Question-and-Answer Session
Operator
Ladies and gentlemen, (Operator instructions) And your first question comes from the line of James Bank. Please proceed.
James Bank
Hi, good afternoon.
David Russo
Hi, James.
James Bank
I understand LIBOR has come down a little bit, but the majority of the debt you guys have outstanding is going to be based on that. Is there any risk at all there to consider going forward?
David Russo
Well, we obviously don’t have much debt change. I think the variable based on LIBOR is about $16 million, and so no, I mean, we always look for a little bit of a mix between fixed and floating and with the low amount of debt we have, we really don’t view that as any kind of a risk at all.
James Bank
Could you split the billing margin improvement with the positive variance from manufacturing improvement in the quarter?
David Russo
Manufacturing was a little more than 50 basis points.
James Bank
Okay. And the balance was billing margins?
David Russo
Billing margins and price variances.
James Bank
Okay, great. And the LIFO expense in the third quarter, that $5 million, is that run rate maybe for the fourth quarter?
David Russo
The fourth quarter is not going to be as – we don’t expect at least at this point in time for the fourth quarter to be as high as the third. We have really recorded LIFO year to date to reflect our full year forecast. So the nine months is expected to be three-fourths of the full year.
James Bank
Okay. And how much on your inventory with regard to piling and rail are you hanging on to that has been older than August let us say, the month of August.
Stan Hasselbusch
Let me just say this, James, our inventory at the end of the quarter was $120 million, which was about $25 million compared to last quarter last year. 77% of that inventory is in new rail and piling, and of that inventory, which totals a little over $90 million, we feel that 75% of the new rail inventory, which is $27 million is committed, it has been sold or it is either work in process or waiting to be released. We also think that in the piling side of our business, which has got approximately $65 million in new piling, that over half of that is either committed, it is work in process, part of our rental pool, or has actually shipped and we have not been able to recognize the revenue. So, those two products, where we have got $93 million in inventory, for the most $55 million of that inventory is committed and we probably have $38 million of risk, which is really quite low overall. I think that when we talk about inventory and there is no doubt about it, inventory is a concern as we go forward, we do have a little risk in there. I think we have got a little risk in relay rail, which is driven exclusively by scrap pricing and scrap pricing, as we have talked about and we have seen in the last two months has dropped considerably. We have about $3 million in relay rails and there is some risk there. We have known that bearing pile, which we don’t carry a lot of inventory; announcements have come out as far as an $80 a ton drop in there. We don’t feel we have got much exposure, but there is a little bit there. And the other side of it where we are doing very good is in threaded pipe and we have seen some of the pipe prices, which are driven by flat rule, are down approximately $100 a ton and so we have got a little bit of risk there. So, we have got $120 million on the balance sheet, and I think that overall, there is risk out there; and don’t get me wrong. I mean, it is something that we are on the product mix about everyday, and they are really watching what we buy and really watching how we go forward and our cost that we are paying, but $120 million with the bulk of it probably committed.
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