RS - Earnings call transcript Q4 2018 | Reliance Steel & Aluminum Co.

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Operator

Greetings and welcome to Reliance Steel & Aluminum Company Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brenda Miyamoto, Investor relations. begin. may you you, Thank

Brenda Miyamoto

by not cause not These factors or call recording of Annual Thank the the Exchange Jim also President Commission. information date you, XXXX forward-looking A herein. this you our to these from any of other in expectations Executive statements. and of our and be only by I'm release December of and results, to to but known quarter call disclaims CEO; President caption to will President company include, and on speak performance, our portion and therein at Report Vice and Karla update actual a on with press call. under Securities uncertainties available CFO; of other turn Good contain The which risks, press statements joining unknown our Bill those during will XX-K on Factors to morning, Reliance. materially the now the XX, company Lewis, this be be the Risk implied may posted President based subject control, and the joined results. for of year financial filed discuss duty Executive the on full-year Form thanks the Hoffman, change performance the number the or today's the ended Investors achievement forward-looking website conference I question-and-answer and certain our and which this are call this and and be factors, Vice all results, limited information Senior XXXX other operator. over or may may will information Jim reports and and call of fourth of our CEO of company's Operations, the involve to Hoffman, section as which are release call assumptions investor.rsac.com. The provided on to the factors are and company's that Sales, under disclosed different the for the

Jim Hoffman

and Good everyone we quarter numerous demonstrated financial financial you through records our results for an organic and significant discuss both incredible confidence full-year pleased initiative for to repurchasing today. and business joining growth morning strategy thank by strength the of Reliance, our fourth full us. of and in XXXX very record and with our I'm $XXX.X of was you XXXX, to year earnings operational of culture. Earlier Reliance's invested achieved safety our and principles our improved of our I'm in I in outlook we XXth we customers. thank acquisitions and In XXXX to like say anniversary. founded But milestones. core for this celebrated was our employees to more service importantly, our Reliance part a safety based common plus say, performance would stock. continued on you outstanding providing the million month, making to of happy each XX,XXX

your organic XX-year inventory quality you, center products unwavering the family XXX over also daily our thank our contributions the service our throughout of servicing to for be company. unparalleled value-added Today, processing. Reliance's and strategic in expansion commitments to live. Reliance growth improved our financial you achievements as and our our as and of delivering outside contributed managers for to in customer with communities across growth and our as tenure XX CEO, excellent to giving to is customer execution for quarters margin, on visible of by pricing XXX,XXX our history, in well countries of Mollins, tremendously made made would companies. to marked financial are healthy in would each like grown his Despite long I states business unchanged employees, conditions the that by to the you not our over you've acknowledge gross earnings, our metal of without XXXX. specialty in management course the caring America, done have -- which Gregg growth our margin, growth, not commitment and Gregg. in influence plus service the for culture Thank performance. and organic high -- entire but have field. XX-year accomplishments his We on as focus We our and was for US. through President many XXXX remains folks time safety founding of possible XX tremendous and field, profitability footprint, service Gregg's multiple enhancing record demand in largest by we our the only with service all culture North immense profit record contributions his experienced possible during locations and and of you customer We back Reliance the company in and emphasis of decade acquisitions and country customers

of record As dollars gross million. a margin of result, of generated pre-tax we -- billion $XX.XX XX.X% when income combined profit $XXX.X profit our sales record of and with record strong $X.XX which billion, net gross produced

increased business on higher on Demonstrating income sales. year-over-year business. margin XX.X% disciplined XX.X% of an and in pre-tax model our focusing increase of Importantly, strength strategy the year-over-year our

per new earnings of year-over-year a was represents and $X.XX share Our a increase full-year non-GAAP also record in XX.X%. Reliance diluted

we shipping conditions across schedules, decline vacation demand Turning experience volumes quarter, and remained fourth healthy serve. underlying positive demand to due continue end markets the the to the seasonal to and while we lower experienced we normal shutdowns customer of

from quarter sold our range result, of of tons X% a end As our the the to at top XXXX fourth down down X% were in of quarter the third X%. expected

average metals to tons per was X.X% steady sold remains XXXX trends our fourth of of feedback the processing Overall selling third quarter in in from relatively compared markets, price our strong. positive down outlook XXXX. ranging the Our with demand to on quarter with end steady

potential Our to of some outlook in increases. fourth factor for price the X% quarter pricing flat up

announcement of a Following carbon for did which flat-rolled products not hold. the increase October price

selling price that fourth compared multiple demand XXXX. fourth of driven quarter actions the quarter both average to and XXXX, trade months in increased price solid increases the of Our mill by supported nine the XX.X% first throughout

absence of the the the However, quarter XXXX. our in fourth in elevated of levels profit price margin three meaningful mill from quarters increases gross first pressured

recorded margin $XXX.X discuss per our along the and Karla LIFO reduced earnings gross $XX our share. the we of diluted expense profit with the quarter, of for for significantly an detail, impacted rate than tax addition, the per expense of million fourth more will short, share our In in which expected higher in resulted and rate the higher the further would of estimate earnings in of above LIFO higher expense million, XXXX. $X.XX than adjusting $X.XX fourth have diluted expected share but rate fourth $X.XX quarter tax in earnings per for LIFO non-GAAP than tax quarter $X.XX expected our

strong. to our U.S., operations market automotive, in in end through which toll remains conditions Mexico mainly Turning key the we very our markets. and for service processing Demand

orders at market for processing share, We to remain quarter and in expect abroad. and backlog the on to in maintain both continue times aluminum vehicles. was we meet equipment actively construction mill outlook in lead to as Aerospace demand and facilities in to continues solid. to robust our positive heavy content fourth increased steady increased remaining value-added perform continue energy extending domestically to and growing and especially for in well, in XXXX this also services and similar the compared Demand to focus XXXX. We related invest we our provide, with industry, market non-residential the levels the

said, long-term expect in semiconductor slow as outlook remains market. the XXXX. demand in we That Finally, progress have improvement our we positive and we noticed through demand in reduction and

in price. for compared believe for continue structural remains steel of first tubing, fourth following significant in mill As the plate, we the for quarter months number including increases Pricing nine price carbon presence coil. a announced stable some recent of on levels products hot-rolled overall on the monitor see to carbon we first where in for of and have relatively pricing during as products XXXX, increases pressure pricing, and quarter, up the a of quarter to stable the products to pricing were carbon year. though the we the fourth remain steel carbon flat-rolled did quarter XXXX will high We

aluminum remains per Our the strength sheet price plate in increases in products throughout which steel these XXXX. common to sales stainless Demand we Based remains continues continued increase into strong specialty be supply the fully flat continues common heat-treated saw and especially throughout heat-treated for products. quarter. pound that aluminum hold. We products, announced aluminum the tight, to aerospace XXXX was expect the of be trends, market fourth and products effective as plate strong consist alloy to recent X% supportive. steel in alloy March $X.XX our solid. for continues and became Demand for January Demand to significant price pricing for to persist for X% on increase with titanium aluminum well as stainless

fourth price Our relatively average steady the third increases products stainless in the selling was mills by quarter quarter. following during steel for announced price the

products reminder, steel a by challenge. is nickel stainless remained As which pricing impacted prices for

base prices and been hold. while remain pressured, ahead, times to lead short Looking surcharges have continued have

energy. strong positive demand relatively Finally, alloy supported and remains pricing automotive trends in by

capital capital is expenditure investments our XXXX million organic once allocation, budget to growth. to focused $XXX Turning drive again strategic on of

facilities to our continue customers and innovative to need. in equipment and our will support We invest technology

expand our margin. our profit to Importantly, to identify processing gross positively opportunities we capabilities, contributed which continue to value-added

with our the will pleased but selective are the opportunities market, of acquisition in activity. we remain We robust pipeline M&A in

in that and XXXX allocation XX% consecutive our and core acquiring for and acquisition services strengthening increase announced XX the diverse these All philosophy. servicing We quarterly markets, geography appliance of the in specializes and position strategy value-added cash automotive, construction, November XXXX already processing capabilities. logistics return LLC increase to primarily remain Holding, dividends diversification complement for toll of capital processing paid markets. with repurchase other and our of our customers our represents share end our Metals IPO. perspective, and well-run dividend today regular All transportation Metals solid From service, a dividends our shareholders' XX years aligns since products, businesses Our quarterly

of execution have management our and and reflect the strategy will extremely repurchases. excellent in strong to record Our and And business approach demand repurchases our the our solid in consistent pricing am opportunistic share outlook. made and in confidence in be possible marketplace. continue by results strong to employees and trust our XXXX proud the of board dedicated by our financial we I XXXX supported

continue our for Looking environment maximize keeping served, value the our ability end and detail. for safety markets over safe you results XXXX, important stockholders. Thank XXXX. remain in our in power review our closing, of in improving ahead, your most we quarter to all performance I the and today. In more our team fourth attention to nearly will confident financial aim is employees our through our now to while call the demand our to and must to earnings turn Karla we about goal for supporting improve XXXX time we increase Karla? applaud

Karla Lewis

Thanks, Jim, and good morning everyone.

billion XXXX, $XX.XX to billion XX% discipline of healthy orders Jim pricing value-added discussed, XXXX. our of as from conditions up focused with sales in processing the in record pricing of increased XXXX levels improved due as and demand $X.XX well that processed were our and Our

order XX.X% XXXX. were Net from our fourth of in per fourth million up average average to $X.XX tons $XXX.X decreased X% And increase quarter selling tons X.X% Our was sold our sold year-over-year, up XXXX our stock of in in the price quarter $X,XXX. XX.X%. our up billion, sales rose sold average price the while tons XX.X% were size and or XXXX

our gross profit high and of gross positive XX% of the primarily of XX% due sustainable XX.X% margin was to increased Our a of range was billion of impact XXXX. the estimated our XXXX metal profit pricing to near record $X.XX end in

expense compared share highest or gross an annual of third during $XXX.X impacted our calculation ever LIFO year end $X.XX Because and LIFO our of $XX.X estimate than the $XX.X actual per $X.XX quarter or each increased also higher metal negatively was margin that had and is million the at our expense with LIFO profit end However, of to we earnings annual record XXXX. we at million the EPS of XXXX. the in to million estimated the year diluted because prices

than quarter gross and along prices third of and fourth profit to $X.X This $X.XX was quarter fourth LIFO our our higher Our reduce in LIFO of higher gross or inventory LIFO XXXX, per that the margins that million price expense of the the in the gross reversed these million in generate the results generate estimated million LIFO was to in will of XXXX. metal This fourth profit significantly expense income increase than XX.X% periods When $XX.X our will prices earnings profit share. margin combined expense. with prices. decline lack and quarter and our XXXX periods of during when LIFO and $XXX.X reserve is increase, of declining quarter and costs LIFO metal builds in be XXXX the lower mill earnings increases expense future positively periods benefit during in of

LIFO December Currently, be expense XX, or Our reserve in XXXX. LIFO million, million somewhat XX, $XXX.X LIFO of an benefit $XX metal at XX, estimated as December XXXX annual estimate to prices our lower December XXXX of of at million XXXX will XXXX. increased $XXX.X with than income we that

we our inventory As and pricing based in quarterly prior expectations metal upon our years, will costs trends. update

As a XXXX. was SG&A primarily our of of in fourth reduction were increased sales, of to our net as in sales. with XXXX The percentage consistent XX% from net selling XXXX, expenses due which a percentage quarter quarter XX.X% of third quarter higher fourth the prices sales the and down

fourth In by our in our quarter non-core of XXXX expenses addition, $XX.X the the SG&A sale million. a that assets included gain reduced from expenses of

and $XXX.X record XXXX quarter our of environment. or Our favorable of compared to the $XXX.X in $XXX.X was income due represents income fourth pre-tax execution Pretax XXXX an to and million. in increase a of XX.X% pricing strong million million XXXX demand

increasing interpretations Tax we Cuts Our XX.X% issued quarter rate tax XX.X% as in Jobs in to tax effective the of deferred rate and was with our amounts to XXXX certain fourth with income Act. adjusted the recently comply

enactment effective to diluted the which tax of the rate $X.XX $XX.X was in as higher that tax earnings for per XXXX a tax in were Our asset one-time rate approximately the share of of of from our LIFO $XXX.X We benefit million $X.XX expense $X.XX for benefited currently million, result XXXX to XXXX from higher-than-expected a and in rules. of XXXX the income $X.XX from the by rate quarter in the share of new recorded XX.X%. Net attributable quarter was our tax resulting repurchases non-core reduced our by $X.XX, and sale quarter. of negative a fourth X.X% fourth be due to the expect

and For the net record per had of full record income of year, earnings $X.XX. $XXX.X share million we

in were $X.XX, non-GAAP earnings Our highest per the or diluted share $X.XX from up also in at $X.XX Reliance's XX.X% XXXX. history

complete million invested acquisitions value three priorities paid cash of of expenditures a generated we of resulted cash stockholders. to growth million capital of in our and to business XXXX. Turning allocation record to our our our quarter sheet grow balance capital our to and higher and million record used In the requirements, $XX.X XXXX business. $XXX.X $XXX.X in flow XXXX, working capital flow, flow execute fourth further in from earnings with million on investing cash the despite returning our operations We $XXX.X our in strong to

for to a repurchases of We dividends our and on million we $XXX.X return at activities to cost also execute $XXX.X $XX.XX share our million. with an total a totaling million stockholders. share In fourth our per in million of $XXX.X $X.XX stockholder average shares the payment stock quarter of of of repurchased XXXX, continued record

is net debt XXXX, at outstanding EBITDA in share to For an cost share. At XX.X%, year we pro billion XXXX effect debt times. XXXX, multiple ended $XX.XX per X.X a repurchased our ratio $X.XX share. shares was total the of average total net of our annual of XX, forma full $X.XX to debt December $X.XX earnings The repurchases XX, our was capital resulting December per diluted total million

our As the $X.X areas facility, quarter, we to strategy. executing credit end on providing revolving fourth of $XXX allocation ample us had of our of the liquidity capital billion million available continue all

regard healthy. are that we to we of remain first outlook, first expect conditions our the the with quarter demand in and in XXXX to Turning optimistic quarter business will

in a fourth quarter X% increase XXXX to shipping normal the tons As first of will fourth the compared the XXXX, our quarter which sold quarter. in seasonal compared X% result, of estimate to reflects the at be we to volumes

As raw pricing given our announcements solid anticipate of many current discussed, for the products, material recent costs Jim of we demand, effects fundamentals by increases and price supported and actions. trade ongoing

expect quarter XXXX we compared our to of price first be However, average the X% fourth in selling flat to XXXX. of down quarter the will

price downward these month not of are of XXXX. for effective and trended the our price of the many each selling As fourth average full during increases quarter quarter

costs earlier, at of of at we to the year currently estimate in million inventory we XXXX. XX, lower be income discussed expect beginning than and quarter December therefore the of the our As $XX.X first XXXX LIFO

to a benefit shares our We result outstanding quarter of earnings due our first lower $X.XX XXXX also number repurchases. in anticipate the of total the to XXXX as a of

result, a to expect to our pricing quarter extremely of XXXX. and $X.XX and with solid operational are the $X.XX execution the our in earnings which be we by range of demand we were a environment by per employees. As for supported closing, financial share in results diluted non-GAAP currently and pleased outstanding first XXXX, In

sheet activities. growth our to and continue return the Our executing us with stockholder strong balance foundation provides

XXXX to call and current and the ability at prepared up remarks. the reflect we Management and XXXX for and time, in Our would That you million Thank repurchase healthy open operator? like our environment. perform the first in our Board our the our to questions, your concludes the in attention, this to business our in dividend demand outlook pricing stock and of have record that together $XXX.X of of quarter XX% common confidence in quarterly effective our increase

Operator

Matthew is Sachs. Korn [Operator Please Goldman ahead. Great, Our go Instructions] thank first from you. from question

Matthew Korn

watched question a like then a macro for quarter and a strike, fourth you, looking bit we growth to there to of to signs below steel last buyer first they micro and prices of was the the holding XQXX of mills, been have question your and in on in and key little top still is a way. any expectations in into that And see now, the Question given according on softer going they characterize the at buyers I'm particularly of normal mouth? We decline, that heard seeing. kind into seasonality. for expected, Was quarter. I So you're that the lot phenomenon the your you the bit still to little optimism it level years, used demand the going little are is, a out hand even do right double-digit a couple and we've

Jim Hoffman

Our They our like We be seem coming pay always Orders need. what change positive. really that business kind in they much. of are customers have. doesn't just to attention to

know. customers to telling reflected just the As what of us that we far the we don't the the orders on going and maybe a those don't, -- they optimistic, day-to-day but in pay We as us we do, prove are, buyer we our conservative nature, just script out. strike, by really our guys mills what try, it's things, that's we a don't but what in it's -- said give and we're were think see attention But we are kind there release, and basis. of that's said one we we're

Karla Lewis

is you directed side XX% the comments flat-rolled Matt the total of carbon remember indicated those dollars. more only think a and I as of about flat-roll our little sales And were toward business,

and folks some that see spur think some we enforcement of So increase help to may buying the announcements recent start again. price those we of of business

Matthew Korn

things are ask the there capabilities, more And this the mill that expanding Got the of of in year, is painted In in in higher number capacities. your you the been types expanding of things question. Many high changes let like of steel, really the over see or to whether processed steel past come or availability regions if flat on, these prices policy picture as wake growth Do deeper that. reach to where any loans, we've the of risk they a of US, has business seen it, true? kind seemingly feel coated one appreciate or particular from underserved broader these me the or potential. mills steel there bigger the

Jim Hoffman

all all and again serviced, big good, all a customers what They all run running day-to-day, for to of coming don't, companies, the online. again the smart those I is we our us. -- and customer will know where is capacity that be folks. week-to-week, them just business them. have they good service We those We're we we to want people of month-to-month for listen that's very see them, be they good

see domestic of call are don't of realize like really that, coming processing board and a risk lot ours, positive. I that customer it lot are as of our and So we any customer partners you've And those do their a when to on actually profitable folks they we do busy. for we our we -- probably and

their because for to they So make applaud there us. there good we're we decisions be be going decisions, them will and for they and

risk. see So don't big a I

Operator

question from next from ahead. Our go Jefferies. Martin is Please Englert

Martin Englert

XQ if think could more you is maybe year-on-year past here far as so here, on wondering the order what could implied and new by you you're as what or seeing into recently, entries month lower which Just be over well with volumes guidance? I driving about the believe talk so touch

Jim Hoffman

changes understand that a run I question it can promptly, good can nothing the company month-to-month. days. I pin daily. just so have day, again -- There's good really your We day-to-day, week-to-week, We point. If really we not and

Karla Lewis

slight decrease, they mean as are mentioned customers you our earlier, I overall, volumes numbers still and Yes, last down Jim think January out, MSCI little from bit QX'XX I the year, optimistic. a for the to even little I January mean, were lighter, 'XX, were with but and a came know

not of pricing market they positive standpoint, mean on supporting, slightly. demand, there, can a Jim is as but even I there's indicated, the been we much think very and still pricing macro from we're with busy, maybe I busy general environment, down levels year helping this in the concerns maybe ago, just as but are demand our little well in as were, not as day-to-day type do demand out uncertainty as a and buying customers the

Jim Hoffman

another it's as And don't different of to company. company for it like we time even at a our and many and massive going group run market We the have it market same we diverse do they markets remember a difficult we this markets. my customers is it's every that And us run different up lot look thing into really time. Martin, have every career of customers hard, way, very times and many has XX-year at market all been things up, in one few down same been and at has the to

we So as as our obviously part much -- can. strategy we like to sell, buy it also we and as companies out it we've we of the spread products the got

So -- things of market our up. as we're things dramatically less market when in little change -- a the target the be could of part

Martin Englert

tolling provide an your appreciate can just I you Maybe, detail also that there. update there. on thanks. if Okay, business all

expectations kind You on year in initiatives and automotive some had of guess the at and volumes the past of strength maybe continued within you're as prepared and future that year, of touched just this seeing this what and the start you've progresses, remarks growth on review there? briefly I

Jim Hoffman

do continues that well. business It's business. for a We Yes. It to like us. good

nice company got invest, to that. continue we've locations Mexico four with and expanded in we've We

share, up, of of CapEx the goes or our number, lead when kinds you, be a that's it's particularly expand and that our is ourselves last continue offerings the one We into have picked still couple you and that's And units SUVs, when SARs -- to in and business, type one particular the lot we we of got Karla really, for of that busy a trucks going, and this happens design at in aluminum a with a different and down, because -- comes up of being have over kind will, if light the we kind kind relationship of which as high of it's market. build dollars, exposed years company they good and that's automobiles, really their up -- equipment all the that designed a the spot. report the number they've sweet what company great a and it U.S. capital-intensive us again of mentioned extremely has and to

William Sales

we're about new All the And also acquisition, Metals. excited really

So to part that's business. of our going tolling the add to

Karla Lewis

increased processing that to ownership Prime, the of toll our in quarter our Mexico business of that. And Acero we the in also have addition fourth now a we All during ownership Metals, XXX%

in increases seen also fourth have the so and of quarter in we've quarter in January to of sold we versus and for tolling well not of opportunities growth sold of fourth them -- both far include the report and 'XX we tons that our out that tons to and do So, 'XX number of compared as the point see number the just also our we're tons year. any up we last

in the share continue to us forces. more made So aluminum because doing that and picking up -- there see investments primarily especially with market growth the the we've of we the

Jim Hoffman

really the or remember, aluminum. isn't be base of producers the factor, in It's Yes, steel whether customer our another business, end user. it it product, that the

So customer. customer and that's We're relationship. their they kind a are our unique of

Martin Englert

on Thanks touch detail volumes in now. know all the for are it if all, don't at your there. tolling you'll excess reported I but of volumes

Karla Lewis

and are, they some time. they for been Yes, quite have

Operator

go Our Please America Timna from ahead. Merrill from of Lynch. Tanners Bank next question is

Timna Tanners

Yes, And morning, happy hey, anniversary. guys. good XXth

Karla Lewis

you. Thank

Timna Tanners

a Okay, bit little so wanted to more. I ask

that performing any a could Matt products your there the particular if could specifically year-over-year and areas at improvement, if First, better on talk And you question the year-over-year a about little in I beams. are it are get bit worse little just color? you sequential more give or earlier, asked you're but that while more plate carbon key bit

Jim Hoffman

they've us. the and want it's been like good it what ones. the Bill, are that where Like the said market but of as the little and doing that's worse, that some do we business, we're and so does semiconductor to We is. point remarks. --? okay They're at The better now, at right rest markets good and say have far better we It's going as now legs like a where -- of anything like kind for forward been right or they've and real well the going is at aerospace you then business anticipate levels, we're about I doing one levels and it's -- slow not good in we anything getting

William Sales

we to continues said, outlook we as and fast. aerospace all those strength be watch continued very lead positive build and backlog very our times Aerospace rates, are really for

Jim Hoffman

your was question what Timna, And the on beams? plate and

Timna Tanners

construction those big beams non-res markets products could market? more within if plate, and just that Just you and a on I and a for those little color more guys, is you wondering in bit on color provide was pipe,

Jim Hoffman

good and Yes, those the rest that of, haven't also we're grow seen all is like of in going markets also if infrastructure chugging there kind down. to we are non-res -- are all know, so that we and Americans as along spending are we you The to waiting falling see all fix yet, for bridges those us. we're

absolute -- from stock we is being don't semi no in shipped the should the which filed really that that that China there you as into the in were direction. business in, we're filings and about a coming good it continues American into as let some that far know, by and U.S, and hoping some back we're to participating that. come, the -- product appreciate suits appreciate producers on on So but go Canada see cheating will way, We'll

fair, However, happen, and domestic will a be, I know a -- participate what's have but fair no that's idea will our then field a that the fabricators, have or will will what's more be that what to fabricators playing of penalties that don't does certainly even if happening we in. -- findings -- have more I

are a nice because for little the long quality. now with right an is they're right I now. And for so So shut it's is that right -- of market uptick because pricing plates -- an they Korea that an -- bump. unusual in, flat really is, on. it's last believe figure kind little coming being uptick a -- well, us give got shut could there import out plate Plate the just out to of I what product good us, goes now. out year,

to getting That last up. long. catch they're Now can't

We're there offerings and the be may do XX% really don't it's but partners. participant the we know, fans huge the is of down I can you not to participating attractive. all count certainly take I what import drag, domestic don't there see we're still that a So we in Reliance little not this get see, pricing. not because pricing on for not

we're support to So them. to continue going

to So boring again, because it be again answer just of continues a kind fine.

Timna Tanners

that. surprised didn't know guys while. a mention in And I'm guys in involved you were you I

part it mentioned you ago walls think, it initial an might again, for you? the looks way, of phases now like and that that years opportunity be tubing I under was is getting

Jim Hoffman

to -- knows. the do, more as I as going much know nobody what's about wall about happen you as to

of some decide call that into and sell is And I on we talk So that pieces they if build we that all of flight in past. in to their people know metal into we it. for the and I the metal and wall parts tubing certainly that it, call goes Reliance they going have hope will

Timna Tanners

on to XXXX. questions Karla. switch ask want a to just and I I expect of flows could cash for what couple to

You to then will capitalizing more down kind the come you is of or of color us capital Any particularly end It on release this give should QX. working see a quarters. can might couple they in of a year. signal of by buyback, you high market capital last kind and working you release days in the weak had inventory that kind then on assuming of sounds what on stable you prices? sharply a of pretty pretty some big the expect came of And

Karla Lewis

Yes.

was, cash million off strong standpoint and the higher year the in a for XXXX, the capital requirements, the you had cash Timna, we with hi flows $XXX flows, that on price first as from metals. So, primarily working of commented

the little that anticipate we see a we in LIFO given shape, level did would year guidance our on from have So, is what price than but than at decent end our our higher things still just is a And higher them. we inventories little in XXXX. goal and inventories, a a relief, prefer we standpoint to

this do relief on from quantity a standpoint the we year. some So, anticipate inventory

really than of be not expecting flow a stronger level anticipate from is looked with So, really $XXX last we're where projecting of being can our to being way million we the at at low opportunistic we in a guiding gave make. volatility. lot buying higher consistent buybacks, trading level, approaching looking being the than are toward fourth in certainly year, and we're of cash risk the XXXX. shares certainly, back of buyback lot what it but a we're would the most From Reliance the or stock us standpoint, was that we at acquisition opportunity, was quarter, there we a They that

repurchase to but at needed for to think So we level positive shareholders it's a the pleased shares very we that stock we basis. on trading see we're long-term our were our able because there,

move to advantage So we'll we at of took as that forward. and we look continue opportunities

see his in bought acquisition continue of comments. There to because year. back on as continue capital other to the out still we of we think, year. we hints that as execute that mentioned more Jim did of our first in this I I move maybe allocation forward as stock see again didn't increase opportunities some saw we are opportunities to we expect last just Dividends, comments we levers, we quarter but opportunity for there, all

have year for to we we're because our lot and So continuing our a customers. that at of last good business, to highest shareholders continue the our invest grow expenditures to do level this and then high for to year happy we're opportunities in do for capital see more budget to a we're

same approach we way the buybacks, doing. have we'll the been share So,

Operator

from is Please Deutsche Chris question head. Bank. from go Terry next Our

Chris Terry

questions. Hi for my guys, thanks taking

Just two from me.

flesh to the capital just management. Firstly, out

buybacks I probably you just in the can the dividend that basically total Karla well. dividends understand second willing split as of -- to income further, the comment amount XXXX, allocate. versus and it's terms company bit little close of buyback a to the you paid buybacks in and Just net Maybe the to total, you opportunistically. use had, for the question you on And of

the Just down years, we years forward to glide the used level, XXX level. XXX about expect or point it be on to a below the CapEx. think Thank we that Should last how the you. that you level over eventually few CapEx XXX two do around ago

Karla Lewis

Hi, Yes. Chris.

high and capital So good a of fairly dividends. first but on standpoint, we amount we and did markets the allocation last sure execution kind returning off kind a type shareholder it the was on buybacks year stock. as best-in-class or above We of return between from do out split cash Dividends, have we of a think our not that. formal for make levels have did policy that is to try yield at we're -- we what commented,

long-term to the not rate quarterly also have that We at don't in dividend. want and because is sure want a or we a sustainable do have paying start never dividend future to level make our reduce to

keep the at execute at at buyback, trading. And that's how stock's to the continues look and So increase periodically to the as but it's grow, able we're which to we share continue rate We look on it our where with to of level. that there have other we forward, as going the do we'll We opportunistic. kind mentioned company we to manage dividend that. sustainable dividend then opportunities really want

we the we the more part value-added want to really then we our us. our a of So think been where have it has makes to CapEx target, a which can you've to on we're standpoint, the we the we gross range, for think provide be the flexibility sustainable and into processing able our that customers. value jump from -- And sustainable market, most don't profit sense set margin improve doing, due additional that to and seen

to opportunities for customers. this can and so how we and out our more and some do work are that able people closely we for get customers customers their of So we're our for field existing in prospective paid very with always looking

And with of operations leased we those. If expenditures the over operations are taken have some higher opportunities levels prefer there also we've in few businesses been of for so the we've center years, own our of our we last to capital seen, the at -- facilities. good advantage of

there those we've are that and ticket and different of $XXX different million, invest equipment there out bigger upgrade. bought also with out of a of that in CapEx continuing we're them are indeed leased we but So again lot in XXX properties for to were -- doing facility operating locations items some and items, us, all plus XXX different remember there our

Jim Hoffman

Yes, Chris, is Karla right.

tolerances, really we'll they and of changes Saws we're being they we ask, -- known and the than They do and the business where their X they kind lot opportunity bright our be of Karla to equipment going ago, makes base on customers shifting to to and things -- of And when customer Our just amount type out years different it, of technology something we've a an ask can got we make and seems better a and when are when a they said us, more. of frankly are it for are do money then listen. more are offer now the -- value-added are asking us operators are to is, in into field. sense whatever like all they get plan safer, they tighter they business faster, see were like we're different hold that and we buy. and lot and certainly for that we they a buy, we lasers bit

Karla Lewis

And to million I question $XXX mean, Chris, your longer longer an term I level for back reasonable. is average think term coming CapEx down to probably

Operator

question Chris Instructions]. go from Please next Longbow [Operator Olin My is Research. from ahead.

Chris Olin

shutdown activity on the view quarter, you trends, construction did -- the Or markets? your business given particularly Curious, of government kind the business? that during on or support the short-term the abnormal any fourth by in any was shorter-term stores see of weather either of kind impacted order could've order the the

Jim Hoffman

they and Chris, of part if can't is on because our eventually some, weather Because to or or blame we need, get tomorrow what happens they going product today never we need or don't on weather -- it shutdown business and we it. -- the government something the or can't control. they're or that the

may we timing month-to-month -- may eventually or timing if it So sometimes a over but moves the move, comes quarter, the back.

but that to control we don't, provide the flow all bases. really shutdown, that not really don't we -- the is of good customer weather uninterrupted our that, we we do product -- we and can control can things don't we an like government on So

to. back they able open material the when -- to get when or do we'll up receive So it they're

a been sometimes that but know be we've a couple could out long it situation don't delayed So is, bad of the by days, week, time. I how

So really doesn't change.

Chris Olin

about like talk big inventory I impact negative my can And of material, consumer say, canceling any you the if aerospace? something question its more Airbus management just curious given that's type aluminum or on, I'm that? second plate the of of market a risk I program, news you specifically, guess any pretty about is, anticipate guess, little bit a AXXX

William Sales

market, capacity right or it's We positive. where at look being on -- Long-term, and some tight. of plane the that aerospace extremely with happen look supply take And I that's will we what are, market but cancellation conversions built very if back need that of and build at overall now with it's mean obviously really some the lead you rates, mill the the to you our cancellation, eventual will look planes. other if out we at times the when plate side, look don't at backlogs again, future,

as at right positive. quite of strong. in now We've on think, outlook continues to the North look maybe and if we aerospace wasn't the had be very America the strength the I tremendous side, -- world So rest

Now world improve a the we're the seeing too. rest bit of

of outlook positive all on side. to that aerospace real a So leads the

Chris Olin

I of your business aerospace related? percentage what is Can now ask just

Karla Lewis

probably the On around dollar XX%. it's basis, sales

Operator

Our next question Capital is from Phil ahead. Markets. Gibbs KeyBanc go from Please

Phil Gibbs

directions, bit on we big of in particular, Sometimes that healthy noted budget color projects of little a little maybe couple this a in a but pretty more CapEx year bit any times, more, have, number. some again a the has to pulling lot and problem you there? which in I talked your of pieces is in those customers the but good you processes of any about value-added notable a know

Karla Lewis

buying of leases. Phil, we as where I mentioned, a out the facilities couple are think, got I we've

were CapEx. up takes to year business down in lot growth a of chunk that Kentucky So of aluminum that the we there. a toll processing our support announced the last down expanding our of aluminum -- We

a of a carrying for So spread year, item was year really last this it's out. equipment over that lot big into really it's and

Jim Hoffman

well million. over are, tube all clients. lasers big Flat are, mean, items. I are $X $X million They're bigger Those lasers plus. ticket those are

we take seriously. over them a So very

that number. into we But all would large see guess a if as amazed on up add And So up, you'd thing. of that line that big you roll that CapEx be front-out many that our I they have expenses. the lot have, how those we they're events are of items and all

Phil Gibbs

what exactly first share your just there? direction Karla for number some Can quarter. that you Then the had give count is, pushed think us I you us

Karla Lewis

we the gets our added XXXX, just more million actual and end basically of at outstanding shares to share. under X we're generally XX shares million just about so Yes, have at over shares our earnings that a or diluted per

right around XX-ish million So shares.

Phil Gibbs

I beach say just the out And hope on you're Greg if helpful. want you're that's to there, somewhere. Okay,

Jim Hoffman

boat. sleeping, he the in is trying to that get probably fish He's

Karla Lewis

Thanks, Bill.

Operator

from Kenyon Tyler and from Please Company. is question next go Cowen Our ahead.

Tyler Kenyon

Just wanted touch a little on bit. to SG&A,

seen have So some transportation costs. inflation labor we

curious of some there, abating, the pressures you're on seeing can that worse update Thanks. getting and is what you that Just if appreciated? inflationary

Karla Lewis

our in Tyler -- were significantly the profitability one and in on Yes, thing pre-tax so on we especially earlier our seen think I commented SG&A, also compared teams are years, but very that corporate operations. is XXXX out our and structure in management just to prior in our office all performance-based, not here compensation in different of our levels, up XXXX had as you've that levels

we 'XX, have. a in levels income to kind problem drove our good of pre-tax which elevated compensation up that, it's our think, because expense of So,

with So, bit the down 'XX might we expect as and some mill continued having a allow gross our normally come do. not prices consistent though and high even that margins of that raises expectation a potentially the comp expect levels as percent to to some profitability in pop get could come normal profit XXXX that us We expense up we We in increases margin. down. would of

last out still and build last hire rates for us there the had in big we increases it's a So is transportation that drivers that to tight did third-party our a we're year. also up expecting for ramp not some we market then I there inflation and think need year, see costs, the to you carriers. But

Tyler Kenyon

Great. that Yeah, thanks color. for all

the that to but that just seeing at I in it was pursuing you the -- the M&A angle. aggressively you're guess earlier, I question last think still alluded So -- and on least, growth opportunities had there I other, out

your provide in you update now. more product expanding of to could perspective? terms valuation seeing, Just -- and positively category terms in right you're curious, with where what are you us opportunities disposed end What or of market kind be reach an if from an of you seeing would

Jim Hoffman

have companies we'll if accretive. planning and things talk those and you pulled good coming not and buy like only we have can't trigger a involved, there. lot it don't our change Yeah, did -- plan if buy environment. of There's last to have we something comes about year. and they're to that the you fit with you call reach a -- let's our lot game immediately make good succession looked They of of opportunities place, to -- like on are We culture. them work target-rich way. at M&A, have We how the don't so to we They it look to have people the We a three. certain We But fixer-uppers. you and to to have kind you our point. have when many, right visit chance money in they we -- we see There's at out pretty it.

of is opinion. my years Over the couple last this

these answered business, don't because dad sell a seems kids think been like it, family the talked want generational owned ran that and I it to companies of reform want think. I we kind kind of launched, that thing. lot for to of the Grandpa tax that to that's companies started kind of out it lot there, the part they a be are of have the that of questions of

a with to may me Karla other were, are than doesn't more a sometimes down say, there hand willing week kind there not walk but there's the more out their several engage come hall doesn't hey by We worth to sell guys. companies reasonable off So think a price, lot that, people of these in think look, lot stay at more than and us and willing are of we there. There's busy.

busy. it's So

Karla Lewis

them right upon for year And year is other for out that. lot and I future good look try also think and was then based normalized understand not level that for over the understand what of think we on a we way companies value valuation, value a we we have to the good really companies cycle and changed XXXX there, a earnings of It the was Reliance. a that. company we we

evaluating So, and about Tyler, consistently when earnings we we we're we to happened targets. out at really sharp look And there specific are and 'XX enough asked then other any there understand, also our understand created potential that from XXXX believe opportunities. that strong you We if some are buyers what companies. also in hope still

type we add do companies. the but at You there value higher Jim not. for every really, or it out about. of the kind think and if right for specialty products know, higher companies other fact mentioned fit that the it's what and than We we look look good Reliance opportunity We like margin that's determine

Operator

Our from Please go Martin Jefferies. next question is Englert from ahead.

Martin Englert

Thanks.

that today fourth how plate. Can of one still versus maybe Just the you trends persist? inventory the on there's destocking Aluminium where any kind compare and whether heat-treated at follow-up times they on quick there, lead talk Aerospace touch in about were quarter

William Sales

mean lead Martin. out moved to happy domestic we've XXXX. that the The of gone is The have completely mills. -- Yes, through seen This we've some lead Bill. sold recently, times out times, just do one I

market strong. type So, world I the on the and the of be receive mentioned, supply side of not as that rest we're the in continues as the to that we was side

We are improve. seeing that

So, we strength to continued see move the are aerospace out on from those suppliers and those so starting again, lead side. times

Martin Englert

And that. trends Thanks for inventory the seeing? there, are you what

Jim Hoffman

market is There about destocking. in talk the some

or it's there not the it. position moderating was I of in in terms system less the that really of where inventory think was in business. more couple an at was our the of that's or destocking reports that level, really See a OEM the issue

situations standpoint, we're to that's of from inventory our think in good I a specific overall couple shape.

any not overstocked means. are by We

Operator

Thank I'd closing Hoffman to turn for you. back like any This the session. question-and-answer the Mr. concludes to comments. floor

Jim Hoffman

to to your Yes, very call again, once and for thank like today. and commitment much and for of on customers thank our suppliers I'd employees your continued and you stockholders participating And relapse. the support

and So have good very much a thank you day.

Operator

This teleconference. concludes today's

for lines You at your you may your time. participation. this disconnect Thank

Reliance Steel & Aluminum (RS) 21 Feb 192018 Q4 Earnings call transcript