Hello and welcome, everyone, to today's Commercial Metals Company First Quarter Fiscal 2014 Earnings Call. Today's call is being recorded. [Operator Instructions] I would like to remind all participants that during the course of this conference call, the company will make statements that provide information other than historical information and will include expectations regarding economic conditions and the company's future results, prospects, operations and capital spending. These statements are considered forward-looking and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. These statements reflect the company's beliefs based on current conditions but are subject to certain risks and uncertainties that are described in the company's latest 10-K. Although these statements are based on management's current expectations and assumptions, CMC offers no assurance that events or facts will happen as expected. All statements are made only as of this date. CMC does not assume any obligation to update them in connection with future events, new information or otherwise. Some numbers presented will be non-GAAP financial measures and reconciliations can be found in the company's press release or on the company's website. And now for opening remarks and introductions, I will turn the call over to the Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Mr. Joe Alvarado.

Thank you. Good morning and happy new year. Thank you for joining us to review CMC's first quarter fiscal 2014 results. I'll begin the session with highlights from the quarter. Barbara will then provide further financial details and I will close out with comments on our outlook for the second quarter of fiscal 2014. After which, we will open the call to questions. As detailed in our earnings release this morning, we reported net sales of $1.7 billion for the first quarter of fiscal 2014, which was consistent with our net sales for the first quarter of fiscal 2013. For our first quarter fiscal 2014, we reported net earnings of $45.9 million or $0.39 per diluted share. This included an after-tax gain of $15.5 million, or $0.13 per diluted share, associated with the sale of our wholly-owned copper tube manufacturing operation, Howell Metal Company. Earnings from continuing operations were $32 million or $0.27 per diluted share, which is an increase of $0.24 per diluted share when compared to the preceding quarter. Furthermore, for the first time since the first quarter of fiscal 2013, all of our business segments reported positive results. In particular, we are pleased with the improved profitability of our Polish operations, which posted one of the best first quarter results since CMC acquired the business 10 years ago. For the quarter and as indicated in the earnings release, the Board of Directors declared a dividend of $0.12 per share for shareholders of record on January 21, 2014. The dividend will be paid on February 4, 2014. At this time, I'll make a few remarks on market conditions and other strategic initiatives. During our last conference call discussing our results for the fourth quarter of fiscal 2013, we noted strength in many of the key U.S. economic indicators.…

Thank you, Joe. Good morning and happy new year. As Joe mentioned, for the first quarter of fiscal 2014, we reported net earnings of $45.9 million or $0.39 per diluted share, which compares to net earnings of $49.7 million or $0.42 per diluted share for the first quarter of the prior year. First quarter results for fiscal 2014 included an after-tax gain, $15.5 million or $0.13 per diluted share, associated with the sale of our copper tube manufacturing operation. Similarly, during the prior year first quarter, we recorded an after-tax gain of $17 million or $0.14 per diluted share on the sale of our 11% ownership interest -- ownership investment in Trinecke. More notably, during the first quarter of fiscal 2014, we reported $0.27 per diluted share from continuing operations, which included after-tax LIFO expense of $2.8 million or $0.02 per diluted share compared with LIFO income from continuing operations of $15.1 million or $0.13 per share during last year's first quarter. Turning to our results by segment. Our Americas Recycling segment reported adjusted operating profit of $839,000 in the first quarter of fiscal 2014. Average sales prices on non-ferrous scrap decreased $119 per short ton or 4% when compared to the first quarter of fiscal 2013. We shipped 56,000 tons of non-ferrous scrap, which was a 5% decrease over last year's first quarter. Our ferrous shipments averaged -- ferrous scrap sold for $326 per ton during the first quarter, representing a 1% increase over the $322 per ton reported in the first quarter of fiscal 2013. Ferrous scrap shipments during the first quarter of fiscal 2014 remained flat at 503,000 tons when compared to last year's first quarter. During the first quarter of fiscal 2014, this segment's results benefited from a gain on the sale of real estate and…

Thank you, Barbara. Overall, this quarter's results were strong and marked our ninth consecutive quarter of profitability. Despite the strong start to the fiscal 2014 year, our fiscal second quarter is typically our weakest quarter as holidays limit activity and winter weather slows construction markets in North America, Poland and Northern Europe. We plan to take advantage of the seasonal slowdown in the second quarter to conduct routine maintenance outages and to upgrade our equipment. Furthermore, in addition to preparing for the March furnace outage in Poland, we expect to build inventory in preparation for the busier spring construction season. In summary, we remain upbeat about the nonresidential construction outlook in the U.S., as well as the improved economic indicators in both Europe and Australia. Thank you for your attention. At this time, we'll now open the call to questions.

[Operator Instructions] Our first question comes from Luke Folta of Jefferies.

The first question I had was on -- we've seen a pretty nice move in scrap over the last couple of months and I wanted to see if you can talk us through how that should impact margins across the main North American businesses in the second quarter. And all-in-all, do you expect that to be a net positive or a net negative factor in 2Q?

I think broadly speaking, prices moving up are positive for the business overall and they speak to some of the positive indicators that we're seeing in the market. But in the near term, we would expect in the mill -- on the mill side of it that prices will move in tandem with changes in scrap. The fab side of the business will see a little bit of a squeeze until their prices can catch up, see the movement in rebar prices. But again, overall, we think it's positive for the long term. I would point out that we do anticipate a fairly large LIFO impact in the second quarter as a result of prices moving higher.

Okay. All right, that helps. And also, your trading business in the U.S., I think -- I know you talked in the past about having some leverage to the flat rolled market historically. There's a pretty wide disparity between U.S. and global prices and I was curious to know if you'll participate -- or if that's opened an opportunity for you to import product into the U.S. and just maybe your perspective on the whole situation and how that is likely to play out over the next few months.

Yes, flat rolled trading is certainly an integral part of our overall trading activities, one that's been strengthened of late. And yes, of course, these kinds of disparities create opportunities for us and we participate in them. But I'd say that we're a relatively smaller player in the flat rolled business. But yes, we take advantage of those opportunities when they present themselves, Luke and there's a significant threat. So a lot of speculation about what will happen in the future. We just monitor the market as best as we can and take advantage of opportunities when they present themselves.

The next question comes from Meredith Bandy of BMO Capital Markets.

I just wanted to ask, with this -- with the completion of the copper tube sale, are you -- do you feel comfortable with your current asset base? Do you see -- foresee any more asset sales?

Meredith, we, as a company, are always evaluating our company's assets and balance sheet and trying to optimize the use of whatever invested capital that we have. And I wouldn't comment on if we were planning anything, but it's a normal -- it's a required routine activity for any management team to look at their asset base and make sure that we're getting the best we can out of what we've invested in those assets. So we've made a number of changes over the years. We mentioned in our earnings results the sale of the Trinecke investment a year ago. A year before that, we shuttered the Croatian operations. Before I ever joined the company, we disposed of some deck and joist assets. And so the copper tube facility sale, really, was a sale that we determined would be good for Howell Metal in that it's with a strategic player now in the copper tube manufacturing business and allows us to focus on our core business.

That makes a lot of sense. And then that also, obviously, helped your cash position. So how do you prioritize the uses of cash between growth and reducing debt or possibly, dividend increases?

Yes, well, clearly, with some of Joe's comments around the market, we do look forward to improving market conditions and a cycle recovery in construction and that will generally consume additional working capital as that cycle recovery materializes. So we see that as a use of cash and so growth is certainly a priority. We have a CapEx program, as we mentioned and currently, for this year, we're projecting around $150 million. We've remained committed to the dividend throughout the cycle since the global financial crisis. I think we evaluate that every quarter. The board evaluates it and makes their determination. Today, our yield is fairly healthy relative to our peer companies. So that would be the top 3 priorities for us.

The next question comes from Evan Kurtz of Morgan Stanley.

Nice improvement in mix on both U.S. and Poland, something to drill down a little bit more into detail there. Can you provide the semi-finished tons numbers for each of those 2 segments?

Yes, we could, but...

We generally don't give that level of detail. Sometimes, I think we do highlight the billet sales. I could probably put my hands on that if we dug through some of the...

Yes, it'd will be great to know at least billets because we, historically, used to track billets and it does give us a sense of how the mix is shifting as time goes on. So it's a good way to see the improvements there.

Why don't you follow up on the other question, Evan, then we'll get that.

I can tell you in the Americas, our billets for our year-ago quarter were 88,000 tons and the current quarter was 50,000 tons. I'll try to look up Poland here.

And assuming that, that can continue, could you ever get to the point where you're really not selling any billet at all in the U.S.?

Evan, given the cyclical nature of our business, that's an option that we always want to have available to help operating rates and facility utilization. So I'm not envisioning so much strength in the market that we wouldn't be interested in some billet sales. But certainly, we're always measuring the economics of billet sales versus finished product versus overall operating rates at mills. So it's -- I guess I'd call it a relief valve of sorts. And when the right opportunities present themselves, we can take advantage of it and we do.

Okay, that's helpful. And then just maybe one follow-up on the rebar market. It seems like rebar imports went off a cliff in December just based on the license data. Are you starting to see any sort of activity in that market as far as just ability to negotiate pricing, that sort of thing? Just maybe an update on that, market conditions there.

The rebar imports are up significantly. As you know, whether we look at it on a quarter-to-quarter basis or a year-to-year basis, there's certainly a spike coming in January based on the licensing, mostly from Turkey. And as we noted, this negatively impacts our business overall and the timing of as much as 100,000 tons of rebar from Turkey coming in, in January, which is when all of us -- doesn't bode well. But I think it also reflects on Turkish practices or expectations of what the trade ruling might be. I guess I'd further advocate, Evan, that we had a similar situation a year ago, which was finally curtailed in Poland, where unfair trade practices and dumping from Latvia resulted in pretty significant negative impact on our results. And when legislation was introduced, whether it's trade legislation or, in the case of Poland, the VAT legislation, it's a level playing field, that we're very competitive in the markets that we serve against imported or dumped steel.

And Barbara, maybe I'll just follow up with you offline on the Poland billet question.

Yes, we looked it up. In the current quarter, we shipped 25,000 tons of billet and prior year with 14,000, so a marginal change there. And the 25,000-ton level is light in comparison to past periods. That was a very small part of the overall mix.

Our next question comes from Timna Tanners of Bank of America Merrill Lynch.

I wanted to ask 2 questions similar to the last one. Actually, the first one, if I could drill down a little bit in the solid performance in the U.S. Mills segment. So if you look at it on a per ton basis, your profitability improved. But if you would humor me for a second, I was still kind of confused that despite the better mix, you didn't see year-over-year improvement in pricing. So the improvement in per ton profitability seemed to come more from the cost side, with $92 a ton or so of operating profit per ton. And then even if I take out the South Carolina furnace fix and also take out the $1 million from Howell, I get $85 a ton year-over-year. So I'm just trying to understand where the improvement came from if it wasn't price. And is that something sustainable that we should be looking at going forward in the U.S. Mills segment?

Well, Timna, we're not unlike any of our competitors in electric arc furnace business and steel business in total. We're always aggressively attacking cost. And so some of the cost benefit of upgrades in facilities, like we did in South Carolina, does trickle down to the bottom line. And we're doing everything we can to manage those margins, recognizing that we don't control the price. The market sets the price and we get squeezed when raw material costs, like ferrous scrap, in particular, swings. So I don't think there's anything extraordinary in what we're doing other than minding our Ps and Qs as efficiently as we can and being really good efficient minimill producers in the products that we produce.

Okay, that's helpful. So the second question really has to do with the comment you had on your backlog. And as you know, we think of you as an important company with regard to non-res exposure here in the U.S. I was kind of surprised when you said the backlogs are stable. What does that mean with relationship to your outlook on non-res improving? Is it stable and growing? Or can you characterize a little bit more your backlog?

Yes. We've been talking about it for quite some time. It's very regional. And if you break our backlog down, we are seeing improving trends in fab side of the backlog. And we continue to see a benefit from being positioned in the Sun Belt states. And the regional growth in the markets that we serve is stronger than the growth in other parts of the country.

And Timna, the only other thing I'd add to that is we're seeing better bidding activity, particularly in the Sun Belt. And when that bidding activity, even at whatever our normal hit rate might be, materializes into orders and tons that are booked, that will add to sense of more stability. And that's what we're seeing, a little bit less of cyclicality or inflection, if you will. And more stability in the bidding activities, particularly in the Sun Belt regions.

We're also seeing a continuing trend of a higher level of private bidding over public, but more recently, we are seeing some public spending start to come back. There's been funds released. In certain parts of the country, we are seeing even higher levels of public bidding than we've seen in the past 3 or 4 quarters.

Our next question comes from Thomas Van Buskirk of Sidoti & Company. Tom Van Buskirk - Sidoti & Company, LLC: Just a couple of real quick things. Most of my questions have actually already been answered, but the -- I wanted to try and get a little bit a sense of the timing of CapEx over the course of the year. Obviously, it was pretty light for the first quarter. And then if you could also maybe characterize a little bit what you're expecting for the amount of inventory build you're going to see in Q2 maybe in terms of days or however you want to put it.

Yes, the CapEx will probably be back end loaded this year. I think it was a little more evenly spread last year. Clearly, we have heavy spending that's going to begin on the furnace rebuild in Poland very shortly, but some of the other bigger projects in the U.S. just haven't had a chance to get started yet. In terms of the inventory build, I don't have a specific breakdown in terms of tons. But I think it's safe to say that we could see $100 million of cash usage associated with that in this coming quarter. Tom Van Buskirk - Sidoti & Company, LLC: Okay. And actually, just one quick follow-up, if I can. One of the other thing on non-ferrous, in terms of the pricing kind of coming off in non-ferrous scrap, do you see any remedies out there for that? Or are you planning anything else in terms of improving some of the recoveries, maybe putting a little more capital spend into that? I think that's kind of been the trend lately because of the weakness in scrap business.

Yes, Thomas, that's one of the things that we've just completed in the way of a capital project in our Texas region. We, a year ago, authorized and in about 8 or 9 months' time, built out additional recovery systems to our -- for our shredder. It's been operational since August and we've seen very positive results. We're pleased with that investment and we'll consider additional investments for other shredders where the economics make sense.

The next question comes from Brent Thielman of D.A. Davidson. Brent Thielman - D.A. Davidson & Co., Research Division: You mentioned stable or, I guess, kind of slight increase in backlog in fabrication. I was just wondering if you could quantify or give any metrics around the increase in tons bid or tons booked in the quarter.

Well, let me consult my cheat sheets here. I would point out the following, that normally, moving into this time frame, we see the backlog begin to drop because the second quarter shipments are lower and affected by weather to some degree. So the fact that the backlog increased slightly sequentially and is up by a good measure year-over-year is -- those are both encouraging signs for us. And the change year-over-year is about 10% increase. Brent Thielman - D.A. Davidson & Co., Research Division: Okay, that's helpful. And then has the mill in Poland been profitable thus far through the second quarter? And do you think you can sort of sustain that through Q2, even with, certainly, some seasonality setting in?

We can't comment on second quarter, of course, Brent.

We don't give specific guidance.

Yes, but suffice to say that Poland is a mill that's very much impacted by weather, more than any of our other Sun Belt facilities, for sure. Although all of our facilities had some impact because of the cold weather snap that's impacted us. But we also have a holiday effect. Practically speaking, Poland shuts down for 2 weeks. It was only today, after the Feast of Epiphany, that they come back to work. So we're hindered by shipments because of holidays, as well as weather. The good news on the weather front is that we haven't had any bad storms or a lot of snow coverage in Poland, kind of the opposite of what's normally the case, just like what we're experiencing in Midwest and North and Northeast is the opposite of what we normally experience. So we benefited from that somewhat thus far, but that can turn on a dime and come to a halt very quickly. What happens more than anything else is a lot of the project work in Poland just stops because of the weather uncertainty. That doesn't mean that stocks aren't being built, that merchant products aren't shipped, but project work, really, really comes to pretty much a halt and then picks up again significantly in the spring. So the situation in Poland is improved and a big part of the improvement is because of the legislation on VAT to stop fraud. And so we're grateful for the benefit that's resulted from the initiative taken by the Polish government.

The next question comes from Sal Tharani of Goldman Sachs.

Just a couple of housekeeping questions. On America Mills -- Americas Mills, what was the LIFO over there?

The Americas Mills LIFO for the quarter was actually a LIFO benefit of $1.8 million.

$1.8 million. Okay, great. And also, when I look at your divisional information, Americas Mills $481 million revenue, does that include Howell in there or Howell sales profit or whatever -- not the profit, but the revenue got from selling Howell in there?

Yes, we re-classed Howell to discontinued ops, so it's been removed from that.

Oh, from sales and profit both, operating profit both?

Yes.

Yes.

The next question comes from Phil Gibbs of KeyBanc Capital Markets.

How should we be thinking about the timing of the capital upgrades at Poland as far as how we're thinking about it moving through the year?

Probably best way to think of it like this, Phil, is we've begun to build inventory for the outage. We still have -- it's a 2-furnace operation, so it's a little bit different in most plants, where we don't have the option of running. But we still have to build inventory ahead. The outage is slated for March into April time frame and then there's always [indiscernible], which will probably carry us up to June. So the back half of the second quarter won't reflect the capital as much as the third quarter will and third quarter should nearly fully reflect the capital expenditures. Does that help?

Yes, that is -- that's really helpful. I appreciate it. Typically, the IM&D business picks up in your second quarter and you're back to, at least, a breakeven outcome, which is good. Anything that we should be expecting there from a seasonal progression standpoint? Are you looking for that to play out typically as it does, or is seasonality not as really a big of a factor anymore?

Seasonality and merchant distribution is more impacted in the second quarter by holidays than anything else. I mean, we have -- essentially, Australia shuts down for a more extended period than we might normally expect. We have the Chinese New Year and that all affects trading activity. So we'd expect a normal recovery in the third quarter in our trading activities. I guess one thing I wish I could say is that we're seeing really extended lead times or strong demand in building backlog in our raw materials group, but we're not just yet. And I think that reflects more the international level of activity, where lead times are short and supplies are abundant. But in the grand scheme of things, our raw material business in North America is generally stronger. Which it kind of reflects the same thing that we're seeing in the steel business, a generally stronger North American market, which obviously attracts imports, not only raw materials but finished goods. And continuing weakness in Europe, despite the fact that Europe is expecting growth in GDP in 2013-2014. Some of the projections are, even at the end of 2015, that the operating rigs will be in the range of 20%, 25% below the peak. So recovery is relative. And we still got a long way to go in Europe. And of course, the overcapacity in China has a tendency to impact margins and prices and availability throughout Southeast Asia. So we don't see any really strong recovery in China until the capacity issues are addressed, which, as we all know, are very slow in coming.

Okay. And if I could just ask one more, I really appreciate all the color. The merchant bar market, I know you had a little bit of a pickup in your mix and you're aggressively oriented in the southern United States. So I was reading that the Mexican government put out a public works plan largely for increased -- double-digit increases in public work spending for 2014 calendar year. Does that help you, at all, in the South, potentially, send off merchant bar imports from Mexico in the next year?

Yes, I would suspect so. There's been significant additions to capacity in Mexico for merchant and rework. The Mexicans have never overstretched their reach on merchants because they really didn't have the capacity and we've seen them more active in north of the border. So if that merchant project got tied up in infrastructure projects in Mexico, yes, that would have a, I think, a positive effect.

Is the majority of merchant bar going into non-res construction, or is it split between that and industrial usage?

Phil, it's so hard to measure because so much of it goes through distribution. It's really hard to say where it goes. I'll just call it distribution and the normal mix of end markets from distribution is the best way to characterize it.

The next question comes from John Tumazos of John Tumazos Very Independent Research.

It's great that the cash balances rose about 3x as much as the asset sale and are above $0.5 billion. Would you explain what the normal level of cash you require for letters of credit international operations, the diversity of your 5 segments are and how much of this cash might be surplus and whether you view, at today's low interest rates, your debt as an asset and you'd rather hold the cash than repay the debt, or whether you intend to pay down debt after some breakage fee periods or when the right time arises, it's cost-effective?

Well, there's a lot in there, John. In terms of normal level of cash, you can do all kinds of math around that. And it's a number that can change over time based on business activity levels and we do think that we're at the beginning stages of a recovery. So the cash requirement -- and with that recovery could come price increases, which would also increase the amount of cash needed to fund working capital. So we do see, as I mentioned earlier, at least $100 million use of cash in the second quarter to fund some of the working capital. And we look forward to the recovery continuing and also requiring some additional cash. We have increased our CapEx projections the last couple of years and so that's another use of cash. In terms of the debt question, I think we sort of answered that earlier in the year, when we tapped the market and we extended the maturity on the notes that came due in November of 2013. The market was so favorable. And as you know, we printed under 5% in that new note and extended the maturity 10 years. While I would like to be carrying a slightly lighter debt load at this point in time, we really don't have any debt that would be economical to take out right now with some of the excess cash that we have on hand. But we evaluate those things all the time. Our next maturity is 2017 and we do have a little bit of that prefunded in our current cash balance.

The next question comes from Aldo Mazzaferro from Macquarie.

So when I heard Sal ask his question on the Americas Mills line and the revenues, I thought you were going to say the copper revenues are still in there. The fact that they're not in there, can you tell us, briefly, what that incremental $30 million or $37 million, I think, of revenues would be? I mean, if you back into the numbers by multiplying the tons price times the volume, you come up with something like $440 million and I think there's about $37 million more there. I just -- and I know that's been variable all over the place. I just wonder if you have any idea what that might be or whether it's sustainable.

Yes, I'd say it's probably mix-related, but I would have take that off-line and do some more research on it, Aldo.

Okay. Hey, a quick one, too. You mentioned it was a real estate gain in the recycling, Barbara. Was that anything material?

No, it was $1 million.

The next question comes from Michael Gambardella of JPMorgan. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: I wanted to see if you can give us some more color or maybe quantify -- and I know you can't give an exact number, obviously, you don't know, but a range on what you're looking at for the LIFO in the second quarter?

Yes, it was a $0.02 expense for the current quarter. And I could easily see that be north of $0.10 in the second quarter. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: Okay. And then last question, just on the color on the non-res construction part of your market. In the past, you've mentioned kind of a breakdown that you have between private and public. Has that changed much since the last quarter?

Yes, Mike, it continues to improve slightly and slowly. We've shared with you and with others that in -- prior to the downturn, we had as much as 70% private and 30% public. That got converted completely to where private became 30% and public became 70%. And so quarter-by-quarter, whether it's in book tons or bidding, bid tons or even shipments, the private number continues to shift to be a greater percentage. And so I'd put it in the range of about 45%, maybe, in some instances, a little bit better than that. So we're not back to the historical levels but certainly better than where we were when we were 30% private project activity. But it's been a slow climb. And we've been talking about this now for 3 years and are only now getting at a point where we're above 40%. Michael F. Gambardella - JP Morgan Chase & Co, Research Division: In Europe, can you -- what do you think is holding back the non-res activities from being more than just a slow climb?

I've always expressed it as confidence, Mike, that there are any number of projects and a lot of projects that get bid, rebid and quoted, once again, because developers are looking at their overall project cost and trying to find the right opportunity. And the best illustration I can give is a building in downtown Dallas, not far from where I live, which is -- we were told over 1.5 years ago that there would be a building started and that they'd turn dirt by the fall. And what happened is in the late fall, they put a sign up, saying they are working on it and they're going to put a project together. So I think when they -- when developers believe that they can get the occupancy rates to a level that justifies the investment, whatever that minimum level is, as long as they can control the raw material cost and other aspects of the build-out, they'll go forward, but not until then. And a lot of that gets back to confidence in the government, what's going on with taxes, what's going on with health care. And I'm sure it won't be long before we're hearing about the midterm elections and the posturing that takes place there. So it's hard to get the solid kind of momentum that leads to significant growth. But if you go back and think about what some of the GDP numbers were and the upward revisions, there's just a little bit better sense of projects moving forward. Certainly, in Texas and Florida and even California now, some of that confidence has returned and projects are moving forward a little bit more aggressively. But it's all the places in between that were a big part of strong nonresidential construction demand where it's still fairly tepid. And I'd use the Atlanta market as an example of -- there's a good construction activity, but it's not great. And so until the Atlantas, Charlottes and Birminghams of the world start building out again, it's the larger regions like North Texas and Houston and L.A. and California and South Florida and the Beltway around Washington where construction activity never has really been as negatively impacted. But we need the rest of it to strengthen. And so there are some signs of that and we keep monitoring it and it's reflected in bid tons. But the bid tons aren't necessarily orders. And I can say the same thing about the Australian market, where we are also very construction-related. There is a bit of a euphoria with the change in government, a lot of activity. But it hasn't materialized to real strong orders or demand for -- future demand for products. It's just kind of the same activity with a little bit more exuberance, I guess, is the best way to describe it. Not yet confidence.

The next question comes from Nick Jarmoszuk of RBC.

I was hoping you could talk about the CapEx budget and just detail some of the larger projects.

Well, the biggest project by far and away is the furnace rebuild in Poland. That's going to impact the second quarter into the third quarter. But by far and away, it's the largest. We've just done some major maintenance in our Texas facilities and completed that. We have other projects that are slated for later in the year in our South Carolina facilities. So it's really kind of across the board. I wouldn't say anything that's extraordinary, but routine maintenance that we needed to get caught up on and some additions to productive capability that aren't insignificant. So it -- the biggest single project this year would be Poland. The biggest single project last year was South Carolina. Both are furnace-related. Well, the other project last year was the recycling additions and processing in Texas. And we're looking at doing more of that activity this year, which would also tap into our CapEx budget.

Okay. And then what is the budget for the Poland rebuild?

Similar expense to South Carolina, around $20 million.

Yes, ballpark.

The next question comes from Brian Yu with Citi.

The first question. I think you mentioned earlier that in Poland, the government has made attempts to address the VAT circumvention. And along those lines, do you think the November quarter results fully reflect a more normalized market, or is there more to come as we try to look at the future quarters?

I would say that it doesn't fully reflect the potential of that market. There's still some recovery. And from our perspective, there's more that we can do on mix between merchants and rebar. And we added significant production capability to make more merchant products. And we're still being introduced to that market. We're a latecomer. So there's-- it takes time to shift buyer sentiment towards us. But I mean, we've been working on that for quite a while. We've made some key personnel moves to make that work more effectively and more smoothly. So I think there's still some upside in Poland from what we saw in the first quarter. Even though it was a really good quarter, I believe, fundamentally, that, that market is still a strong market. We'll gain some efficiencies from the capital investments that are going to be made. But even there -- and we won't see that in this fiscal year, but those are efficiencies that are intended to drive improvements to the bottom line.

Okay. Well, my question is more just on the VAT circumvention side. The government looks like they have addressed it. I'm wondering, when did that -- did you see -- start to see the benefit of it in the margin expansion as the VAT circumventing material exited the market and helped to restore better balance? Do you think the November quarter fully reflected the government's actions?

Yes. No, I understand your question, Brian. The legislation was actually enacted and effective on October 1. But I'd say that we saw more or less the full benefit of it throughout September as buyers were starting to shift their patterns because of the unavailability of imported Latvian product, as well as declining stocks. So I'd say, more or less, we got the full benefit in the quarter of the VAT.

Got it. My second question is -- I think, Barbara, you mentioned earlier that you're going to see some margin squeeze in the fabrication business. How should we think about the lag in timing now, with the shift in your public versus private backlog? I mean, I remember, historically, it was 6 months. Is that still the right way to think about it?

I think to get the full price realization, that's probably a good rule of thumb. I think our current backlog has -- is pretty attractively priced. And the private moves through maybe a little quicker than the public does. So hopefully, it can translate into a little shorter lag, but...

[Operator Instructions] The next question comes from Charles Bradford of Bradford Research.

When I look at AISI numbers for November on rebar shipments, they were up, like, 17%. And it looks like year-to-date is up almost the same. If I work out the quarters to match your quarters, it's more like 29%. That's an awful lot better than what you've reported. Is there anything changing in the domestic market?

Well, yes, Chuck, that's what we've been talking about. There's -- we had a little bit stronger quarter, shipment-wise and seeing, as I said, better bidding activity. I'm not sure exactly how you're adjusting for AISI versus our quarterly data. Generally speaking, the quarter is not as strong as our third or fourth quarter have tended to be. But certainly, we've seen good demand for rebar product. That's reflecting some of the construction activity we've talked about. And yes, imports have also increased, but a lot of that materializes into what's basically positions in inventory that distributors or others might take in anticipation of higher prices. So it's hard to measure, really, the impact of what goes in inventory, Chuck, whenever a trade case is announced. But certainly, there's that effect as people try to rush to bring product in. But overall, demand has been better.

It's just the light shape reported data was actually relatively weak. I presume that matches more up to your merchants.

Yes, it does.

But rebar was unusually strong compared to what all the other numbers showed. Just sort of curious if there was anything -- any of your competitors getting more aggressive or...

Only on the import side, Chuck.

Yes and that wouldn't show up in domestic shipments.

Yes.

The next question comes from Phil Gibbs of KeyBanc Capital Markets.

So a lot of the industrial projects going forward in the U.S. over the next few years could be LNG export facilities, a lot of the chemical processing renaissance that we're supposed to be seeing. Do you feel like any of the steel has been laid for a lot of that going into this year, or do you feel like a lot of that is still really on the come?

My own view is most of that is still on the come. There are some projects and we can use the Nucor DRI facility. It's a classic example of something that creates tremendous infrastructure demand not only for the plant but for the surrounding communities. A lot of the petrochem projects that we're tracking are all future-based. Until LNG is approved, it's hard to think about putting investment into the infrastructure because those are multibillion-dollar projects. So I believe that's all part of what is potential demand for a strong nonresidential construction recovery. That's the kind of stuff that dreams are made of. Because that, in conjunction with some infrastructure build by the federal government, which, we all know, is badly needed, is, I guess, a perfect storm from a demand perspective, not that it would ever happen that way. But that's why we're pleased to see the nonresidential construction improving of its own accord, with business confidence improving slightly or to the point where activities are just a little bit stronger.

At this time, there appear to be no more questions. Mr. Alvarado, I'll turn the call back to you.

Okay. Well, we had a, what I thought was a short call to report our numbers and lots of good questions. And we appreciate all your questions and look forward to answering any of those that we didn't -- weren't able to answer here today. So thank you for your questions and thank for joining us on today's conference call. We look forward to seeing all of you in the very near future. Thank you.

This concludes today's Commercial Metals Company conference call. You may now disconnect.