Karla Lewis: Yeah. I think, Phil, so we do an annual CapEx budget. Last year we were at a record budget of $455 million. We only spent $342 million last year, mainly just because of supply chain constraints. But we have to — we have really long lead times on some of the opportunities we see now. This year our budget is $500 million. We think the actual cash spend, which will include some carryover from prior years is probably only going to be like $400 million to $450 million this year. But we — like I said, our folks stay close to their customers, they go out in their warehouses, they look for opportunities for us to do more for our customers with the labor shortages, a lot of our customers have struggled with that and if they have to invest money in new machines, which have become more expensive, maybe they decide not to do that and they ask Reliance to do that for them.
So we have a couple of hundred different types of processing equipment in the budget for this year, same as last year. So we have got over 300 locations and we are trying to grow all of them and give them more resources to be able to serve our customers better.
Phil Gibbs: So, Karla, I — this is a rough math, so there’s — it seems like there’s over $300 million of growth CapEx in your cash guidance this year of about 4.25%. Do you see returns on those immediately or is there a gestation period in terms of when you would realize a return, because I know you all are good at adding capabilities and value-add and they end up being very accretive to your business and margins, but how long does that typically take for those to bear out?
Karla Lewis: Well, for all the Reliance people listening, we expect it immediately and we do have a pretty short runway with the equipment we put in. We have good well trained people out there. We are able to leverage people through our family it’s not a long — so it’s not a long lead time. We are putting a lot of CapEx items in place all the time and it’s a pretty short lead time, but it is hard to measure exactly what the return is on each individual piece of equipment.
Steve Koch: Yeah. And Phil, it’s Steve. I’d just like to add regarding CapEx. The CapEx budget that we are spending for 2023 is a good sign, because the past spendings in 2021 and 2022, our customers have asked us for more capabilities and we — whether it’s plate, burning machines or new saws or new cut the length lines. They are filling up pretty quickly almost as soon as we install them. So lead times are extended, so we are just trying to get out in front and try to make sure we continue to exceed our customer’s expectations.
Phil Gibbs: Understood on that. And then you mentioned on automotive improvement year-on-year and sequentially and I know the end market itself has been very choppy since the pandemic recovery. So what are you seeing now looking ahead? Are you expecting business levels to improve or with this a little bit of improvement you saw in the back part of this year, you basically just expect those levels to sustain? Thanks.
Steve Koch: We have to give our companies that do the toll processing for automotive, a lot of credit for working through the automakers supply chain issues probably the last, at least two years. Whenever we think that things are kind of smooth, there’s a step backward. But we think going into 2023, they are much better shape from their component point of view, their labor point of view and we are looking for a healthy 2023 from an auto toll point of view.
Operator: Our next question comes from the line of Katja Jancic with BMO Capital Markets. Please proceed.
