Oct 21, 2007
Executives
David H. Hannah - CEO Gregg J.
Mollins - President, COO Karla R. Lewis - EVP and CFO
Analysts
Timna Tanners - UBS Michelle Applebaum - Michele Applebaum Research Michael Willemse - CIBC Tony Rizzuto Jr. - Bear, Stearns Yvonne Varano - Jefferies and Company Mark Parr - KeyBanc Luke Folta - Longbow Research Daniel Oakman - Analyst Sal Tharani - Goldman Sachs Timothy Hayes - Davenport and Company
Operator
Good morning ladies and gentlemen. And welcome to Reliance Steel and Aluminum 2007 Third Quarter Year-to-date Financial Results Conference Call.
At this time, all lines have been placed on a listen-only mode and we will open the floor for your questions and comments following the presentation. It is now my pleasure to turn the floor over to host David Hannah, CEO.
Sir, the floor is yours.
David Hannah - Chief Executive Officer
Good morning and thank you for taking the time to listen to our report and financial results conference call for the third quarter and nine months ended September 30, 2007. 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.
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, 2006, and other reports on file with the Securities and Exchange Commission.
After the completion of this call, a printed transcript, including Regulation G reconciliations, will be posted on our website at www.rsac.com/investorinformation. For the 2007 third quarter, net income was $93.6 million or $1.22 per diluted share compared with net income of $107.5 million or $1.41 per diluted share for the 2006 third quarter.
2007 third quarter sales were $1.81 billion, an increase of 11%, compared with 2006 third quarter sales of $1.63 billion. For the nine months ended September 30, 2007, net income amounted to a record $328 million, thatís up 17% compared with net income of $279.9 million for the same period in 2006.
Earnings per diluted share were $4.28 for the nine months ended September 30, 2007, compared with earnings of $3.83 per diluted share for the nine months ended September 30, 2006. Sales for the 2007 year-to-date period were a record $5.55 billion, an increase of 33%, compared with 2006 nine month sales of $4.17 billion.
All share and per share amounts have been adjusted for our two-for-one stock split it was effective on July 19, 2006. For the 2007 third quarter, our volume increased 8% and average pricing increased 3%, compared to the 2006 third quarter, that was driven mainly by our acquisitions in both 2006 and 2007.
Our volume was down 4% and average pricing decreased 1%, compared to the 2007 second quarter. For the 2007 year-to-date period volume was increased 20% and average prices increased 12%, compared to the 2006 period.
For the 2007 third quarter, carbon steel products represented 46% of our revenues, aluminum was 19%, stainless was 21%, alloy was 7%, toll processing was 3%, and the remaining 4% was miscellaneous, that includes titanium, copper and brass and some other things. Overall, considering the market factors, we were pleased with our performance in the third quarter.
It was, I believe, based on market conditions and the overall business environment, the most challenging quarter weíve had since 2003. If you wondered lately whether this can still be a cyclical business, I think you have your answer, even though we have done our best to make Reliance less cyclical through our product, customers and geographic diversification strategies.
During the quarter, pricing on many carbon steel products was soft, common alloy aluminum driven by LME based pricing decreased somewhat unexpectedly, and stainless prices were falling faster and lower than expected. Demand for our products was, however, relatively stable for a third quarter with our volume off only about 4% from our record second quarter amounts.
And keep in mind also that the third quarter had one less shipping day than the second quarter, thatís about 1.5% in terms of sales to ship. We managed our receivables and inventories well, which when combined with our operating profits, resulted in very strong cash flow.
Our operating profit, EBITDA and net income were very respectable 9.4%, 10.5% and 5.2% of revenue, respectively. So, you are asking why the mess?
The answer is gross profit. We told you in July that our guidance anticipated a 3% to 5% decrease in volume from the second quarter and our volume was down 4%.
We also estimated a drop of 1% in gross profit margins, but it was down about 2%. That additional 1% is equivalent to $0.15 per diluted share and is directly related to the drop in stainless steel gross profits that were off about 4 percentage points, compared to the first half of the year with the major impact occurring in September.
Gross Profit margins on our carbon, aluminum and alloy products by comparison were down about 1%, compared to first half levels. During the quarter we completed the acquisition of Clayton Metals, Inc., headquartered in Wood Dale, Illinois with three additional service centers in California, North Carolina and New Jersey.
Claytonís sales were a $123 million for their year-end December 31, 2006. And effective October 1st we acquired the outstanding capital stock of Metalweb plc headquartered in Birmingham, England with three additional service centers located in London, Manchester and Oxford, England.
Metalweb was established in 2001 and specializes in the processing and distribution of primarily aluminum products for non-structural aerospace components and general engineering parts used in high-end industrial applications. Metalwebís net sales for the fiscal year ended May 31, 2007 were approximately $53 million.
This transaction will bring an additional global presence to Reliance and marks our first metals service center based in the United Kingdom. Also during the quarter, we repurchased about 1.7 million shares of our common stock at an average cost of $49.10 per share under our Stock Repurchase Plan.
We began repurchasing our shares in August when the price dropped down to the low $40 per share range. At that point it was more accretive for us to purchase our own shares than acquiring other companies based on our established valuation parameters.
It is important to note here that we are not purchasing our stock in lieu of acquisitions or internal growth projects, but given our strong cash flow and relatively low debt levels, it was the right thing to do and we will continue to look for these opportunities going forward. On July 18, 2007, the Board of Directors declared a regular quarterly cash dividend of $0.08 per share of common stock.
The 2007 third quarter dividend was paid on September 14, 2007 to shareholders of record August 24, 2007. The company has paid regular quarterly dividends for 47 consecutive years.
We still expect record sales and earnings for the year 2007. Our strong operating results, solid balance sheet and cash flow will continue to provide us opportunities for future growth.
We are proud of our performance and our leadership position in our industry and believe that our proven ability to grow both internally and by successful accretive acquisitions through very market conditions will result in continued strong operating results going forward. We do expect demand to soften further in the fourth quarter due to normal seasonal holiday slowdown, as well as, cautious buying by our customers in the midst of an uncertain economic environment, leading us to anticipate relatively flat pricing and only a slight improvement in gross profit margins.
As a result we currently estimate earnings per diluted share for the 2007 fourth quarter in a range of $0.95 to $1.05. Iíll now turn the floor over to Gregg for some additional comments on our operations and market conditions.
Thank you.
Gregg Mollins - President and Chief Operating Officer
Thank you, Dave. Good Morning.
We knew going into the third quarter itís going to be a challenge, but we feel our managers did very best they could do in a very competitive environment. We have said on several of our most recent conference calls that managing gross profit margins was our biggest challenge and that certainly was the case in the quarter three.
Nickel surcharges on stainless steel fell $0.74 a pound in the quarter, the largest decline ever, and Midwest spot aluminum ingot dropped $0.13 a pound. Carbon steel was also extremely competitive with several price discounts announced in flat-roll and plate products.
The race to reduce inventories was intense, to say the least, and our customers bought only what they absolutely had to have at the time expecting prices to fall. It was a battle that was and continues to be, hard fought.
In spite of all this, we managed to produce an 8.3% pretax profit. Many companies havenít achieved this in the best of times.
Our product diversity, broad geographic coverage and outstanding customer service has served us well. Many of the industries that we support continue to be busy.
These include aerospace, non-residential construction, energy, machine tool, heavy machinery, ship building and infrastructure, as well as electronics and semiconductor. From a cost perspective, stainless surcharges appear to have hit bottom October 2007 with type 304 at $1.26 a pound increasing $0.10 a pound in November and an expected $0.05 to $0.10 a pound increase in December.
This should create some stability in our stainless and nickel product lines. Midwest spot aluminum ingot has leveled off at the $1.10 to $1.15 a pound range.
Carbon steel flat-rolled increased $20 a ton effective October 1st and has held, as have increases in wide flange and mini-mill products. Future price increases in carbon steel products are expected as imports continue to decline as a result of the weak dollar.
Raw materials such as coke and iron ore continue to rise and service centers should begin to replenish inventories. These are all positive signs for our company and our industry.
Internal growth through investment property, plant and equipment is doing very well. We will be moving into a new Greenfield site near Green Bay, Wisconsin in December and weíve recently acquired property in Las Vegas.
We also intend to purchase a facility near Cincinnati and numerous other expansion initiatives are in the works. We are excited about our internal and external growth opportunities, and we are confident in our ability to navigate through ever-changing markets.
Although there may be some short-term challenges, our future looks bright. That concludes my report.
Iíll turn the program over to Karla to review the financials. Karla?
Karla Lewis - Executive Vice President and Chief Financial Officer
Thanks Gregg. Good morning.
Same-store sales, which exclude the sales of our 2006 and 2007 acquisitions were $1.04 billion in the 2007 third quarter, down 0.6% from the 2006 third quarter with a 2.2% decrease in our tons sold and a 2.0% increase in our average selling price per ton sold. For the 2007 nine-month period, our same-store sales were $3.25 billion, up 4.9% from 2006, with a 2.1% decrease in our tons sold and a 7.6% 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. Although, we have continued to see fairly stable and market demand during 2007, our same-store sales volumes are down somewhat from the 2006 periods mainly because of the substantial growth experienced in many of our markets in 2006, especially non-residential construction and aerospace.
Our same-store average selling price increased because of increased costs for most of our products compared to 2006 levels, especially stainless steel products. Our 2007 third quarter same-store sales decreased 6.4% from the 2007 second quarter.
This included a 3.1% decrease in our tons sold, which was expected due to normal seasonal slowness. Our average selling price per ton sold decreased 3.8% mainly due to the significant reductions in the nickel surcharge affected the stainless products that we sell.
Our 2007 third quarter gross profit was $440 million or 24.3% as a percentage of sales in the 2007 third quarter, compared to 26.6% in the 2006 third quarter and 26.2% in the 2007 second quarter. For the 2007 nine months period our gross profit was $1.4 billion or 25.4% as a percentage of sales, compared to 26.9% in the 2006 nine months period.
Our gross profit margins have been lower in 2007, as compared to 2006 mainly due to competitive pressures resulting from excess inventories throughout the industry and, with regard to 2007 third quarter, our margins were adversely impacted because nickel surcharges on stainless products experienced significant decreases, lowering our stainless selling prices more rapidly than our inventory costs on hand were lowered, resulting in reduced margins. Our 2007 third quarter LIFO expense, which is included in our cost of sales, was $12.5 million or $0.10 per diluted share, compared to $33.3 million or $0.27 per diluted share in the 2006 third quarter.
In the 2007 nine months period we reported LIFO expense of $45 million or $0.37 earnings per diluted share, compared to $56.3 million or $0.48 earnings per diluted share in 2006. Our 2007 LIFO expense is mainly due to continued increased costs for stainless steel products in 2007 over the 2006 levels.
Based on actual results to-date our expectations for the remainder of 2007, we have lowered our annual LIFO expense estimate to $60 million from $65 million, which results in an estimated fourth quarter LIFO expense of $15 million. The reason for lower in our estimated is primarily due to the larger than anticipated stainless price decreases experienced in the third quarter along with the unexpected decreases in common alloy aluminum pricing in the 2007 third quarter.
Our 2007, Warehouse delivery, selling, general and administrative expenses have increased mainly due to our 2006 and 2007 acquisitions. As a percent of sales, our 2007 third-quarter expenses were 13.9% compared to 13.8% in the 2006 third quarter and for the 2007 nine months period were 13.9%, compared to 14.1% in the 2006 period.
Our 2007 depreciation and amortization expense increased $12.3 million over 2006, mainly because of our 2006 and 2007 acquisitions. Operating profit for the 2007 nine months was $588.2 million or 10.6%, compared to $494.5 million or 11.8% in 2006.
The operating profit dollars increased due to increased business levels provided from our 2006 and 2007 acquisitions. However, our operating profit margins are deteriorated because of the lower gross profit margins experienced in 2007.
Interest expense for the 2007 nine months was $60.2 million, compared to $42 million in 2006, the increase is mainly due to increased borrowings to fund our 2006 and 2007 acquisitions. Our 2007, effective income tax rate was 37.5% compared to 38.0% in 2006.
The 2007 rate is lower mainly due to our increased international exposure and tax benefits due to our 2006 and 2007 acquisitions. Net of acquisitions, our accounts receivable balance increased $66.9 million and our inventory levels decreased $15.5 million at September 30, 2007, from our year-end 2006 amounts.
Our accounts receivables dayís sales outstanding rate was consistent at year-end approximately 40 days, our inventory turn rate of 4.4 times was equivalent to about 2.7 months on hand consistent with our year-end 2006 rate. Our focus on reducing inventories and continued solid profit levels provide a net cash growth from operation of $384.7 million in 2007 nine months, the $214.4 million of this being generated in 2007 third quarter.
This included $111.9 million of cash flow from a reduction of inventories in the third quarter. Our outstanding debt at September 30, 2007, was $1.28 billion, which included $390 million borrowed on $1.1 billion revolving line of credit.
Our net debt to total capital ratio was 36.7% at September 30, 2007 down from our year-end 2006 rate of 37.6%. In the 2007 nine months, we used our borrowings and cash flow to fund our increased working capital needs, capital expenditures of $88.4 million, and acquisitions of $257.6 million.
In addition, we purchased $82.2 million as our common stock in 2007 third quarter. The significant cash flow is generated in 2007 third quarter allowed us to completely finance our acquisitions for Clayton Metals and Metalweb our stock repurchases and our capital expenditures during the quarter with cash flow from operation.
The Metalweb acquisition was completed on October 1st, 2007. We repurchased 1,673,467 million shares of our common stock during the 2007 third quarter at an average cost of $49.10 per share.
This was the first time we have repurchased our stock since 2000. Thus initiating our stock repurchase plan in 1994 we have repurchased 12,750,017 shares at an average cost of $12.93 per share.
Repurchased shares are redeemed and treated as authorized but unissued shares. We currently have authorization to purchase an additional 10,326,533 shares under our plan.
Our book value per share was $27.12 at December 30, 2007 up from $23.07 per share at December 31, 2006. Thank you.
And we will now open the discussion for questions. Question and Answer
Operator
[Operator Instructions]. Mr.
Curran, your line is now live.
Unidentified Analyst
Hi everyone. Good morning.
David Hannah - Chief Executive Officer
How are you doing?
Unidentified Analyst
Good. I was wondering how on your daily sales in October comparing to September and then what was the trends during the third quarter, month-by-month?
David Hannah - Chief Executive Officer
First of all, in terms of and move to a big data information now weíve got but in terms of month-by-month, July actually turned out exactly how we have worked out till date, and in terms of earnings and earnings per share. Then I think we talked before about July being the fastest month of the quarter and then August stepping backup.
August did not back up this year and then usually we got a step up in September. And I think in September, we did get a slight step up pretty much just offset what we went.
We actually softened up a little bit until we did in August. So it was a kind ofÖ it was a different kind of a quarter than weíve seen traditionally but the trends, you know overall the average sales per day was pretty positive.
It was about $28.8 million in July and $28.5 million in August and about $29.1 million in September. September only had 19 days, so that really has an impact as well.
But, overall, I think from a demand standpoint or volume standpoint, we didnít see any real big slow down that surprised us. We were from a demand standpoint, seeing regular activity, although, we certainly noticed the pressure on the margins and this, as I mentioned earlier was a quarter where we had and rarely this just happened but we had prices on pretty much all three of our product groups carbon, stainless and aluminum going down at the same time.
And you know, that is something that we do not see. So it made the quarter quite a challenge.
Unidentified Analyst
Okay. Did you and how is October looking versus September?
David Hannah - Chief Executive Officer
October right now from what we, itís hard to tell but it looks similar itís not trendy enough, itís not trending down, itís just right in line with what weíve been experiencing.
Unidentified Analyst
All right. Thank you very much.
David Hannah - Chief Executive Officer
Okay.
Operator
Thank you. Our next question this morning is coming from Timna Tanners of UBS.
Maíam your line is live.
Timna Tanners - UBS
Yes. Hi.
Good morning. Thanks for the great detail.
I just wanted to ask if you could elaborate a little bit more on how much of the challenging markets circumstances have to do with underlying demand, and how much have to do with excess inventory in the channel?
Gregg Mollins - President and Chief Operating Officer
I think pretty much the challenge was in the excess inventory and really the race to get that the inventory that you had itís stopped that was being divided neither inventory get a lower cost, lower replacement cost as quickly as possible. The demand is not that bad.
Okay, we have seen the collaboration yesterday, but compared to the environment there itís very, very extreme because of the reevaluation. You know itís a severe reevaluation, I think the inventories has gone down, dollar and pounds in October.
Weíve never seen anything like that in our life now we get this as well it did first hand buyer.
Timna Tanners - UBS
Okay.
Gregg Mollins - President and Chief Operating Officer
Now itís correct installment, and itís a little bit, I mean, it hurts right now, but for the long-term we think we can bear interest cost. They got a standard choice trade in a reasonable rate they worked as they compared.
Timna Tanners - UBS
Okay. So along those lines do you see a lot of tons of demand in stainless I know they had and then.
If you could help us understand the most things we are talking about, demands staying quite sustain enough and thatís the thing that you have been talking about. But we are getting quite a different picture from some of the machinery, and customers about demand weakening on non-resi.
How do we reconcile the difference in ton about the non-resi market?
Gregg Mollins - President and Chief Operating Officer
I think the non-residential market for us is still pretty young. Okay itís not as we played out earlier in the years.
Itís not accelerating as it was in shares. But itís being getting at a reasonable wealth.
I donít know what to tell you about how can I reconcile that wherever you are get as weíve been always saying is we are experiencing through Reliance, and non-residential construction is still pretty down in our term.
David Hannah - Chief Executive Officer
It may to, Jim to have a, it may result. If you look at the MSBI statistics that I think just came out the volume year-to-date was off 8%.
And we are off year to date same-store 2%. So I think our people are doing a great job out there, working streets and selling.
And thatís pretty important to us. And thatís on a same-store basis.
And one other thing as weíve talked about consistently is growing the company through very markets conditions and our volumes actually up 20%, if you just look at pure numbers year-to-date versus í07 versus í06. So you know we have been successful in finding ways to profitably grow throughout all these different market conditions.
And yes, a lot of that is due just this year the acquisitions but acquisitions is a part of our ongoing trend.
Timna Tanners - UBS
Okay. Thatís helpful.
And then just finally if you could comments on, given that your leverages declined a bit and we've seen in the past when youíve moved below your target leverage youíve done sometimes larger deals like EMJ, can you talk about the priorities of cash use on a go forward basis?
David Hannah - Chief Executive Officer
Yes. Well first off we will pay that debt, I mean, thatís the initial use of cash is to pay down debt.
We're net borrowers and as Karla mentioned we have just under 400 million borrowers on our revolver. So as we produce cash we use it to pay down debt.
Then, after, then, we borrow on our revolving line typical for capital expenditures to fund internal growth for acquisitions and for dividends of course, and then for stock repurchases, lately. So, and weíll continue to view all of those things I think youíll see us be doing all of those things as we go forward.
Karla Lewis - Executive Vice President and Chief Financial Officer
Yes. In the order of that and obviously would depend upon what we have in the acquisition pipeline because as we look at using our cash always looking at whatís on the near-term horizon.
So it may not fall exactly in the order they gave depending upon what the opportunities are at the time.
David Hannah - Chief Executive Officer
Right.
Timna Tanners - UBS
Sure. Okay.
Great. Thanks again.
David Hannah - Chief Executive Officer
We could, just as a last comment, if we levered up the rest of our revolver thatís and so we borrowed another $700 million our debt to capital would go up only to 48%, which is on the high-end of our comfort range, but still itís in the comfort range. Itís not in the range where we think that we have to just to go back to deleverage
Timna Tanners - UBS
Okay. Great.
David Hannah - Chief Executive Officer
Thanks.
Operator
Thank you. Our next question today is coming from Michelle Applebaum at Michele Applebaum Research.
Ma'am, your line is live.
Michelle Applebaum - Michelle Applebaum Research
Hi Yes. Not a bad quarter in a tough environment.
I wanted to ask you if you could give me the implicit same-store sales forecast in your fourth quarter BPS forecast, is there anyÖ?
Karla Lewis - Executive Vice President and Chief Financial Officer
Yes. Michelle thatís probably, I guess we havenít calculated that because typically when weíre forecasting for the next quarter.
We're not separating the same-store numbers that we report technically exclude all of our acquisitions from the prior year and the current year. So when we're forecasting for instance in this case for the fourth quarter we're looking at third quarter sales.
So the only difference going from third quarter to fourth quarter this year will be the addition of Metalweb effective, for the fourth quarter, which their annual revenue last year were $53 million. So, thatís really not, I think faster, you know when we did look at forecast sales, it was more difficult because we are little uncertain about whatís going on those demand and pricing and this probably, weíve got some factors for demand, some for pricing, so demands, weíve probably got looking down about anywhere from sort of 8% decline in demand.
David Hannah - Chief Executive Officer
They troubled withÖ
Michelle Applebaum - Michelle Applebaum Research
That would be a kind of proxy for same-stores sales?
Karla Lewis - Executive Vice President and Chief Financial Officer
Yes.
David Hannah - Chief Executive Officer
Yes.
Karla Lewis - Executive Vice President and Chief Financial Officer
Yes. Particularly same-store 234 for us.
Michelle Applebaum - Michelle Applebaum Research
Okay.
David Hannah - Chief Executive Officer
Itís a little tougher in the fourth quarter because you can count shipping days which obviously makes a big differences to us in this business, but then you have to look and figure out what are the good shipping days and with the holidays that they follow this year, I mean you got the money before New Years and money before Christmas that technically for us days that we are open and shipping, but not much is going to happen on those days. So and then in between Christmas and New Years is always been constrained, we still have a pretty good slow down there, because customers do their business down, many still close during that timeframe.
Michelle Applebaum - Michelle Applebaum Research
Okay. But, I remember as I was growing up my learning, I was talking to people like you and then you.
That it appears the time where you actually might be closed on Monday, but openÖ close on Monday, Tuesday open, Wednesday, Thursday, Friday. Your same-store, your daily orders on those three days you are open would actually reflects some other closure, some other kind of, people packing it in into those three days.
So you canítÖ itís not a perfect investment?
David Hannah - Chief Executive Officer
Youíre right. Yes.
I say, youíre right and thatís what makes it kind a difficult. If you count the days are 62, we know practically is less than that, but how many less we donít really know.
Michelle Applebaum - Michelle Applebaum Research
Okay. And on the quarter, you get a lot more smoothing?
David Hannah - Chief Executive Officer
Right.
Michelle Applebaum - Michelle Applebaum Research
A month or a week youíre on a field?
David Hannah - Chief Executive Officer
Exactly.
Michelle Applebaum - Michelle Applebaum Research
Now, and reconciling, I mean, I know that youíre gaining market share and itís evidence looking at the trends of MSCI, but also, I mean, thereís different pieces of non-res that are weaker, I mean, my sense is that a residential related non-res is weaker. So, the kind of, corollary building that you get with the housing development whether itís institutional or shift malls and that kind of stuff.
And is your mix more industrial non-res and maybe you wouldnít be saying some of that, do you get that deep into it?
David Hannah - Chief Executive Officer
We do participate in the demanding malls, hospitals andÖ
Michelle Applebaum - Michelle Applebaum Research
So you are saying, are you saying this as aÖ
David Hannah - Chief Executive Officer
That part of non-residential construction, yes we did it was in 2006, but overall if you look at our non-residential construction is still pretty active.
Gregg Mollins - President and Chief Operating Officer
And we do infrastructure in there and then schools and hospitals that are good industrial and commercial that as our plan not as good as last year but it certainly fairly sharp.
Michelle Applebaum - Michelle Applebaum Research
In your press release of yesterday less trendy was his, I am sorry, I donít mean to sarcastic that we are talking about your stainless steel weaker and his comments was less trendy in the non-res side are you saying less trendy?
David Hannah - Chief Executive Officer
I think itís probably just weak, okay.
Michelle Applebaum - Michelle Applebaum Research
My goodness. You got a star.
Gregg Mollins - President and Chief Operating Officer
But, okay, by historical standard we desperately occupy.
Michelle Applebaum - Michelle Applebaum Research
Okay. Yes, itís hurt and word coming from the place and using that, w, word is so painful I understand.
David Hannah - Chief Executive Officer
Okay.
Gregg Mollins - President and Chief Operating Officer
We havenít had to use it in a whileÖ
Michelle Applebaum - Michelle Applebaum Research
I know.
Gregg Mollins - President and Chief Operating Officer
For us and itís probably although weíre not like to have to use it, itís a good thing to wake some people up and realize that things can come down they donít know always just go up and up and up and up as much as weíd like too.
Michelle Applebaum - Michelle Applebaum Research
Right. Well, they were bunch few years ago you had to be sort of retrofit I think that actually could go up?
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
And so you know, itís a high class problem but let me ask another one too Iíve got to ask my question I always and itís more hopefully relevant now then unusual which is your piece of paper, your M&A target list.
Gregg Mollins - President and Chief Operating Officer
M&A list, yeah. Well itís still there the problems incur me to throw down thing away and this years the list been in the Purchasing Magazine.
Michelle Applebaum - Michelle Applebaum Research
Well, thatísÖ
David Hannah - Chief Executive Officer
All service center.
Karla Lewis - Executive Vice President and Chief Financial Officer
I am not incurred being him to throw it away but I donít want because it says that the numbers that we talk about on immediately in process because some of these weíve been talking to for 10 to 12 years and we donít want to give listeners the wrong idea that we are working onÖ.
Gregg Mollins - President and Chief Operating Officer
Obviously.
Karla Lewis - Executive Vice President and Chief Financial Officer
Huge revenue base currently.
Michelle Applebaum - Michelle Applebaum Research
Okay. So then let me ask in the right way.
You got a target acquisition list that is essentially your target on the piece of paper and there is a percentage that will get completed and I am not asking at all under percentage that will get completed I am asking what out there and attractive to you, you buy some of this is that the right way to ask.
David Hannah - Chief Executive Officer
Yes. We will buy some of what weíre looking at currently and weíll be buying some stuff that we donít even know about yes.
Michelle Applebaum - Michelle Applebaum Research
Okay. So on this target list of potential companies that you might want to buy in the next 10 years close on.
How many dollars of revenue and how many names and then how many of amount on the Purchasing Magazine must?
David Hannah - Chief Executive Officer
You know Michelle, I should anticipated your question but I donít have the list.
Michelle Applebaum - Michelle Applebaum Research
After this quarter?
David Hannah - Chief Executive Officer
Yes. I know youÖ
Michelle Applebaum - Michelle Applebaum Research
First 20 years.
David Hannah - Chief Executive Officer
I didnít bring the list with me but it got a few more names when the last time I answered the question.
Michelle Applebaum - Michelle Applebaum Research
Okay.
David Hannah - Chief Executive Officer
And you know, itís not a huge change.
Michelle Applebaum - Michelle Applebaum Research
Okay. You said there is incrementally and thenÖ
Gregg Mollins - President and Chief Operating Officer
Thatís whyÖ
Michelle Applebaum - Michelle Applebaum Research
Whatís Gregg saying?
David Hannah - Chief Executive Officer
He said just hard to identify what kind of volume we might be acquiring because you never really know these things are going to happen.
Michelle Applebaum - Michelle Applebaum Research
Yes, I am really not asking, I am not asking that. I am asking whatís out there because people have a tendency to look at Purchasing Magazine?
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
And Purchasing does a fabulous job coming up with that list but even they will acknowledge at their shop that the number of companies that theyíve never heard of?
David Hannah - Chief Executive Officer
Yes. Probably, half the people and if I got, I donít know 16, 18 people on that list there are something like that now and that have more in that in ranking.
Michelle Applebaum - Michelle Applebaum Research
Well, thatís kind of thatís what I am asking is.
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
Your target market is bigger than what might be appearing to us.
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
And that is why I asked at every closure?
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
And then in terms of, financing has got a little bit more challenging Iíve heard and, but platinum has got license and there was some most that happened. Are you seeing private equity, a little bit less active?
David Hannah - Chief Executive Officer
You know, not really. I donít think as you know most of the vast majority of the deals that weíve done in the past have not been sharp deals.
Michelle Applebaum - Michelle Applebaum Research
Right.
David Hannah - Chief Executive Officer
They have come so, right now, obviously the private equity is in some deals but we havenít seen a big change or a change at all in their activity level.
Karla Lewis - Executive Vice President and Chief Financial Officer
But we are not actually directly involved.
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
Okay. I understand.
David Hannah - Chief Executive Officer
Yes.
Michelle Applebaum - Michelle Applebaum Research
Understand. Okay, thank you so much.
David Hannah - Chief Executive Officer
You were best. Thanks.
Operator
Thank you. Our next question today is coming from Michael Willemse at CIBC.
Sir your line is live.
Michael Willemse - CIBC World Markets
Great. Thank you.
I just wanted to check, first check the couple of things that was said at the beginning. Did you say that gross margins on stainless decline by the 4% versus the first half of the year?
David H. Hannah - Chief Executive Officer
Yes.
Michael Willemse - CIBC World Markets
And we just expect that should be about the same to be in the fourth quarter or even lower.
David H. Hannah - Chief Executive Officer
No, we donít expect it to be lower, slightly better. And if you ask how much slightly is, we just donít know.
We werenít very good at anticipating what was last quarter and, but we do expect that the margins will be a little better than they were, you know as Gregg mentioned that stainless surcharges of announcements have come up likely so that helps from a demand standpoint, from our customer volume standpoint, and from our pricing standpoint.
Gregg J. Mollins - President and Chief Operating Officer
Whenever see price increases especially after you see the amount of discounting invest going on over the past 90 days. It helps stabilizing and it also allows us breathing, whereby we donít have to choose price down to that level, so when that happens generally speaking I might suppport.
Michael Willemse - CIBC World Markets
So, I know this is a tough guess, but would you say stainless is stabilized now stainless prices.
Gregg J. Mollins - President and Chief Operating Officer
Let me put this way. Prices as far as just get stable, okay so there was still 30% discount in the month of October.
So I would say going forward, November, December with the increases of $0.10 found advance in November and the potential filing in found in December. Thatís the interest you can get to become more stable.
Michael Willemse - CIBC World Markets
Okay. And just going back to the gross margin, would it be safe to say that in the first half of the year, the gross margin on stainless was, well pretty close to the average gross margin for the company or is for both 26%?
Gregg J. Mollins - President and Chief Operating Officer
With retail products, that would be the stainless. Stainless shoot products.
It probably be, mainly a price lower. Okay, itís on a stainless flat-roll, as a percent.
Itís generally one of the more competitive product lines in all the capital business. But bar is more profitable from a percent stand point in stainless steel
David H. Hannah - Chief Executive Officer
And probably half of our stainless is in bar, bar and tube.
Gregg J. Mollins - President and Chief Operating Officer
Yes. We have that problem.
Michael Willemse - CIBC World Markets
Okay. And just going back to that question on acquisition, are you seeing any competitors that might be struggling financially now, to the pretty tough quarter, either in the stainless business or another business thatís, Reliance is a big player and is tubeless and itís tubular products and prices have come down over the last year there as well.
David H. Hannah - Chief Executive Officer
You know that I am not aware of anybody thatís in any financial difficulties because of that I think you know times were pretty good and maybe some activity is backed off since the pricing is backed off. I think people are still making money, they are just making less than what they did last year and maybe the year before.
So I am not aware of anybody thatís in any dire strait. We did see, I think we mentioned this on our call earlier.
There was seen to be a very high level of activity of stainless related businesses for sale. We've seen a lot of deals come across that have to do with stainless products.
So, but I think that was because things were so high over the last, particularly in the first half of this year and last year.
Gregg J. Mollins - President and Chief Operating Officer
And some of those, many of those happenings were really energy related. I think they felt that they had to and it was a good time for them to go to the street.
Michael Willemse - CIBC World Markets
Okay. and then a couple of more, on the imports side as I recall correctly does Reliance import about usually 10% to 15% of your steel buy and could that go to 0% over the next few months and is that going to impact margins much or not really?
Gregg J. Mollins - President and Chief Operating Officer
And I donít say that the import was 0% but its certainly going to be less than 10%. And will it impact margins?
I think that the public in general and service center sector are all backing away from off shore purchases because theyíre just not attractive and thereís less offerings out there so will that hurt our margins? I donít think so.
No.
David H. Hannah - Chief Executive Officer
Some of the, why it wonít go to 0, Michael is because thereís some products that we buy off shore that you just canít get here.
Michael Willemse - CIBC World Markets
Great. Okay and last question.
Now, what were the fully diluted shares that standing at the end of the quarter?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
It was $75.4 million.
Gregg J. Mollins - President and Chief Operating Officer
Reports 25%
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Yes.
David H. Hannah - Chief Executive Officer
$75 millionÖ
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Well, thatís actually, I apologize thatís actually, sorry.
David H. Hannah - Chief Executive Officer
What was your question again Michael?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
At the end of the quarter.
David H. Hannah - Chief Executive Officer
At the end of the quarter, on a year-to-date basis weighted average diluted shares.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
In term of that.
David H. Hannah - Chief Executive Officer
Is that it?
Michael Willemse - CIBC World Markets
No I, just the shares outstanding at the end of the quarter just so I know how much how many shares sheís going to the next quarter.Ö
David H. Hannah - Chief Executive Officer
Okay.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Yes. At the end of the quarter.
Iím sorry it was $74.6 million.
Michael Willemse - CIBC World Markets
And that was basic.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Yes. Thatís basic.
Michael Willemse - CIBC World Markets
Okay. Thank you.
Operator
Thank you. Our next question today is coming from Tony Rizzuto Jr.
at Bear, Stearns. Your line is open.
Tony Rizzuto - Bear, Stearns
Thanks very much. I've got several questions.
First of all you guys have been pretty nimble in the past when the margins have come under pressure. Can you discuss any cost containment efforts that you might have going on right now?
Iíve got a couple more questions too. I hate to beat a dead horse, but I have a question about acquisitions and another one too about the aluminum?
Gregg Mollins - President and Chief Operating Officer
Sure. Weíre looking at probably a tie.
Okay. Right now in all of our locations and in an effort thatís beingÖ their cost value, thatís simple.
So, I canít elaborate on that too much, because weíre right into middle of it, but itís fair and secure to say that weíre probably being happy to less peak year by the end of this month and in the end of the last month.
Tony Rizzuto - Bear, Stearns
Right. Is that more, giving your nimble capabilities there or is it more reflection maybe that you see possibly a softening maybe sustaining a little bit further out possibly in 2008?
Gregg Mollins - President and Chief Operating Officer
Well done. I think, the answer to that is, yes.
I think we are receiving some softening in the fourth quarter. And we are comfortable with that, that across your self decline that deferrable, weíre not going account.
We are notÖ weíre going to plan ourÖ plan for the worst, and hope for the best.
Tony Rizzuto - Bear, Stearns
All right. Did you guys talk about acquisition?
And just at slightly different angle, I mean is it fair to say that with all the margin pressure that clearly is going on in the industry. Would this accelerate consolidation activities in your view, perhaps bring more folks to your doorstep, so this be?
David Hannah - Chief Executive Officer
It could, Tony, what we have seen in the past is when times are running along at relatively higher level people are pretty happy and you get some at that point that consider as we said earlier and last the energy related stainless business is kind of, flooded in front of our steps. They thought well, maybe this is a good time to get out because things are maybe as good as weíve ever seen.
And, but weíve also seen, when things can get tighten up a little bit that reminds people that this is a cyclical business. And that, itís not going to stay at these high levels forever and that maybe they should consider selling at that point.
So, there are different things to drive different people and we really, itís almost like each one has its own story that we wouldnít be surprised to see a little bit more activity. Not because these business are going to be losing money, because itís simply not that bad out there, but most of us are making loss obviously than we did before.
Tony Rizzuto - Bear, Stearns
Okay, great. This is the final question, I have, I didnít hear anything about the aluminum market.
And, I wonder if you guys could discuss current demand levels, pricing and with a dislocation with the Airbus A380 easing and now the 787, have you seen that playing out in the market place from your standpoint?
Gregg J. Mollins - President and Chief Operating Officer
Now, this I have shown you on each group place, okay, two and seven. Weíre still now, of course, we times 10 to 15 weeks.
So, itís still fairly tight. Itís not being as allocated, okay as closely as it was a year ago, but the business itself was not doing well.
Our customers were telling us that Boeing is not okay would back on here another way is pushing out some of their cost they have brought out on the street in shops like continuing to sell and just keep manufacturing cost and they were taken them into the inventory in their bank. So what happens with the streamliner, I think that looking into all that know our customers is really kind of know it like to spend but they are also checking the guarding officers if thereís ladder push up and with that there should be problem.
David H. Hannah - Chief Executive Officer
Could be a similar situation that we have in the A380.
Gregg J. Mollins - President and Chief Operating Officer
Right.
Tony Rizzuto - Bear, Stearns
And it also seems, I mean it seems that this we still have some of that overhead working itís way through the system even though that, itís like a delay obviously start a little that was passing around from the VA creative that pretty much all clear have you guys still seeing some dislocation there?
Gregg J. Mollins - President and Chief Operating Officer
There is still some that at the time.
Tony Rizzuto - Bear, Stearns
And whatís your best guess Gregg is to when, weíre really going to see that demand pick up begin in earnest from that program?
Gregg J. Mollins - President and Chief Operating Officer
You ask some tough questions. Weíre hopeful that we should be able to realize some better market conditions so that final rounds reign of 2008.
Tony Rizzuto - Bear, Stearns
Okay. Thatís pretty consistent with what we hear it elsewhere.
I appreciated guys. Thank you very much.
David H. Hannah - Chief Executive Officer
Yes. You know 72 aerospace is one of the highlights for us still again last year was really buying high but this year is still really great and solid high-level performance by our aerospace related companies and thatís all said and itís great that is one of the areas that we do expect that they get some strength building as we go through 2008 that and the energy side really is the other piece of our business is very strong right now and we expected itís going to stay that way, so those are two really big areas for us that are strong and we think weíll be strong going forward.
Tony Rizzuto - Bear, Stearns
Okay. I appreciated.
Thank you very much.
Operator
Our next question today is coming from Yvonne Varano of Jefferies and Company. Maíam your line is live.
Yvonne Varano - Jefferies and Company
Thanks. I believe if I could talk a little bit about what your strategy is from potentially expanding more internationally but Metalweb obviously picking in the UK for the first time but what more can be done out there?
David H. Hannah - Chief Executive Officer
As you know, Yvonne, weÖ our international businesses outside of North America was stopped. We have gone whereÖ we have gone to the countries where we have already expanded because of our needs from a customer perspective.
And weíve gone over and established ourselves and tried to be offering to all people and we donít intend to do that going forward. So, the answer to your questions depends on a large part upon what we see from a customer standpoint here in the U.S.
where our customers are actually establishing additional businesses offshore and the support they might be for us to go and followed up and certainly weíve done that and in South Korea, weíve got it in China, weíve got it in Belgium and weíll continue to do that. I think you will see us grow more internationally as a percentage if you just look at our international revenue and what we expect after growth.
I think the percentage increases will be fairly substantial with the actual dollar amount are still going to be very small compared to the rest of the company. Youíll see more growth in North America and in particular the U.S.
in terms of actual size than anything that weíve seen today offshore. Even though the growth rates might be greater offshore.
Gregg J. Mollins - President and Chief Operating Officer
We really take a brighter look closure when it come to no decline outside North America and as they said in the past, strongly going forward, weíll be called there by our customer.
Yvonne Varano - Jefferies and Company
Do you see lot of acquisition opportunities over there?
David H. Hannah - Chief Executive Officer
We see some acquisition opportunities outside of North America, not a lot but we see some, certainly Metalweb was a different yield and that was one, it was an opportunity and weíve known the management team there for quite sometime. Metalweb was only established in 2001 but weíve not only spoke for 20 years but more when they were as the predecessor company.
So that is a little different we didnít have customers pulling us there but Metalweb will be an important platform for us to grow. The management team there is very knowledgeable about international business, more than we are very honestly.
That was one of the things thatís very attractive to us for that deal and we expect them to help us grow internationally not only in Europe, but in areas outside of Europe.
Yvonne Varano - Jefferies and Company
Would you see gross area potentially more organically?
David H. Hannah - Chief Executive Officer
Yes, yes, I think so.
Gregg J. Mollins - President and Chief Operating Officer
No question about it. Yes, it is a very, very good control growth opportunity to us.
And we can claim to them of products that will complement their own that they are currently not able to acquire further bills.
David H. Hannah - Chief Executive Officer
So the resources we bring them are, they are pretty excited about that.
Yvonne Varano - Jefferies and Company
Okay. And, Gregg, on the common alloy Aluminum, itís just that you were a little surprised that the further prices coming down.
What changed there?
Gregg J. Mollins - President and Chief Operating Officer
I think that was the market itself got a little soft. Okay, the NGís thought that, I think that the best volume producers back added a little effect on and maybe some other NGís projects.
So I think it was just, I didnít realize, that I was taken by surprise, I think itís about them but I like this business condition were better than it were and the prices would pull that but, obviously I was wrong.
Yvonne Varano - Jefferies and Company
Okay. Thanks very much.
David H. Hannah - Chief Executive Officer
Thanks Yvonne.
Operator
Thank you. Our next question today is coming from Mark Parr at Keybanc.
Sir your line is live.
Mark Parr - Keybanc Capital Markets
Hey thanks very much. Good morning.
David H. Hannah - Chief Executive Officer
Good morning Mark.
Mark Parr - Keybanc
I guess its afternoon now but morning still where you are.
David H. Hannah - Chief Executive Officer
Yes.
Mark Parr - Keybanc
I was, I had a couple of follow-up questions and I wanted to try and get a little more color if I could on your assumptions, in the fourth quarter guidance relative tot the third, I think you have talked generically about margins being about stable in the fourth quarter relative to the third. I think you talked about stainless margins actually coming up at touch.
And I was just wondering if you could give us any color on how you would look for the profitability and some of the other name, product categories.
David H. Hannah - Chief Executive Officer
Well, on part of the steel products, I think, that with the price increase that was announced that went into play on October 1st, on a flat roll was an inflated product increase that was announced in September. I think thatís a question I think on the 31st and Newport came out December the 1st.
Mark Parr - Keybanc
Okay.
Gregg Mollins - President and Chief Operating Officer
I think, thatís going to help us, it normally does. In March it was going to expand with pricing are going up and it tend to track prices are going down, I would expect that trend to continue going forward.
You know right now weíre just try to bite because they canít stand us.
Karla Lewis - Executive Vice President and Chief Financial Officer
And I would say, Mark, you know in that carbon everything Gregg said is true. You know, we are little cautious looking at fourth quarter, because of some of the uncertainty.
And you have those number to the different quality products that were tearing, the current price really itís only 8% of our business. So with those expectations on other companies including the fourth quarter, because the ship price increase, you are not going to see as much of that reflected in our earnings because of our small percentage it is.
Mark Parr - Keybanc
Right.
Karla Lewis - Executive Vice President and Chief Financial Officer
You know, and stainless were fairlyÖ on certain amount we think based on the price increases, Gregg talked about, kind of, steady hopefully up a little bit compared to the third quarter on limited we look at, fairly steady. So those are the assumption we used, are we right, we donít know.
Gregg Mollins - President and Chief Operating Officer
And there was even an announcement just recently on stainless that there were demos they were going to increase by a metal tray, for people to be more consistent in their ten quarters of production. Stainless and flat roll.
So, all those signs are good, theyíre positive for us. So weíre going to work for our tails off trying to maximize our gross profit margin as best we can.
Mark Parr - Keybanc
Okay. It is fair to say then that the majority of the sequential reduction in guidance just relates to the outlook that you have for the demand environment as opposed to the pricing momentum?
Gregg Mollins - President and Chief Operating Officer
Yes. We think itís going to be softness in fourth quarter and as David pointed out, those number of gains, more and more companies nowadays and certainly 10 years ago if they close up that last week cynical.
There is just a lot of shipping days that you look at your calendar and you think are there that arenít. And, I think weíre being a little bit cautious still as I think all, Iím looking at all of three of us here.
We are a little bit surprised with what happened in that third quarter. We didnít take that the prices were going to fall that far.
David Hannah - Chief Executive Officer
We knew they were coming down, but we just didnít the think they were, on the safer side, we didnít think theyíd come down that far that fast.
Mark Parr - Keybanc
Yes, Gregg. Another question on customer inventories, you look at the MSCI numbers inventories on balance look like they are in pretty good shape.
And just yes, Iím wondering, if you could give any color as far as what kind of condition you think your customers are in from an inventory perspective?
Gregg Mollins - President and Chief Operating Officer
I think, they are in great shape, I really do. I think that they are like ourselves.
Okay. Our customers did the same thing at the third quarter that we did, I mean we just quit buying.
We basically told our first few people to take their PO look at stainless and put it in their drawer. Pull it out when youíre out of stock.
And I think our customers are doing the exact same thing. They are buying, they are being very cautious.
They are buying only what they need for that particular job. And thereís plenty of inventory, okay even though inventories are in good shape, with service centers and what not according to the MIS guys.
There is still inventory out there. Theyíre not worried about their supply.
David Hannah - Chief Executive Officer
And on the carbon side itís been going on for longer because the carbon prices were trending down over a longer number of months. So, I think our customers will gain...
earlier, buying only what they needed because they saw that trend and they anticipated thatís where I can buy it later. And whenever later, whether itís a week or a month away itís something lower than what I just bought today.
So, I think because of that, what Gregg said, the customers are in really good shape from an inventory standpoint they continue to buy what they need. And only what they need and you know the big capital is for a margin improvement from our perspective is going to be demand.
I mean, thatís the thing that I think all of us are waiting for is the things that you talked about and others talked about, out there is that you know some of the input cost, but the mills are going up and that scraps goes up over time, but the real thing thatís going to cause us to be able to raise prices is a good boost in demand. And we certainly havenít seen that, weíre not expecting it in the fourth quarter.
Mark Parr - Keybanc
You know, probably Dave the only thing that would create some of that in December is that people thought inventories in the pipeline were so low that there maybe some supply availability issues emerging in the first quarter. But, thatís what youíre saying is pretty much, what weíre hearing on our end across the board for the fourth quarter.
I had one last question, if I could. Now this is kind of a nit picky thing you think itís a little selfish, but could you tell me, give me some color on the difference between flat-rolled stainless and some of the borrowing tube on the stainless side.
Is thereÖ have you seen any difference in the margin performance of the respective stainless product launch on the demand environment for either one of those two?
Gregg Mollins - President and Chief Operating Officer
Yes. The margin deterioration was greater in flat-rolled.
Mark Parr - Keybanc
Okay.
Gregg Mollins - President and Chief Operating Officer
But it wasnít borrowing tube.
Mark Parr - Keybanc
Okay.
Gregg Mollins - President and Chief Operating Officer
Has not say that borrowing tube maintain it didÖ it went down, but if borrowings tube maintain the margins much, much, much greater than inferable.
Mark Parr - Keybanc
Okay, terrific. I really, appreciate all the help and thanks for listening.
The call go over and thank you very much. Congratulations on all the progress.
Gregg Mollins - President and Chief Operating Officer
Thanks.
David Hannah - Chief Executive Officer
Thanks Mark.
Operator
Thank you. Our next question this morning is coming from Luke Folta at Longbow Research.
Sir, the line is yours.
Luke Folta - Longbow Research
Well, good morning.
David Hannah - Chief Executive Officer
Good morning, Luke.
Luke Folta - Longbow Research
Most of my questions have been answered already. I did have one, I know this isnít a large business for you, but can you kind of, talk about what is going on in the high-nickel alloys in the titanium markets as far as pricing and demand are concerned?
Gregg Mollins - President and Chief Operating Officer
Well, pricing in titanium has come down certainly bronze and steel. Okay.
The demand though for titanium is still very, very strong. So, the price will come down where weíre trying something herewith to get an idea.
David Hannah - Chief Executive Officer
They are kind of have to repeat that in the very first quarter, okay. And they will come down maybe 25% into October.
In October and September has been very low for the year.
Luke Folta - Longbow Research
Have you talk about, what volume growth was that for that period?
Gregg Mollins - President and Chief Operating Officer
I am sorry.
Luke Folta - Longbow Research
Can you talk about what volume growth was over that same period?
Gregg Mollins - President and Chief Operating Officer
No, we donít have that information with us in the room here, but titanium is only about 1.2% of what we do. So, it is pretty small, but we donít have the volume but we spill the room with paper, if we have by-and-by product in here.
Luke Folta - Longbow Research
Just directionally, I mean there are things flattering out of the EBITDA?
David Hannah - Chief Executive Officer
On titanium?
Luke Folta - Longbow Research
Yes.
Gregg Mollins - President and Chief Operating Officer
I think, its fairly steady the only thing as far as demand point of view, I think, I notice that the only things is little less the point of view getting yourself less money again in the year.
Luke Folta - Longbow Research
Okay. Thanks a lot, good luck.
Gregg Mollins - President and Chief Operating Officer
Good day.
Operator
Our next question today is coming from Daniel Oakman [inaudible]. Your line is live.
Unidentified Analyst
Hi, thanks very much. You commented on fourth quarter margin outlook given competition and given same as.
Just wondering, if that change with all your outlook for 2008 we have a target margin for next year. Thanks.
David Hannah - Chief Executive Officer
We do not have a target margin for next year. We would expect it to be something more than the margin we just had in the third quarter.
But, we donítÖ we're in the midst right now, putting together our projections for next year.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
And, I mean our long term gross profit expectation is there in the 26% to 27% range over a long-term period. Now, that hasnít changed.
But, whether or not we get there in FY08, we're a little uncertain about it right now.
David Hannah - Chief Executive Officer
It really depends on the pricing and demand and pricing depending to a great extent what happens on the demand side. But, if pricingÖ it is seems that all those pricing decreases that all of our products whereas they occurring in the third quarter has now stopped.
And some of them have started back up again. So, if that continues and demand holds up, then weíll approach the margin our historical gross profit margins with like Karla said are in the 26% to 27% range.
Unidentified Analyst
Okay. Is it competitive factors that you mentioned, is that also working into the equation as opposed to pricing and volume?
David Hannah - Chief Executive Officer
Competition has been as Gregg had pointed out in his talk. Itís been fierce really over the last, well pretty much all year this year.
If you look at different products early in the year there was a surplus of carbon inventory out there particularly in the flat-rolled side. So, with the environment there competitively was very high because people were trying to work off carbonsÖ and work off their inventories anticipating the prices would eventually soften.
And in fact, carbon pricing did start to soften and than that kind of, accelerated that whole activity. So, its that a soft year from our competitive standpoint stainless too, I mean even earlier in the year, when stainless prices were going up, there were some things going on that cause margins to be lower than what they should have been because of some competitive issues out there.
And also as so close as to material.
Unidentified Analyst
Okay, thanks very much.
David Hannah - Chief Executive Officer
Thank you
Operator
Once again ladies and gentleman the quarter is open for question. [Operators Instruction] Thank you.
Our next question is coming from a Mrs. Sal Tharani at Goldman Sachs.
Sir, your line is live.
Sal Tharani - Goldman Sachs
Thank you. Good morning, guys.
David Hannah - Chief Executive Officer
Hi, Sal.
Gregg Mollins - President and Chief Operating Officer
Hi, Sal.
Sal Tharani - Goldman Sachs
Follow-up quick questions, Karla, can you give us the same store opting margin for the third quarter, is that handy?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
No. We actually donít give out the same store margin.
Gregg Mollins - President and Chief Operating Officer
Right.
Sal Tharani - Goldman Sachs
Okay. And how about in terms of volume on the inventory, how much was it down?
Is that handy?
Gregg Mollins - President and Chief Operating Officer
Well, that was inventory down.
Sal Tharani - Goldman Sachs
Yes, at the end of the third quarter versus end of second quarter.
Gregg Mollins - President and Chief Operating Officer
In dollars?
Sal Tharani - Goldman Sachs
No, in volume.
Gregg Mollins - President and Chief Operating Officer
In volume? Well, just let us figure it out here, if we would have that?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
We have it.
Gregg Mollins - President and Chief Operating Officer
Is it here Karla?
Sal Tharani - Goldman Sachs
In the mean time, Gregg can you give us some view on how are you seeing the demand on the Ethanol Plant Construction. Youíve mentioned that in that past that it was very good at the beginning of the year.
Has it toned down now?
Gregg Mollins - President and Chief Operating Officer
On Ethanol?
Sal Tharani - Goldman Sachs
Yes.
Gregg J. Mollins - President, Chief Operating Officer
No. Itís still very active.
Sal Tharani - Goldman Sachs
And youíre associating Ethanol plants, because you heard that some of them have delayed the projects as the conditions have deteriorated in that market.
Gregg Mollins - President and Chief Operating Officer
Okay. I was speaking to a couple of our guys here this week that just got a few fairly significantly advantages, not the entire company.
Okay.
Sal Tharani - Goldman Sachs
Okay.
David Hannah - Chief Executive Officer
We, the pounds in the inventory, the pounds were tons in inventories, shall decrease 8.2% from June to September.
Sal Tharani - Goldman Sachs
Okay. So, very much in line with MSCI inventories has decreased?
David Hannah - Chief Executive Officer
Yes.
Sal Tharani - Goldman Sachs
Yes. And also Karla did claim on medals was the profit from [inaudible] metals were fully included in the third quarter or was there I mean inventory reevaluation in the quarter for that?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Yes. We, Clayton, weíre still working on finalizing the purchase price allocation, but certainly from inventories, they should be properly valued and be made estimated right up for 6000 so thatís pretty small numbers in our total on consolidated amounts.
Sal Tharani - Goldman Sachs
Okay. Lastly on the price increases, we are seeing in flat steel.
Are you having any trouble passing it on to the customers or are they pretty much expected or are pretty much accepting it as the mills are increasing prices?
Gregg Mollins - President and Chief Operating Officer
No. Weíre going to pass through it out, I am not standing at a vicious spot of a competitive market and where itís, you know, really easy to do it.
But, eventually theyíre very much aware that, I think on either steel or aware that basically gets $500 to $520 a ton on odd ball. Okay.
And in August and we were very pleased to see that the mills drew the line and once again, okay and then provide us. So, price increases that was very much we enjoyed that.
We donít want to go below $500 a ton any time so our customers, weíre constantly telling all of our customers that basically thatís where they draw the line. Their average is probably going to be somewhere around $550 to $560 in our minds.
I think we pretty much conveyed that to our customers. Now there is an increase in demand.
There is any improvement in demand in the first quarter next year we donít believe thatís going to happen this quarter, but if there is, Iíll tell you what, with inventories as small as they are with reduction in imports that are coming in, we can have a little bit of fun in 2008 with some price increases.
Sal Tharani - Goldman Sachs
In the beginning comments you gave some qualitative guidance, you said that alternative prices expect to be flat while volumes slightly better, is that correct what I understood or volume slightly worse.
David H. Hannah - Chief Executive Officer
We said that we expect demand to soften further in the fourth quarter due to really two things, just the seasonal nature of the fourth quarter and the shipping days as well as we expect our customers to continue to buy cautiously. There is a lot of uncertainty out there.
Most people, you talk to think the economy is worse than it really is and eventually if we all start believing that itís going to get worse so hopefully we are not buildingÖ not building a self-fulfilling prophecy there but all in all, we do know that our customers are currently buying cautiously and we expect them to continue to do that. Again as Gregg pointed out if all of a sudden their business starts to pick up and that did cause some opportunity for some significant price increases.
Sal Tharani - Goldman Sachs
Thank you very much.
David H. Hannah - Chief Executive Officer
.
Thank you.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
Thank you.
Operator
Our last question today is coming from Timothy Hayes of Davenport and Company. Sir, the line is live.
Timothy Hayes - Davenport and Company
Thank you, good morning. A couple of questions and what is your estimate on when industry destocking will end?
Gregg J. Mollins - President, and Chief Operating Officer
I think it is about close to being there right now as we speak. But I think, as you know, that with everybody that I speak with, theyíre taking a very cautious approach on how theyíre buying going forward and a lot of the problems with what we normally see with people are restocking, okay, after theyíve been destocking and doing it offshore.
And now that is not really available right now in many products [inaudible], relatively attractive. Most others arenít.
So I think we are just going to see people holding close to the best [inaudible]. Weíve seen demand as being reasonable.
But everybody you talk to, they donít seem to think that way so I think everybody is just going to make a cautious approach to the inventories keeping with the best suppliers [inaudible] and [inaudible].
Timothy Hayes - Davenport and Company
And then what about the stocking specific to stainless products. What might the timing on that, when would that might end?
Gregg Mollins - President and Chief Operating Officer
Depending on how quickly you turn the inventories in our stainless platform we turn on our inventories very, very well. Weíll be in good shape, okay, this monthÖ really good shape by the end of September from a stainless lateral standpoint and I think weíd like to be a little bit thinner but weíre in pretty good shape now.
And I think by the end of October we might be just fine.
Timothy Hayes - Davenport and Company
Okay and then finally just to verify some numbers on the same store sequential changes. What was the increase in unit revenue and the increase, change in unit revenue and the change in volumes list?
Karla R. Lewis - Executive Vice President and Chief Financial Officer
They transfer sequential, the volume was down 3.1% and the selling prices were down 3.8%.
Timothy Hayes - Davenport and Company
Okay. And then, sales, same store sales were down.
Karla R. Lewis - Executive Vice President and Chief Financial Officer
6.4%
Timothy Hayes - Davenport and Company
Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, there are no further questions in the queue at this time.
If there are any closing comments you would like to finish with.
David H. Hannah - Chief Executive Officer
No, just thank you for your time. And we look forward to talking to you again in February, I believe.
Thank you again. Have a good day.
Operator
Thank you ladies and gentlemen. This does conclude todayís conference call.
You may disconnect you phones lines at this time. And have a wonderful day.
Thank you for your participation.