Good morning. I'm Brenda Miyamoto, Vice President of Corporate Initiatives for Reliance. On behalf of our entire team, I'd like to thank you all for joining us this morning. We're thrilled to have you here with us at the New York Stock Exchange, and we welcome those who are joining remotely via webcast. Not a good start. At the outset, we'd like to highlight our safe harbor statement. The information that we're going to share with you this morning will be webcast live on the investors' portion of our website at investor.reliance.com and is subject to Regulation FD. We're going to kick things off today with the premiere of our new corporate video that showcases Reliance, focusing on our culture, operations, and processing capabilities. Please enjoy.
At Reliance, we're service-oriented, we're high quality, we're diverse, we're industry-leading, and we're just getting started. Since our humble beginnings in 1939 as a small local distributor of steel in Los Angeles, we've grown to the largest metal service center company in North America. Providing innovative solutions in the safest possible manner is the cornerstone of our success. You can always rely on Reliance. Our diverse product offerings and value-added processing capabilities set us apart from our peers. We distribute a full line of over 100,000 metal products from over 300 locations in 40 states and 13 countries. Our 125,000 customers represent a variety of industries, including aerospace, automotive, non-residential construction, and heavy industry. The dedication of over 15,000 employees allows Reliance to process quick turnaround orders with some of the shortest lead times in the industry.
Metal received direct from mills via truck, rail, or barge is distributed to our customers in small-sized orders averaging approximately $2,000 per order. Over 40% of orders are delivered within 24 hours, thanks to our wide geographic footprint and proprietary fleet of trucks. With a vast array of products, end markets, and strategic service center locations, we mitigate the impacts of changing metal prices and end demands so that we can continue to deliver solid financial performance through all market cycles. Our number one priority at Reliance is the safety of our employees and all members of our local communities. That's why we created our Smart Safety program to promote safe working environments, enrich our communities through community service and the Reliance Cares program, and develop greener solutions in our offices and operating facilities. Though our operations minimally impact the environment, we work hard to lessen any potential impact.
Most of our inventory is produced from recycled metal. Our buildings are energy efficient, and our service centers are strategically located close to our customers to reduce our carbon footprint. Reliance's business model strongly focuses on providing value to our customers while driving profitable financial performance. Our minimal contractual sales and buy domestic philosophy allow our salespeople to support strong working capital management and reduce volatile metals pricing risks. We focus on customer relationships with 97% of our sales to repeat customers. With our diverse customer base, no single customer makes up more than 1% of sales. Using this model, Reliance maintains gross profit margins at industry-leading levels. How else does Reliance lead the way within the industry? Profitable growth. Our capital expenditure budget significantly outpaces our peers, with over half dedicated to growing initiatives. We open and expand facilities in both new and existing markets.
We invest in advanced innovative technologies. We also acquire well-run businesses who see their inventory, gross profit, and operating margins improve under Reliance. These investments enable us to reach more customers, provide more services, deliver higher quality products, and financially outperform our peers. To outpace the competition, a company needs to invest in itself. We've set the standard in investing in new state-of-the-art equipment and technology, providing us a significant competitive advantage. These investments have helped us build a reputation for being a problem solver for our customers with certain one-of-a-kind capabilities and the ability to perform some of the most difficult processing tasks in our industry. We operate in a decentralized structure, which enables us to place decision-making as close to the customer as possible. By keeping the brand names of our family of companies intact, we maintain local customer relationships.
After an acquisition, our role isn't to shake things up. It's to help the acquired business grow. Since 1994, we've helped our over 65 acquired companies reach new heights. At Reliance, we deliver results. We've built a strong track record of year-to-year profitability by focusing on growth and cash flow generation. Strong cash generation enables us to expand into new areas of possibilities while standing by our commitment to our shareholders, regularly returning capital through quarterly dividends and opportunistically repurchasing shares of our stock.
With over 80 years of service and leadership, we are proud to lead the industry as the largest and most profitable metal service center company in North America. Ever-growing in innovation, diversity, profitability, and commitment to service, Reliance is ready for the opportunities that lie ahead. As you saw, Reliance has a long history of being service-oriented, high quality, diverse, and industry-leading. We're really excited to share our story with you today. We hope today's presentations will provide you with a deeper perspective into our operations, strategy, and commitment to stockholder value. Before we dive in, I'd like to take care of a couple of housekeeping items. First, the bathrooms are located down the hall. In case of an emergency, the nearest exit is just past the bathrooms down the hall to your left.
We want to make sure we provide plenty of time for you to ask questions, so we've set aside two blocks of time in our agenda for Q&A. We'll also have a mid-morning break around 9:30 for coffee and tea, and boxed lunches will be available at the conclusion of the presentation. Please feel free to stay and eat lunch with us. Please also be sure to pick up a bag with Reliance gifts on the table at the rear of the room on your way out. Included in the bag is a special coin created for this event commemorating Reliance's 80th year as a company and our 25th year listed on the NYSE. A term you will hear frequently today is FOC.
Reliance is made up of many individual companies that we collectively refer to as the Reliance family of companies, and we refer to the individual businesses as the FOCs. Our presenters here with me today represent the executive management team at Reliance Corporate, as well as leaders of three of our larger FOCs. This group has over 360 years of combined industry experience and has collectively been with Reliance for over 210 years. With me today from our corporate team is Jim Hoffman, President and Chief Executive Officer. Karla Lewis, Senior Executive Vice President and Chief Financial Officer. Bill Sales, Executive Vice President of Operations. Jeff Durham, Senior Vice President of Operations. Steve Cook, Senior Vice President of Operations. Mike Shanley, Senior Vice President of Operations, and Arthur Ajemian, Vice President and Corporate Controller. From our FOCs, we have Jim Desmond, President, Earle M. Jorgensen Company.
Tracy Drees, Chief Financial Officer, Precision Strip, and Mark Haight, President, InfraMetals. Each of our presenters will share a little more of their personal background with you when they present. As for me, I've been with Reliance since 2001, starting in our corporate accounting group, becoming Corporate Controller in 2004, and then taking on the new role of Vice President of Corporate Initiatives in 2012 to help support the continued growth of Reliance by developing and rolling out programs that leverage our size and buying power across the FOCs. Thank you again for joining us today. We're excited to get started. Please welcome our President and CEO, Jim Hoffman.
Thank you, Brenda. Morning, everyone. I'm Jim Hoffman. I'm really happy to be here with you today. Having been born and raised in Pittsburgh, I've been around the steel industry practically my whole life. I began my career with US Steel Corporation, where I spent over a decade, starting in their training program and then holding various sales positions. I joined the Earle M. Jorgensen Company, otherwise known as EMJ, where I spent the next 17 years. I started with EMJ in a sales position and moved into management roles running four different EMJ branches. I was the Executive Vice President and Chief Operating Officer of EMJ at the time it was acquired by Reliance in 2006. Two years later, I transferred to the Reliance corporate management team as a Senior Vice President of Operations.
In 2015, I was promoted to COO of Reliance, and I am honored to serve as Reliance's current President and Chief Executive Officer. We are fortunate to have all of our senior vice presidents of operations, whom we refer to as SVPs, here in the room today. I'd like to give you a general idea of their role. Each of our FOCs is generally managed by a president or general manager. Each of those folks reports into a Reliance corporate SVP, who not only provides strategic corporate oversight of the FOC, but more importantly, serves as a resource for their leadership team to develop and execute strategies for growth and to improve the day-to-day performance of the business. Oftentimes, this occurs when an SVP points the FOC leader in the direction of another FOC to share best practices.
At Reliance, we truly believe we have the best people in the industry, providing a wealth of knowledge and experience that is available to all of our FOCs. Our SVPs also maintain relationships with our mill partners and drive safety as our top core value. Reliance went public at $14.50 per share or $3.22 per share on a split-adjusted basis on September 14, 1994. Nearly 25 years and three stock splits later, we closed at a record high of $103 per share on July 26, resulting in a compound annual total return of approximately 15.6% over this 25-year period. Reliance has been profitable in every one of its 80 years, except for one year back in the 1970s. Our track record proves that our business model is resilient and that we can be profitable and maintain stable operating results throughout economic cycles.
Because we cannot control external factors such as end market demand and global metals pricing, we focus on the areas that we can control, which has produced positive earnings per share every year since our 1994 IPO, even during recessionary periods. Two of our most important operating metrics are gross profit margin and inventory management, which we believe directly influences each other. Our working capital needs are often impacted by external factors that we can't control, including overall end demand and metals pricing. However, our business model enables strong cash flow generation that is counter-cyclical throughout economic cycles. Even in times of reduced earnings, we can generate strong cash flow as we reduce our working capital. This is important, as our cash flow from operations is an important source of capital we use to fund our growth in activities and our longstanding history of stockholder return.
Our cash generation enables us to invest in our growth both organically and through acquisitions. Over the last five years, we've made CapEx investments totaling $919 million, far outpacing spending of other metal service center companies. Our capital expenditure budget in 2019 is a record $245 million, of which 50% is allocated to growth activities, as has been the case historically. They are typically related to new equipment and new facility construction or expansion based on where we see the most attractive growth opportunities. We've also invested an impressive $673 million in acquisitions over the last five years. Having completed 66 acquisitions since our 1994 IPO, M&A has been and remains a core element of our growth and diversification strategy. We expect to continue to selectively acquire well-run, profitable companies that meet our stringent criteria.
Our strong cash generation also supports our longstanding commitment to stockholder returns. We've paid regular quarterly cash dividends for 60 consecutive years. We have increased our dividend 26 times since our 1994 IPO, which equates to an increase of 9,800%. We've also repurchased $915 million worth of our common stock over the last five years as a part of our opportunistic stock repurchase strategy. Our strong financial profile enables us to execute on all of our capital allocation priorities, whether it be investing in organic growth, acquisitions, paying out dividends, or repurchasing shares of our common stock. We'll discuss our capital allocation strategy in greater detail later in today's presentation. This chart depicts Reliance's EBITDA margin in navy blue, along with the average EBITDA margins of industrial distribution companies in green. We're often grouped with metals companies from an investment standpoint.
However, as you can see from this slide, our EBITDA margin consistently tracks with higher multiple industrial distribution companies and has expanded beyond that group in recent years. Many characteristics of our business are similar to industrial distributors, including a strong and consistent margin profile, disciplined inventory management, diversified end market exposure and scale, and a strong balance sheet and liquidity. Our top line is subject to metals pricing risk. We have maintained our focus on those aspects of the business that we can control, enabling us to consistently generate profitable results throughout industry cycles. Moving metal safely is no easy task. We take the health and safety of our employees, customers, suppliers, and communities very seriously. Our executive team supports a company-wide safety program that requires adherence to policies, standard practices, and goals at each of our facilities.
We have a team of safety professionals that monitors compliance with regulatory requirements and safety best practices. This team also conducts regular safety assessments and training to continuously improve our safety practices within our operations and for our drivers who travel public roads. Since safety is one of our most important priorities, we remain strongly committed to reducing the rate of injuries. As a result of our consistent focus on safety, we saw a 6% year-over-year improvement in our incident rate in 2018, and our fleet accident rate has averaged approximately 0.75 over the last three years, significantly better than the national benchmark of 1.50. It will not stop until we get these numbers to zero.
That is why we implemented a company-wide peer-to-peer SMART Safety program back in 2017 with a focus on one family, one culture of SMART Safety. During the course of the presentations today, we will highlight our decentralized operating structure and differentiation amongst our FOCs. When it comes to safety, however, Reliance has one uncompromising culture. Earlier this year, we celebrate our 80th year in business. Reliance was founded in 1939 as a small mom-and-pop shop in Los Angeles. From our humble beginnings, we've grown to over 300 locations in 40 states and 13 countries outside the U.S., and are now the largest metal service center company in North America and recognized industry leader. In 2018, we reached record annual net sales of $11.5 billion, and we're number 275 on the Fortune 500.
As a service center, we provide value-added metals processing services and distribute a full line of over 100,000 metals products to more than 125,000 different customers across a broad range of industries. What is exactly does a metal service center do? Generally speaking, service centers purchase metal products from the steel or aluminum producers or mills, and process and distribute the metals according to the customer's specification in the quantity, size, and shape they need. The mills have minimum order sizes that are often larger than what is needed by our customers, and that may require specialized equipment to be able to handle these larger quantities of metal. In addition, for products such as many aluminum items, you must be recognized by the mill to be able to place an order.
Many of our end customers are generally not willing or able to make significant investments in the necessary technology and equipment to do things themselves. That is where we come in. We utilize specialized equipment to efficiently handle and process metals, which requires high volume production to achieve cost efficiencies. Our specialized processing services, or what we refer to as value-added processing, combined with our readily available inventory and reliable, timely delivery on our own fleet of trucks, helps our customers lower their overall costs, increase efficiencies, and improve the overall quality of the end product. Although we do sell directly to many large OEMs, the majority of our sales are to small machine shops and fabricators in small quantities with frequent deliveries, helping them efficiently manage their working capital and credit needs. At Reliance, customer service and quality are the cornerstones of our success.
We operate in a decentralized structure, putting the decision-making and resources close to the customer to enable quick turnaround, high-quality services that save our customers significant time, labor, and expense. Our customers value their local relationships with our service center. With more than 97% of our net sales to repeat customers, our average order size is small, at approximately $2,000 per order. Imagine how many orders we filled in 2018 to reach $11.5 million in sales. That's doing $11.5 billion, $2,000 at a time. Quick turnaround deliveries are difficult, but over 40% of our total orders are delivered within 24 hours of our customers placing the order. Our customers know they can rely on Reliance. They continue to ask us to do more and different services for them. As you'll hear in more detail today, we work hard to deliver on their requirements.
We remain committed to investing in innovative machinery and technology so we can keep doing more things for our customers. In 2018, we performed value-added processing on 49% of our orders, which is up significantly on our more historic level of 40%. We believe our increased sustainable gross profit margin range reflects our ability to earn a fair return on these investments. At Reliance, we are not dependent on any particular customer group or industry, making us less exposed to fluctuations in the financial or economic stability of a particular customer or industry. This is by design, and will remain a key element of our strategy as we continue to grow our company. As I mentioned, many of our customers are small job shops and fabricators who also have a diverse customer base and flexibility to serve multiple end markets, furthering Reliance's diversification.
The end market breakdown of our shipments depicted on this pie chart have been consistent for many years, even as we have grown, and reflects our best estimate as it is very difficult to track which specific end market our products are ultimately used in. Our customers operate in a wide array of end markets. At a high level, we estimate that general manufacturing, non-residential construction, and transportation each represents about one-third of our revenue dollars. We include infrastructure within non-residential construction. In the transportation category, a significant identifiable portion of the business is aerospace and defense, which is about 10% of our total sales dollars. We also include railcar, truck trailer, and shipbuilding within our transportation category.
General manufacturing includes everything else, such as energy, that being oil and natural gas, electronics, and semiconductor fabrication, and heavy equipment, which includes agriculture, construction, and mining equipment. We also serve the automotive industry, primarily through our toll processing operations, where we process metal for a fee without taking ownership of the metal. Toll processing fees represent about 4% of our total sales. We believe this diversification has been instrumental in our ability to produce industry-leading operating results on a consistent basis through all market cycles. We operate in a competitive, highly fragmented market, offering us significant opportunities for continued growth. We believe that our 2018 U.S. revenues accounted for only 4.7% of the entire 2018 U.S. metals wholesale industry, which includes metal service centers. The next four largest U.S. metal service centers accounted for just over 5% combined.
Our leading position in the marketplace enables us to benefit from significant economies of scale, including purchasing power with U.S. metals producers, which contributes to our industry-leading gross profit margins. However, because our customers value their local relationships and service, we maintain a small company feel at each of our service centers. Reliance's scale, as depicted in these charts, far exceed that of other metals service center companies. With our total 2018 net sales of $11.5 billion, nearly twice that of the next largest service center, and a record 2018 pre-tax income dollars of $850.6 million, nearly three times that of the next largest service center. Few metals service centers or value-added metals processors offer the wide geographic footprint that Reliance provides. Most of our customers are located within a 200-mile radius of a Reliance operation servicing them.
We believe that our long-term relationships with many of our customers significantly contributes to the success of our business. Providing prompt and reliable service is an important factor in maintaining and expanding these relationships. The proximity of our service centers to our customers helps us provide just-in-time delivery and increases the likelihood of repeat business. Our proprietary fleet of approximately 1,800 trucks allows us to service smaller order size and provide quick turnaround deliveries. We believe that maintaining our own fleet of trucks and drivers provides a competitive advantage, especially in the current environment where it is difficult and costly to contract with third-party carriers.
Now that I've given you a high-level overview of Reliance, we would like to take some time to try to give you a better understanding of Reliance's secret sauce and highlight some of the areas that we think differentiate us from other service centers and metals producers. You're going to hear from some of our key FOC leaders, and you will see for yourself the diversification and diversity within Reliance that all comes together to produce industry-leading financial results that allows us to reward our stockholders with continued growth and stockholder returns. Our decentralized operating model and investments in value-added processing are key areas we will discuss further in detail. Thank you very much. Now I'd like to turn it over to Mike Shanley.
Good morning. I'm Mike Shanley, and I am currently one of those SVPs that Jim described earlier. I started in the metals industry in 1978 with Liebovich Bros., a family-owned metal service center company headquartered in Rockford, Illinois. I've worked at various warehouse and sales positions before becoming a branch manager at several different Liebovich operations, then became president of Liebovich in 2009 when it had grown to six locations and $180 million in sales. Reliance acquired Liebovich in 1999 and has grown it to over $420 million in sales as of 2018. In 2015, I transitioned to the corporate team as an SVP with responsibility for multiple Reliance divisions. I believe my experience at an FOC for all those years, including going through the transition to ownership by Reliance, allows me to better mentor and guide our FOCs. Plus, I'm kind of hard to fool.
I've done most of their jobs for many years. To pick up where Jim left off, let's talk about what sets us apart from other metal service centers. First of all, we are highly diversified in terms of our products, our customers, and our geography. This was done deliberately in order to lessen the impact of cyclicality on our earnings and our cash flow. Early on, the Reliance founders recognized that because of the high cost of transporting metal, service center businesses frequently developed unique areas of expertise based on their specific group of products or end markets, ones that generally operate in their local geography. This focus on specialty service centers, ones that provide the highest levels of customer service in local markets, resulted in us building and maintaining a decentralized operating structure.
That puts the decision-making and resources close to the customer, and our customers place a very high value on their local relationships. We'll describe our decentralized model in more detail in a few minutes. Our emphasis on providing just-in-time inventory management, value-added processing, and small order sizes supports our model of focusing on higher margin business versus larger volume business. Our decentralized structure with locally situated processing equipment, along with our own delivery fleets, gives us a competitive advantage that allows us to provide best-in-class service levels, resulting in higher margin business. The founders of Reliance also believe strongly in an entrepreneurial environment, which we continue to foster. Our managers in the field have significant authority to run their day-to-day businesses and are compensated in a manner to drive consistently strong execution in line with our overall objectives. They are responsible for pricing discipline, inventory management, and expense control.
We've made significant investments in new state-of-the-art equipment for our operations, and they have learned to sell the value they provide to our customers to provide a reasonable return on those investments. We do not speculate, hedge, or buy large quantities of imported material. We conduct our business predominantly on a spot basis on both the buy and the sell side, meaning we buy what we need when we need it. The buy and sell decisions are made at the local level, where they have real-time visibility for their customers' needs. This helps us effectively manage working capital and mitigate the impact of volatile metal prices on our financial results. Finally, we continue to make significant investments in our business, primarily through value-added processing equipment, to better service our customers and to drive up our gross profit margins, resulting in higher earnings.
You'll hear much more about that later today. If you talk to any Reliance manager, you'll hear a lot about gross profit margin. Our persistent focus on maximizing our gross profit margin through providing the highest levels of customer service have really differentiated us from other metal service centers. This chart illustrates Reliance's gross profit margin in green, consistently exceeding the service center peer group in yellow. We're also showing the mills in red as we are often grouped with metals producers from an investment standpoint. That's primarily because there aren't very many publicly traded metal service centers to compare us to. However, as you can see from this slide, our gross profit margins are both much higher and more consistent than both metals producers and service centers.
We believe our model of diversification, smaller order size, and growing value-added processing, along with our focus on providing value and service to our customers, is the key to our strong gross profit margins. As Jim mentioned earlier, we have begun to compare ourselves to the industrial distributors peer group, that's the blue line, as many characteristics of our businesses are similar. When we talk about a decentralized model, what does that really mean at Reliance? As you will learn from our FOCs presenting here today, there is not one model at Reliance. In fact, there are many models. In addition to the diversity of products, end markets, and geography, our FOCs are structured differently. They go to market differently. They price differently, they buy differently. Our FOC managers make their day-to-day transactional decisions with limited oversight from corporate.
We do drive them to make good decisions by keeping it simple with consistent KPIs and a compensation structure that is heavily weighted based on how they perform. Jeff will go into more detail on our key performance indicators and compensation in a few minutes. At Reliance, we have always said that we make our money on the sell side, not the buy side. That is, we strive to provide the highest levels of service to customers who are willing to pay for it. How do we do that? We believe our decentralized model is the key factor. It requires a higher level of investment, but we believe it is important to have all the components of customer service close to the customer. We couldn't provide next-day delivery to our customers if we didn't have the inventory and the processing equipment near them.
This also gives our local teams the ability to disrupt the processing schedule for hot orders if needed. With our own fleet of trucks, we can meet the quick delivery needs of our customers and make that special run if it's required. Typically, our trucks will stop at eight to 12 different runs per run. Most of our competitors focus on one or two orders per truck and will often use third-party carriers, resulting in much less flexibility. We also need the right people. Each FOC makes their own hiring decisions and determines the type and level of people needed to support and grow their existing businesses. We believe we have more salespeople than most of our competitors. Our outside salespeople are responsible for generating business by establishing relationships with existing and prospective customers. They're on the road every day calling on those customers.
With our focus on smaller customers, we stop at many businesses that most of our competitors drive by. They're not interested in dealing with the little guy and their small order sizes. Our inside salespeople are responsible for pricing the orders. Each operation has their own version of pricing, but generally, there's an established price book, meaning a suggested price for the product. This price is usually based on a margin over current replacement cost of material, along with fees for delivery, processing, any special packaging needs, or any other unique requirements for that customer. While we provide guidance for pricing, our salespeople evaluate each order independently to establish the appropriate price. This decentralized model also allows our salespeople and management to visit our customers more often and become a true partner in supporting them.
Because we focus on the smaller privately owned companies, we often work directly with the owner of that company. This allows us the opportunity to discuss how best to enhance the growth and profitability of their business, and it creates a bond with that customer that, in turn, supports our own growth and profitability. Another interesting element of our decentralized structure is that we often have multiple Reliance FOCs operating in a common geographic area. Our model of specialty service centers, where each has a targeted area of focus and different characteristics of how they go to market, allows each to be successful. This also creates opportunities to collaborate to better support a common customer and share best practices. We treat our customers fairly. We do believe that we deserve a superior price because of the service levels we provide.
Most of our orders are spot orders with limited to no backlog. We strive to have the shortest lead times in the industry, which again is supported by having the equipment and inventory local and in the control of the local management team. Customers value just-in-time deliveries, and short lead times garner a premium. Our local teams need to anticipate the inventory needs of their customers. That's why we also make those buying decisions locally and on a spot basis. This avoids contractual volume commitments that may result in us buying too much of the wrong inventory. There's a good reason why we place the decision-making of what and when to buy in the hands of our local management and their local purchasing resources. You see, they have local intelligence. They know what's happening in their markets with their customers, and it's critical in making effective buying decisions.
This also supports making local credit decisions. Although purchase orders are placed by our individual operations, we do maintain Reliance programs with the key domestic mills and develop relationships at the corporate level. The other SVPs and I spend a large portion of our time maintaining these relationships and ensuring that our FOCs are receiving the appropriate Reliance treatment. While we do not beat up the mills for lower prices than everyone else, we do expect to be at the lowest market price, given the volumes of metal we purchase and our consistent loyalty to buying domestic. In addition to effective working capital management fueling our strong cash flow, we see a direct correlation between our inventory management and our gross profit margin.
If we maintain efficient inventory levels, our salespeople and managers in the field are more selective, only parting with the inventory when they attain the appropriate level of gross profit margin. Conversely, if you have too much inventory, the tendency is to take lower margin orders just to move it off the shelf. By partnering with the domestic mills, we are better able to manage our inventory, as they have the shorter lead times than if buying offshore. Also, the more consistent our purchases are from the mills, the healthier the overall metals industry becomes, which supports higher metals pricing. In summary, we believe that providing a high-touch service model for our customers on a decentralized local level with a focus on profitability has resulted in an effective model for Reliance. Thank you. Next, you'll hear from Jeff Durham.
Good morning. I'm Jeff Durham, and I'm an SVP like Mike with a somewhat similar history. I started in the metals industry with EMJ in 1985 and moved to the Reliance company earlier this year. While at EMJ, I held various sales and sales management positions, mainly in the Tulsa and Dallas areas, where I became very familiar with the energy market. Reliance acquired EMJ in 2006. In 2008, when one of EMJ's large energy services companies asked us to open a facility in Malaysia, I volunteered to open that greenfield operation there. I spent three years in Malaysia and installed a strong local management team. I returned to Dallas, where I became district general manager responsible for multiple EMJ locations. In 2014, I took on an EMJ corporate role as vice president of merchandising. Merchandising is an EMJ term.
All of the other FOCs refer to it as purchasing. In that role, I gained a greater perspective of the importance of effective inventory management and built strong relationships with our mills. The combination of all these experiences support my SVP role, and I'm learning a significant amount as I spend time with other FOCs and begin to appreciate the decentralization and differentiation within Reliance. Picking up on Mike's comments, I'm going to describe how Reliance consistently earns such strong and consistent results given the structure just described. For us, it's actually pretty simple. At least we try to keep this simple as we can. What our folks do in the field every day is very difficult, and we try not to overcomplicate what we ask of them. We have six core key performance indicators that do not change.
We may adjust our expectations of the levels that should be achieved given our investments made in the FOC or other factors, but we take a long-term view and don't want to confuse our people with changing objectives. Our core KPIs are as follows. Sales growth. We expect our FOCs to grow their businesses. This doesn't always happen by just growing tons, since we're more focused on growing profits than volume. It's possible to sell less and make more pre-tax income. We want the focus to be on taking higher margin business where we're growing the value we provide to our customers. Make no mistake, we do like to grow tons, but only if we can do so profitably. Gross profit. At Reliance, we focus on margin. We know the mills and some other service centers often talk about gross profit per ton.
Because of our highly variable cost structure, product diversification, and metals price volatility, we believe gross profit margin is a better fit for our model, and it certainly works for us. Expenses and headcount. Each of our managers must control expenses. We believe we are generally able to run lean because of the dedication of our employees and our focus on profit-based incentive compensation. Arthur's going to talk more about our expense structure later, but our people costs are the largest component of our expenses in a key area we proactively address when we see changes in demand trends in our businesses. Inventory and accounts receivable are the two largest components of working capital. We monitor inventory turn and days sales outstanding or DSO.
We have different inventory goals for each of our FOCs depending on their product mix and end market with an overall company-wide goal of 4.7 turns based on tons. At the FOC level, our turn goals could vary from 2 turns to 10 turns. Our DSO is generally about 41 to 42 days, but can vary a bit across the FOCs due to customer base or their geography. Pre-tax income. It all comes down to this as our key measure. All of the above KPIs flow to pre-tax income. Within Reliance, we act as the bank to the FOCs, giving them each a revolving credit line, and we charge interest on their outstanding balance. Poor management of working capital will reduce the pre-tax as a consequence of higher interest expense.
They are also charged interest on capital expenditures, so they need to consider the interest cost when requesting additional equipment or new facilities. At the FOC level, the range of gross profit margin is much more significant than the pre-tax income line. Some of our more commodity-focused FOCs might be on the lower end of our gross profit margins, but also have lower expenses. Our highest gross profit margin FOCs often have higher expenses because of the higher level of value-added processing they perform, increased quality, or other requirements specific to their customer base. All of this flows down to a more common pre-tax margin across the FOCs. The Senior Vice Presidents are responsible for monitoring each of our assigned FOCs and reviewing each of the KPIs at least monthly to see how they're performing. As mentioned, there are different goals at each KPI level for each FOC.
Given our long-term focus and the significant experience of our corporate management team, we're able to apply meaningful judgment to understand when a trend is within or outside of our control, and when FOC management team needs support. When appropriate, we will leverage ourselves and other FOC resources to get more involved with local management. Effectively managing the combination of these KPIs drives our industry-leading earnings and cash flows. A key driver of performance and motivation of our managers in the field is our incentive structure. Although there are slight variations, in general, our FOC managers are paid an incentive based upon their FIFO pre-tax income return on manageable assets above a threshold amount. The pre-tax income return threshold can vary based on the characteristics and expectations we have of the individual FOC that approximates our capital return hurdles for acquisitions and organic growth investments.
This is the cash bonus amount that is generally paid annually. We believe this formula takes into account all of our KPIs and drives behavior to align with Reliance company-wide objectives. These calculations are tailored to the individual manager's responsibilities. For instance, a manager with responsibility for a single branch is measured on the results of that location. A district manager with responsibility for five branches is measured on the result of the group of five branches, and so on. Our salespeople are also in highly incentivized positions. We try to drive behavior towards maximizing gross profit. The formulas vary, but they're generally based on gross profit dollars generated and growth in gross profit dollars. First off, we do not pay based on volume. That goes against our philosophy of going after the right orders. Secondly, a salesperson cannot just stay status quo.
They have to look for new opportunities to generate gross profit. We have other incentives that are focused on specific departments or groups. Purchasing managers may be incentivized on inventory turn, credit managers on DSO, and so forth. A few of our FOCs offer incentives to all employees. You'll hear more about the various incentive programs from EMJ, InfraMetals, and Precision Strip shortly. We believe our performance-based compensation structures contribute to our strong, consistent, and growing financial results. Particularly, we think they also appropriately motivate our people and support our consistent and growing gross profit margins. Both Mike and I have described how different our FOCs are from each other, and you'll hear more as we move through the morning, and that we have varying targets of gross profit margin by FOC. However, our consolidated gross profit margin has remained extremely steady over time.
We believe a significant factor in this is the strength of our people and the talent we have throughout our organization. People who like to work in an entrepreneurial environment are typically very competitive. To use this competitiveness in a positive way, we hold two meetings each year where we bring the leadership of each of our FOCs together to discuss best practices and other relevant topics. The most effective part of the meeting is when we put up each FOC's key performance indicators and rank them from top to bottom. It's not fun to be near the bottom of any of these rankings.
Trust me, if you are, you're taking notes of which FOCs are the top performers, and you seek those managers out at break or over cocktails that night to find out what they're doing and how you can improve yourself and move up the rankings. With the abundant talent and resources we have throughout the company, these meetings provide excellent opportunities for our leaders to network and learn from each other. They build strong relationships over time and push this down throughout their organizations, sending different groups of their teams to meet and learn from one another. This slide shows our historical gross profit margin range of 25%-27%. Our current estimated sustainable range has risen to 27%-29%. After the EMJ presentation and our break, Bill and Steve are going to share how we've accomplished this and why we believe it's sustainable.
I'll now turn it over to Jim Desmond, the President of EMJ.
Good morning. My name is Jim Desmond. I'm excited to be here to tell you about EMJ. Excuse me. Earle M. Jorgensen Company, known as EMJ. I began my career in the metals industry in 1981 when I joined EMJ's training program. I worked in various sales and management positions until becoming branch manager in 1993. I then moved several times to run larger EMJ operations, often at locations that need improvement. In 2009, I became Vice President and COO with operational responsibilities for all EMJ locations. In 2011, I was promoted to my current position, which is President and COO. EMJ was founded in 1921 in Los Angeles, just down the street where Reliance was founded 18 years later. EMJ has a rich culture and is now comprised of over 42 locations, spanning 27 states and three countries with over 1,300 employees with sales of $1.7 billion in 2018.
EMJ is a leading supplier of specialty long products with a great reputation for customer service and a very diversified customer base with an average order size of only $1,000. EMJ went public in 2005 and was acquired by Reliance in April of 2006. This was Reliance's first acquisition of a public company, and the only time that it has used stock as consideration, with 50% of the purchase price paid in Reliance stock. Since 2006, EMJ has grown its profitability more than its volume by increasing the amount and level of services provided to its customers, with focus on increased value-added processing through significant capital expenditures funded by Reliance to upgrade and add processing equipment. Consistent with Reliance, EMJ puts safety number one. We have improved our incident rating by almost 70% since being acquired by Reliance.
Although safety has always been important to us, the programs and resources Reliance provides to its FOCs have been instrumental in this improvement. At EMJ, everyone is held accountable for safety, including me. What is the advantage that sets us apart from other service centers and makes us unique within Reliance? There are several elements that I'll try to briefly describe, then discuss in more details as I move through the presentation. First off, we have a wide geographical footprint that supports our transactional business of providing small orders to local customers, which is the majority of our shipments. However, our footprint allows us to serve a select larger national customers. We have a broad mix of product that allows us to sell into a wide variety of end markets that I will discuss in more details in the next two slides.
We have a hub-and-spoke approach with an automated state-of-the-art storage and retrieval system that allows us to optimize our inventory while providing quick delivery across a large distribution network to obtain industry-leading gross profit margins. In the spirit of putting resources and decisions close to the customer, we have processing equipment and a fleet of trucks at all our facilities. EMJ has a strong culture built by longtime dedicated employees. We are a sales and service organization and have developed very deep relationships with our customers as well as our suppliers. Something that is very unique is our on-time or free delivery guarantee. No other service center, including the Reliance FOC, have adopted this practice, but we believe it is a factor that drives our high customer service levels.
Combining all these attributes gives EMJ a distinct advantage in the markets and allows us the selective choosing our customers and the orders we take. As you can see here, our focus is on bar and tube across all different commodities, with the largest concentration in carbon, which makes up 40% of our total sales dollars. We sell these products into a wide range of end markets, with our customers producing anything from recreational vehicles to industrial tractors. Alloy bar is 27% of our sales. Most of this product is sold into the energy market, where it is used primarily for fracking, drilling, and oil and gas recovery. We're also a large distributor in stainless and aluminum bar and tube. Our customers often combine their purchases of stainless and aluminum products, making EMJ a desirable supplier as we carry a broad mix of inventory to meet their needs.
These products are often used in critical operations such as aerospace and medical due to specific product characteristics such as corrosion resistance, high strength, and light weight. Although not a significant percentage of our overall sales dollars, one of our core products is processed plate across all commodities. We focus on selling smaller quantities of custom-to-order processed plate with quick turnaround. In many locations, we purchase our plate for stock from other FOCs, supporting Reliance company-wide profitability. In line with our product mix that I just described, our largest end market is machine tools with our customers manufacturing such items as industrial sprayers, CNC machines, and plastic injection equipment. Another significant market for us is construction of farm equipment, especially in the Midwest, where we sell into both OEMs and their subcontractors who manufacture large equipment such as tractors, combines, and balers.
Many of our locations sell into the oil and gas market, with the biggest concentration of our branches in Texas, Oklahoma, and Louisiana. We sell into several other end markets with very diverse customer base that helps lessen the effects of swings in sales and earnings. Our location in Schaumburg, Illinois, is the heart of EMJ and houses our one-of-a-kind KASTO inventory storage and retrieval system. This allows us to support our 40-plus locations with inventory while providing the efficiencies of bulk inventory purchasing. I'm going to play a video in the background as I describe this. Our KASTO system is the largest automated storage system ever installed in a metal service center handling bars and tubes. This system, 10 stories tall with 20,000 unique inventory storage locations. The sheer size and cost involved does not make this feasible solution for others.
We installed our system in 2004 with a total investment of approximately $40 million. Our KASTO system automates both the receiving and shipping of material. On the receiving side, we unload material from the mill, which the system automatically weighs, assigns a location, and transports to assigned storage pans. The material is available for immediate sale with no additional labor involved. This system also delivers efficiency on the shipping side. Once our salesperson enters an order in the system, specialized software automatically identifies the location holding material, retrieves the material, then bundles the quantity needed to fill the order, and stages it for shipping. The orders are filled and staged in accordance with a shipping schedule generated by another specialized software program enable us to ship 160 trucks a day out of Schaumburg.
Again, all this occurs with no labor involved from the time the salesperson enters the order until our people load the material onto the outbound truck. This unique system provides optimal material storage, fast and accurate inventory visibility, and low-cost handling, and is yet another competitive advantage of EMJ. By strategically locating the KASTO system in Schaumburg, we're able to receive large quantities of metal from the mills, which is advantageous to them and optimizes our inventory cost. The cost of automation and low cost of filling orders, including transfer orders, to over 40-plus branches, we operate a hub-and-spoke distribution system. Each EMJ location stocks material that is critical to their local customers and markets. Each branch receives material direct from the mill as well as trucks from Schaumburg, with many branches receiving trucks daily, maximizing our inventory turns and reducing costs.
This also allows each branch to carry a wide variety of inventory with both common and uncommon items to meet customers' needs without carrying excess or obsolete inventory. EMJ offers an on-time or free delivery guarantee to our customers. We are not aware of any other service center that offers this guarantee. The amount of free material that we provide to our customers has been very minimal. While this provides us with another advantage over competitors, in the eyes of our customers, we believe that the true benefit to both EMJ and our customers is the focus on providing on-time delivery 100% of the time. Also located in Schaumburg is our centralized purchasing group, or merchandising, as we call them. Because of the hub-and-spoke system I just described, we centralize purchasing at EMJ to drive efficiencies in both our inventory management and our expenses.
Once again, taking advantage of automation, we developed a custom inventory tracking system that allows our merchandising group to support the inventory needs for our 40-plus branches with only 20 people. We believe our centralized purchasing structure provides better control of our inventory and leverages our volume spending. We buy primarily from U.S. mills. However, certain specialty items are not produced in the U.S., so we purchase these items offshore. Our merchandising group spends significant time with our strategic mill suppliers building relationships and developing programs that improve our inventory terms. Given local nature of our business, we have developed pricing matrix unique to each branch, as we believe this is critical to being competitive with the market while maximizing our gross profit margin. The matrix assigns an item ranking to each inventory item and varies by branch based on the dynamics of the local market.
Our item ranking from A to F, with A items being the most commonly stocked by the local competition and F being the most uncommon. All pricing starts with base price of metal from the pricing matrix and then is built up with adders based on unique processing, packaging, and delivery requirements. Our system provides pricing guidance for each of these items and also makes adjustments for order quantities and verifies gross profit minimums are met. However, our salespeople are incentivized to maximize gross profit margin while at the same time providing a fair price to our customer for the value they are receiving. In regards to incentive, everyone in our management team and all our salespeople have a portion of their total compensation tied to performance. Managers are incentivized on return on manageable assets and are paid yearly, as Mike and Jeff have discussed earlier.
Our inside and outside salespeople are incentivized on gross profit, both on gross profit dollars generated and growth in gross profit dollars. To create a team environment, 30% of the incentives for our inside salespeople are pooled, and the balance is based on their individual performance. Because our outside sales have defined territories, each of their incentive is at 100% on an individual basis. EMJ has over 400 pieces of value-added processing machinery spread across our 40-plus locations. This equipment was requested by the individual branches based on their specific customer needs. With a strategy to be more than a steel and aluminum distributor and more of a customer-focused, just-in-time, steel and aluminum distributor and a partner, each branch works with their customers looking for opportunities to provide profitable value-added services that are in line with our core products.
With all of this equipment, we're able to provide a vast offering of value-added services to our customers. Because of the significant investments we have made in recent years in new state-of-the-art processing equipment, I would like to briefly highlight a few of our specialty processing services. At EMJ and throughout Reliance, we have added two lasers. These machines can make complex cuts at high speed with tight tolerances. These machines are expensive but generate high returns as customers realize cost savings by eliminating labor-intense in-house processing. Given our products mix. Next slide, please. There we go. Sorry. Given our product mix, the majority of the processing we perform involves cutting. Because of high cutting speeds and tight tolerances on new equipment far surpass older technology, we have been adding many new saws.
Several of our locations have high-production saws, allowing customers to call and have large quantities of cut product delivered next day. Some of these saws have automated loaders and robotic packaging, allowing us to achieve significant cost savings while also increasing our throughput. Here is an example of a newer technology that provide tighter tolerances for our customers but is cutting plate instead of bar and tube. When cutting steel, this equipment eliminates heat-affected zones that results in cost savings for our customers as they no longer need to anneal hardened edges, saving time, money, and tool life. The aluminum router is unique to our industry and to EMJ. We have worked with the manufacturer to develop two aluminum routers that cut contoured shapes to tight tolerances. Once again, this allows our customer to eliminate in-house machining and lowers their total cost.
Boring and trepanning are processes that start with a solid bar and either bores or trepans a hole through the entire length. This process typically required by customers who have a need for heavy wall, long length tube, which cannot be produced by the mills. A significant amount of this product is consumed in the oil market. Now that I have described some of our recent CapEx investments, let's review our performance. Over the last five years, EMJ has improved its gross profit margin by 460 basis points. Improved its return on investment by 320 basis points. Historically, EMJ's gross profit has been at consistently high levels given our specialty product line and focus on customer service and next-day delivery.
However, with the focus on pricing and the implementation of item ranking, along with our ability to provide increased levels of value-added processing, we have been able to increase our gross profit margin to even higher levels. We're very proud of our returns. You might note here, though, the ROI dropped in 2015 and 2016, primarily due to the exposure to the energy market. However, our higher levels of value-added processing allowed us to recover more quickly from this downturn than in prior cycles. In addition to continued growth through increased value-added processing, EMJ can add to our distribution network by opening low-cost satellite branches to further penetrate into the local markets. Pictured here is an example of our Charlotte branch that supports multiple satellite locations.
With our strategy of being more than a distributor of metal to our customers and our long history of providing highest levels of service, we will continue to build our partnerships with our customers, looking for opportunities to provide them with more value, while at the same time continuing to grow EMJ's profitability. Thank you for your time and attention today. I will open up the floor for questions right now, and we will bring the mic over to you so that those participating at the webcast can hear your questions as well.
Good morning. Timna Tanners, Bank of America, Merrill Lynch. I feel like the last couple presentations, as you said, were about the secret sauce. I just wondered if you could elaborate a little bit more. Since your last Investor Day, you exceeded your targets on gross margin. Why do you think that is? What do you think are the risks going forward to have kept you from raising the target even further? Regarding your other targets enumerated back, what, six years ago, why do you think they haven't been as successful? Thanks.
Morning, Timna. As far as how we've been able to raise those gross profit margins, I think we're trying to get that message across. We're going to spend a little more time on it after the break also. To get up to the new, higher sustainable level, we really believe that the value-added processing, doing more of that, has helped us elevate our gross profit margins. In particular, Arthur will dive into that a little bit more later to better explain why we're up there. As far as risk on the gross profit margins, we feel very comfortable with the 27%-29% sustainable range that we've communicated. We have had some favorable metal pricing environments, particularly in 2018, that allowed us to exceed that. We're always a little conservative, I think, we're comfortable in that 27%-29% range.
We will continue through further investment to try to drive that higher. We do want to be very confident that we can maintain that at those higher levels before we communicate that going forward.
Hi, Timna. How are you? Just to add on to what Karla said, that's our goal. We went from 40% to 49% value added. If we can get that up, and that's what we're trying to do, if we can get that up into a much higher level, our margins will go up with it. You know us, we're just conservative. We're not going to tell you we can sustain it until we actually can. Stay tuned. We're working on it.
I'm sorry, because I know, Timna, you're very good about reminding us of the targets that we did put out there six years ago. We did put more than the gross profit margin out there. We've done really well on the gross profit margin. When we gave those targets, if you recall, we talked about, that was in 2013, and we said that the numbers were based upon getting back to a more normalized environment, which at the time, we compared that to volume level, shipment levels, similar to the 2007 year, and pricing generally there. I think pricing, as I mentioned, has come back, but the volumes have not. As Jim showed in his presentation, non-residential construction's our biggest end market. We've seen good, positive business in non-res, but certainly not at 2007 levels. MSCI industry shipments continue to be down about 30% from pre-recession levels.
That's really what we would need to get there. I think we're very proud that with that gross profit margin improvement, we've seen, we believe, a very significant improvement in our pre-tax income returns, much more than the volume that we've picked up since then.
Chris Terry from Deutsche Bank. Just in terms of that growth in the value-added processing from 40 to 49, maybe you'll come to this in the latter sessions, but can you talk a little bit about conceptually how high you could get that, and then also just what the difference in margins are for value-added processing versus non-value adding, just to think about how we tie that back to the gross profit margin. Thanks.
Well, I can address the first part. I'm not sure how high it can go. It just depends on what our customers ask us to do. We don't.
Just speculate and say, "Well, why don't we put in this and put in that, and hopefully somebody will come?" We listen to our customers. They ask us, "Can you do this step? Can you do this step?" Our salespeople are trained to go in, to not just call in the purchasing agent. They try to get back in the plant to find pieces and parts, and try to offer solutions, and try to take work out of our customers' plants. They'll guide us there. I can't speculate on how high I could go. North of 49, though.
Yeah, I think as far as a little more visibility into the gross profit margins, Arthur is going to talk about that a little bit later on and give you guys a little more visibility into the differences on some of the processed items.
Hi, Alex Hacking from Citi. Thanks for the presentation. Just following up on the value add. I guess this is kind of a basic question, but when you grow the share in value add, conceptually, is that market share that you're taking from your competitors, or is it more about talking to your customers and them not making investments? Is that how conceptually that business is grown?
Right. Yeah. That's exactly what it is. We have competitors. We don't really focus on what they're doing. We just listen to what our customer base says. Basically, we're taking work out of our customers' shops. Some of this equipment that some of the folks have talked about, extremely expensive. You're going to invest $2.5 million on a tube laser and put it in your building, and it's about the size of this room. It takes up space. Extremely expensive. If you can't run that constantly, at least two shifts a day, then you really can't get your return on that. We'll go in and talk to them. We do. We have that equipment. We have the wherewithal to buy it. The best of the technology out there.
We'll put it in, we'll do the work for them, and they don't mind paying more for that. That's where that value add is coming from.
Okay, thanks. Just a follow-up question. Maybe you can address this later, but could you talk a little bit about the role of technology in what you're doing and how that's changed, in terms of maybe inventory management, in terms of price discovery for metals, and how you see that evolving over the next several years? Thanks.
I'll take a stab at it from two different standpoints. We've been talking about value-added equipment. The equipment today, the technology involved in the equipment itself over just the last five years. If you'd have bought a laser maybe just five years ago, the ones they have now are nine times faster. Expensive, but faster, and they're tighter tolerances. The technology and the equipment, the folks that we do business with, we buy their equipment. They spend a lot of money in R&D trying to get to the next level. From a technology standpoint, we stay very close to our machine builders and what have you. I think Jim or somebody was talking about we actually helped them design a piece of equipment for us. That part.
The other technology that we're involved in, we have a big IT department, which our CIO is in the room here somewhere. They work diligently to keep us running and develop new systems and what have you, that'll take us into the future. That is a core focus of what we're trying to accomplish because we think that helped us get us where we are today, and we have no intention of dropping back.
Good morning. Michael Bugnana, TLF. You can just step back and share your thoughts sort of about the end market and your customers, because the world's changed and the business changed, not on a daily basis, not on a short-term basis. To have the volumes be down 30% since 2007 is a big deal. If we have another recession at some point in the future
Help us understand. You are a great company, and you continue to improve. The end markets are changing, the customer is changing. How are you thinking about this, and what does it mean in terms of the next cycle, if it ever comes?
Yeah. Well, this is just my opinion. It's hard to figure it out. We look at that. The pie is smaller. It is smaller. Are we losing share? No, we don't think we're losing share. In fact, we think we're gaining profitable share, which that's kind of what we talk about. If you look at the manufacturing in North America, where we are most of the time, that has gone away in some instances. Now some is coming back. It just depends on what the Donald Trump's able to do in a short-term basis and whoever's president in the future. There are policies and what have you that could help us, and we're counting on those, and we're hopefully supporting those. There's always a dynamic in this industry. I've been in business for 39 years, and it's changed a lot over the 39, and it continues to do so.
Years and years ago, when I first got into the business, mills owned service centers. That doesn't work out very well. They're going to try it again. They always try it again. The European market, that's the way their model is. The producers of the product also own service centers. It really gets hazy of where the share is.
We've got great partners and suppliers who have more people out on the road right now calling on customers. Maybe they're taking some of the orders that we've gotten in the past. That's a cycle. We'll get through that as well. It's really hard to determine that. I think the three things I talked about probably have something to do with it. Again, as I said in my presentation, we really don't focus on things we can't control, and we can't control that. All we can control is what we can control, and that's what we're going to focus on.
Thank you so much.
All right. I think we'll take a break right now and start up again probably about 9:30 A.M., 9:35 A.M. Thank you.
Okay. Welcome back. Hello, I'm Bill Sales. I'm Executive Vice President of Operations, operating in a similar role to the other operational SVPs. However, my background is slightly different. I worked with Kaiser Aluminum, a U.S. aluminum mill, for 16 years, and Reliance was my largest account. In 1997, as Reliance was expanding and entering into the aerospace market in a bigger way, they asked me to join the company to provide some expertise and experience in these highly technical areas. Since joining Reliance, I've primarily worked with the aluminum and stainless FOCs, as well as maintained relationships with our mill partners for those products. More recently, I've also been working closely with some of our new FOCs that provide welding and laser services.
I believe my mill experience, including technical expertise regarding certain products and end markets, has added to the Reliance team and provided strong support for our FOCs. Let me pick up where Jeff left off just before the EMJ presentation. Over the years, Reliance has maintained a fairly consistent gross profit margin within a range of approximately 200 basis points. We generally fluctuate within that range due to metals pricing volatility, as well as changes in overall end demand. Metals pricing is impacted by many factors, including global capacity, the level of imports coming into the U.S., and overall end demand strength. While we generally pass changes in our metal cost on to our customers, we tend to operate in the higher end of our gross profit margin range when prices are increasing and demand is healthy, and toward the lower end when pricing and/or demand soften.
One thing we've learned in our 80-year history is that metal prices go up and they go down, and end demand also goes up and down, especially given the cyclicality of many of the markets that consume metal. However, our product and end market diversification, along with our focus on smaller orders with quick turnaround times and high levels of services, reduces our gross profit margin volatility. Because of this, we maintain a relatively consistent margin through all cycles and do not overreact to fluctuations in pricing or demand. In early 2017, we increased our estimated sustainable gross profit margin range by 200 basis points from our historical range of 25%-27% to a range of 27%-29%. What gave us the confidence to do this?
Primarily, the increased levels of value-added processing that we now perform, which we attribute to our significant capital expenditure investments in recent years. As Jim noted earlier, we spent just under $1 billion on CapEx over the past five years, and the majority of this spend was for growth-related investments in value-added processing equipment. Why the increase in spending? Mainly because of the opportunities identified to do more for our customers. Mike and Jeff talked about our decentralized structure and our significant sales force that resides close to our customers. Our salespeople consult with our customers to understand their pain points and offer solutions that also provide cost-effective services. As an example, a customer might have an outdated shear that they operate 10 hours a week. This creates significant in-house expense for our customer. One, the shear is occupying valuable space that could be used for other purposes.
2, the machine requires a trained operator, and these types of people are increasingly difficult to find in today's environment. 3, the machine is outdated, so maintenance costs are high, and purchasing a new one is not cost-effective given the limited use. 4, additional steps are often required to finish the product coming off the older shear. Our salesperson works with the customer to understand the true cost of performing the process in-house and demonstrates, although Reliance's price for a processed part initially sounds high, it's much less expensive than the customer's current in-house cost. Reliance has invested in state-of-the-art equipment that can produce a higher quality part that the customer no longer needs to finish. Our advanced machines run one to three shifts every day.
We have trained machine operators that are experts on the equipment, all of which unlocks value for our customer. Another factor contributing to our increased CapEx spend is the significant advancements in the technology of processing equipment available today compared to 10 or even five years ago. It used to be commonplace to run a piece of equipment for 20-plus years. Some of our competitors still do that. However, Reliance has the capital to invest in efficient, state-of-the-art technology to provide higher levels of service and quality to our customers. We've been doing exactly that, further separating ourselves from other metal service centers and value-added metal processors. Given our significant investments in value-added processing equipment, near the end of 2014, we challenged ourselves to understand the value that we were now providing to our customers.
This triggered an educational drive with our sales staff and management to raise our expectations of appropriate levels of return on investment that has resulted in progressive increases in our gross profit margin. In many cases, customers have moved more business to us because of the advanced equipment that we have. Not just more volume, but more types of processing. With our increased value-added processing capabilities and a solid understanding of the value we are providing to our customers, we are confident in our ability to maintain the higher gross profit margin range of 27%-29%. Back to CapEx. Our annual spend for maintenance CapEx is about $90 million-$100 million, which we can scale back if needed.
It's somewhat difficult to differentiate between maintenance and growth CapEx, as replacing a piece of equipment, such as a saw, typically results in us being able to cut material faster and hold tighter tolerances. It's somewhat unclear whether it qualifies as maintenance or growth. Our strong cash flows that Jim discussed earlier allows us to reinvest in the growth of our company and take advantage of the opportunities we see in the market, while also executing in all other areas of capital allocation and maintaining a strong financial profile. This is a huge advantage for our operators in the field and allows them to grow their business and outpace their competitors. On this chart, you see the increasing levels of cash flow as we've grown the company and also higher levels of capital expenditures. Our cash flow from operations has consistently exceeded our CapEx spend over the years.
Here's a recap of our last five years of capital expenditures, including our record spend of $240 million in 2018 and an even higher 2019 budget of $245 million. The slide also highlights the steady increase in the % of orders with processing performed, which is attributable to our investments in value-added processing equipment. You will also note our gross profit margin in recent years is in that new, higher range. You're hearing from three of our FOCs today, and each has benefited from significant CapEx spending in recent years to fuel their growth. However, it's important to note that our average annual spend of $160 million-$200 million is spread across all of our FOCs in each of our more than 300-plus locations and includes hundreds of individual line items.
We have very few single CapEx items that exceed $2 million, though there are some exceptions, such as purchasing a new building, expanding an existing building, or purchasing or installing a new slitting or blanking line, which might range anywhere from $5 million-$15 million. We build our CapEx budget from the ground up each year. For growth item, the salespeople identify opportunities and work through those with their local branch management and FOC President. If they agree this is a good opportunity and they can achieve an acceptable return on investment, they submit this in their annual CapEx budget request to their SVP. If the SVP agrees and our corporate accounting group confirms the payback analysis, the request is included in the first round of the CapEx budget.
As a group, the SVPs review the budget with the CEO. Once he has signed off, the CapEx budget is submitted to the Reliance board for approval. However, as opportunities often arise throughout the year, we retain the flexibility to approve additional projects during the year if we believe the potential returns are attractive. Although we have strong cash flows, our FOCs have to compete for CapEx dollars and convince our management team why they deserve the money over another FOC and why their opportunity is a better use of Reliance's cash than other capital allocation activities. I'm going to highlight a few investments we've made in recent years in some high-growth end markets. Given the strong backlog and build rates in aerospace, we've expanded internationally, opening and expanding new facilities in France and Turkey. Earlier this year, we began operating in India.
We also have continued to invest in value-added processing equipment to better partner with customers who require high levels of machining. We opened a new 64,000 square foot machining center in Spokane, Washington in 2015, and have also expanded our machining capabilities in the U.K., Belgium, and Turkey. We offer our aerospace customers a wide range of machining services, from basic plate preparation to surface decking, featuring various precision drilling and tapping elements that allow direct mounting of our product to the customer's fixture, thus reducing setup time. As you can see on this slide, we also have machined complex near-net parts, which reduces freight cost, improves material and scrap utilization, and most importantly, these specialized processing services help customers streamline manufacturing processes, increase throughput, and expedite the overall production cycle on their higher-cost machine tools, driving down overall manufacturing expense.
As Jim mentioned earlier, we touch the automotive end market primarily through our toll processing operations, where we process our customers' metal for a fee without taking ownership of the metal. We value the toll processing business, as we're not exposed to fluctuating metal prices, and the earnings and cash flow streams are very consistent and predictable. In a few minutes, Tracy Drees from Precision Strip, our largest tolling FOC, is going to review PSI's business with you and include some of the recent significant investments. In addition to Precision Strip, we have a tolling operation in Mexico with four locations, and whose largest end-market exposure is automotive. We acquired a 50% ownership in this company through our PNA acquisition in 2008 and have since increased our ownership to 100%.
We opened their fourth location in 2016 and are currently in the process of expanding three of their four facilities, given the significant opportunity for continued growth in the Mexican market. Also, in November 2018, we acquired a small toll processing company in the southeastern U.S. that further expanded our specialty toll processing and logistics presence. We anticipate further growth and improved profitability from this business, given the vast resources available through the Reliance family of companies. While our toll processing operations represent only 4% of our sales dollars because they are only charging a fee to process and deliver the metal on behalf of their customers. These 3 FOCs, that consist of 19 locations, process more metal than we ship from the other 300-plus service center locations. Think about that for a minute. That's a huge amount of metal processed.
Okay, I'm now going to turn the presentation over to Tracy with Precision.
Hello, everyone. I'm Tracy Drees. I joined PSI in 1996, serving in the roles of financial analyst, controller, and most recently, CFO since 2008. PSI's President, Joe Wolf, is also here today, and he will participate in the Q&A session. PSI was founded in Minster, Ohio, back in 1977 and has since grown to 13 locations across six U.S. states. As the largest toll processing company in America, PSI was an attractive acquisition target for Reliance, who purchased the company in 2003. Back then, we had eight locations and were processing about 3 million tons of flat rolled metal. Since 2003, Reliance has consistently invested in the growth of our business through both capital expenditures and acquisitions, resulting in PSI's more than 1,300 associates processing 5.2 million tons of flat rolled metal in 2018. Safety and community are at the core of PSI's values.
We have a strong culture of encouraging our associates to practice safety both at work and at home. We recognize outstanding achievement of our internal safety goals through an annual Sharpest Knife award, and we are very happy to award this trophy to eight of our 13 locations in 2018. To earn this award, you must achieve our incident rate goal for the year, which is well below the industry average rate. Our current safety performance has improved significantly since Reliance acquired us. Through sharing of best practices, Reliance policies, monitoring, and goals, along with developing a true culture of safety, we have reduced our incident rating by 67% since 2003. Although our operations have minimal impact on the environment, we strive to be environmentally responsible through our company-wide recycling programs.
Because we touch over 5 million tons of metal per year, our operations receive in a lot of dunnage, which is primarily packaging materials. In 2018, we prevented 1.8 million pounds of dunnage from going to the landfill. We're also very active in the local communities in which we operate. We support several volunteer efforts and participate in charitable activities. PSI is truly a second family to our associates, and participating as a team in these activities further bonds our associates and provides a sense of personal well-being. In 2018 alone, we processed over 5.2 million tons of metal. This is nearly two times the amount of metal we processed in 2003, when PSI was acquired by Reliance. We also nearly doubled our number of processing lines to 54, grew our footprint by five plants, and increased our total square footage by over 50% during the same time frame.
We attribute this impressive growth to our reputation as a problem solver for our customers and the high levels of customer service that we provide. That said, had it not been for the capital available to us from being a part of Reliance, this level of growth would not have been possible. We have grown through both acquisition and greenfield operations, with the majority being greenfield. In our business, we are generally securing large volumes of processing related to a few programs or customers that establish a solid base volume to support our investment decisions. In our business, it is important to be in close proximity to the mills and key end users, especially for the appliance and automotive markets that are significant consumers of flat-rolled metal. We try to build operations close to the mill and/or end user of the identified programs.
Leveraging our experience, we generally replicate our existing operations unless our customers in that specific area have unique niche processing needs. For example, we recently added facilities and specialized processing equipment in Woodhaven, Michigan, and Bowling Green, Kentucky, to address the unique processing and logistics services of the rapidly expanding automotive aluminum market. Although we have specialties in certain operations, we leverage the capabilities of all of our operations to meet the growing and substantial needs of our customers. This increased volume has translated into strong sales growth. In 2018, we grew our total processing sales by 47% over 2013, with growth across all of the metal types we process. This was primarily driven by strong demand for increased aluminum content in automobiles brought about by the CAFE standards introduced in the U.S.
As you can see from the chart on the left, in 2013, aluminum processing comprised roughly our sales. In 2018, our aluminum processing sales were almost triple compared to 2013 levels and represented 41% of our total sales. With the mix shift, we've also grown our total tons processed by 15%, including growth in both carbon and stainless. It's important to note that processing surface-exposed aluminum is very difficult, resulting in premium fees. While we sell into a wide and diverse array of end markets, automotive is by far our largest end market, comprising 56% of our 2018 sales. Other markets we serve include appliance, welding wire, construction and building, and beverage. Although many service centers perform toll processing services, PSI is very unique as it performs highly specialized processing. We toll process 100% of the metal we touch, meaning that there is no ownership of metal throughout our locations.
While PSI does not own any inventory, on any given day, we are storing 1.5 billion pounds of customers' metal across all our locations, which means inventory management is extremely important. Our customers rely on us to manage their inventory, process and inspect their material, and deliver it to their end users on time, meeting the highest quality standards. In the service center world, the mills are suppliers of metal. In our world, the mills are our primary customers. We generally invoice our fees to the mills, who comprise most of our top 10 customers and make up roughly 80% of our sales book. While we are dealing with fewer customers than service centers, especially the Reliance service centers that focus on small order sizes with many customers, we engage in much larger volume program business.
Whereas mills negotiate the price of the delivered metal with their end user customers, PSI negotiates the price to process and deliver the metal with the mill who passes this cost through to its end user customer as a small portion of the total mill price. Types and levels of processing services we perform can vary significantly based on the needs of the end user, which we will discuss shortly. The nature of our customer relationships is also unique, as we basically have two customers to keep satisfied: Those who own and ship us their metal, typically the mills, and then ultimately those that PSI delivers the metal to, whom we refer to as the end user, where the metal will be consumed. The nature of our high-volume program business delivered to manufacturing companies drives dedicated truckload shipments. A typical example is a large automotive OEM considered an end user.
In this instance, PSI ships in 25 trucks per day for a total of 1.7 million pounds per day, which is just shy of 0.5 billion pounds per year into just this one location. How then, do we differentiate ourselves from other toll processors? Since our inception, our focus has always been on the difficult-to-do niche market processing. We have a 24-hour customer service model where we must often receive in, process, and ship material within hours. We own and have control of our own fleet of 230 trucks that enables us to meet the high-volume needs of the end user customers. This is also key for our customers, given the shortage of truck capacity in the market. We like to think of ourselves as the easy button.
About 60% of our volume, or 6.5 billion pounds per year, is delivered by our fleet, which logs more than 16 million miles per year. We also have a proprietary internally developed ERP system, which gives us both the ability and control to satisfy our mill and end user customers' demanding quality and information requirements. Finally, we design and build the majority of our own specialized processing equipment at PSI, which is a major point of differentiation from other toll processors. As you'll see on these next few slides, since our founding, our continuous R&D and CapEx investments have enabled us to continue to raise the bar in toll processing through the development of highly sophisticated, one-of-a-kind processing techniques. We do this by designing and building our own equipment.
We'll now take a look at some of these processes. The core process of our tolling business involves slitting wide coils into specific narrower widths for a large variety of end-use applications. Many other processors slit product, but they do the more vanilla processing. We focus on the hard-to-do, which earns higher fees. We can also perform oscillate slitting, which is a niche process of slitting and oscillating to wind a very narrow strip into large bundles to increase downstream efficiency for end users in flux core welding wire and automotive hose clamp applications. This is similar to the way you wind line onto a fishing reel and allows the end user to have significantly longer production runs from a single coil.
All of our blanking processes start with a coil of steel or aluminum that we convert to blanks of various shapes based on their end-use applications, which are primarily automotive related. Our cut-to-length shearing process can produce a single rectangle or trapezoid shape. An example of this can be seen in automotive closure parts. For instance, an automotive hood blank for stamping into 3D shapes by the OEM. Our press blanking utilizes customer-supplied dies to cut custom shapes for automotive and appliance OEMs. Common parts include door panels, hoods, and fenders. In lieu of conventional dies, our laser blanking process uses a fiber optic laser to provide end-use customers with blank shapes for trial service parts and low-volume automotive vehicle programs. This is where we truly differentiate ourselves at PSI.
One of our core competencies is performing specialized inspection of light gauge, surface-critical products, a key requirement of the automotive and appliance markets. This inspection occurs across diverse metal types, from coated products to stainless steel to our growing aluminum volume, and helps to ensure flawed materials never enter the supply chain, which can be very disruptive for the end user's operations. Another highly specialized process that we offer is the proper application of specific lubricants required for certain downstream processing. The picture here on the far right is an example of PSI's engineering and R&D efforts, solving customers' demanding requirements of applying specialty lubricants to the surface of the metal. We partner with both our customers and end users to understand their requirements and pain points to be able to use our resources to solve problems they encounter. This is where we believe we bring the most value.
Because our model is more like a mill than the traditional service center, given our large volume runs, we focus on a few additional KPIs to measure our performance. Primarily, we measure productivity. Because of the significant amount of metal we process and the fact that labor is more than half of our cash cost, we closely monitor our hours worked. We manage overtime in our production schedules depending upon our customer demands and to optimize efficiency, which we measure through a productivity index. Using this index, we can demonstrate consecutive productivity improvement in each of the last 13 years, which is the basis of our incentive compensation to all our associates. Due to the large volumes we process, most PSI operations operate 24 hours per day, five to six days per week, and we design robust equipment that can handle high-volume usage.
As I mentioned, we direct a lot of our growth CapEx dollars toward building our own equipment to service the specific needs of our customers. With our focus on production efficiency, we also invest in equipment that will improve our internal efficiencies. Recent examples include the installation of automated storage and retrieval systems in two of our plants that have allowed us to increase our storage capacity significantly while also reducing labor costs. These investments have led to positive trends in our return on invested capital, which has risen in recent years. Our business also provides strong and consistent levels of cash flow and earnings. Over the last five years, PSI has added five new lines and two new facilities to support automotive aluminum processing demand. Our first entry was in Michigan, with two aluminum slitting lines in a leased facility. We moved to the Kentucky area.
We built this greenfield facility in Bowling Green, Kentucky, in 2016 to process heavy carbon products in order to free up a nearby existing facility to focus on processing automotive aluminum. With the continued mill expansions in this area related to automotive aluminum, we just added a 145,000 sq ft addition to our Bowling Green facility and added an aluminum slitting line. This line began operating in the second quarter of 2019 and is still ramping up. We also added two blanking lines in Perrysburg, Ohio, to provide blanked aluminum shapes to certain of our automotive customers. As you can see on this chart, we have a significant position in the aluminum tolling market, and our growth has moved very closely with mill capacity. As discussed, we have been heavily investing in automotive aluminum processing capabilities given the trend of increased domestic production capacity.
As you can see on this map, PSI is strategically located in close proximity to where this metal is being produced by the mills. Much of the expansion at the mill level is centered near Kentucky, where we have two plants in close proximity to the three existing aluminum-producing operations. In addition, there has been an announcement for a fourth mill to be built in this area, and we are well-positioned to support all of these mills. Given our expertise in building equipment and the financial resources provided by Reliance, we are ready, willing, and able to expand further. There are other growth opportunities for our toll processing operations in the light gauge aluminum market related to HVAC and food container products. In addition, we recently installed a new oscillate line in Minster, Ohio, to take advantage of known growth with both new and existing customers.
We certainly are talking to the carbon mills in relation to high-strength steels to ensure we are tooled up to best support their needs as they continue to grow their capabilities in this area. In regard to logistics, we are seeing increased interest from our customers wanting a complete solutions provider. This involves transporting coils outbound from the mill to PSI and then delivering them back to the customer, regardless of geography, using our asset-based fleet or through third-party logistics providers. In summary, we believe we continue to raise the bar and set the standard in toll processing through our key points of differentiation, including hard-to-do processing capabilities, superior levels of service that provide value to our customers, and industry-leading customized CapEx investments for growth and internal efficiencies that benefit our returns. Thank you for your time and attention today. We'll now turn the floor over to Steve Cook.
Morning, everybody. Once again, thanks for joining us. We really appreciate your interest in our company. I'm Steve Cook, I run our team of corporate SVPs. I started in the metals industry when I joined Chapel Steel in 1988, where I sold carbon steel and heat-treated steel plate, moving into sales management and ultimately became vice president at the time that Reliance Steel acquired us in 2005. At that time, Chapel had sales of about $270 million in five locations, that's all steel plate, all Chapel sales. Chapel has expanded since the acquisition with a new location in Eastern Canada, a plate depot in Cleveland, Ohio, and a plate processing center in Tuscaloosa, Alabama.
I became president of Chapel Steel in 2007, then joined the Reliance corporate team in 2010 as a senior vice president, and I've worked with several of our FOCs, primarily on the carbon side of the business. As Mike and Jeff mentioned, commented earlier, my time working at an FOC under Reliance management gives me a unique perspective when working with our current FOC management team. The exposure to many of our different FOCs has expanded my knowledge of best practices and has made me a better resource for the FOCs. I also spent a significant portion of my time further developing our domestic mill relationships, and earlier this year, due to Jim's transition, I took on more responsibility in the safety arena, in which I like to spend a little more time discussing as it is our top core value and of the utmost importance.
Our team has spent quite a bit of time today discussing our investments in value-added processing equipment and other organic growth activities focused on the impact these investments have in driving up our profitability levels. Included in our industry-leading CapEx are many items that improve the safety of our warehouses and the equipment that our operators use. Although the ROI that improve our safety environment cannot be directly identified in our financial results, we believe the ROI of preventing just one injury or one fatality is infinite. We drive our FOC management teams to continually grow their profitability. We also communicate with equal importance that there's no cutting corners when it comes to safety.
I'd like to talk about a few of the initiatives we've rolled out company-wide over the past few years that support our SMART Safety program, many of which are not expensive but are impactful. In our warehouses, we implemented a light and bright policy requiring that high-visibility clothing be worn in our facilities to improve visibility and help keep our employees out of harm's way. We also mandated that all forklifts have blue lights installed so that the trajectory of the light is visible to others to prevent the forklift from hitting someone. We also have installed red projecting lights on our overhead cranes that shine down on the floor so the person is aware if they're standing in a fallout zone under the crane that might put them in danger.
There are many other steps that we are taking to improve safety of our people, ranging from different colored hard hats for visitors, new employees. There are sign-in procedures for third-party truck drivers that require them to review and abide by our safety policies, to installing more extensive machine guarding and improving racking systems. As mentioned, we have also approximately 1,800 trucks traveling public streets and highways every day, which pose a significant risk, as our drivers must not only practice good driving themselves, but also defensive driving due to poor driving behavior of others. In support of our goal to keep our drivers safe and reduce crash involvement, we are implementing Smart Driving throughout the FOCs, which is a Reliance-developed defensive driving program. In 2018, we kicked off a pilot program using in-cab cameras to monitor the driving behaviors of our drivers so that we can identify training opportunities.
The pilot was successful. We will have cameras installed in our entire fleet by the end of 2019. In addition to training opportunities, the video footage has been critical in obtaining facts related to incidents when they occur, often resulting in determinations that our drivers were not at fault, which reduced our costs. We're also investing in trucks with crash mitigation technology and designing safety products to keep our drivers and warehouse employees safe when working around our trucks and trailers. Changing culture is not easy. All of us here today are very passionate about the safety of our people and recognize that we're on a journey that requires a relentless commitment to safety. Our focus on one family, one culture of SMART Safety holds every one of our employees accountable for their own safety, as well as the safety of their coworkers.
Even though every one of us here is responsible for safety, I'm our lead operations SVP working with our team of safety professionals at corporate. This team establishes our policies to ensure compliance with all OSHA, EPA, and FMCSA guidelines. They also develop our safety programs and travel to our locations to implement and train our programs, assess compliance, and share best practices. This team observes processes and practices and makes recommendations to improve our safety outcomes. The ultimate goal of this team is to move all of our FOCs to the status of living the culture of SMART Safety each and every day. A newer element of our safety program is to reach out to our mill partners, other service centers in an effort to benchmark and share best practices to improve safety, not only at Reliance but throughout our industry.
A group of Reliance employees meets with a group of peers on site at one of our facilities or at the mill or at the other service centers operations and review the host sites safety practices and discuss observations and potential areas of improvement so we can all benefit. We're also extremely involved in the safety activities of our industry trade organization. In 2019, Reliance held our first-ever safety innovation contest. We had six winners from various FOCs who developed what we believe to be excellent ideas, and we've submitted them to our industry trade organization and hope that these ideas will be shared, supporting our goal to improve the safety of our entire industry. We spent a lot of time today talking about the organic growth with a focus on extending our facilities and processing capabilities, but our ultimate goal is to grow our profitability.
Sometimes we can improve our profitability by combining our closing facilities. Each SVP reviews the financial and operating results of each of their locations, at least on a monthly basis. This is important because a multi-location FOC that may have strong combined results, but there may be one or two individual locations that are underperforming our expectations. If we see this, we ask questions of the FOC management team to understand the factors contributing to this. Sometimes it's simply a management issue, and we need to change. Sometimes it's cyclical, and we need to take action to reduce our expenses until the market improves. Other times, it's structural, and we need a permanent solution. I've been involved in situations where we've closed the location, though significant portions of our customer base have migrated to other geographic areas.
The remaining business was no longer able to generate profit returns that were acceptable to us. We've also merged locations in the same general geographic area where we believe we can reduce costs and gain operational efficiencies by doing so. If we close or merge a location, we look for opportunities to transfer the business to another Reliance company. There have also been instances where we've transferred a location or group of locations from one family of companies to another because we feel there's a better fit due to geography, product mix, or customer focus. I'd like to tell you about a couple of those transfers which have been successful for us. Mark Haight, President of InfraMetals, is one of our stronger operators and will be presenting to you next. Mark has successfully grown InfrMetals over the years and orchestrated a few turnarounds within the Infra organization.
Because of his experience and track record, in 2014, we transferred IMS in Atlanta, a long products company, from the sister company over to Infra. In 2017, we did the same thing with Delta, a 5-location FOC serving the Texas, Oklahoma, South Central market. In the IMS steel example, this helped fill a market void for Infra serving the strong non-residential market in Atlanta. With Infra's operational excellence, the team improved the plant layout to achieve cost efficiencies and improve safety. The transfer of Delta to Infra was similar, and it allowed Delta to participate in the strong Texas non-residential construction market and energy market with a broader product mix. The sharing of a common computer system and mill sourcing programs, along with improved throughput from the various locations, have improved profitability across the entire group. Heavy industry.
Before Mark begins his presentation, I'm going to highlight Reliance's participation in a few key end markets we serve, then Mark will speak more specifically about InfraMetals and the niche in these markets. Heavy industry is a large and diverse category. It includes things like construction equipment, barge, ship manufacturing, agricultural equipment, truck and trailer manufacturing, and mining, to name just a few. Although we do sell directly to many of the manufacturers in this space, including companies like John Deere and Caterpillar, our exposure is primarily with the extensive network of small to mid-size companies that support these larger OEMs. This vast supplier network is made up of fabricators and parts manufacturers that feed the assembly lines of these large businesses.
Our role here is to supply these small and mid-size companies with just-in-time inventory, often including high-quality first-stage processing, like laser-cut shapes or tight tolerance saw cutting, combined with extremely quick turnaround, often within 24 hours. This provides our customers with greater flexibility to respond to changing demands and helps them manage their cash flow with smaller size orders. We've invested in value-added processing equipment to service the growing needs of our customers supplying the heavy equipment market and see continued opportunity to do so even more for these customers. We believe sales in the non-res construction market are about 1/3 of our total sales dollars. When we refer to non-res construction, we also include infrastructure in this bucket. We generally sell structural steel, tubing, and plate products into these markets, and our customers are typically fabricators.
There is a significant amount of metal that is sold direct from the mill to tier 1 contractors for large projects. Service centers can provide steel for these projects with 1st-stage processing in smaller quantities and on a just-in-time basis, something the mills are not really set up to do. Service centers will often participate in certain elements of large projects but are generally the lead for projects that are 5 stories or less. We have several FOCs that focus primarily on the non-res construction market across the country and several others that have a meaningful position in this market. We believe we lead the U.S. service-center market in non-residential construction. InfraMetals is one of our largest non-res FOCs, and I'd like to ask Mark to share the InfraMetals story with you.
Good morning, everyone. I'm Mark Haight. It's great to see all of you here today. I began my career in the steel industry in 1980, working in various sales and management positions until I helped found InfraMetals in 1990. I was General Manager and President of InfraMetals' northern region until I became President and COO of the entire company in 2012. From its founding in 1990, InfraMetals has grown to be one of the largest structural steel service centers in the U.S. InfraMetals joined Reliance as part of the PNA acquisition in 2008. At that time, Infra had six locations and an annual sales of approximately $600 million. The InfraMetals footprint has grown substantially over the years through both greenfield activities and acquisitions.
As Steve just explained, the InfraMetals group grew with the addition of Atlanta in late 2014 and Delta Steel mid-2017. In 2018, InfraMetals had sales of just over $1 billion through 12 operations. Our primary customer base consists mainly of fabricators whose projects range from typical non-residential construction and mixed-use buildings to large infrastructure and energy projects. Safety is a top priority at all InfraMetals and Delta Steel locations. We have increased our efforts in recent years with a strong focus on safety. We continue building our culture of safety every day. We've adopted the Reliance Smart Safety program and are in the process of implementing the Five Pillars program to provide an even safer environment for our teammates. We shipped nearly 860,000 tons of steel in 2018, including shipments from five Delta Steel locations.
This is more than double the amount of materials shipped back in 2008 when InfrMetals was acquired by Reliance. Our volume has grown steadily since the 2009 recession, generally in line with the slow but steady improvement in the non-res construction market. In 2018, we grew our net sales more than 13% compared to 2017, mainly as a result of higher mill prices for carbon steel products due to the implementation of tariffs under Section 232, which limited imports into the U.S. and drove up domestic metal prices. We generally pass along higher metal costs to our customers and benefit from a rising price environment as we generate a higher level of gross profit dollars to cover our expenses. As you can see in this chart, approximately 40% of our sales are heavy carbon structural steel.
We believe we carry the largest inventory of structurals in the country and stock the full range of wide flange beams. Structural and mechanical tubing is the next largest portion of our sales, followed by carbon steel plate and bar. From an end market perspective, our sales are split amongst construction, both buildings and infrastructure, energy, and heavy manufacturing. We are a major player in the non-res construction and infrastructure space and have participated in many meaningful projects through our fabrication customers. In buildings, we participate in anything from suburban office buildings to high rises, hospitals, schools, and assisted living facilities. Non-building related construction may include steel used for stadiums, airports, subways, bridges, and water treatment plants. In the energy market, we often participate in offshore platforms, power plants, refineries, and transmission lines.
In heavy manufacturing, we participate in the construction of barges and ships, overhead cranes, material handling equipment, including racking systems and conveyors, and truck and specialty trailers, to name a few. I'd like to share with you a few high-profile projects we've participated in recently. We supplied 7,000 tons of wide flange beams and tubing for a new cruise line terminal. We processed and delivered the material as needed, and this resulted in a beautiful facility that utilized all the best attributes of structural steel. Pictured here is a high-profile distribution building spanning over 1 million sq ft. We supplied all of the structural steel for this project, which totaled approximately 9,000 tons. 2 Infra plants worked together to meet the needs of our fabricator customer.
We cut the steel to size and delivered on a just-in-time basis to improve the fabricator's productivity and support our customer in meeting a very aggressive construction schedule. We believe we are one of the only companies with the ability to process and deliver such large volumes of metal on a just-in-time basis. As a major theme park continues to expand their facilities in both Florida and California, Infra has been able to participate to support them on a national basis through our expanded footprint. We have been a large participant on multiple projects over the years. We participated in a recent project supplying several thousand tons of carbon steel plate that we burned, beveled, and drilled to construct the root system of this attraction.
Now let's talk about Infra's niche in the market and how we are differentiated from other service centers, as well as within the Reliance family of companies. At Infra and Delta, we tend to carry the larger size range of products. With our breadth and depth of inventory, we have a competitive advantage as many other service centers are not willing to make the inventory investment needed to supply larger orders and major projects. Because we carry a larger range of inventory and specialty sizes, especially in wide flange beams and tubing, we typically turn our inventory at a slower rate than many of the other FOCs who stock more commodity products. It is important that we properly price our product to offset our higher carrying cost.
Our facilities were specifically built for our business to provide for the storage, handling, and processing of large size beams and plate in large quantities. We also have strategically located our facilities near major transportation lanes to allow for deliveries via rail and barge, and in areas with cost-effective labor pools to manage our cost structure. We have purposely located our more recent greenfield expansions in less urban areas that feature plenty of land and a skilled workforce. Because of the significant tons that flow through our business, we focus on maximizing our internal cost efficiencies. We strive to be the low-cost provider to our customers for the high level of service and value we provide, including inventory availability, quality first stage processing, and just-in-time delivery, all of which result in improved throughput for our customer. We believe the total value we can provide our customers far outpaces our competitors.
Our focus has always been on long-term repeat business. In many cases, our customers have very tight deadlines, and we are here to ensure that they meet them. We may get a phone call at 4:59 on Friday. We call in a flexible weekend crew, process the material for the job specifications, and deliver to our customer early Monday morning, so there's no interruption in their business. Our customers understand the value we're providing and rely on us to deliver as promised, and that keeps them coming back. Our fleet of 110 trucks, driven by our drivers, supports our ability to meet our customers' needs and is another advantage we have over many of our competitors. We view our drivers as an extension of our sales team as they interact with our customers daily and build strong relationships.
We also believe our system capabilities present a competitive advantage and provide another service element to our customers. Our proprietary customer portal allows our customers to get information that they need, when they need it. This allows them to obtain real-time information on the progress of their orders, availability of invoices, mill test reports, and purchasing history. We've also developed a comprehensive LEED, that's Leadership in Energy and Environmental Design, solution that allows our customers to download the necessary LEED information for their project, saving countless hours of documentation on their end. Further, we are now downloading customer fabrication files directly to our software and processing equipment, saving us significant time in entering orders and reducing errors, which benefits our customers. We are also developing tools to transfer data back to our customers' equipment to further streamline their processes as they fabricate the steel.
To our knowledge, we're the only service center in our space that can do this today. Our company slogan is, "Customer satisfaction built with steel." That slogan's everywhere in our organization. It's what we live by and what we do. Everyone is focused and motivated to first and foremost be safe, followed by providing the highest levels of service to our customers to meet their expectations of timely delivery of quality metal, meeting their specifications. We pride ourselves on executing in accordance with this slogan at all levels within our organization. We believe our purchasing philosophy also differentiates us from many of our competitors. Nearly everything that we sell is produced in the U.S., made from recycled scrap. Given the large quantities of steel we purchase, we receive most of the inventory via rail and barge, which can take two to four weeks to deliver.
With mill lead times ranging from 2 weeks-12 weeks, it's a challenge to manage the broad range of sizes and lengths we require to fulfill customer orders, while at the same time achieving inventory turn goals. To effectively manage these inventory challenges, our product managers who make purchasing decisions are also closely involved in the sales process, which allows them to better anticipate customer needs and make informed buying decisions. Placing our orders with domestic mills provides us with an advantage achieving our inventory goals as opposed to buying offshore material, which could have lead times ranging from 3 months-6 months. Also, we consider our mills as partners and believe that our consistent pattern of purchasing domestic material enhances these relationships.
We train our commercial team to recognize where we outperform our competition and provide value to our customers, and to ensure that this is justly reflected in our pricing, which helps generate incremental margins for the business. With our wide range of products, we're able to supply an entire project on a just-in-time basis, which helps our customers improve productivity. By working with us, they do not need to carry significant inventory, which improves their cash flow, allowing them to invest in more productive equipment and facilities. We pride ourselves in having an incentive program that is directly related to profitability and drives the right behavior from our team. From the beginning, we wanted to connect and incentivize everybody in the company to contribute to our collective success, so we established a company-wide program that applies to everyone on our team.
Basing incentives on profitability helps promote efficiency and reduce costs and creates a laser focus on financial returns. We all have a hand in what we do and it benefits all of us when we perform well. If we have team members that are not performing well, there is peer pressure to improve quickly. If profits do trend down, our SG&A expenses decline as compensation declines, which is essentially built-in cost control. In recent years, we have significantly expanded the processing capabilities of both Infra and Delta. Today, we specialize in many types of processing with our equipment spread across our facilities to provide these services close to our customers in order to meet their just-in-time needs. I'll describe a few of our key processes in order to give you a better understanding of some of the value-added services we provide our customers.
Blast and priming involves the removal of mill scale and rust to prime and paint the steel to help prevent oxidation. End-use applications are most typically in the marine industry and also include infrastructure projects such as bridges, commercial construction, and tank manufacturing. Cambering is the process of forming an upward curve in a linear product relative to its center. Cambered beams are typically used in building construction and bridges, and you can think about that with any bridge you have gone across recently. Our plate processing machines burn, drill, bevel, and in some cases, mill plate. All are CNC controlled and driven by a program that is typically downloaded from our customers. Saw cutting is probably the most common process we perform utilizing CNC-enabled saws.
What makes us unique is we can download fabrication files from our customers that feed directly into our software and then to our saws, eliminating the chance for input errors. Tee splitting, which is when we split wide flange beams down the web, yielding a pair of tees, are most often used in roof trusses and shipbuilding. Just think of any gymnasium you've been in recently. When you look up, the top and bottom course of those trusses are typically tees. One of our most unique processing capabilities is our 60-foot press brakes that we use to turn plate into the shells for transmission towers and monopoles. As you can see from this chart, we have consistently invested in our business over the years to improve profitability levels.
As I mentioned earlier, we have expanded our processing capabilities, especially since the Great Recession in 2009, which affected everyone but had a severe impact on the non-res construction market. With the financial backing of Reliance, we invested heavily in advanced equipment, which positioned us to provide higher levels of value-added processing for our customers while also generating better financial returns. During this time period, we opened a new greenfield operation in New Boston, Ohio, to create a local presence in that market. We also integrated other FOCs into the Infra network to leverage our purchasing and other inventory management activities. Our teams have worked together to develop market opportunities and internal efficiencies and have executed to produce higher levels of profitability from the combined group.
Our investments in organic growth have led to positive trends in our gross profit margin and a return on invested capital rates, which have risen dramatically in recent years. At InfraMetals, we look forward to continuing to profitably grow our business. We see many opportunities to do just that. As equipment becomes more sophisticated, efficient, and expensive, we see continued opportunities to add capabilities and capacity to our existing plants and provide more and more services to our customers. However, we will continue to grow in a manner that does not compete with our existing customer base. This includes expanding our percentage of sales that includes value-added processing, with the addition of more first-stage processing equipment.
Through our sharing of best practices, we have been systematically employing the Infra strategy into the Delta locations, increasing their internal efficiencies with higher throughput and increasing the amount of value-added processing they perform for their customers. Within our combined network of Infra and Delta facilities, we have the capacity to process and ship significantly more volume than our current levels, which further leverage our fixed assets and meaningfully increase our profitability. If non-res construction or infrastructure activity increase materially from current levels, this could provide a substantial opportunity for us. Thank you for your time and attention today. I'll now turn the floor over to our CFO, Karla Lewis.
Thanks, Mark, and hello, everyone. I'm Karla Lewis, and I'm the Senior Executive Vice President and Chief Financial Officer at Reliance, and I'm very pleased to see many new and familiar faces in the audience today. To echo Jim's comments from earlier, we really thank all of you for your support. For those of you who may not be as familiar, I've been part of the Reliance family for nearly 30 years. I first worked with Reliance as part of their external audit team beginning in 1988, when Reliance's sales were less than $200 million. I then joined Reliance as their first Corporate Controller in 1992 and became CFO in 1999. Here we are now with $11.5 billion of sales. So far today, you've heard a lot about our unique operating structure.
You've also learned that we have a two-pronged approach to growth, with our capital expenditures being the driving force of our organic growth. Accretive acquisitions that help grow our footprint, expand our value-added processing capabilities, and continue to expand our customer base are the second prong of our growth. Since our IPO in 1994, we focused on growing Reliance's bottom line more than our top line, with most of this growth attributable to our acquisition strategy. We target acquisitions of profitable, well-run companies that we believe will complement our strong financial results. We also see companies that we believe we can help grow, and that will benefit from being a part of the Reliance family of companies. For the next few minutes, I'll walk you through our M&A strategy in more detail.
As you may have picked up from the video, these logos represent our family of companies which have become a part of Reliance through acquisitions. Because our acquisition strategy is to purchase well-run companies with strong customer relationships and outstanding reputations, we leave the acquired company's name in place as it is recognized within the markets they serve. In 2018, we completed three acquisitions, including a toll processing company, a service center that's nuclear-certified and performs high levels of value-added processing, and a company that performs laser processing and welding services. These acquisitions support our growth strategy of providing high levels of value-added processing to produce above-average profitability while also expanding our product and market in geographic diversification. Reliance has been the most acquisitive company in our industry. Since our 1994 IPO, we've acquired 66 companies, each of which met our disciplined acquisition criteria that I'll discuss shortly.
Most of these acquisitions were family-owned, small to medium-sized service center companies, which is reflective of our highly fragmented industry. However, we've also completed three somewhat transformational acquisitions of companies with sales of $1.5 billion-$2 billion at the time of acquisition. This included EMJ in 2006, the PNA Group in 2008, and Metals USA in 2013, which is our largest acquisition to date, with an acquisition cost of $1.25 billion. Over the past five years, we've invested a total $673 million on a total of 10 companies, all of which are performing in line to above our expectations. We believe we remain the acquirer of choice in our industry and have a proven, well-executed acquisition strategy that has enhanced the performance of our acquired companies.
These acquisitions have been instrumental in our diversification strategy by supporting the expansion of our geographic footprint and market exposure and products, which I'll elaborate on in the slides that follow. Reliance was founded in L.A. and was primarily a West Coast company. At the time of our 1994 IPO, our footprint remained west of the Mississippi. One of the reasons Reliance went public was to obtain funding to become a national service center, as we were beginning to see well-run reputable companies available for sale. We first expanded in the Southeast and then focused on the Midwest. As you can see, the Midwest now comprises the largest portion of our sales, and we now have operations in 40 states and 13 countries outside of the U.S. Our customer base has also increased significantly to over 125,000 today, and we are serving many new end markets.
The majority of this growth and diversification was driven by our significant acquisition activity. Similarly, our product mix has also expanded. Before our IPO, the majority of our product offerings were flat-rolled, which tend to sell into highly competitive markets. As we grew through acquisition, we focused on increasing our specialty product offerings, such as plate and tube, to achieve higher margins. As displayed here, in the first quarter of 2019, carbon flat-rolled represented only 14% of our total sales, and flat-rolled sales across all commodities was 25%, compared to approximately 80% prior to our IPO. Although our overall carbon steel sales have remained consistent over time, at about 50% of our total sales, the mix within carbon has changed. Now led by plate, tubing, and structural products. Our acquisition criteria has been consistent and remains unchanged.
We do not and have never set targets for a number of acquisitions we look to complete in a given year, and we remain disciplined and opportunistic in our approach with a relentless focus on value creation. We evaluate each opportunity on its own merits, considering how it will fit within the Reliance family of companies and what growth opportunities we can provide. For potential targets, we require that any transaction be immediately accretive to earnings and that it be cash flow positive, applying the same valuation metrics that we have consistently applied over the past 25 years. We look for a pre-tax return on investment hurdle rate of 12%-15% based on normalized pre-tax income, which excludes projected synergies and the cost of financing. Typically, we buy only profitable, well-run companies with strong management teams already in place.
The most important element of our due diligence is to evaluate the existing management team, including the depth of the team, as we generally want the team to remain in place post-acquisition. This evaluation is done by the Reliance Team here in the room today. We do not rely on others to evaluate the quality and integrity of a potential new member of our family of companies. When we acquire a company, it's for the long term. We need to ensure that there is a strong cultural fit and that the management team can continue the strong brand and reputation going forward. In line with our decentralized structure discussed today, we generally allow the acquired company to continue to operate fairly independently post-acquisition.
In most cases, we leverage our industry experience, supplier relationships, and expansive network of resources within our family of companies to improve inventory turns and gross profit margins, resulting in higher earnings. We also structure incentive plans to align the interests of the local management team with our corporate objectives. However, as each company we acquire is unique, we tailor our approach to achieve the improved results. Given the results to date, we have an excellent track record of improving the already solid performance of the companies we've acquired. Going forward, we expect to continue to selectively acquire companies that fit within our criteria and our strategy of profitable growth.
In light of our expansive existing network and numerous opportunities for organic growth, it's not surprising that we have become more selective in our acquisition strategy, placing greater emphasis on niche opportunities that meet or exceed our higher earnings expectations. We will continue to evaluate all opportunities and execute on those that we believe support our profitable growth objective. Currently, there are many opportunities in the market that we are evaluating. Many of these are smaller companies and may not be attractive to us, sometimes because they compete with our existing customers and we try to avoid these potential conflicts. Many do not meet our profitability hurdles, and we do not see a clear path to achieving those levels. We have seen an increase in the number of more traditional service centers in the market recently.
We'll continue to seek well-run businesses that expand our existing footprint, complement our diversification of products and services, and increase our value-added processing capabilities to create profitable growth for Reliance. We will only execute on those opportunities that we are confident will fit within our family of companies and provide value to Reliance. Thank you for your time today, and I'll now hand it over to Arthur, who will discuss certain elements of our financials.
Thank you, Karla, and good morning, everyone. By way of introduction, I'm Arthur Ajemian, Vice President and Corporate Controller of Reliance, a position I've held since 2012. However, I have been with the company for almost 15 years, having started in the various accounting and finance roles, and most recently, Group Controller and Director of Financial Reporting. Prior to joining Reliance, I spent seven years in the assurance practice of PwC. Very pleased to be here today and look forward to addressing a few areas related to our financials that we would like to more thoroughly explain in light of frequent comments and questions we hear from many of you today. More specifically, I will be covering the underlying elements contributing to our gross profit margin improvement, our LIFO inventory method, and drivers of our operating expenses.
To provide a better understanding of our gross profit margin improvement, I will start with a basic discussion of what is included in our cost of sales. For Reliance's cost of sales, for our operations that buy and sell metal, which accounts for about 96% of our revenues, is comprised of the cost of the metal purchase and inbound freight costs. Direct labor and overhead costs are not included in our cost of sales for these businesses. For Reliance's toll processing and logistics operations, which represent approximately 4% of our total sales, our cost of sales include the direct cost of processing, handling, and shipping the customer-owned metal. This includes costs such as direct labor, packaging, supplies, fuel, and many others. We also include overhead, such as our indirect labor with incentive pay and payroll taxes, as well as supervisory compensation.
Over the past few years, as we raised our sustainable gross profit margin range by 200 points to 27%-29% from our prior 25%-27% range, we received many comments indicating that the reason for the increase may be due to our higher levels of toll processing now being performed. That is not the case and would like to clear up any misconceptions. Although our toll processing businesses contribute a higher gross profit margin than the overall average gross profit margin we earn in our businesses that buy and sell metal, they do not generate a gross profit margin of 100%. Further, because toll processing comprises only 4% of our total sales, the inclusion of gross profit from toll processing has a very minimal impact on our consolidated gross profit margin. Please don't misunderstand me.
Our increased levels of toll processing is positive for our gross profit margin, as well our earnings and cash flows. Why did our sustainable gross profit margin increase? Well, mainly as a result of the increased CapEx investments that we have discussed today. Also, Reliance is now performing more value-added processing on a higher percentage of its total orders, up to 49% in 2018, compared to our historical level of around 40%. Now, we earn 100% gross profit margin on the processing sales generated from our businesses that sell metal. Remember what I just reviewed, we only include the cost of metal and inbound freight and cost of sales. All of our costs associated with processing metal that we buy and sell are included in our operating expenses, which is not factored into our gross profit margin.
Our sales amounts include 100% of the fee we charge our customers to process the metal we sell to them. 100% of this fee is included in our gross profit dollars. If we continue to increase the percentage of orders with value-added processing, we should also see an increase in our gross profit margin. I'd like to focus on the gross profit margin improvement experienced in our businesses that buy and sell metal. Since 2014, when we began investing significantly more in value-added processing equipment, we have increased our gross profit margin across most of our products. Because majority of our sales are carbon steel products, which represent a little over 50% of our sales dollars and about 80% of our tons sold, I'm going to concentrate on the gross profit margin improvement from our carbon sales.
In total, our consolidated gross profit margin has increased over 330 basis points since 2014, and that's 330 basis points on $11.5 billion of sales in 2018. Let's review our gross profit margin at the product level for carbon products. For this example, I'm going to use the increase in our gross profit margin for 2017 compared with 2014, and the reason for that is that in 2018, we had significant price increases in carbon steel products due to implementation of Section 232 tariffs, which further inflated our gross profit margin. When reviewing our gross profit margin improvement at the product level, you see that the types of products that lend themselves to more value-added processing experience the largest increases. In bar products, our margins increased 550 basis points, followed by tubing of 350 basis points, plate of 340 basis points, and structural products of 300.
This is very meaningful as these products also make up the largest portion of our overall product mix. The gross profit margin on our carbon steel flat-rolled products also increased, but to a lesser extent. Our carbon flat-rolled margins were up 150 basis points, which is still meaningful. The reason for the modest increase in our gross profit margin on flat-rolled is that they're among the most commoditized and most competitive products we sell. Even though we perform high levels of processing on almost all the flat-rolled products we sell, our gross profit margins are typically at the lower end of our internal gross profit margin range. In addition, because we already almost process 100% of our flat-rolled products, we did not experience the same level of margin improvement due to processing more tons of flat-rolled as we experienced in some of the other products.
It's also important to note that within our carbon steel products, our gross profit margin may vary by more than 15 percentage points, depending on the specialty nature of the product and the level of processing that we perform. I'll now turn to a discussion on our LIFO inventory valuation method and its effect on our reported financial results. It's another area that we receive many questions on. As many of you may be aware, LIFO, which stands for Last In, First Out, is an inventory costing method that assumes the most recently purchased inventory is sold first in an accounting year. During periods of rising metal prices or inventory costs, this method results in lower profit as we recognize a LIFO charge or expense as our cost of sales increase. Conversely, during periods when metal prices are declining, we will recognize a LIFO credit or income.
Essentially, what these LIFO adjustments do is they reflect our cost of sales at current replacement costs. Now, we believe using the LIFO method provides a better matching of sales and cost of sales, and therefore results in more consistent gross profit in earnings than if we use the FIFO accounting method. How does LIFO work at Reliance? LIFO is an annual measurement in which we compare our inventory costs and quantities on hand at the beginning of the year to the end of the year. The calculation's complex and is performed for each legal entity, which at Reliance, it results in over 30 different calculations.
Further, each calculation has different LIFO base years and indexes and may move in opposite directions depending upon the product mix and market conditions. The takeaway here is that building a model to estimate our LIFO adjustment is very difficult, and we believe investors should focus on our sustainable range for consolidated gross profit margin of 27%-29%, as that takes into account our annual LIFO adjustment. The diversification of our product mix and the LIFO method help us maintain a more stable gross profit margin overall. During the year, our practice is to estimate the LIFO adjustment and record our quarterly adjustments on a pro-rata basis. Our current 2019 annual LIFO estimate is a credit or income of $70 million, half of which we have booked through June 30, 2019, as income or reduction of cost of sales.
Our fourth quarter adjustment is trued up to our actual calculation at the end of the year. It's important to note that our cumulative LIFO adjustments reside on our balance sheet in a reserve, which you can also think of as a bank. When we record LIFO expense, the reserve grows, and when we record LIFO income, we're reducing the reserve or withdrawing from the bank, so to speak. As of June 30, 2019, our LIFO inventory reserve was $258.6 million, which can be released as LIFO income and favorably impact our earnings if metal costs were to decline. Next, moving on to expenses. We've received many questions about the best way to model our SG&A expenses and develop an appropriate operating expense run rate going forward.
The major components of our operating expenses are warehouse, delivery, selling, general, and administrative expenses, and in this category, we report all of our operating expenses except for the cost of metal, depreciation, amortization, and impairment, if any. Direct labor and overhead for tolling and logistics are included in cost of sales, as I mentioned previously. Now we have a highly variable cost structure. About 65% of our total SG&A expense is people related, including direct compensation, payroll taxes, and employee benefits. Certainly, not all of our people-related costs are variable, but those directly related to our warehouse and delivery departments are highly variable. The remaining 35% of our SG&A expenses primarily relate to items such as freight-out incurred with third-party carriers, gas and oil, rent, plant supplies, utilities, repairs and maintenance, et cetera.
As highlighted in many of our presentations today, we believe Reliance has a competitive advantage as we deliver the majority of our shipments with our company-owned fleet of approximately 1,800 trucks. That said, at some locations and for longer deliveries, we incur costs with third-party carriers, and they are included in our freight-out expenses and can range anywhere from 6%-8% of our SG&A costs. This expense is highly variable and fluctuates with our shipment levels. Changes to our shipment levels impact the variable component of our SG&A expenses. However, it does take a meaningful change in our shipment volumes to see a significant change in our SG&A expenses. We believe we are proactive in adjusting our expenses when we see changes in the market.
Given our decentralized structure and significant diversification across our companies, the impact of these expense reductions on our consolidated results are generally not visible unless there is a broad-based decline in shipment levels. With that said, we can speak to how profitability levels impact our expenses. As indicated on the prior slide, our profit-sensitive expenses are primarily comprised of bonuses, commissions, and incentives, and stock-based comp. These expenses generally range from 9%-14% of our SG&A expenses and fluctuate based on our gross profit and pre-tax income levels. In 2018, these expenses were towards the high end of the range at about 14%, given our record profitability levels, and accounted for about half the increase in our total SG&A expenses in 2018 compared with 2017.
Although we do not measure our performance on a per ton basis, if we analyze our SG&A expenses on a per ton basis for this exercise, you'll see that 2018 SG&A expenses increased $28 per ton compared with 2017, with half the increase in the form of higher performance-based compensation due to our increased profit levels. Now, because of the increased volatility in metal pricing in recent years, modeling our SG&A expenses as a percentage of sales has become difficult. We believe it's more appropriate to model using our first quarter SG&A expense dollars, as they generally reflect annual inflationary changes. Using this as your quarterly run rate, you can then adjust the remaining quarters for our normal seasonality trends.
Of course, if you anticipate any material changes in volume or pricing, you should take that into consideration. Hopefully, a few of these examples I just walked through will be helpful when building your models. Thank you for your time, and I will now turn it back over to Karla.
Thanks, Arthur. Maintaining a strong balance sheet and solid overall liquidity position is a top priority, as it provides the foundation for us to continue executing on our growth and stockholder return activities. Because of our gross profit margin enhancements in recent years, we expect to generate higher levels of cash flow from operations through increased net income. An effective working capital management is also key to our cash flow. We're very pleased with our current liquidity position, as evidenced by our solid investment-grade credit ratings. At June 30, 2019, our total debt outstanding was $2.02 billion, resulting in a net debt to total capital ratio of 27.4%, and our net debt to EBITDA multiple was 1.6 times. Our strong cash flows have resulted in these metrics being somewhat below our targeted levels of the low 40% for debt to capital, and 2 times debt to EBITDA.
We believe our current levels solidly support an investment-grade financial profile. At June 30th, we had $699 million available on our $1.5 billion revolving credit facility. If you were to take a look at our balance sheet headed into the Great Recession in 2009, we were more highly levered. While it was a challenging cycle, we emerged from it with an even stronger balance sheet because of the countercyclicality of our cash flows. Today, we believe our ability to weather a storm like the Great Recession is even better, given our low leverage position and significant liquidity. The countercyclicality of our cash flows gives us the ability to pay down our floating debt if we were to run into a recessionary time. Please note, we are not anticipating a recession in the near term.
Rather, we're highlighting our ability to weather any downturn in the economic cycle. As mentioned earlier today, the countercyclical nature of our cash flows is a very powerful point of differentiation for Reliance. As you can see on this chart, some of our most trying times from a profitability standpoint can be our best times in terms of cash flow generation. This countercyclicality is key to our performance as we're able to perform throughout all economic cycles while simultaneously maintaining our ability to continue executing our growth strategies while consistently returning value to our stockholders. The strong cash flow and access to capital provides us with the flexibility to allocate capital across capital expenditures, acquisitions, dividends, and share repurchases. As I discussed earlier, we're focused on organic growth and acquisition activity to drive our earnings higher, and we believe that these activities represent the best long-term use of our capital.
We're also highly committed to returning capital to our stockholders, primarily through regular quarterly dividends and opportunistically repurchasing our shares. As of June 30th of 2019, approximately 6.4 million shares remain authorized for repurchase. With respect to dividends, we have an outstanding track record. Reliance has paid regular quarterly dividends for 60 consecutive years. We've increased our dividend 26 times since our 1994 IPO, with our most recent increase of 10% in the 2019 first quarter. Our repurchase of $50 million worth of our common stock during the second quarter of 2019 and the increase in our quarterly dividend earlier this year to total $2.20 per share annually reflect the confidence our board and management team have in our outlook and our ability to execute through economic cycles.
To wrap up, we hope we were able to provide more insight into some of your questions today in regard to our cost structure, ability to sustain high margins, and how our strong balance sheet and countercyclical cash flow generation helps us maintain a strong financial position in both good times and bad. Thank you for your time today. With that, I'll turn the floor back over to Jim.
Thank you, Karla. Well done, as usual. Listen, today you've heard from an amazing team of really bright people who are passionate about our company and the bright future that we see ahead. Hopefully, you've learned a lot about our history, operations, growth strategy, and strong record of financial performance. All of these pieces fit together to make Reliance a special and unique family of companies. Before we turn the floor over to questions, I want to recap on some key themes for today, along with our primary focus on areas of what's next. First and foremost, as you've heard me say time and time again, the health and safety of our employees, customers, suppliers, and communities is a core value to Reliance. Second, our diversification of products and markets, geography helps reduce volatility in various markets and economic cycles.
Although we operate in a decentralized structure, you've now seen firsthand how we've been able to grow our family of companies by leveraging scale, supplier relationships, tremendous CapEx investment in sharing of best practices throughout the FOC. Our ability to expand and sustain industry-leading gross profit margins is a direct result of our investment in value-added processing capabilities that allows the highest level of customer service, as well as several elements that comprise our decentralized operating structure. By staying true to our core values and tried-and-true business strategy, we have been consistently profitable since our 1994 IPO, despite ever-changing economic cycles. We also leverage our strong balance sheet and counter-cyclical cash flow generation to fuel our growth initiatives and long-standing history of stockholder return activities. Over the past 25 years, we've generated a cumulative $6.7 billion in cash flow from operations, and we've returned 40% of that to our stockholders.
Our track record proves the success of our strategy and business model, and we believe all of these things are what makes us such a high-quality, attractive investment opportunity. We are committed to sustainable profitability, which we will achieve by staying true to those same core principles that have fueled our historic success, but at the same time, always looking towards the future. What's next for Reliance? Looking ahead, we're going to focus on three areas. First, an even higher quality of earnings. We've maintained our selective approach for decades and plan to be even more selective going forward. We will maintain our focus on quality over quantity as we continue to do more for our customers and focus on higher-margin orders versus volume. Second, we plan to continue making industry-leading innovative investments to return our competitive positioning.
As you've heard today, these investments help us do more for our customers and be more efficient and enable the family of companies to grow and, importantly, support our higher-quality earnings. Finally, we will maintain our commitment to employee safety and sustainability. The health and safety of our employees, customers, suppliers, and communities is a core value for Reliance and remains an important area of focus for the future as we continuously strive for improvement. We aim to set highest standards for business practices, adhere to regulations, and protect the environment, give back to our communities, and ensure a safe and productive workplace for our employees. You've heard a lot today about our focus on safety, and I'd like to take just one moment to talk about Reliance's commitment to our environment and communities. We are committed to investing in and enriching our communities.
For starters, we are very supportive of our veterans, those who serve ensure the sustainability of our nation. Since 2013, we've supported a nonprofit that provides transitioning services to our veterans, including financial scholarship, donations of metals for training courses, and graduate hiring. We also participate in a national program focused on supporting enlisted members of the armed forces and their families. We encourage our subsidiaries to engage in and initiate events serving their communities, and we support and often match their local fundraising efforts. In the wake of the 2017 hurricanes, we launched our own employee relief fund, Reliance Cares, to support our employees and their families impacted by natural disasters. We are very pleased to have provided relief grants to our employees affected by the 2017 and 2018 hurricanes to help with their rebuilding efforts.
Finally, we are committed to reducing the impact our products have on, and operations have on the environment. Due to the nature of the service center business, our operations do not have a significant impact on the environment. They do not emit significant amounts of carbon dioxide or other greenhouse gases. Over half of our orders are basic distribution with no processing services performed. For the remainder of the orders, we perform first-stage processing, which do not require significant amounts of energy or toxic or hazardous materials. That said, we are constantly evaluating and implementing energy conservation and other initiatives to reduce pollution and improve our environmental impact. As a part of our commitment to environmental sustainability, we purchase significant amounts of metals produced from recycled material. We sell scrap material generated in our operations to recyclers. We install natural and energy-efficient lighting in many of our operations.
We utilize energy-efficient diesel tractors that consume less fuel and reduce emissions for the majority of our trucking fleet, and we use propane fuel to operate our forklifts. On behalf of the Reliance team here with you today, on behalf of the 15,000-plus employees in our family of companies and corporate offices, I'd like to sincerely thank you for your time and support of Reliance through your participation in today's event. Later today, we'll be commemorating our 80-year history and 25th year as a publicly traded company by ringing the bell here at the New York Stock Exchange closing bell. We are extremely proud of our history, and we are excited for the bright future that lies ahead. With that, I'll turn the floor back over to questions. Karla, come up here and help me
Thanks. Chris Terry from Deutsche Bank. Just in terms of the M&A, Karla, thanks for the color on the criteria and going through that. Just thinking about the overall gross margin of 27%-29% and then the ROI target of 12%-15% on M&A. How do you think of both of those in the context of each other, i.e., if you get a business that returns 12%-15%, do you then think about what impact it then has on the overall gross margin of the business? That's the first part. Secondly, given the fragmentation of the overall market, I understand your own strategy is to build on bolt-on parts to the business. Do you think in so many years to come that the whole U.S. sector will remain as fragmented as it is?
Do you think, say, some of your peers may combine and the structure may change of the industry? Thanks.
Yes. I think on the first part of your question, Chris, with the gross profit margins and return. The 12%-15% return on investment, that's what we use to value the company. We come up with what we think a go-forward normalized level of pre-tax income would be for the company, and then we value our acquisition at that 12%-15% on that normalized pre-tax income. Remember too, we never put in synergies for a potential deal. We think any savings we get there should come back to us if we're generating those synergies. We also don't include the cost of capital in that. We expect the pre-tax income return to be consistent or above our consolidated pre-tax income return for most of the acquisitions we look at.
I think at a gross profit margin impact, certainly we hope to continue to drive that up. We're focused on niche-ier, more value, higher level of value-added processing types of opportunities. That should support or contribute higher gross profit margin levels. Absent a very large acquisition, one individual acquisition probably isn't going to move the needle much on that sustainable gross profit margin range. We're comfortable with that, but hope to have a positive impact on that as we continue to acquire companies. As far as the composition of the fragmented service center market, we've done 66 acquisitions since 1994, but it's still really fragmented out there. Other companies also do acquisitions, not as many as we've done. We think there will be continued consolidation. We think there are some reasons why it makes sense for that consolidation trend to continue.
At the same time, there aren't huge barriers to entry in the service center business. The barriers are becoming higher with the increased value-added processing and things that service centers, especially ones like Reliance, are doing. We would anticipate a continued fragmented market.
Hi again. I have a couple questions. One is, given the low cost of capital, do you think that some of the other service centers will be adding more of the value-add processing equipment that you were talking about? Because it's still a pretty low ticket. You're saying sub $5 million. That's one question. I know over the years they haven't, but maybe they'd start, and your margins are attractive. Maybe they'd want to emulate you. I mean, they do. Second question is, how far downstream can you go before you compete with some of the mills? If nobody else is going to ask it, I'm going to ask you to comment on the end markets. We've been hearing some OEM caution. Can you just give us a quick update on what you're seeing there? Thanks.
I'll try to answer some of those questions. As far as our competition, yeah, they can do that if they'd like. They've tried. You have to have somebody who wants to buy from you first, and that's the first step in that. They have different models. They're good at what they do. There's a lot of what we call tons for fun kind of service centers out there. That's their thing, and they can do the contractual business. The way our companies are set and why we bought those companies, they're more transactional. Transactional business lends itself to more value-added. It's America. They can go out and do what they want and buy equipment, and they probably will, which is fine, but we'll try to stay one step ahead of the game. What was the second question? Oh, how far downstream before we compete with the mills?
We don't make anything. We buy from them, and we've added value to it. I'm sure they think about how they can go more downstream to compete with us versus going the other way. We have a kind of an unwritten rule. We don't compete with our suppliers or our customers. Our suppliers are good at what they do, and we don't want to get in their model. That's a different model, and they're good at it, so we'll just let them do that. We're really not worried about how we're going to compete that much upstream with our supplier. Now, downstream, to lead into your second question, there's a line there. You just have to watch it. You have to watch it. As we said earlier, the value-added equipment that we've added over the years, those are requested by our customers.
Our customers ask us to do more and more and more every time we turn around. They say, "Hey, listen. You used to ship me a truckload of beams. Now I need you to cut those beams, miter cut them, etch them, paint them on one side, put them in a kit, and deliver them directly to the job site." They ask us to do that, and we oblige. We do an M&A side. We look at companies that they look okay, but we just walk away because you're not going to buy a fabricating company in Chicago because we have a lot of fabricators in Chicago that we don't want to be their competitor. Let's Who else?
Timna, you threw in comments for end markets. We really can't comment much on that from the comments we made at the end of July at our last earnings call. Certainly, we see the same news stories and hear the same things from those companies that you guys do. Overall, kind of no comment on that because our attorney's standing in the back of the room.
Tim, that was nice of you to ask that question. Appreciate it. That, one more here.
Hey, your M&A strategy has historically been focused around buying high-quality operations. Have you ever been tempted into value-type acquisitions like this thing's horrible, and we can turn it around?
We laugh about them. We look at them and say, "How do these guys stay in business?" No, I'm just kidding. No, we don't. It's really hard work looking at companies and buying companies and bringing them up to speed. Buying fixer-uppers is really hard work, and the folks you saw here today, they travel for a living, and they work really hard, and the folks out in the field, they're really good at what they do. We think, you bring somebody in like that into a company, and it has a tendency to lower the expertise and success of the rest of the company. Those guys are out there, and we've looked at them, but somebody else can get them. That's it? Hey, listen, thank you very much. We really appreciate it.