HAYN Earnings Call Transcriptbeta

Operator: Greetings, and welcome to the Haynes International, Inc. Second Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Van Bibber, Controller and Chief Accounting Officer. Thank you, sir, you may begin.

David Van Bibber: Thank you very much for joining us today. With me today are Mark Comerford, President and CEO of Haynes International; and Dan Maudlin, Vice President and Chief Financial Officer. Before we get started, I'd like to read a brief cautionary note regarding forward-looking statements. This conference call contain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. The words believe, anticipate, plan and similar expressions are intended to identify forward-looking statements. Although, we believe our plans, intentions and expectations regarding or suggested by such forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties, and we can provide no assurance that such plans, intentions or expectations will be achieved. Many of these risks are discussed in detail in the company's filings with the Securities and Exchange Commission, in particular Form 10-K for the fiscal year ended September 30, 2014. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. With that, let me turn the call over to Mark.

Mark Comerford: Thank you, Dave. Good morning, everyone, and thanks for joining us today. Hopefully, you've all seen the press release and had a chance to review it. We'll follow our standard agenda on today's call. I will open with comments about the business and our end markets, and Dan will give you greater detail on the financial results. We had a number of positive factors impacting the second quarter. Over the past year or so, we've talked to you about new applications and the constant work we do with the designed engineering community to develop applications for our proprietary materials. We had strong quarter in shipments of those products in the niche applications in energy, consumer and chemical markets. We also shipped over $60 million of our aerospace-related products in the quarter, and we had positive impacts from our tolling business, both with the inclusion of the LaPorte facility for the first time in our numbers, and good activity in our baseline tolling business. Perhaps more importantly -- or most importantly, even with these higher shipping levels, we managed to see our backlog expand in both value and quality, specifically, higher overall dollar volume and higher price levels in spite of falling commodity prices, indicative of the mix we booked during the quarter, but I'm especially pleased to see the backlog gains in the quarter because our shipping levels in each of our 4 defined markets increased sequentially from the first quarter to the second quarter. Overall, net revenue in the second quarter was $138.7 million, up 20.2% from last year's $115.4 million. Pounds shipped in the second quarter were 5.9 million, up roughly 4.3% from last year's 5.7 million. Net income in the second quarter of fiscal 2015 was $11.7 million, up approximately $13 million from last year's reported net loss of $1.2 million. Last quarter when we spoke with you, we had expected the lower-value, high-volume material side of our business, primarily in corrosion, to increase. However, that did not happen. The high volume side of the chemical process industry is still slow and very competitive. Similarly, the gas turbine market has not yet rebounded. At Haynes, we were able to ship some project work that we didn't expect to be able to ship until the third quarter. And then I stated, we had a stronger-than-expected quarter in aerospace products. As a result, we've performed well above where we had anticipated. I'd like to say that we're seeing better strength in the high-volume CPI and land-based gas turbine markets, but at this point, they're still very slow. Also, on the downside, we're still disappointing customers on lead times and deliveries. We're making some gains in the tubular products area with our new capacity coming on, and we're booking that facility at higher levels already, but we're behind on our core sheet and coil products. You'll notice in the Q that we're finally pushing material through whip into finished goods. This is to meet the demand we're seeing as evidenced by our increased revenue levels and increased backlog. Finally, as we stated last quarter, we're cognizant of the issues impacting the specialty metals industry, primarily, the cutbacks in oil and gas industry. And we do suspect we may see some impacts in the downstream chemical industry applications we supply. However, we remain confident in our business based on the strength we've seen so far this year, and the strength and quality of our backlog as we look forward. With that, let me move into the markets and give you some color on what we're seeing. Net revenue in the Aerospace market for the second quarter of '15 was $60.3 million, up 27.6% from the second quarter of 2014. Volume was 2.7 million pounds in the second quarter, up 20.7% from 2014's 2.2 million pounds. Aerospace comprised 43.5% of our net revenue in the quarter. In spite of the higher shipping level, our backlog in Aerospace also increased 11.7%. We don't expect any broad sustained downward corrections occurring in the supply chain. In fact, we expect the Aerospace business to continue to increase as 2015 progresses, and as we said last time, we expect the progression to be somewhat uneven, especially with the volatility we are experiencing in commodities and the inventory levels in the supply chain. At the macro level, I'll repeat what we discussed last time, specifically, that Boeing and Airbus now have aggregate backlog of about 12,000 aircraft and new platforms like the 737 MAX, A320neo, 777X, and others continue to book well. Engine manufacturers and sub-tier fabricators associated with these platforms are experiencing better activity. And as a result, we expect stronger demand as we move through 2015 and into 2016. On the structural side, our tubular products facility had one of its best 6-month period since 2012 in both output and order intake. Again, overall, we expect the aerospace market to remain strong as we progress through 2015. By the way, sequentially, we did about $43 million in Aerospace in the first quarter of '15, so the $60 million this quarter is a substantial increase, almost 40%. To see the backlog increase during the quarter on top of that revenue increase lends credence, I think, to our confidence in this market. I also think it's a good time to note that as we're moving more of our inventory from whip into the service centers, as I mentioned earlier, we can take advantage of these spikes in demand. Last quarter, we mentioned during the call that we felt that destocking in Aerospace had ended, but obviously, we didn't expect the 40% spike in the next quarter. In fact, if you recall, we had expected better transactional activity to occur in the CPI market. Anyway, obviously, the transactional increase occurred in the aerospace market. And by having the material available, we were able to take advantage of that increase in the aero demand in this past quarter. Moving to the chemical processing market. Net revenue for the second quarter of 2015 was $35.6 million, up 16.9% from the second quarter of '14's $30.4 million. Volume in this market was down 11.6% in the second quarter of 2015 to just under 1.4 million pounds from last year's just over 1.5 million pounds. The higher revenue and lower pounds shipped is indicative of the lower levels of the high-volume projects we had mentioned earlier, combined with our strong results in developing new high-value applications. CPI accounted for 25.6% of our net revenues during the quarter. Backlog fell 22.6% during the quarter, principally, due to the high value of the shipments. As we have discussed previously, several of the new applications we have been working on over the past 3-plus years became orders in 2014 and '15, and we have been shipping these projects throughout fiscal '15. We still have several projects in the pipeline for 2015. As I mentioned last time, it's sometimes very difficult to dedicate the resources to developing these projects in lower-demand, lower-profitably periods. And I think it's very important that we acknowledge the work of our technical people, our production people, our field people when these projects hit the order book and turn into top line revenue and bottom line profitability, as we've seen over the past few quarters. Looking ahead, we continue to work on new projects in this area. In fact, we just booked a nice project late in March that should ship late in our fourth quarter and early in our first quarter of fiscal '16. We're confident we'll continue to convert some of these new applications just as we've done over the past few quarters. However, we do feel that the cutbacks many of our peers are experiencing in the oil and gas industry, along with oil and -- lower oil and natural gas prices, may cause this market to experience some reductions in new technology on the energy-related side of the project business. Moving to the land-based gas turbine market. We had $19.9 million in net revenue in the second quarter, down 8.7% from second quarter of '14's $21.8 million. Volume was 1.2 million pounds, down 19.6% from a year earlier. This market accounted for 14.3% of our total revenue in the quarter and the backlog increased 5.2%. As we discussed last time, this market remains depressed as the OEM side of the business remains slow since roughly the end of 2013. We do not foresee a pickup on the OEM side until we start to see energy demand from the industrial economy rebounding globally. The maintenance and repair side of the business is holding up. And as you know, demand on the MRO side is very difficult to predict. We've been successful in developing new applications for our high-temperature capability materials, but again, until new platform sales kick in on the OEM side, we don't expect those applications to result in significant short-term sales. Overall, we expect this market to remain soft and exhibit very low visibility through 2015. In our other markets, we had net revenues of $16.6 million in the second quarter of '15, up 45.5% from the second quarter of last year. This market accounted for 11.9% of our revenue in the quarter. And even in spite of this higher shipping level, our backlog increased about 3.8% during the quarter. We've been successful in developing new applications in this area as well as winning some customers with nonproprietary materials via better service. We're continuing those efforts to develop new applications, primarily, targeting corrosion, industrial heat-treating, welding and brazing markets. I also want to quickly update you on the CapEx projects we have going on in our plants. On the tubular products expansion, we've essentially completed the work. We're doing things like calibration and modifying tooling and working on production rates and standard operating procedures, but essentially that equipment is in production right now. We're already starting to see the benefits in capacity and scheduling, allowing more consistent output and increased booking levels. On the flat rolled side, the equipment is up and running. And as we've said previously, we'll need some market cooperation to fill that area up. But we're seeing the benefits and quality, safety, turnaround time and in not having to send as much product to outside process. But again, like I said in the CPI section of my remarks, we need to see some demand pick up for the high-volume ideally heavier-section specialty alloys projects for this area to really pick up in its -- in performance. Finally, on the IT project. We're making inroads into getting things up and running the way we want. Having the strong invoice level we've had and the high-booking level we've had, the system hasn't held our people back. Frankly, we've seen -- we've had a lot of people working a lot of hours to get this project up and running, and it's not been pain-free, but it's necessary to the growth of the business and the management of the business. We're looking at the schedule for the manufacturing implementation, and as I mentioned earlier, that we're just now starting to get caught up with customer demand and with our lead times and our scheduling. Where we stand with regards to the order book, we'll have a say on our implementation schedule on the manufacturing side. We'll keep you updated on that. With that, let me turn it over to Dan, so he can give you some more details on the financials.

Daniel Maudlin: Thank you, Mark. Our financial results in the second quarter represented continued margin improvement, driven by 4 important factors. First, solid niche project work, both in our chemical processing market and in our others market category. While these projects were not big volumes, they were sales of high-value proprietary and specialty-type alloys that provide a strong margin. These type of projects showcase one of the foundational strengths of Haynes, which is our technical applications development. When we win orders due to the strength of our technical applications team and the order for proprietary or specialty alloys, we can drive solid margin profitability. Second, aerospace volumes are now picking up with product flowing through the supply chain. We have a high exposure to aerospace at 43.5% of sales. And as Mark mentioned, aerospace sales were up 27.6% this quarter over last year's second quarter, and over 39% higher in the sequential quarter Q1 of this year. Third, price increases that we implemented in the second half of fiscal 2015 have increased the value of our backlog; and as we ship these orders, drives more profit to the bottom line. And finally, the return on investment beginning to materialize related to the CapEx projects recently completed, especially in the tubular product form. We're just beginning to see increases in volume and capturing the benefits that we expect from these projects. Our gross margin percentage this quarter of 20.1% provided $27.8 million of gross margin, which was an increase of $7.6 million compared to Q1 of this year and up $18.8 million compared to Q2 of last year. These results continue a solid progression of margin recovery. As we continue to drive stronger margins, certain headwinds and uncertainties persist such as declining commodities, especially the price of nickel. And the 30-day average LME price of nickel at the end of the quarter was $6.23 and continued to drop in April to below $6, but just recently came back to the low to mid-6s. However, just 2 quarters ago, the price of nickel was nearly $2 higher. It has dropped nearly 25% in 2 quarters. This declining environment is a headwind to margins as it may push down our average selling prices as we sell off the higher cost inventory in our stock. Also a headwind is the continued strong U.S. dollar and the impact on our competitiveness in foreign markets and the translated value of sales made in foreign currencies. Partially offsetting this headwind, we have a slight natural hedge with U.S. dollar monetary net assets we have at our international locations and the fact that the aerospace market is predominately U.S. dollar-based, and most competitors in the aerospace market are also manufacturing in the United States. The corrosion side of the business on the other hand, is where we see the largest impact of the strong dollar. We expect the margin percentage and margin dollars in the third quarter to be below the second quarter due to these headwinds, along with the shift in product mix, which will likely have less high-valued specialty projects than we saw in the second quarter. SG&A costs combined with research and technical costs were $10.5 million for the quarter, which includes higher incentive compensation accruals compared to last year, primarily offset by favorable foreign currency translation of the monetary net assets in U.S. dollars at the foreign subsidiaries that I previously mentioned. SG&A as a percentage of net revenues was 7.6% in the second quarter compared to last year's 9% and the full year 2014 of 9.3%. Operating income was $17.3 million compared sequentially to Q1 of $9.6 million and last year's second quarter of an operating loss of $1.3 million. Outlook for next quarter. The company expects revenues and operating margins in the third quarter of FY '15 to be lower than the second quarter of FY '15, but above last year's third quarter of FY 2014. This is attributable to our success in shipping certain high-value orders in the second quarter of FY '15 that were originally expected to be shipped in the third quarter of '15. In addition, the company expects a modest margin compression to arise in connection with the continued softness in raw material prices, principally nickel, which customarily results in lower average selling prices for the company's products. Backlog was $220.4 million at March 31, 2015, an increase of approximately $4.9 million or 2.3% from Q1. Solid tubular products order entry contributed to the increase, which was enabled by the capital expansion. Backlog at April 30 is approximately $210 million. We have slightly reduced the forecast for capital investments in 2015 to approximately $33.4 million, including the acquisition of the Leveltek, LaPorte assets, which $14.6 million was paid in January of 2015. The integration of the LaPorte acquisition has gone well and is already accretive to earnings. Completing this acquisition was important to our long-term strategic growth plan and important to our enterprise risk management initiatives. As a management team, we are excited to make it a part of the Haynes' organization. Net cash provided by operating activities was $15.5 million in the first 6 months of fiscal 2015 driven by strong net income. Controllable working capital was $286.1 million at March 31, relatively even with the first quarter of this year. Our revolver balance remains at 0 borrowings. And our cash balance at March 31, 2015, was $32.2 million, a decrease of $6.2 million over the quarter even with the cash acquisition of the Laporte assets for $14.6 million. Our cash is expected to increase over the next quarter due to the projected solid accounts receivable collections as well as an expected inventory reduction. Our projected free cash flow for fiscal 2015 is expected to be positive. In summary, we continue to see concerning macroeconomic trends and uncertainties related to the impact of lower commodity prices. These will be our headwinds, but we will focus forward to drive the execution of our strategic growth plan. Key to that plan continues to include: one, differentiations for technical applications development for new profitable orders; two, mix management of higher value alloys and product forms; and three, capturing the ROI on the capital investments we have made. The execution of this plan is expected to drive growth in shareholder value. Mark, I'll now turn the discussion back over to you.

Mark Comerford: Thanks, Dan. It was pretty good quarter. We shipped some high-value project work. We sold in books some high-value products on the Aerospace side. And we got the Laporte operations up, running and contributing. On the downside, we still haven't seen a bounce in the higher-value CPI business or in the land-based gas turbine business, although, specification activity has been excellent in both of those areas. I'm very pleased with the quality of the backlog we have. We're continuing to drive waste out of our operations. And I know I've touched on this in the past, Lean, Six Sigma and Black Belt operations, we've really just started that process at Haynes about 5 years ago. And I looked back at places where I used to work, Materion and Brush Wellman, we started that 15 years ago. So there's still gold to be mined in our mill, and I'm very excited about that. I'm very excited about the gains our people are making as far as process engineering, and driving out waste and increasing our capabilities. A lot of these special projects that we manufacture are not easy alloys to manufacture. And our engineering's teams and manufacturing teams always step up and make these things happen for us. But again, both externally and internally, there's a lot of opportunities for Haynes. I just gave you a rough idea of the internal opportunities. We just had our R&D review, too, at the end of April, and gosh, that was exciting. Some of the things that are going on in that area. I talk to you frequently about the new specification work, and I think most of you know that our R&D and our marketing people report in under the same person. So when we have an R&D meeting, they're very functionable, they're very action-oriented types of meetings with the marketing people. And the application engineering work that's going on is still -- it's very exciting to a guy like me. You think about all the new plants that are going to be built on the chemical side of the business. And just so everybody knows, too, these new chemical plants, it's not like they're still using 1995 technology in these chemical plants. The new processes that are being used to operate at higher temperatures, more corrosive environment, these are all good things for all of us in the nickel-based and cobalt-based industry. But again at Haynes, we like to think that we're on the forefront of working with people on these applications and developing the prototypes and moving things into production. But anyway, I like the path we're on. I like the path that all of the specialty metals industry is on, as we look forward into 2016 with the new platforms that are coming out. There's definitely some short-term headwinds that as an industry we have to deal with. Dan mentioned things like currency exchange rates and the compression we'll see with the commodities. But again, we also need some of the global economies to pull out a little bit out of their current malaise. But all in all at Haynes, we're very pleased with where we are, where we're positioned right now and with the quality of the applications and the end markets that we're serving. With that, let's open up the call to your questions.

Operator: [Operator Instructions] Our first question comes from Phil Gibbs with KeyBanc.

Philip Gibbs: As far as what may have surprised you in the quarter, is it fair to characterize that as the pull-through of the Aerospace business in the service center side? Is that really what surprised you in the quarter because I know that, at least, from a margin perspective, you were looking for something weaker relative to the prior quarter, and clearly that didn't transpire? And so I'm just trying to get a little bit more flavor for what could have really surprised you to the magnitude that it did.

Mark Comerford: Yes, so I think it's almost like a "best of both worlds" type of situation. We had the upside surprise on the aerospace transactional activity that came through, along with the volume downside surprise of -- we just didn't see the CPI, which is typically lower-value products. We just didn't see the CPI come through. And what I mean by that is the high-volume project work, we didn't see a lot of that come through. That also then gave us the opportunity. We had a lot of orders out there, would be the best way to put it, that are on or before types of delivery dates. That gave us the opportunity to pull forward some of these other specialty projects and get those shipped out. So it was a very -- I think you -- I said it, I think, a number of times, I always prefer the receivable to the inventory. So I know it makes it real tough for analysts to plan on, on what our numbers are going to be quarter-on-quarter, but any time we see a gap in the schedule and we can get something pulled up, and get it invoiced and get it out to a customer, and they want it, we do it.

Philip Gibbs: Yes, I mean, Mark, I only think I got your quarterly earnings right once in 8 years. So why start now? As far as the projects that were pulled through, were they largely in the chemical processing and maybe some of the oil and gas applications in the quarter?

Mark Comerford: Yes, exactly. There's a couple of key projects. One is an ongoing project that's a consumer-related application, that's doing really, really well for us. But most of the others are -- they're -- we classify them as chemical process industry, but they are kind of loosely related to the energy industry. And that's one of the interesting things happening. A lot of us are talking about the CapEx changes, and concerns about drilling and completions, but there's also the other side of this thing, that there's going to be a lot of opportunity downstream as you move again. Essentially, natural gas being the base material for everything, but it's going to create tremendous opportunities further down in the chemical supply chain. And we see a lot of opportunity there. And I think everybody sees a lot opportunity. A lot of opportunity in North America as well as other parts of the world for these new processes and new procedures for refining and developing more advanced chemicals. And at Haynes, I think we're going to play a pretty good role in that.

Daniel Maudlin: And one note on the special projects. As Mark mentioned, we still have more in the pipeline. We were just -- the mill is performing well, and we were able to ship some of these a little more than we expected in Q2 than Q3, but we will still have some of these special project-type items in Q3.

Mark Comerford: Yes, like one of the projects that did ship in Q2, that made a big difference -- there's still material on the dock, so there's more of that specific project to go in Q3. And I think we're maybe only a little bit more than halfway through that project? There's -- maybe 2/3 of the way through that project?

Daniel Maudlin: Yes, maybe 2/3s.

Mark Comerford: So there's still a lot of that like that. That one project is a nice size project that's still going to ship in Q3. And then, as I mentioned, we've booked another real nice project. It's actually a repeat project late in March that looks like it's going to ship late in Q4, early in Q1. So still a lot of good things going on.

Philip Gibbs: Was that CPI or oil and gas?

Mark Comerford: That one is -- that one is more of an energy-related cogeneration application, might be the best way to put it.

Philip Gibbs: Okay. Okay. So still clearly a lot going on in energy under the surface here despite the fact that oil is down and things are moving forward?

Mark Comerford: Yes. I think you're going to hear more about the downstream applications still continuing to be good. Allegheny shipping that big pipeline thing, that's a real good project out there. But a lot of the chemical side of the business, there's a lot of things still on the drawing board [indiscernible].

Philip Gibbs: Are these international projects, Mark? Or are they largely North America or split?

Mark Comerford: Split would be the best way to put it. It's -- the world has gotten so small now, Phil. A lot of times the fabricator is international and the end vessel or heat exchanger might be coming back here to the U.S. or vice versa. Might be being fabricated in Columbus and being moved over to Japan or China.

Operator: [Operator Instructions] Our next question comes from Edward Marshall with Sidoti & Company.

Edward Marshall: So the -- there was a strike, I guess, of USW strike in some downstream energy producers that affected maybe the first quarter of 2015. And I'm wondering if there's any disruption to demand or shift in the capacity from competition? I know there was a lot of maintenance schedules that got delayed or kind of thrown off kilter. Did you see any of that at all through your chemical processing business?

Mark Comerford: The one side of the CPI that's held up fairly well has been the maintenance and repair. In fact, that's going fairly well. I don't know Ed, I'd say that maybe some of the OEM types of projects or new projects might have been pushed out a little bit, but I think the vision on these things, it's almost like the jet engine business, the vision is a lot longer term than that. And so the contract, the manufacturers, the contractors for these things tend to keep guys like us keep working on that material. So I don't think the strike at the Royal Dutch Shell thing and all of that, I don't think that impacted things really at all.

Edward Marshall: Yeah. But I mean that would be on maintenance more than the OE side, right? I mean, more than the new contract builds, it would be on the maintenance side of the...

Mark Comerford: Yes. And so you might say that some of the maintenance got put out or pushed off. I can't really say that I've had anybody come in like the way we used to see it on the utility side. We might have someone on the flue-gas desulfurization say they're going to put off the spring rebuild until the fall or something like that. I can't say we saw anything like that on the chemical side of the business.

Edward Marshall: Okay. On the -- can you quantify maybe the pull forward on demand that you saw, and maybe from both a revenue and an EPS -- or an EBIT perspective, whatever is easiest for you?

Daniel Maudlin: Well, I would say on the -- if you look at these special projects and how much it improved our gross margin, I would say, if you were to carve that out, our gross margin may be around 2 percentage points less, say 18%. So it helped us by about 2 percentage points, I would say, all the special projects together. So from a revenue point of view, how much did we pull from 3 into 2? It would probably be in the $5 million range, maybe $5 million to $10 million range.

Edward Marshall: Okay. And historically, when I see pull-forwards in your business, I mean, that's a bullish sign sent from your customers. Is this the case -- I mean, because you're able to ship earlier than necessary? Or is this just that you guys had the available capacity, it was done and was sitting on your docks, and the customer said, "Okay, we'll take it?" Or this more of a bigger positive sign starting to brew?

Mark Comerford: On the project side, I would say that this is -- yes, these have been things that have been in the plans for 2 or 3 years we've been working on them, and the vision is a lot longer than that. The bullish sign for me, I think, you guys know, I'm pretty conservative when we get on these calls. The bullish sign for me was what happened in aerospace. In fact, it was funny the lawyer was sitting across the table from me and gave me a funny look because we talked about aerospace destocking earlier this week. My point being that the destocking is over. If aerospace drops now, there's a whole new thing going on. We're definitely seeing the restocking of the supply chain and building up for new platforms, et cetera. So to me that's a much more bullish sign. Now, I wouldn't be me, Ed, if I didn't give you something negative. And frankly, staff meeting everybody walks in, and we had a pretty good quarter. And the first thing I asked about is what's going on with the CPI, the big projects, and what's going on with land-based gas turbine? Why haven't those bounced back yet? That to me is still -- we're getting into that 2-year time frame, where maybe those things will start to bounce in '16, they should. But again, from a bullish sign, I'm very pleased with what I saw in aerospace.

Edward Marshall: Your cash is going to be up this year, reduced CapEx, what are the plans? Is there, I mean, potentially, a dividend hike in the futures, acquisitions? Are you considering a buyback? What are you going to do with the cash?

Mark Comerford: Yes, it's everything -- we have pretty rigorous capital allocation discussions at the board level. And we've just come off a pretty good period of investment in the company. And I think we said to you before, we want to prove that out a little bit, get that equipment filled up, and start to generate some cash again. And we are having discussions at the board level about capital allocation.

Daniel Maudlin: As I mentioned, our projection on free cash flow, just a note that, that includes the acquisition of the Laporte asset. So we're projecting a positive free cash flow with that included in the free cash flow number.

Edward Marshall: Great. And then, finally, what was the benefit from Laporte in the quarter, maybe top line and EBITDA if you'd like?

Daniel Maudlin: Well, it is helping. I mean, it's 1 quarter and that was a smaller acquisition. So you'd probably quantify it of about $0.02 to $0.03 on the earnings per share. And remember, we acquired it in January, and that's with some acquisition-type expenses layered in there as well and start-up expenses you might say. So it is performing -- when we annualize what we're expecting here, it is performing better than we expected in the deal metrics.

Edward Marshall: You made a good point there. There's some short-term accounting for the integration of this business, I guess, in the quarter. Was there any inventory write-ups, or anything like that, that normally is considered maybe shorter term and nonrepeating?

Daniel Maudlin: No. Keep in mind, this is a tolling business. It has no inventory.

Operator: Our next question is a follow-up from Phil Gibbs with KeyBanc.

Philip Gibbs: Just curious as far as the new projects and how the tubular backlog is unfolding at this point?

Mark Comerford: Yes, tubular backlog is very strong right now. We're -- as I mentioned in the prepared remarks that it's -- in 2012, we had a huge oil and gas project. But if you pull that out, the tubular products facility probably had its best 6 months in history. And that's on the delivery side, so the shipment side of the business. And just to give you a rough idea, everything we shipped in the first 6 months, we pretty much replenished 6 months worth of shipments with orders in the last quarter. So the order volume, the order intake in the last quarter on the tubular side was very good. Now you guys know the story behind that. We got some recent contracts completed, and we started to fill out the order book on those contracts. So a lot of good things happening there. But the tubular side of the business is -- it's performing well. It's getting caught up and we're continuing to book it very heavily for the new capacity.

Operator: At this time, there are no further questions in queue. I would like to turn the call back over to management for closing comments.

David Van Bibber: Thank you, Lutania [ph]. Thanks, everyone. Thanks for joining us today. And thank you for your interest and support of Haynes. We'll look forward to updating you again next quarter.

Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a great day.