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RS Reliance Steel & Aluminum

Participants
Brenda S.Miyamoto Reliance Steel & Aluminum Co.
Gregg J. Mollins Reliance Steel & Aluminum Co.
James D. Hoffman Reliance Steel & Aluminum Co.
William K. Sales, Jr. Reliance Steel & Aluminum Co.
Karla R. Lewis Reliance Steel & Aluminum Co.
Chris Terry Deutsche Bank Securities, Inc.
Seth Rosenfeld Jefferies International Ltd.
Timna Beth Tanners Merrill Lynch, Pierce, Fenner & Smith, Inc.
Novid Rassouli Cowen & Co. LLC
Chris D. Olin Longbow Research LLC
Philip N. Gibbs KeyBanc Capital Markets, Inc.
Call transcript
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Operator

Greetings and welcome to the Reliance Steel & Aluminum Company First Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Miss, Brenda Miyamoto, Investor Relations for Reliance Steel & Aluminum Company. you. Thank

begin. may You

Brenda S.Miyamoto

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

Gregg J. Mollins

Thank continued million the experienced of quarter. with of you, today $X.XX you quarter, the resulted through first and XXXX XXXX, Brenda. record momentum financial to an higher pricing and positive demand first Good morning and tons joining the results. throughout for quarter pricing us by We selling driven quarterly sold. record of fourth exceptional building prices X.X quarter fundamentals sales billion discuss thank volume in the had in This of our everyone

profit generated with gross of of our gross along history $XXX.X record in margin strong our sales XX.X% Our quarterly profit the million. Company's highest dollars

Section have April, continued for of drove sell. Strong X.X% Section demand end first early share, increase actions high produced range execution with diluted of reform XXXX, share the our strong compared into environment in selling quarter the our resulting the of in at a managers in pricing highest an activity company's in product $X.XX XXXX, of by the quarter, to an near and of XXXX. in the quarter significant steel products. which of been record. field, pricing our second per positive expectations. price highest earnings fourth our per quarter every benefit the average diluted tax accelerated throughout If increase of not remained the XXXX expected March, fourth quarter creating earnings supported our compared quarter the price have of in along metal the Continued on very for we the our XX.X% nearly especially movements the business history metal XXX by anticipated on would strong The first XXX carbon to the higher in most our environment, from quarterly exceeding $X.XX

We customers first be positive metal In a our and achieved pricing. quarter of increase a sold normal in over as aluminum of seasonal activity tons the resulting the from Russian quarter. Together, to expected a first and of sanctions experienced exceeding XX% concern price these gross with throughout result factors range. certain very quarter. due we we level, of now we volumes addition, are began drove in in In entities to over an XXXX, advance selling the increase have in receiving prices increases inventory. significant improved in environment higher increase amount the what FIFO already shipping a certain of during month a combined into in metal of as our the demand average to demand remained our favorable our ability pricing recent limited these February believe quarter margin pre-buying increases sparked fourth The increase our high-end second cost rapid believe environment profit the March, on the meaningful We availability. of strong about our pre-buying, our

price I than mentioned a steel notable XX% which more most As the represent our products, in of carbon for March were little increases sales dollars.

in our in quarter enables provide hours continued operations our the about with on churn strong we or remain the first however to industry first dollars were consistent effective customers, with well positive leading We rate generate X.X environment. time gross during comfortable due based to We tons current use often achieve typically which quarter cash margin inventory delivery less. XX management, Through position to XXXX. we an of able activity to times capital generally profit build in from our inventory from flow us seasonal working as $XX.X our of inventory just the improve to excited are levels levels, maintained as quarter. as earnings cash fourth our We

with capital growth. $XXX and continue million, to of facilities in to investments we strategic both Turning make allocation, drive budget XXXX to expenditure capital our equipment organic

and of geographies products quick pipeline our capabilities. market. turnaround well-run expanding on diversification Returning remains continue products capabilities years of align processing capabilities capital to and that continuing products, several DuBose high also Ohio. fabrication, & Energy Cleveland, an provide stockholders sales value-added Reliance. of metal to Fasteners acquisitions Services and Energy returns. on and provide drive and To discussed, and maintain in focused As Carolina our our $XX.X The value-added at investments of focus DuBose March over are X, its contractors. our to number National complement ability were and we XX, processing levels of quality we affiliate, On value-added previously and businesses Parts of With specialty metal year Clinton, combined our the all in Energy quarter and the first acquisition look accretive we to supports utilities, industry, grown The well with processing DuBose DuBose gross our see acquiring and growth in the companies the profit focus in our The for targets trend. remained our global attractive our also are to with component strategy of these for services fabrication in manufacturers June businesses fiscal of high further DuBose their that earnings forward net of to a for uptick North products and/or key past million to services, which higher. to specialize distribution supply growth, acquired stock that robust we our opportunities coming National potential acquisitions DuBose Machined XXXX, XXXX, the outstanding including consistently with niche and have increase the Fasteners drive ended bulk related margin nuclear growth customers

or million of the increased per $XX share, first management Effective share. cost in $X.XX stock quarter, quarter of XXXX, During confidence annual an our dividend per regular an $X strategy have and our average board and of repurchased for the underscoring $XX.XX to XX.X% the of we dividend quarterly per by outlook. cash we our at our team share

have inventory milestones dollars improved quarterly record highest levels by our gross of We achievements. a the sales, extremely in performance pre-tax times quarterly in remain profit and momentum the XXXX. first IPO. quarter execution we marked Their second years another dividends company XX field. that managers control We into consecutive of third resulted our $XXX.X record discipline, management and and and through quarter. pre-tax and has dividend the income by year income surpassed by start XXXX of to million, pricing yet In since in proud quarterly We pricing quarter quarterly generated strong dollars increased very our expense encouraged regular our continued summary, the and demand significant only strong XX are paid the the the for positive environment

increasing to opportunities our value in uncertainty now on While the in there hand conditions. comment confident Jim to focus market on our further a Jim? call is further environment market, over I some ability stockholders. current to with and the the maximize will in we to still our operations are

James D. Hoffman

and good everyone. Gregg, Thanks, morning,

First off, to folks done. well in in thank contributed the achieved to quarter. multiple we I'd Thank a the records job first who all like the field for you our

and to their pricing as which our certain stainless will and well through outlook operations address we products related continues Now, I'll products, carbon on as aluminum then and automotive, toll steel mainly the our and demand alloy strong. in Bill steel processing for markets. discuss Mexico, for our U.S. Demand end our key and markets. service end be

automobiles. will investments We and heavy for including remain demand of the demand Demand well to reform to believe federal this from the the year. experienced has for been and increased their and equipment activity continue investing as improved. and infrastructure spending quarter are construction increased seeing quarter, the In to remain to We to are our facilities strengthen. particular, with XXXX. is considerably market. continue on the grow continuing we primarily agriculture shipbuilding, equipment industry from growth supporting their XXXX rate and in reform first into wind potential customers the volume that that we improve has are manufactures includes first we both in which and industry, barge compared low transmission uptick increased domestic continued who've equipment trailer, Our we in fourth optimistic market spending We tax steady spending market levels but for focused processing the spend. still in construction believe important grew for manufacturing, throughout market, of railcar, experienced tax this the Accordingly, will to contributed to heavy this at infrastructure, end non-residential and capital Demand tank in content due remains quarter infrastructure heavy upside up truck XXXX. is towers, experiencing our carbon aluminum clients in volumes a incremental by aluminum peak levels in to in optimistic support heightened improve below

increased this volumes the support to has in our well-positioned gradually which products sell as we We continues for to existing market natural recover. gas, oil market, is are mainly Demand strengthening. footprint end into been and energy

and this We market to see well-positioned lead Completion also to activity, activity growth in growth to rig demand support as counts drilling times been increased with extending. continue gaining We're strength. has continues improve. mill

let's activity coupled our during and There months. the talk steel pricing was strong with from Now, we tubing, due well levels for demand of most lead sell, extended December of quarter been volume announced XXXX extremely represents for accelerated the increases strong for the first XXXX products has plate products ton $XXX quarter, carbon over pricing into up which steel Mill a which per pricing. price carbon XXX products. summer to carbon the with the environment about mill as time April in highest steel multiple Section

the receiving result, before of the portion able As pass price into we to during first higher announced onto a our a customers inventory. quarter our cost increases metal are

ahead, quarter products second pricing in strong for continued the products given place. of Looking will increases for at we levels on current the believe XXXX carbon remain fundamentals potential in with certain steel that the

levels will inventory. our important However, gross we higher our expected that second FIFO current to do we in be the also to not from is first strong increase It's metal into of margin compress profit anticipate cost as in as rate the the receive note quarter. quarter as

markets. higher impact improved momentum pricing comment experienced for trends quarter. forward. first support products Bill? our the subject pleased we quarter are the and help Lastly, today. to customer alloy first second non-ferrous demand going with pricing in maintain the we as our activity increases pricing market in have activity Thank the very outlook had I continue during the hand through over levels Bill the summary, may and will both on further any We in positive quarter. potential quarter call for believe that we the we in In to in further to energy your you attention now pre-buying should

William K. Sales, Jr.

Good Thank everyone. morning, you, Jim.

positive our since outlook job. also review and folks into. planes strong to key as customers. of and market would thank grow of these strong presence rates the build many steel Global the activity in continues demand for plate start field the markets well throughout by like products The for market improving. I we execution I'll We to has our as strong Excellent first in market been and been aluminum in First, quarter, activity very aircraft now orders semiconductor rapidly most products been and including in to our for the for Demand aerospace remained quarter. sell aluminum our the industries stainless the fourth as share increased their the in for has Aerospace year. notably this demand for defense we lead the continuing have once our of improve. XXXX. primary the supported improve the single-aisle maintain was times in compared have extended are overall quarter area and aerospace increase commercial demand well-positioned global first to our pricing to aerospace again backlog feel

an our As and to the market We on from capacity our support a process result, in China the outlook customers. of we outlook semiconductor and trends demand. maintain XXXX for demand South U.S., customer positive the are a in Korea strong expanding based solid in in encouraging existing

improve. month majority the the aluminum heat well into to as products as price believe pricing, increases especially end took treated specialty market We sales for titanium heat-treated April announced also the effect the at on continued and aluminum plate stainless of in aerospace take price our been to plate increase to steel have The of for recent of consist Moving Demand that effect the products heat-treated market will this have by mills. products. fully has aluminum support. supported

Looking have times pricing increased Most common markets. quarter to continue price sheet lead increases fabricators to alloy products products are market. now first full support that for end allocation. during of a are second the to sheet will ahead the price the aluminum Demand and alloy the spot of increases in that XXXX, Conversion quarter, and sold significant variety extending metal on of optimistic support we in these for with our Midwest common aluminum strengthen.

aluminum which these products in pricing continue for with aerospace strengthen are quarter. to that selling contracts long-term pricing – the prices. of to about the market, business second we big expect in note We to one Please half sales is participate our piece of the big selling our where

products selling aluminum pricing our of follow market as generally, result, a average As as other the will prices many closely sell. we not

was kitchen stainless our Finally, up market and demand for sold equipment, in which significantly are the flat end quarter. construction first steel products, the primarily in appliance

ongoing price as driven steel a of rising selling XXX primarily input well by result price increase costs increased, Section the mills products as stainless as developments. announcements average also for Our by

price steel supported the market demand that, attention Karla in review financial the increases first Karla? May increase over recently your for strong. quarter I'll for to call turn to Thank and the XXXX been remains all today. now results. including and you, far, time announced So stainless With our the have

Karla R. Lewis

good and morning, everyone. Bill Thanks,

sales with XXXX XX% tons $X.XX per our of up were up quarter selling XXXX, our XX.X%. to quarter tons our and were up sold sold price our sold of a of XX% from the average up billion, tons and fourth the up our first X.X%. tons Compared XX% net price per quarter the sold selling Our net with X.X% in sales first record average up at XXXX,

was quarter first XX.X%, of and quarterly up XX.X% dollars margin to exceeded our which FIFO XX.X% XXXX record range On gross the XX% the million. XX% end of our from high XXXX the in Our quarter in profit fourth first the margin was of of gross profit XXXX. XX.X%, of basis, $XXX.X at in estimated drove of a gross quarter profit and

increases, As are of higher to inventory. metal receiving higher exceed may we our range prices our of customers, we've to in our cost the pass price explained able previously, mill advance when periods in we on into

metal during XXXX. LIFO valuation charge or first of inventory of quarter in in a quarter, a $X.X for of quarter $XX As of higher net we result XXXX $XX quarter million the compared of fourth prices recorded the first million expense XXXX and to the the million

million of the announced LIFO current to anticipate but our some significant price our at XXXX, increased half year $XXX inventory second of our previous have of on in in than We to continue will expect from estimate expense We cost the increases end estimated the $XX full higher given prices XXXX. to-date. levels, softening hand be year-end million, from year the

expectations update will our pricing costs and trends. based inventory We metal upon quarterly our

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

Our in $XX.X X.X% primarily due expenses. first quarter sold, store from increases levels were annual with to tons Xst, significant increased million wage same or increases to our and compensation of to increases SG&A increase XXXX, in store higher earnings expenses incentive related freight effective our X% along same January due up the

tax to earnings Net tax second the down and in from Reliance to XX.X% of income and from the in first for flow. history. first from rate $X.XX due first were earnings effective quarter the in diluted share, XXXX, XX.X%, diluted XXXX the the share cash first quarter was reform Non-GAAP attributable favorably also was to of $X.XX a of our our income for XX.X% in $X.XX, fourth Our the $XXX XX.X% that's quarter quarter of million quarter XXXX. XXXX or highest $X.XX per up contributing per Company's

outstanding balance flow, our we and average selling as prices from generated and gross $XX.X million cash resulting and levels our billion, during shipment capital capital in in result million our total and acquisition, XXXX. stock, debt spent paid million of effective profit margin $XX.X the activities to quarter common was our to our expenditures, total dividends We sheet XXXX, in to management, $XX $XX.X repurchased March million of a strong ratio of net capital XX.X%. At with Turning debt invested XX, first $X.XX along stockholders. $XX.X an our higher in of cash a operating working million for

net first Our the profile. was billion revolving multiple EBITDA the X.X debt to with financial our quarter, $XXX.X facility. in million At times, our we had line credit on of available end $X.X targeted

continue our to Turning regard in levels second we operate quarter with are to XXXX will to the the activity outlook, that be by that impacted business end improve, levels to in occurred quarter. optimistic first although and the markets pre-buying in of the we anticipate are expected shipment which activity

a X% estimate of quarter will our sold compared XXXX quarter down the that the in to tons second first we to be X% result, As up of XXXX.

quarter believe be average X% of Accordingly, X% to also quarter price to We first of XXXX strong. compared up will our in expect the fundamentals selling will remain pricing XXXX. the we second

outstanding currently of results we execution our in a per XXXX. $X.XX quarter diluted As excellent second thanks the by the field a for of result, the had earnings in In to be closing, environment. managers share first to to in quarter; the financial favorable expect and range $X.XX we

position. to favorable our and continue our current execute confident to well our the this time, Thank in to And return That open outlook, questions. our for our to attention. continue call as given would successfully concludes your ability stockholder in the growth about and remarks. you this given we remain excited up market, in are market, our We position prepared to at financial like Operator? activities as strong

Operator

you. Thank

proceed the from Terry your with Chris Deutsche comes Bank. question first question. Our line of with Please

Chris Terry

taking question. for my thanks and team, Hi

on first X% in the negative in is change XQ. guidance of one just to The volumes X%

or after Xst deadline on in decrease on from exemptions Section sense? you May is the that potential With the on the predicated taken what temporary imports that import that, guidance approaching an and into have account the XXX

Gregg J. Mollins

us there It's based the really minorly, we historical little not. will think past. patterns bit we've was here. hedge first quarter It's think in of and but in in a second the affect demand, okay, that us buying, on okay, quarter the still We that experienced affect

why imports it affected by all. So wasn't at that's really

demand. Our guidance based on is

Chris Terry

aerospace going? Okay, okay. that's and And if just bit you. India Thank you talk a could little entry then the wondering into about more how

William K. Sales, Jr.

Yeah, get the got schedule, building waiting bit it's a permits permits but to place, some and final the equipment and into just put equipment up the behind of ready to and there on It's Bill. just Yeah. in we've little getting move we're on running. things

Chris Terry

capital on in dividend side. you. the the buybacks thinking forward the And price, are that move you how periods? the Thank share guess, Okay. the in one then the just given about increase last versus in management recently I had you've

Gregg J. Mollins

at the as going a we to us and get we if the in worth repurchased the looking for dip billion we'll to market is stock of stock, in our have feel that And back our that. have definitely advantageous we do bought past. purchase quarter. We're into buybacks first be $XX We

Chris Terry

That's Thank all you. me. Okay. for

Gregg J. Mollins

Thanks.

Operator

Thank you.

with from Seth Please comes question the Rosenfeld your proceed of with Jefferies. next question. Our line

Seth Rosenfeld

Good today. questions morning. for my taking Thanks

and please. pricing, on a on question then First M&A, question second

exaggerated level flat or perhaps outlook, steel you've question bit upside and are to not customers market you pricing on being valuations a regards there's did little through any about about for more seeing, whether with between you. of in ThyssenKrupp an of talk of carbon size? into asset QX. comfortable just you seen material the but specific levels and a categories? both that looking then And sale, pricing, about thinking talk of to products, but us you you're on any bit long pre-buying still valuations, especially some in also the products thanks can how for Can the your coming sustainability, you're Thank these activation plate to little product about assets more more interest comment, second their been or your talk amongst comments at within services more the M&A, the incremental Can there's you you business. then recently speak On earlier discrepancy sector in any dispose

James D. Hoffman

This address address the the Yeah, Jim M&A. Gregg hi, is Seth. pricing to and I'll Hoffman. like Mr. would

is know pricing reduction. what's a we as to concerned, is, don't all be far going happen, think will we know As dramatic don't we there

As far and they that between continue pricing as Like continue the on before was said increases based long quarter, go had products earlier, up, both rapid the activations Gregg think flat, in we to demand. to climb in there. we

there prices we buying, – environment, they that, environment, As some – have prices always are I hedge like been. for personally good higher, as we there the the into think of the out was line, perhaps have should thing climbed actually think a we've don't way we that's they've not Reliance. no are of but said, I telling where always

could it second reductions, as continue to but goes dramatic up. go up we quarter, demand the anticipate no also So

Gregg J. Mollins

we're you very – know, On you – looking the know, you front, acquirer, M&A we're we we're and, that's we know, robust, do. that – anticipate it's what seeing how that's carefully an it at

So deals know, you you ahead you of you for some good know looked know. us. But know potentially never we've

– a it wanted a – evolves don't and we do to can to fall. you all the think you We we we we as don't then thing the company, when that. So opportunities. We say, look just do I and like at X say team, let number of just right year it's as is, know a the know, acquisitions or management we don't value chips in we anything

So, environment is that always how IPO valuation will also in that, I this the good it companies regardless a over for is we of we've we're – process acquired the in in same. our successful since the been XXXX. companies, and environment news our XX value that, say good We've that is we

Our matter it's environment and we're evaluation favorable not think we change what very does to in our process been shareholders. and no

Seth Rosenfeld

Thanks.

business. in you I diversification Obviously, grade or have strategic market there on focus the more isn't think will some focus into today know the large for follow-up perhaps interest on or When overseas. one the scale the focus in been Just remain commodity do that European in about U.S. you something U.S.? then your think or products investments M&As M&A.

Gregg J. Mollins

open opportunity we're et to any there team, based profitability, basically know is cetera. know management You you on

– an North look So America. inclined know geographically we're it's prefer opportunity – it be not we're profitability honestly But at will to wherever arise closely. we the in it to, very going you to

Seth Rosenfeld

That's you great. Thank very much.

Gregg J. Mollins

Thank you.

Operator

Thank you.

question of from Tanners your America next Bank Our comes of Timna with line Please question. the with proceed Lynch. Merrill

Timna Beth Tanners

Good everyone. Hey. morning,

Gregg J. Mollins

Good morning.

Timna Beth Tanners

on ask pick I tricky, know for there detail for HX understand or guidance. the price explanation you I to what conviction – I appreciate on Karla is the that of that? I wanted LIFO and how it's and specific just that you drives you but LIFO decline, when the talk about number conservatism do have any

Karla R. Lewis

here know out difficult with pricing conservative Timna, figure trying this point. at a so next week, you we're to little what's and Yeah, its typically happening

half. So we through some the potential for in think prices quarter decline are going the second in back hold and just to factoring the

we'll we do at do the calculations. every our know We guidance, based You quarter on on are LIFO we month. where our pricing, of update end next

downward the million. be into is But the the in think So we have we where the go bit point. yeah, that inventory some the that to pressure, point, just there actual million upon quarter increases not $XXX our is nothing cost of to right the potentially what receive we're of but this the through based $XXX a we prices to year, year quarter first indicating get in are higher and books the it's there number that from announced, up is first at still that anticipating at price some have for remember, the might that assumes just been the back half, this

Timna Beth Tanners

that competitors recent credit that's have sense, makes smaller your to think you about that selling its shipments to service of perhaps way higher centers you opportunities, sustainable small Reliance end. a hearing about M&A kind is past to that a for understand, do bit to and that constraint talked centers this that – the too I keep situation Okay, the something is by do possibility? totally leads perhaps past – or smaller to Is in service boost selling constrained – credit more on or a

Gregg J. Mollins

of Good are the control loyal morning, that very needle fact honestly, sell to we all also very see don't the at – I are customers smaller but have really for that We us. to to that the to Timna. We're okay. ones we conscious and going inventory our – moving the

Coast, cautious, really cognizant us, very with you that especially being of from are smaller fact okay, not bit of constrained we're coming control not buy a our the that that position. of on able but So the are and are that's we we there being know for us, we get to the careful inventory companies, metal to offshore are we're have quite their on and West availability how some also metal

them credit credit as So comes doesn't that any model. all into manager's it is our it it But have really okay, and in the probably really other – – should. mind our business mind, doesn't stuff my to on crunch applies come as well into mean, it I doesn't impact

Timna Beth Tanners

go into Thanks. a with to tough and might beams those down the been there. because have of of I'm go Okay. far distributor value any have products? the large owe last you're course insights any the of I asking big chain transshipments you one after how have appetite into Gregg. insights some administration you Do transshipments? And then you a Do one, administration's

James D. Hoffman

Jim. Hi, what's insight it's on. go don't into to going have We any Timna

of people the know While we they is talk lot the and same, don't either. to answer a

of to speculate plans. So we're types on we're not – going not those

Timna Beth Tanners

Thank enough. Fair you.

Gregg J. Mollins

us when and I'll answer out, give that tell you the call a know to let that. what, us you figure Timna,

Timna Beth Tanners

right a Fair be you. lot. back enough. to I'll Thanks

Operator

you. Thank

comes from next Cowen of & Novid proceed Please with Rassouli question. question with line your Our Company.

Novid Rassouli

Hey, for everyone. my Thanks taking questions.

with immediately and quarter was guys lower start in purchased inventory was if to can uplift that pricing Just gross better that margins. I prices to the the in much margins through on? how were was to able of wondering due quantify at you push first you

Karla R. Lewis

we'll we that do onto we specifically. push of trend think you prior I anticipate, in do. our the second really from the that, Yeah. the inventory; receiving quarter, quantify the to margin gross mills was increase customers, can't but that try still what cost price the to most beginning quantify to can't from that what quarter environment But we normally profit of during Novid, the our know in percentage customers in of We the really be was higher and our

Novid Rassouli

That's profit margins fair. are gross And then correctly FIFO I you compress expected XQ guys that in to sequentially? did hear

Karla R. Lewis

most during the Yeah, were our first so, of price increases multiple there because across products. quarter

inventory normal continue inventory anticipate would trend, that down not so the have cost at our into We system that higher the level to the slowdown yet, to quarter, we increase the our and level a prices during second the until little on based mill extent price that do continue bit during them we'll margin received bringing second our cost up. from enhancement catches of quarter, increases mill the

Novid Rassouli

we nominal should these versus makes That price increases. it. as a obviously like the numerical of seeing? And – How better it about the smaller big sales to on SG&A Is Got swings for pricing the a we're think trending basis of a SG&A that a it because remainder percentage then year? percentage sense. think about given in percentage of as

Karla R. Lewis

Yeah.

a keep at million. it expect month, to first but earnings did forward our we steady a to paying as three our months be amount, and kind we're one people, to commissions to was also continue think that the dollar et fairly to were forward. million our include of going expect amount our an up levels, extent SG&A we that about $XXX look so sales to cetera, to acquisition going so we I for a the only would up we in in quarter, our go We fixed $XXX you have

Novid Rassouli

Got – of And what's set one these last then the question, was just to days few as to XXX a the not with exemptions that a color with Xst it to it. mentioned expire, away, earlier deadline, going happen. lot May

assuming what It that guys as part concern point. would that a potentially wondering Just pre-buying was seems as you're of customers. mentioned end procure to I'm heightened able far on with being material. like demand at about as be you seeing your this discussions

Just want that? Thank comments get you. any to around

Gregg J. Mollins

are average the $X,XXX sophisticated plus, many size buyers service not majority of to metal. our order you I'm we customers okay, have very our – that is the not of understand sure so of customers

And expect deadline the people, March, with customers cetera, to think, know customers So anticipate something rebuying. of not Prices that time May those customers on, focusing very at literally and lot customer high of may Caterpillars, our It forward, May don't a our we that. what as the we of is our for much there really a we are Xst the lot is don't exception Deeres, in was they that But all. that okay. Xst a that's base. see are about on We our Xst, bit pretty Boeing, going May et at little whole done, but even don't know bringing.

Novid Rassouli

Got for it. taking questions. Thanks my

Gregg J. Mollins

Thanks for calling.

Operator

you. Thank

Our from Longbow question. the comes Chris your with Olin with question of next Please line proceed Research.

Chris D. Olin

Hey, good morning.

Gregg J. Mollins

Good morning.

James D. Hoffman

Good morning.

Chris D. Olin

aircraft footprint year side ask just is, and capture guess where curious your multi- aerospace on if this rates. either products enough to to like also nickel And a of increasing you're if consider you the materials, into wanted the or consider I today you like I'm in growth titanium, question composites M&A some curious exposure moving asset would another alloys feel lot and of even talking I about is strong or maybe like in or would you I'm these like specialty fasteners? your build

Gregg J. Mollins

to titanium The answer We're high okay? now, getting in open into We're to alloys... not to is basically composites. that, everything, nickel Chris, adverse we're

James D. Hoffman

Right.

Gregg J. Mollins

...which we're in.

something attractive that's to actually us. that is So

side all that M&A and comes opportunities, in. So enhance when would our it profitability. any We're the from all

Karla R. Lewis

we we look M&A, are with opportunities at We try when our look to certainly but at. customers compete those careful to can directly not be

William K. Sales, Jr.

strong and the it but aerospace looking our might pretty more, And, footprint. expand a we've an standpoint, comes open from solid where Chris, always footprint when comfortable with that to and we footprint, got very we're

Chris D. Olin

of And aerospace sales? about today your is still XX%

Karla R. Lewis

to Yeah, XX% XX%. about

Gregg J. Mollins

Yeah, XX% XX%. to

Chris D. Olin

on and have orders enough different seen of infrastructure in the was, other then I just anything do and are question you to demand thinking construction you've if side? terms you ask wanted And exposure that on

James D. Hoffman

that it look strong. we're it anticipate a data, quarter. they This of lot A quarter kind burn was Jim, is non-residential forward-looking and we mean, continue the slow do It We've fine well. construction a a going them anything just all got of unusual. strong I of and was up. wasn't It to type proud and good several businesses up, really continues

we any construction. see So when surprise came really quarter non-residential it a of don't that changing, first but the to wasn't

Chris D. Olin

Okay. for your Thanks time.

Gregg J. Mollins

you. Thank

Operator

Thank you.

Our the with proceed KeyBanc next Gibbs question Markets. from Capital Please your line of with Phil question. comes

Philip N. Gibbs

morning. good Hey,

Gregg J. Mollins

morning. Good

James D. Hoffman

Phil. Hi,

Philip N. Gibbs

got aerospace the, mentioned selling that to Just prices fixed heat-treat Hey, well? trying that you've into market. you have believe, mills Bill, as Should we to I surmise prices selling some fixed the you dynamic? understand

William K. Sales, Jr.

and into selling where that we've are fixed into typically locked fixed a we've agreements price customer, the mill materials got hedged. got Those Yes. then and the locked cost the

Gregg J. Mollins

So margin basically locked in. is the

William K. Sales, Jr.

Yeah.

Philip N. Gibbs

Okay.

you profitability So you out. comment gone look, just that up, say, aerospace aluminum has made our made specifically but don't to of kind to blow expect

I think qualifying that making? kind were a statement was of you

William K. Sales, Jr.

correct. That's

James D. Hoffman

Yeah.

Gregg J. Mollins

XX% then the other About do are secured, and on XX% is okay. buy of on the our and the prices margins the we is aerospace the business so with that contractual fixed sell, spot,

that our margins So would there we would be enhanced. hope

James D. Hoffman

Right.

Philip N. Gibbs

whole that not about heat-treat and you're it's you're just talking aerospace products other then So your both that -? the talking you're piece about selling,

Gregg J. Mollins

aerospace about period. talking We're

William K. Sales, Jr.

Yeah.

Karla R. Lewis

is But aerospace. heat-treated the majority

Philip N. Gibbs

for demand how April you Okay, trends is perfect. out XQ second average quarter put so daily the looking shipments, to Gregg April some guidance the And relative specifically obviously or far?

Gregg J. Mollins

quarter. volume with the a steady from know, it's pretty first you standpoint We're,

price in some regard. that know, you helping have So, increases that but us we are

are range more by think today. is you margins it and that volume. profitability and that pricing I driven plus as okay, we from Phil can and our minus what see know, we That's in the okay, we'll by happens our guidance X, than good growth on see guidance revenue on And X; gave is what So, front. pricing volume dollars and everything

tell So was about excited really awesome, something okay. quarter, you first to okay, I Phil, second we're quarter the got

So here face kind in out going big and ball we sitting our because of the first giggling and and better quarter we're do of having a the quarter. hell even in the second on we're over knocked laughing smile the

Philip N. Gibbs

Nice.

Gregg J. Mollins

me kick just she's way, kicking by the Karla me.

Philip N. Gibbs

excited be the question my on I'm year-over-year Karla, X% is last same-store we too, excited together. can increase in SG&A. just

of a drivers. the of that some How of much just couple the percentage wage to compensation, I'm much increase to and of maybe it trying driven or and a freight. pointed by related was of things. how the, component isolate to increase that You was maybe

Karla R. Lewis

increases given the consistently so it every compensation was majority year. Yes, of wage related. We've

So companywide. overall X% are those usually about

higher are excited. we of Gregg levels, So, so that's is making the bulk profitability it. you But know very

were are of before. our went trucks, incentives who in some So majority we've because own we talked the orders are commissions our earnings paying freight, up. making as and levels deliver us. But higher we charges for there Fuel increases certainly, our people higher about but on

bulk compensation control So up, for freight fourth our, we our some base noticeably are freight you related, where of the use was rates little was of a the rates are that Xst, there we SG&A can May-January carriers, third-party quarter. know rates mainly the more, our but wage

Philip N. Gibbs

Gregg, face. got really Well, Okay. – you've great poker you've a got a

excited you're things must if if So be you're good. Thanks.

Gregg J. Mollins

Thanks, business view. Phil. Thank a are from point Yeah, things, We're of ourselves good. you. enjoying things pretty

Operator

questions the are Mollins, to for floor back any this final no you at Thank Mr. time. turn further there you. I'll comments.

Gregg J. Mollins

to again there of for everyone thanks like Materials in We we support We'd Conference for May. a Basic and day. KeyBanc's Boston will be remind call. and you have with today's hope Well presenting participating in in at many Okay. in to that, that great see

Operator

concludes Thank today's you. This teleconference.

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