for aluminum pricing again? I think last quarter, you kind of hoped that it was going to be 110 to 120 for the year. Are your
expectations up a little more than that, or can you add anything to that?



FINAL TRANSCRIPT


Well, we didn't think that Midwest spot was going to go up to $1.40 a pound, I will tell you that. So -- but we don't expect it to hold there, either.
So I would say, to answer your question, do we think it's going to be $1.10 to $1.20? Maybe it will be $1.20 to $1.30 instead of $1.10. Because it
went up about $0.10 to $0.15 a pound, frankly, than what we had thought. But we just take educated guesses on these things. We're not traders or
anything like that, so I had no idea, frankly, that we would see $1.44 a pound Midwest spot.


The other thing, too, Bob, keep in mind that just if you look at aluminum, we sell a bit more than half of our aluminum sales are in heat-treat
products, and the rest is in common alloy products, and there's quite a difference in price between those two. So if our inventories are a little
heavier or a little lighter in heat treat versus common alloy, or if we sell a little more heat treat versus common alloy, if we are selling more rod
and bar than we are, or plate, than we are sheet product, all of that comes into play and has a pretty big impact on our -- the average cost of our
inventory, as well as the average cost in our sales prices.

We also, in the aluminum side, have contracts with a lot of aerospace customers, and those contracts are at fixed prices. And so if the prices are
going up, we're buying at a fixed price from our mill supplier for that piece of business, that contractual business, and we're selling it in agreed
price to our customer. So you might not see those increases in those prices in that part of the business because it's already booked at fixed prices.

So there's a lot of moving pieces when you look at this. It's very difficult to sit back and say carbon is up X%, so we expect revenues to be up X%
at Reliance because that much of their business is in carbon products. The distribution of the different carbon products, as well as in the non
ferrous side, all the different alloys can have a really -- it can make it do funny things. So there's a lot of moving pieces, is what I'm trying to say.


And the real way that we monitor and measure whether or not we are getting our prices up appropriately is our gross profit margins. And our
gross profit margins did improve in the first quarter, so we are comfortable that we were raising our prices the way we needed to.


Okay. I appreciate the color and great quarter and best of luck. Thanks.

Operator

Yvonne Varano. Please announce your affiliation then pose your question.

Yvonne Varano - Jefferies & Company - Analyst

Jefferies. Gregg, it seems that you indicated that prices on the carbon side are likely to hold here and yet there are a couple things I hear you keep
saying that you are getting push-back from customers, the availability for you guys, and we've heard this from others, is out there still. And I
guess I'm just trying to understand if anticipation of the demand could come down, what really keeps prices up here?


It's really -- it's all the raw materials. I'm sure you saw the other day that there was a shipment made of scrap to Turkey at $650 a ton. China has
been buying $620 a ton scrap. You've got the ironwork component, the coke components, all those commodities. I just personally don't see
anything on the horizon that would make those go down, coupled with the lack of imports coming into the country. In normal times with prices
going out like this, the service centers across the country would be running offshore and buying as much material as they possibly could. They are
not doing that now. It doesn't make any sense to do it, and that's why all the statistics at the MSCI report that industry inventories are at record
lows. Yes, they are at record lows because nobody can go offshore and buy any material. So given all of that, you would think that given what



FINAL TRANSCRIPT

you are suggesting, supply-demand fundamentals, you would think that there would be a pinnacle here shortly and prices would begin to go down
as they have in years past in the summer months, heading in towards the balance of the year. I would suggest that I really don't think that's going
to be the case this year only because of all these costs that are going into effect and lack of imports.

And as long as we don't open up -- the mills don't open up the gauge by pricing their material higher than what it is available in the world market
-- and I think they are smart enough not to do that -- then I don't think we're going to see imports coming into the country, and I don't think we're
going to see raw material prices, transportation prices, energy prices going down anytime soon.


Yes. On the import side, what's the differential that you think you need to invite imports in?


I would say about 8%.


So we need it to be 8% higher on a pricing?


We would need to be 8% higher.


Right, U.S.


Yes, the domestics.


And where are we now?


We're still -- our prices here in the United States are still in most cases -- lower than what the world -- than what they are buying globally.


Okay. And then I think you said earlier that volumes just aren't available and not at attractive prices on the imports?


Right. What few offerings, and I underline the word few offerings that are out there, Yvonne, they are just not at attractive prices, and even if
they were, the quantities that are being offered are very, very small.



FINAL TRANSCRIPT


Where do you see offerings being made from?


Asia.


Asia. Anything out of Russia?


Very little.


Okay. Thank you very much.

Operator

Michelle Applebaum.

Michelle Applebaum - Michelle Applebaum Research - Analyst

Michelle from Applebaum Research. I figured out how to use my phone now.


Congratulations.


It's only been five years. So I hung up on myself. So the questions I have remaining are -- your original LIFO forecast was $60 million for the
year, and you raised it to 70?


Yes, basically, Michelle, what we do is each quarter we have to look at -- during the year, we have to look at what we think our annual LIFO
expense will be and then book ratably to that annual amount. So in February, we were thinking probably $60 million was a good number for the
year because of the carbon price increases mainly being higher than we had anticipated. We're expecting prices to go up, but not to the levels that
are currently announced. And because of that, we have increased our annual expectations.


Okay. But the first quarter did have the correct number in it, so you don't need to adjust it, right?



FINAL TRANSCRIPT


Right. We estimated that, in February, we are estimating that in the first quarter we would book $15 million but we ended up booking $2.5
million more.


Okay, so you beat the number even with more LIFO. That's pretty cool.


Correct.


Okay. Then my next question is, and I know this has been asked around and I was having some trouble with the call, so I'm not sure if it's been
asked quite as explicitly as this, but when I take my handy dandy little model here, and keep demand the same in the second quarter and ignore
price increases, and ignore the comments that you made about improving gross margins, I still get a higher number than your guidance for the
quarter.


I didn't do that.


Okay.


From our perspective, we have the same number of shipping days in the second quarter.


I guess one question is, your other income usually ranges between 2, 3, 4, $5 million. And nobody has asked, you had a charge.


Yes, what that was, Michelle, you know our international business mainly in Canada has increased and with the changes in the Canadian dollar
this quarter, that reversed.


Okay, and what would you expect it to do in the second quarter, the other income?




FINAL TRANSCRIPT

You know, I'm thinking probably a couple hundred thousand dollars of income. Fourth quarter -- last year, third and fourth quarter we were
getting some pretty significant gains from the Canadian dollar, and part of that is -- I don't want to get technical, but is timing because of some
debt they are repaying and that's treated differently, so it doesn't always follow exactly the current currency fluctuations.


Okay. I understand that question -- I mean that answer. Okay. Then my other question is, and I'm preempting Nate who was going to ask this, but
since I got in first. You talk a lot about same-store sales, so how has that trended during the first quarter? And we seem to be at least part way
through the second. How is it looking for April?


I think same-store sales, if we look at the volume and take the pricing out of it --


Yes, if you take same-store first quarter this year, compared to first quarter last year, we were down 1.4%. If you look at first quarter -- well, it's
hard to look at first quarter '07 to fourth quarter of '08 to fourth quarter '07 because of the seasonal stuff.


Yes, I wouldn't even do that.


Yes.


Okay. And then, how did it trend month to month in the quarter? Was March --?


March was the weakest of the quarters, Michelle. We were actually ahead in January and February -- bear with me and I will grab something
here and answer that.


And then April so far?


April so far has been consistent with what was going on in March in terms of volume, but it's hard to tell this early in a month, really, exactly
what's going on.

But in January, and we mentioned on our February call, by the way, I think you probably remember, that our January volume was a record for the
Company in any given month, even on a same-store basis. So January, our volume, just pure tons shipped was up 3.7% over January of the prior
year. February, we were up 2.7% in tons over February of '07. And March, we were actually down 8.1% compared to March of last year.



FINAL TRANSCRIPT


That's for the month?


That's for the month.


February and March were pretty close. January was definitely the strongest on a same-store.


And on an average daily basis, because I do know you look at those things --?


Yes, we do.


Can you give me the same numbers, adjusting for the month?


No, I don't have them in pounds.


Okay, was March on a daily basis down from a year ago?


March on a daily -- sales dollars?


No, volume.


Yes. We had a lot of heavy stainless buy last year.


Yes, it was.



FINAL TRANSCRIPT


Okay, because that's -- the MSCI numbers were I think down 11% year-on-year; but then on a daily basis, I think it was 2.5. So there was a big
difference between -- it was down for the industry, but nowhere near as bad as the headlines read.


Right, right.


But April looks to be down versus April?


April so far is about even with March. It's running at the same rates.


So that would be down again last April, right?


Probably, yes. Although Easter was in last April, so -- if you adjust for all of that stuff.

The whole thing was, we ended up down 0.72% in our tons for the first quarter compared to the first quarter last year, which we were pretty
happy about that because last year, there was some pretty heavy buying going on, primarily in the same stainless side of things.


Okay.


And then there was a lot of inventory that was being liquidated. If you remember last year at this time, the industry had -- too much inventory in
it, not only just in the stainless side, but in the carbon flat rolled side.


For the second quarter?


It was there in the first quarter.


In the first quarter?



FINAL TRANSCRIPT


It was actually there in the fourth quarter.


It was a lot of the import material that came in late in 2006 and it really took the industry almost the first two quarters to get rid of that.

So there was some heavy selling at that point, so the volumes were boosted up by that. So we're pretty happy with our volume, very honestly. We
think it's -- relative what we read about the industry and just from our own expectations, we've been pleased with it.


Okay, so your second-quarter guidance of kind of flat demand isn't just being conservative. You are actually reflecting some trends towards the
end of the quarter. And I am, having done this for a long time, I am sort of geared toward second quarter being the great quarter, and --


We are too, but we are a little uncomfortable at this point expecting the demand increases that we have traditionally received during the second
quarter because of what we have been seeing from a trend line, which I know is what your point is.


And the other thing that for us too, Michelle, is companies, Jorgenson and some other companies that we'd acquired, they historically had had the
first quarter as their strongest quarter. So there's been just within the Company too, there's been a little bit of a change because of our mix of
companies.


Yes, it seems as though, Michelle, that the Midwest and the Northeastern markets, for whatever reason, that their strongest quarter is the first
quarter. So that would be like Yard Medals and Jorgenson Steel. Both of those companies' strongest quarter is the first. And that's about $2.5
billion in sales.


And, do you know why that is?


No.


I was afraid to ask that question. I love your business.




FINAL TRANSCRIPT

They thought it was odd. Both those companies thought it was odd that our second quarter was the strongest. And we said well, there's more
snow back there in January, February, March. Why are you shipping more product? And again, it's a typical answer. Well it depends on the
industry that you are supporting. It depends on the region. It depends on this, depends on that. At the end of the day, we are confused.


At the end of the day, most service centers don't know where the hell their product ends up. Is that fair?


That's a very fair statement.


Okay. Been there, done that. Next question, you were -- I was listening to a lot of the commentary about small service centers not having
problems and maybe some big service centers who have had problems and we're dancing around an issue in Detroit. There's been visibility of the
carry situation, which is a large service center, and I think that people might be assuming that's the tip of an iceberg. And I'm just wondering,
because I've gotten mixed signals. Is that sort of a unique situation because he was taking big bets?


We think so.


Okay.


We don't think that's indicative of what's going to go on through the rest of the country. We think that's unique to itself.


Because others in your business are kind of telling me that there are more situations like that coming, but you don't get that sense? Your credit
department doesn't get that sense?


No, we don't.


No.


No, we don't.



FINAL TRANSCRIPT


Interesting.


They are certainly aware of what's going on in the economy, that some of our customers' working capital needs and our competitors' working
capital needs are increasing. Banks are probably a little more cautious, so we are aware of all of that and trying to be very aware alert to it, but we
are not seeing things to be concerned about at this time.


Okay. I'm trying to remember in '04, did you guys have bad debt write-off expense? What was '04?


Nothing significant.


I was going to say, because others did. Others had exposure to -- in '04, we had that problem, right? The sudden need for working capital and
people couldn't do it and we had a few blowouts.


I think the difference then, Michelle, was the industry was coming out of 2001, 2002, and 2003, which was very painful and most companies in
our industry lost money and their balance sheets became significantly weaker during 2001, 2002, and 2003. So they entered this period of 2004
from a weaker position than they are entering 2008 because the last few years in our industry have been pretty good. And most people have made
money and done well and strengthened their balance sheet. So it's a different -- there are some differences.


Okay, yes. That makes a lot of sense. Okay. And it's good to hear -- I just couldn't remember if you had had exposure. So then you have a good
credit department. I'm not going to worry about that.


We do.


We do.


Or multiple good credit departments.




FINAL TRANSCRIPT

One more. Is that okay?


Sure.


Okay. M&A -- I don’t know how to ask the question anymore, Dave.


There's still a lot of opportunity out there, Michelle. We continue to see things. We continue to get calls. Rarely does a week go on without at
least one of the three of us getting a call from someone asking about our interest in their business. So there's still a lot out there. And we will
continue to be selective as we've ever been and we will try to take advantage of the opportunities that make sense to us.


In terms of -- are you not giving that list out because -- for compliance legal forward-looking reasons?


No, truly, I stopped keeping that list. I just don't --


Okay.


You asked a question and we would then have almost every investor that we talk to ask us about the list and we were afraid they had the
expectation that we were very actively pursuing all the companies on that list. And the expectation was that that's -- whatever, $6 billion or
whatever should be happening within the next 12 months, and that's not the case. As you know, some of those companies are on there for 12
years.


Okay. So it was a forward-looking issue. I got it.


Yes. So let me ask the question a different way. Can you tell me how many companies, privately-owned companies are left in the over $500
million range?


No. Simply because there's probably some out there that we don't know.



FINAL TRANSCRIPT


Okay, so how many -- let me ask it a different way. How many that you know of, because I know -- everyone knows. Purchasing magazine's list,
is -- and metal service center, whatever the magazine is called, they are good listers, as good as it gets, but they always miss people and we laugh
about the ones down the road from me in Elk Grove Village that I miss. Okay? So that's a disclosure. So how many at least do you know?


At least would be the number in the Metal Center News and Purchasing magazine list.


I'm going to kill you guys. Okay. Alright. and what was that number?


I don't know. I don't have it with me, Michelle. I'd have to go in my room and count them.


Find the magazine.


Yes. I have the magazine in my office.


Okay. Some people would call this your pipeline. So it's kind of an important thing given -- you've proven, believe me, but it's what we kind of
have to do as analysts is sort of look forward and say what's left. And to the extent that it's very opaque and if I'm sitting here in the middle of
Chicago going to the Boy Scouts and going to the ASD kind of stuff and I still miss a lot, then we know we are missing a lot and I would think
you're a little bit closer than I am, so.


But we miss it too. And I think you've heard us say in the past, Michelle, that Gregg and I will be out in some area and we will see a truck with a
name on it that we don't recognize. Or we will get a call from somebody or we will meet somebody in an MSCI meeting and we don't -- we really
didn't know the size of their business.


And that's still happening?


Oh, yes. It happens all the time. So -- it's -- suffice it to say that we have been able to consistently grow the Company through all market
conditions with acquisitions and I don't see that stopping.



FINAL TRANSCRIPT


That's a good word. I like it.


Yes. I don't see that ending, Michelle anytime soon.


And you will tell us when you do, right? So we don't have to worry about it?


That's right.


Okay, so we will see that press release.

Valuation expectations with private equity, a little bit ratcheted back at least?


I don't think from our perspective, Michelle, that had any impact on the way that we value our transactions anyway. And I don't see that any
perceived credit tightness, if there is some on the private equity folks has had any impact on their participation in our space or any, certainly
valuations. So we're going to continue to value things that way that we traditionally have valued them. We will only do accretive deals and deals
that culturally fit and, that's what we focus on and there's a lot of stuff yet to do.


Okay, and you've done -- is it up to 40 now?


It's over 40. I think this last one was 43.


Okay. I think I'm done. Thank you so much.

Operator

(OPERATOR INSTRUCTIONS). Lloyd O'Carroll.

Tim Hayes - Davenport & Company - Analyst



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