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RS Reliance Steel & Aluminum

Participants
Brenda Miyamoto Vice President, Corporate Initiatives
Jim Hoffman President & Chief Executive Officer
Karla Lewis Senior Executive Vice President & Chief Financial Officer
Bill Sales Executive Vice President of Operations
Seth Rosenfeld Exane BNP
Alex Hacking Citi
Chris Terry Deutsche Bank
Timna Tanners Bank of America
Chris Olin Tier4 Research
Phil Gibbs KeyBanc Capital Markets
Tyler Kenyon Cowen & Company
Call transcript
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Operator

Greetings and welcome to Reliance Steel & Aluminum Co.'s Third Quarter 2020 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. you. Thank

begin. may You

Brenda Miyamoto

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

Jim Hoffman

joining hope morning, healthy. all Good and staying you today are XXXX to financial discuss quarter you all us third everyone, and our performance. Brenda. thank We well doing Thanks, for

are pleased strength with of our We business quarter the very which resilient results, third Reliance's demonstrates once again model.

exposures, conditions. Our to with to and us mix enabled market operating structure decentralized varying fluid diverse product respond our end-market quickly along

estimated basis $X.XX sustainable sales Our the of to a significantly net our range points XX.X%, to margin quarter gross of from record profit XX% exceeding XXX on XX% prior expanded billion.

their one outstanding challenging in earnings thank and more once million. perseverance profit contributed work provide to I challenging $X.XX, levels. company's from of history. efforts for time the most folks value Our to hard our from all of which like times, field gratitude a to increased our share and to to would increased we their XX.X% gross per earnings flow in increased diluted prior the combined of $XXX.X expense our continued operations these managers to again with diligent the we like through importantly, non-GAAP during Even our express customers our our for margin quarter increase strong increase control, would generated to meaningfully cash the our

would be are key we Our Reliance of the commitment and secret people ingredient we truly the today where of and without support. sauce not are their unwavering

maintain safety, and COVID-XX improve procedures same to spread to adherence period strict and employee including Our performance compared managers prevent a the focus health to the in the XXXX. our their on basis on of safety year-to-date

safe results. We manner. continue quarter in customers, to back and their Getting well third and suppliers support families, as communities financial our our employees as our a sustainable to positive

third customer of surpassed in the XXXX and shipments X.X% and strength. COVID-XX-related prior project shutdowns in following drove this schedules. over quarter economy our our Our continued typical seasonal vacation to majority end the the Improved quarter, expectations reopen demand slowly as shutdowns delays the increasing despite normal quarter markets, second

quarter addition, materially to second levels, increased continued as compared volumes ramp In our automotive production toll up. the to processing

which the from at for of since pre-tax in was our company-wide record mix primary fourth a our the our XXX do products Metal contributor in margin major prior with generally mill service to average. of the our our pricing in quarter ownership into quarter. As a our tolling XX.X% rebound reminder, as compared began increase product reflected processing profit were The take gross are that points a ton primarily Despite we significant to the a The discuss record we second our XX.X% not a third many X.X% operate increases, in than volumes announcements metal, of increases automotive that selling higher quarter, more margins tons was over drove gross toll in financial quarter. price metric. sold third as the sold the businesses our profit profit in non-GAAP income price implemented, down per detail. mill the margin quarter, gross market, price to basis of changes not performance, a price our which highlight was in third further quarter these result continuing sell the increases average to improvement will improve Karla

drove time ability increases implement our profit incremental margin. in the gross along product increases mix, quarter with our price third collectively shifts in to at addition, In announcements, mill our diverse of

investments on continue assisted to as that serve, we well centers certain warehouses, facilities. that key the our living expand we transmission third the projects restart related capabilities margin. these gross to increase the successfully previously activity leverage value-added will due profit activity as demand hold. While sustainable impact in In continue support factors projects military, the towers, managers to bidding and we expect of during large significant higher been we healthy to Quoting to in construction, conditions our market markets, regard slowly largest end for schools believe projects temporary, have the processing to remains be made will of of to and strong municipalities, and new processing a our the non-residential for had put data quarter,

an increase as projects, seen and also such have and in infrastructure highways roads water treatment certain We plants.

the activity improve such, second increased significantly provide automotive we employees and toll services, backlogs As on the through to simultaneously and activities the of production to our of the increased both the to volumes Mexico continue toll the for support operations continued majority to U.S. we and our pleased rebounded be in processing processing furloughed steel at recall were in our able positive up response ongoing COVID-XX construction as processing quarter optimistic automotive we and and healthy to we the non-residential expanding OEMs our demand end this third Earlier in Kentucky. year, following customer operations remain to shutdowns We to market committed presence mills commenced quarter. to aluminum to for will that in remain processing new We toll operations. solid the tolling demand at cautiously based facility trends. our Demand a sentiment. in in ramp month,

will and well to schedules with from XXXX areas toll be Semiconductor levels the break We ground the any indicators Ohio producers of Eastern tolling to generally customers, to second better the on steel fourth in Leading outlook States cautiously Mexico. from service in development XXXX our will also positive equipment and for more and remainder our a well carbon to processing the as their United quarter. users Texas. the and Valley in consistent remain primarily in steadily and businesses facility very agriculture demand strong. our facilities Needless metals year. us remains market the we early large continues the servicing say, for to a new in of both second the increase the points have new are Greenfield some expand semiconductor operations Demand current as the our remained quarter optimistic our heavy industry improvement. and and participate improved believe space through industrial quarter currently improve should we in construction and U.S. to Production begun we and end position market for positioned positive. Southwestern These in capacity tolling soon tolling

segments. commercial of near-term, we our at of by in servicing that of we and impairment military, Turning certain exposure. third diverse airline aerospace to continued and COVID-XX as a aerospace businesses aerospace restructuring half levels portions closures, related our remains about facility aerospace the to reductions of Commercial recorded which quarter, at to the that workforce In the to demand our strong half aerospace In persisted. business, Conversely, represents the to and low in build due the reduced like other our aerospace rates response I'd businesses commercial decline represents aerospace. defense outlook noting aerospace expect negative charges commercial travel start market. demand space reductions in continue to exposure. to service our

expand defense, which the weakness side. commercial offset We some opportunities on participation our to continue the see of in help to will

businesses appropriate businesses. the cost-reduction profitability assess and of aerospace and monitor long-term to health to of continue will needed take of these actions and continued our each We if the ensure when

pressure. demand remains and natural the is under significant energy oil which sector Finally, gas mainly in

we highlighted of I cost throughout facilities including measures As consolidation headcount certain last reduction. our on taken reduction the call, XXXX proactive and have

One which and significant space As any a positioned and we maintain energy power in in recovery is market. result, energy we to a solar particular further in presence sell our believe player of amount the the well spaces dominant are projects. bright a spot in metal renewable wind that support we as for

allocation. Turning capital to

cash flow remain capital opportunistic Our and return generation growth stockholder both us good times allocate and and to both flexible opportunities bad. as countercyclical for we enables in

our technology is customers of value-added strengthen our Our activities the budget innovative further growth expenditure that processing expand towards supports XXXX weighted through capabilities. advanced for capital and equipment and to addition

expenditure service toll increased Texas in our the $XXX million the services. budget our total to maintain processing highest-quality with in to to $XX opportunities to and of our our customers to million equipment response by and customers capital and have provide XXXX products a We including expansion better upgrade

pipeline continue see front, On of prospective opportunities. healthy the M&A we a to

possible evaluate best ensure companies. within we potential our the candidates fit family always As criteria of using to stringent

with service quarterly we We focus strong a product pleased Acquisitions management customer businesses our possess to and payment diversification as most XX to stockholder maintain including increased our XX.X% continue have that be since times of to levels without consecutive seek our regularly of superior recent or well-run rate. end-market regard are first complement our to XXXX payment increase earnings. accretive years dividend in also and strategy profitable XXXX. on teams returns, dividend and safety. immediately of for reducing In our dividend our a suspending quarter of ever must We've we the the XX IPO

repurchased XXXX. common stock also third our a small quarter We during of amount the of

the was quarter inventory our Another during key management. diligent highlight

company-wide to we continues to goal have the reflect And unprecedented very the economy. rightsize are we improved within levels achieved as amid service our cross-selling turns reduced to quarter. are of to expansive through third have the of network demand inventory inventory buying materially our pleased financial summary, proud continue global that results our our to impact as X.X In centers. well We inventory uncertainty current during

to of smaller do organic the our enabling Our within investments sizes often afforded management or to our diligent for profitable the help growth rapidly providing not trends Reliance significant during of testament more is persistence of customer expense their end workforce like is through inventory immediately us to the rely record and gross markets entire demand and profitability. customers leveraging us decentralized The value remains in also them I'd our work in able ensure thank that expansion frequent in of markets for discipline; preserve to companies family model results. our long-term geographies, to to to changing products, their our structure as consistent dedication, diversity but best-in-class service all us margin more flexibility to: realize through achieve strong and and a position business the to our continue commitment producing business shine really and We that needed; respond hard and of unique model to healthy to were XX.X%. safe our a efforts innovation. profit It when and in and a on basis. our aspects increased our resilient is only on they execution believe confidently challenging model a control pricing folks

Reliance very value is in today. our turn efficiencies to for Karla to detail. and to through America solutions your leverage solution improvement As innovation to our going metal provider, customers a Reliance Thank continuous quarter increased continues to time pandemic more diversified to our over review much we evolve and acquired knowledge I'll provide both we leading drive stockholder as the the while to XXXX and enhanced Karla? you navigating profitability. results need financial have commitment the to and third now rebuild. will call

Karla Lewis

and Thanks Jim morning good everyone.

for of XXXX down average tons of with our sold net and sales $X.XX price billion selling third sold quarter third selling XX.X% XX.X% XXXX second up X.X%. our quarter Our sold down of the our to our and decreased price ton X.X% tons of per with XX%. quarter the Compared the net X.X% increased sales XXXX, average down from

expectations Our improved in flat non-residential up markets most tons exceeded of to of end prior construction. demand as in our the the strength notable from X% our sold with quarter many

And included experienced selling quarter tons our the operations X.X% our second significant not the in Although increased contributed per quarter. second meaningfully of to in XX.X% the sold from average processing sales toll lows up XXXX. declined ton metric, the our with sold price rebound processing volumes in compared toll our to

which and Our most aerospace in pricing the significant quarter was selling selling which which third shifts metal XX.X% our certain shipped price. Meanwhile was lowest-priced mix closure to of third sold portion was of of the heat-treated the product decrease represent lastly, are the businesses. than trends. tons percent lower flat-rolled also of lower shipments our as our shift to quarter steel, products, alloy in average products, of of now price tons carbon of our titanium a sell. products mainly due which aluminum average in due our sales majority represent total shipments a overall a total we increased our in some among higher-priced our The our And the reduced our energy rather

well recorded in is the a a Our of On set in to our which day-to-day XXX from profit third quarter increased XX.X% our margin XXXX. from of in best million quarter. XX.X% for XX% basis of believe the XXX at This sustainable above range gross margin and points we non-GAAP record the the of fourth income gross FIFO income XX.X% measure compared of estimated our to current profit the third our of XXXX points quarter ties second XX%. $XX.X when of quarter basis basis, increased of margin record was XXXX profit of $XX we quarter XX.X% million LIFO and LIFO gross in the XXXX operations,

margin. direct providing this outstanding higher-margin our result As field discipline orders our drivers increase who expanded our the sustain a value-added capabilities. more our of by focusing ability our managers circumstances gross customers pricing key profit by the strong the to is processing through performance maintained and challenging are And on value actions in these Jim despite behind highlighted, to and

impacts quarter, may third of be increased the to margin During temporary. contributed which certain gross more other believe our profit factors the we

operate significant increase rebound margins than as tolling volumes our our a profit at company-wide in higher our our a processing in First, drove average. gross toll margin businesses meaningful

contractual shipments sales mix flat-rolled while declined product of as our our increased. carbon in aerospace changes products commercial lower-priced lower-margin contributed Second,

diluted of carbon price, our were our of mills component value-added quarter. recorded products or overall income selling And late profit of to certain average the million of sales on our for larger earnings announced positive has margin in lower are we $X.XX which third a price charges gross earnings quarter a $XX.X in given a enhance or earnings gross per third able profit share $X.XX XXXX LIFO to share impact income of and the steel We Given margin. or third, of of LIFO as $X income of per in in LIFO of record quarter share our million the expect of of quarter XXXX, million we third $XX the XXXX of $X.XX income million to current XXXX. per in our second of quarter fourth in of million $XX annual compared LIFO of increases XXXX. estimate the And LIFO $XX.X income

our at to adjustment true-up will we reminder, And million LIFO $XXX.X LIFO at a XXth. our was December reserve actual September As XXst.

was of performance-based of reduction to efficiencies compared our variable costs non-GAAP as lower our X.X% with the innovation due XXXX, SG&A compared SG&A supplies through lower million and quarter expenses in processing XXXX to quarter The SG&A our expense average third plant expenses increased demonstrating to as with tons decreased the decline XX.X% along increase $XX.X on and non-GAAP only along the mainly as XX.X% down gained a which or shipped expenses in such shipments. third headcount XX.X%; improvement freight on well our a was in X.X% initiative. Our state-of-the-art compensation. When second continuous equipment quarter reduced

additional certain and Frozen termination and intangibles our quarter charges merge few of continued environment SERP we our to in During a due as plan. recorded charges $XX.X or wrote $XX.X restructuring We in Plan in of to the Benefit smaller million close related to an of recorded Defined and outlook of locations comprised million multiple we charges of more our off certain the small for third obligation impairment an XXXX, of a non-recurring markets. challenging settlement settlement

XXXX. our in non-GAAP million for X.X%. third the of of pre-tax the non-GAAP a with million total related pre-tax $XX charges income $XXX in of quarter in debt $X.X remain activities restructuring solidly the financing and to of quarter of third quarter profitable non-recurring in We recorded also We XXXX million margin charges

for was XXXX. third of the XX% quarter quarter of XX.X%, down quarter from tax second Our the XXXX XX.X% effective income the in third rate and up in from

non-GAAP down attributable in from was XXXX, $X.XX, rate XXXX Our year for time, $X.XX And of $X.XX XX.X%. tax to share quarter earnings third per reduced levels in strong the rate up the pricing XXXX was quarter On income $XXX.X tax Non-GAAP approximately per diluted and resulting in of lower this XXXX diluted XXXX were to due levels; attributable estimate XXXX. the lower quarter share be full for our and effective net from demand in we Reliance income due of recovering of to driven a third by our of mainly $X.XX to COVID-XX. margin million, will the impacts the quarter gross third second our demand. GAAP the earnings basis, profit of at

million Turning achieving working $XXX.X during on to levels, flow of operations cash third goal times. cash million due management, capital sheet generated X.X continued operations effective profitable our our the a which right-sizing we $XXX.X first during including inventory our resulted strong of continued nine months of in quarter our balance the flow, from XXXX focus and and to inventory turn

a proceeds remaining and public utilize proceeds the term unsecured five-year repay senior revolving of and X.X% our the we'll purposes. $XXX XX-year for we to of notes general through used portion under of corporate credit facility loan, a $XXX During X.XX% and million indebtedness offering. of issued senior outstanding all million our the We quarter, notes

amended profile. into an facility option with $X additional restated we $X.X facility up five-year debt in our of the was unsecured and The includes to combined our position billion. increase extended resulting XXXX, enhanced entered September outstanding the billion, our XX.X%. an debt an notes debt previous liquidity net billion $X.XX amendment proceeds September, for total total ratio a Additionally, maturity our that to and replaced revolving agreement in credit credit from XX, At capital and significantly have early offering,

to facility. of to and expenditure on million $XXX outstanding borrowings our debt increased third net address was includes credit capital were end times. as strategic investments to In of of And the allocation, quarter, our additional X.X customers' budget billion needs drive multiple no XXXX our capital growth. EBITDA Our revolving $X.X organic regard the

to XXXX, million continue pay invested opportunities. execute quarter selectively quarterly $XX.X of will $XX.X through expenditures In regular We third repurchases. dividend dividends our to our and we and the returned share capital and acquisition repurchase stockholders million attractive in share and

stemming quarter that while COVID-XX outlook, Turning continues, macroeconomic current continue overall XXXX. anticipate based fourth slowly expectations of on market and conditions, to from the our in improve pandemic uncertainty to demand we will the

in quarter the seasonal factors, quarter. shutdowns fourth compared volumes in significant fourth We the shipping to maybe expect less But in factors fourth prior days shipping holiday-related fewer third years. will the to the and the quarter including seasonal of normal in quarter customer due we believe than impact decline

will a compared fourth for steel As be to carbon our We X% the quarter X% result, metals down mill increases. to estimate quarter XXXX of primarily third in we sold the products, to anticipate due of tons XXXX. price improve pricing, will

price to price as However, impact increases by certain product sales offset partially declining mix in involves these and our our products. behind average believe markets higher-priced the be diverse drivers selling we typically such quarter, decline will aerospace, the similar of in which the third

average these in of quarter expectations, quarter per XXXX. to XXXX. $X.XX we range to a the flat quarter compared of the third for selling non-GAAP $X.XX Based share of we our As earnings expect the will price on up diluted currently fourth of XXXX in X% to the result, fourth anticipate be

managing the Looking of our elements ahead, model we remain will continue the uncertainty business on are and quarter pleased within the broader business our our results third we macroeconomic with In focused execute closing, amid pandemic our caused. are control. very has that to

our quarter, of the quickly employees extend focus to of growth gratitude to and high on customer sentiment resulted solid their and Our conditions excellent demand safety quarter recover processing. quarters the respond ahead for value-added look control Reliance to This this keys levels the forward on their our with and and my the the of work to with That managers us to expense I'd time. as ability strategic and excellence thanks echo open conditions another this ongoing in and we emphasis and service to to to customers, combined delivered family our and like you of and and proven stockholder commitment in health, priorities. to remarks. in all companies our business cash Operator? yet execution ongoing to our slowly operational as are maintaining to throughout began people for market Jim's would the our profitability at attention. employees, support also we along our resiliency flow strength return our communities COVID-XX. enabling We improved of We our in your to believe concludes like model unprecedented of impact questions. business. field, suppliers And time Thank prepared the mitigate the call up with

Operator

Our Instructions] BNP. Please [Operator proceed Exane comes with from question. question first with Rosenfeld your Seth

Seth Rosenfeld

Jim Hi strong Karla and and congrats on quarter. very a

Jim Hoffman

Thanks Seth.

Seth Rosenfeld

the some first for If Thank particularly for of your in please. robust a you in I of remarks off outlook providing QX. on can question all on please the with margin color drivers prepared kick margins

forward in QX seems continue gross view imply Looking drivers basis? demand your that guidance settling there the perhaps you margins how through as walk I going which quarter-over-quarter in as with expect to your start expect line guidance? that out I'll please. we And into to should to Can recover reduction a you on XXXX guess would sizable we deteriorating quarter-over-quarter. a pretty key to of us

Karla Lewis

it's Seth, Karla. Hi

performance to margin product the a with We have that did very, profit had QX very achieve. we're still the rebound gross pleased our there. mix. some We're the seeing in from with from been into build we've COVID in comments the changes So able there's perspective uncertainty out folks

and impact at try going sustainable sell we margin forward. price XX% gross will profit both certainly of while end we our XX% range profit those. think So on average gross estimated margin solidly to of did the the highlight high some of And on from we to perform

gross on But going price products the third saw positive allows are the at a a for our percent very we on margin gross to which as that are percent price us including third bit. and had the of were little performance business us. pretty the make the flat-rolled There Reliance cost increases We increases, metal steel as we carbon a fourth helps sizable could on certain in quarter. flat-rolled are in cautious which profit more the quarter quarter that go metal our QX achieving record end as profit dollars into the from -- down

okay we're So margin. at our higher benefit from toll prices lower QX. in slightly with quite a did And gross operations profit processing bit we improved

As has that is our a and impact profit gross on margin that we've talked about positive sustainable.

that when were from the cost-saving a However, the we going just of think QX impact to COVID. because for QX hit measures was took probably some of inflated little we hard we

a very gross but a in our cautious very that maintaining being in saw strong we're what we QX. So profit margin had the third temporary But quarter. again little on between somewhere confident some recognizing high boost end of we sustainable range and

Seth Rosenfeld

confirm That's and I that high was very Did end between right? the in of be last clear. QX range performance And QX? your somewhere hear you'd just comment expect to sustainable to that the

Karla Lewis

stay able to the top be at range to yes. sustainable expect of We the

Seth Rosenfeld

in you're of amongst sequential -- customers? QX the here? think you those question weakness Can recognizing aerospace Okay. a to perhaps recognized seems production growing the rates you. on large step-down number be further second you Thank for just do expect And through it already the challenge a volume extent in kind given you to walk that you'd Or the what company. us in

Bill Sales

think to improvement. start look you? year next that now. How at/or we think from Bill. we We perspective an We're some end-market you bottom. see into bottom And the it to is this as we'll when Seth Yes. we are the at close be will look slowly at

have attacking guys the inventory getting really good the side a done in job expense hard. side Our and really of

as head little outlook of move bit some close a So year. QX we love as side, performance to on look improvement into downside if into be see bottom. may And the still next we at we're you the the there we'd but to

Karla Lewis

about talked we that And a what seeing the continuing just through third to were declines little of kind clarify With Bill quarter. bit.

really near was the third from the at where we think we were we the throughout there bottom. quarter So quarter. But decline ended a

Jim Hoffman

we what the to and from that. heavy reduction be stay will expense and done lifting guys close think do we're the ready going I to market And to we happens. more adjustments make an if point our need to most have headcount view. of But And see of

Seth Rosenfeld

That’s very so you fair. much. Thank

Karla Lewis

Thanks Seth.

Operator

comes question. Alex with Please next proceed Our with Citi. question from Hacking your

Alex Hacking

or just Texas business. call. be that looking auto tolling the was Thanks. third that's And to morning levels flat-rolled Jim good the that's guess volumes exited facility as Could And quarter? going first tonnage normalized just you be you the be question versus new safe to on quantify I those in is And and to Yes, at my it where Karla. around the the quantify tolling it at for co-located then at auto volumes thanks are assume would would new the there? being possible in Texas? mill you built the

Karla Lewis

Alex, on the auto part tolling volume. the I'll of take first that

volumes on of QX overall would that next tolling XX% which then be the of that -- and commented tolling some we miscellaneous. as is about the appliance So script auto-related portion in biggest

XX.X% to up were Our QX the volumes second compared quarter.

into pretty quick. started aware continued you're sure that at quarter. the second quarter I'm B that a was and third end That the As ramp of was the

slight see that X%-ish So the about of coming for pre-COVID below the quarter we levels. quarter. probably And we were a from XX% out X% continue improvement to to --

at probably levels XX% we're XX% now. think we about to pre-COVID So

Jim Hoffman

guess it -- takes site what I is that, And I as to at really running. And looking open intend their quantify in probably that to the Texas true, tons run will they as a up be. new -- like operation to And high hope that. company can't our will released that's what while But that, Alex get and my capacity they the when we're And it's to Greenfield has is. then there's it -- level. it a we a forward lot. so a Yes. if far

Karla Lewis

Kentucky remarks well. quarter, that fourth to that, also as addition we are opening process the tolling of in in we the new then, And in Yeah. another expansion greenfield Jim's of part were for also

Alex Hacking

do the that, EBITDA. structure. billion-ish it one on I now capital guys forward? then, you about I Net the And that you that that. times capital how is through like conservative, for debt should think achieved to Thanks I how mean, mean, arguably have we just guess down Okay. going around I about relatively successfully margin going structure very cycle. given think the forward? so mean seems stability $X

Jim Hoffman

I'll will But all answer we that? sheet. kind Karla with But anybody sorry, -- a Karla Karla let balance have Well, having says, of that cash. of that, before all we what like lazy will do we

Karla Lewis

where from a we certainly Yeah. I very we standpoint. think, mean, I leverage are are with, comfortable Alex,

priorities. continue able execute, all be capital We on to our of allocation to

execute. We've financial think, I we from areas. a a I But position think, very you those been ready be little through with comfortable with our confident As model to know knowing the the Coming we But the uncertainty. very flexible, well. way we've a bad very in all as has for this to performed pandemic, been performed. while gone being opportunistic are and thing, company us we've try not through and the has

As Jim activity. see his lot in of we comments, M&A a mentioned

but look opportunities. saw as shares. to that, And CapEx year, pay working healthy you jump to we've our next continue for periodically our for We notes years. We our into growth. in dividend. as increase we We're increased see organic to organic growth want And many on for done also year. at And just we CapEx to continue continue repurchase a this

harder. to sheet So for little good balance we're a our anxious work put opportunities to

Alex Hacking

you. Thank Perfect.

Jim Hoffman

Alex. Thanks,

Operator

with from Terry your question. Deutsche next Our is Bank. proceed with question Chris Please

Chris Terry

Well-done question specifically. quarter, solid XQ first -- the on this for guidance a on had my just

gross basically the your you're the think profit on saying to XX% sustainable I range. be XX% of will high margin end that,

seasonal X%. impact? I the seasonally think, lot it stronger look that X% when normal to recovery of X% get is normally potentially when we volumes, you seasonally COVID X% a terms you're saw it won't to at Is consider you but bad, that maybe be down. And so conservative, In saying, than you the it the probably

Jim Hoffman

can is we control the that's kind the -- can't conservative. things control. But we demand we And or of price. we Chris, Yeah. manage what this do. the control Where we it

really So I COVID done shareholders. situation, we've job after-year. as good the year, done provide value our we've things we year, look And will a a most The -- think that after damn really the to execute at is things those flattish we've through right at coming that. we're we now of thought. quicker little that still October numbers. September, And But will. kinds In saw of coming than kind a looking if to back you

yeah, be past. in the So, do we we predicting to best but as future conservative. hope it's we there in we and conservative. But the best can beyond, it's Sure, want have the able be to get do to job to able the we --

Karla Lewis

quarter down Yeah. were our X% last the And a volumes fourth reminder, quarter. as from Chris under just third just year

there's little Jim better is this lot out So, on because there. the that, conservative guide side but, of said, still a a than uncertainty as

Jim Hoffman

Chris thing And all Reliance an other our mean are too, that just essential it doesn't remember business, customers because is way. the of

a to continue a they reason. job and really -- not a they're it's that because what may shop who base sure, Remember coming So going if not. lot next They're of stronger, to they're a month some for smaller sure, be play. the may there's job. value-added more, we're out COVID from do what need call quarter. depending out there's see. Then in And will job we're strong. customer making. not the really there customers of They -- our XXX,XXX them be shop, Reliance but on There going our of products to customers perhaps There or shift, go to job more are some a next

that and out that are involved So, the kind control. of But of at the had -- really of a guesswork experience -- it things or a through lot our those look like lens that. things we

to we'll just but -- and nature. try So by And manage it. we're through conservative

Chris Terry

that on up? in makes XXXX, that a and the appreciate trying sense, shape gauge That so project forward just Is a might can Jim think we into Thanks, Texas get CapEx, question talk XXXX and XXXX also $XXX Karla. for Thanks. for the but about sustaining fully all Kentucky. to level toll carries amount that too or of there of million follow-up investment an on how the XXXX, about to early just top of CapEx probably it's normal the

Karla Lewis

Yeah.

So It's budget, the $XXX Kentucky full amount possible both spend and that the, do during the Texas. got paid, the be of Chris CapEx cash updated we our in for could of some amount way XXXX. to budget. the million, Expansions in that trail full XXXX of the are loaded. But we've

we're all throughout see companies But all As different don't that of with. working markets yet. XXXX number now. budget on I do work final servicing continued have mentioned, we we the opportunities our We that our

Jim Hoffman

continue -- Yeah. kind now. Chris customers of middle we We robust them. think another we're to and tell to And things. no ask do anticipate in continue to there's I -- as can the not be do to more us do you different Karla they're to reason said, ask right And where of that. that our there spend, we'll or CapEx going for

it XXXX. spend good So another for should us be in

Chris Terry

That’s clear. for Okay. That’s me. Thanks. all

Karla Lewis

Chris. Thanks,

Jim Hoffman

Thanks, Chris.

Operator

Tanners question Please Bank next question. your with proceed Our comes from Timna America. with of

Timna Tanners

morning good Hey, guys.

Jim Hoffman

morning, Timna. Good

Karla Lewis

Timna. Hi,

Timna Tanners

LIFO. guess in on to you if of I just wondering, range all may But not guidance pretty there may know XX%. it's a And last look while the number, because QX to bit of you the now things despite have phenomenal we the wanted margin and since drill a I result that yes despite uncertainty or gross a at XX% But I QX your at even for I despite you're even was is a year. that been that basis. buyers FIFO I mean, affected down I'm again conservative. know haven't on

forward? I'm whatever then Like time can difference see below that guidance like what makes just forecasting would is actually be take it And dip start it it wondering you thinking higher helpful. would to for because So about big such in you? a you provide just to a going XX%

Jim Hoffman

is about them. time to thinking start it Timna, Well,

Reliance know, you and it. we was sustain – certain a get we'll the into it the Once to before just think And – fourth the this a again that was to was our question and of thing I And of a time. uncertainty. – to This we As we were key about quarter there because your son in can respond But we're of COVID it. say all we fashion point – you really it but typical we It's going it. able that can tough gun. it's say – model. say believe word have we

count and we're with – And you. we on can that will sustainable. hear you it the it when we'll be So you fact we say

but you now. give I So that's I thinking tell the we'll you could wish best I'm can see. answer right I everything

Karla Lewis

to clarify too, And just Timna.

lessen volatility to So And XX% of a LIFO is help the LIFO XX% the does basis. on there. some

for at out. had as are that – raising That the side of you way it product But potentially to our other little while. been a quarter. our bit And third very top point said and results that we've consistently and go mix So end just about and too. we've many positive little that of like and we've to a we could been on margin things proud the by the in – the the Jim the was impact asked

changing So the are that's from we COVID uncertainty. hit. as that recover Things of some

good mean the there sustainable that. that I really hopefully at that at through end. that. think things do earlier least my our did say happened high remarks, think to we are we can – in I QX, We the watching we're margin we're And lot I have monitor we'll stay And So confident. end. a driven And continue of high has to think

Jim Hoffman

it. as some the other has in a things that know, well of mix than as And starts business lower to lot margin direction. you be other might going the up Yes. with Timna, that's The do that the flat-rolled going a at

about we really somebody anticipating going just does our can where And can reported things when added value the from of find two. as being high the having from a to a added and it to value number direct not added type not get what thing or for now. those went going drill value It's XX% our haven't things of fact down that as that's ask charge to that between you'd – have really part we're maybe we correlation traditional up, north. XX% next not But Another to product go do. other is is to we doing. value-added out you question to there's kind There's of that that strategy we

the get. is to that type we're value of this So able added

– really. – different we're was have it out quarter Because for they desires. pay equipment technology surprise pretty of differently. standpoint, COVID or And And And and provider. it able ceases willing up And we're when come needs they from new they to things they this available a there deal some we me offer to come fascinating with. that's solution have it's different our out with This they that never nice this customers different to it. what they're to us and we a and thing

with to listen equipment come up and they we manufacturers solution what need we some partner a can up So that for with them.

into high that those to lot number I going to – drive or a how up, how be that can it know we high numbers hope of get continues I it's don't too. – to And So there's go be things but better.

Karla Lewis

increase doesn't to you something that And higher put in we're just can't mean ready model. because yet not your range

Timna Tanners

All right. there. Thanks permission the That's for great.

Jim Hoffman

nice you was "That to Karla." was say of I going

Timna Tanners

to for granted it's could just on that? down of as you conceptually? and and – in balance some a enough then those obviously to be quarter think but to tolling lost a that dormant Is with while; offset the opportunity is well. components complicated lot opportunity of that The right. out The aerospace? pressure Or auto business, I about into All how growth nice. wanted and only this maybe the loss last if or in drill you this enough and aerospace I with do But very the energy opportunity energy question there's could. and That's said Yes. under sort maybe

Karla Lewis

a ramped, tolling for businesses. currently. a stay But which time energy ramped where not get can those our they fully are assume markets fully when while is aerospace I we're from we'll offset and if in be I certainly the on to profit have hopeful by standpoint it meaningful yet, some going mean auto a we're improvements we see think you too

Bill Sales

All right. And is Timna, Bill. this

through existing In we've new new our two the some to share grow market opportunities tolling got Greenfield, our addition to operations.

So see that a have our positive obviously. to continue to going impact plan is we're

Jim Hoffman

in of anticipate good space aerospace design aerospace that end value-added there's lot And the we just And in too. of by see is opportunities high participating. That's – the in the end opportunities some for and we aerospace there activity. us the – defense of well And a business. that the that's

So that's kind of a bright spot.

Bill Sales

do definitely. We

Timna Tanners

Thanks guys. Great, again. Okay.

Jim Hoffman

Thanks, Timna.

Karla Lewis

you. Thank

Operator

from Chris next with proceed Please Research. with Olin TierX question comes Our your question.

Chris Olin

should estimate than higher Well, Karla can the guidance? our I we also probably ask put then

Karla Lewis

You're different.

price stock higher. target put could your You

Chris Olin

used X% to Okay. aerospace. All I it right. like but a total question to other aerospace getting of commercial have Fair always was I talk that me of just understand make sure enough. slides any ask Half I half And but how – make I and to in sure I it aerospace, just was was XX% about don't front you want to And want of I you're I now. know – just revenues. I know understand lot the numbers. of

what Now they half. get commercial in cut

your risk? The – is it? about Is is stable? about think business So that at X% I rest how seven

Karla Lewis

Yes.

XX have about acquisition revenue With an – COVID bit. with done in has – the of we're come years been to XX% few our over last about XX% dollars. that's XXXX, a So aerospace back we down our

cetera other making the is XX% and we're defense So et range. about that half. then little it maybe And a half-and-half end under bottom the of between commercial space split up

Chris Olin

think in most you much of really of would rates? -- moving that then terms toll At products? And be isn't it I aluminum-related commercial

Bill Sales

play look Correct. at side steel much commercial -- us aluminum. a the and it's you aluminum. when titanium products. There for it's some Yes. But bigger Mostly, on is aerospace

Karla Lewis

Yes. plays. Especially, heat-treated the on

did about the fluctuation are And and sell our these I sales And is we XX% higher-priced again, and dollars. price -- things, so mean, XX% our talk based with products. on average to

percent smaller a of be -- of would but product. tons the the because high-priced tons So total our

Chris Olin

year. a about remember yet. I being nice reversed contract XXXX? think know, from may for And I going Do to I don't we boost forward? last Is that that ask it rollovers if need

Bill Sales

contract has only on that The Yes, JSF definitely. the side defense but been extended.

for So that's a big program us.

Chris Olin

that in commercial numbers? has stepped to demand down aerospace now the relation on Pricing

Bill Sales

Yes.

the commercial on stable pretty been has pricing side. far So aerospace

with in mills approach So been think very the there. their disciplined in the demand even have pricing I drop

is stable. would say I pricing so And is

Chris Olin

That’s I all have. Great. you. Thank

Karla Lewis

Chris. Thanks,

Operator

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

Phil Gibbs

Hi. Good morning.

Bill Sales

Phil Hi,

Jim Hoffman

morning. Good

Phil Gibbs

a the Because regionally in you're markets have got me. excuse serve. obviously, terms question just some side. on country where in Canada. that little something in I even and in non-res a of I just the out My you throat you've know cases of the -- there different view the what And is -- seeing

we take should away regionally? what So

Jim Hoffman

for Yes. quarters. chugging of at That's widespread, for kind if question, Northeast us good a good has Phil. The it's kind good several will. along news you been of pace is a

who that live Now the the probably with issues there weather has really unfortunately a business unfortunately for while. it And won't up. -- Southeast for subside with the people picked

-- we've seen motors things to Out electric and widespread of as a so it equipment far larger water and roads pickup nice West, going So electrical rebuilding bridges as warehouse treatment be in there's elderly people based the on plants strong assisted everywhere. into -- those or live type grid. facilities. big-box and continues and That's been campuses living it's

-- good. that business like our for pretty better. to was or Southeast. us. my Karla did we good mentioned in to energy doing There's the business is good; to to a this I we've And seem comments us. like infrastructure spend related down for -- the continue get then We I so I Oklahoma renewable seen that's -- I a in nice said be pretty anticipate said is Arizona And that some they're that believe, a spot little one So the Texas,

So just a anything widespread is good us for -- across thing.

a So I've that's long now. continues in quarter it comment since the right you and be time if do fourth what going. XXXX for slow that then keep this to anticipate said spot to This we're that. for to seeing. And of continues seem burnup we And lot we

So...

Phil Gibbs

pressure part know rate? of any starting there? increased to you're seeing Or your seeing now some availability constraints out see you in the right have on any or that in trucking own. you constraints noticing Are freight U.S.? sub you a I are either But you're

Jim Hoffman

not. business. -- but we We -- in we're we're No, in that were

we there of can have a up. because for flying they're do And because And drivers consider team reason. well that's who we've the employees. members colors. We lot as truck out then that service our they like ramp trucks and folks salespeople as model. our we our of that our of the So actually We own who customers our they're -- and care with about are part

-- we So if a trucks we the -- problem see we would would away. just We'd on. did build more get

into So operations our we have moved from go has to not well. that. going our seen and be a that around of rail product seems And lot by mills

got got We we ago There's can when our -- don't So if pretty that -- a saw quarters good a I there time many we've that -- issue. ramp finger how there's remember knew driver on shortage where a was up coming. we've well. Phil an we

adjusted we've So that. to

that. I of worried about. we're -- that anything you don't I can So heard I haven't tell

Phil Gibbs

seriously a that Bill change to does and then Bill. a for your these and out on there? take is is a change in how lot there just by that well policy, administration things if question -- their already know long I last are in the defense spending what's history blessing. Because of takes Senate based there funded And influence and

So for? least good is any give Because can I is long possibility it around if the ponder would and starting what's at still maybe there that good? that? a change people you are to how thoughts -- And think

Bill Sales

still that defense is a a Phil. who like say what question, regardless in to that sounds Good of you be play. seeing lot of wins Yes. going already as is It spending priority. And we're

a when going there's programs it be so at significant some we're long-haul. time that not And change But look or believing if that we're seeing there take on a there is the you will the to change. major over

on we a So the outlook standpoint. defense very are positive still from

Karla Lewis

that also lot And some of to that isn't buyers? foreign there a goes Bill

Bill Sales

Yes. we're to -- countries going the programs programs. a Exactly. supporter and seen lot that you've big a legacy other fighter of of are those now probably Even

business will been for and also positive the of we us has continue. that think So very that side

Phil Gibbs

everyone. Talk soon. Thanks

Bill Sales

Thanks, Phil.

Operator

question question. from Kenyon proceed Tyler Company. Cowen Please is with next & with your Our

Tyler Kenyon

well. provide sense maybe that one Hi, just the hope volume and stainless think these Bill. all you're out on as aluminum, break to just product to and to is alloy, categories. sequentially. carbon, Karla of a how each X% down if Question Wondering, of about categories; doing Jim, you various guidance could us the or I between X%

I mix? think some recent of it would the just shifts of help in light in

Karla Lewis

Yeah.

and different is customers as on react our a Tyler we're in end think conservative hopeful year differently. I we With schools I with that going COVID of stronger The thought are be that's schools there out think that of have QX everything being earlier, normal happened this the in from said slowdowns thought seasonality. people of catching may that. been QX up coming it's are to because and there

of school is it's other been thought The ugly.

struggling Jim as down for are customers our over holiday nonessential even said of shut longer Some still are the period. and may

a keeps activity X% the we've unknown comment But us quoting of better. X% that's as seen to downturn. we've got cautious little side normal what a backlog in We more is non-res the good and So did that the a infrastructure. on towards bit seasonal and

type more products. That's more weak. products. We aluminum aerospace carbon That's So probably we're your about being of talked positive. more your of

on Our better it's stainless than the products. in especially side other the held flat-rolled

closures So that industry. doing there well lighter are pretty Alloy us. sales commented of we that's some the our in because energy of for been

remain under to expect We pressure.

high-level that's So guidance. a of at kind

Jim Hoffman

I'd into And the Tyler, effort put of inventory thing management. we lot our only add a

as-needed that it just-in-time. know customers as-needed is not the you what when -- we it. means need don't inventory but sure that's we call versus I'm If just-in-time

their quarter; quarter and a quarter is have their their companies. first of we and companies So third basket best a some fourth. companies In second certain

they're look that. is in that just So quarter And companies and down properly. our that the we're and then at need slowest and flex fourth sure we you your quarter third the -- differently quarter we up inventory if all make spending for those inventory flex don't dollars of

a that there's into of that. goes lot analysis So

our get So in pandemic, told understand also the conservative rewarded and expect get I a And we're better understand -- Like said I because perform. to because history we're and it's because look we very continue you without -- the -- COVID of has we so perform during really guess we Karla would really what expectations history. you fourth aware quarter different. at your difficult past. somewhat probably projecting you this we'd to our it us. have product-by-product. go are if But well the than you to it. are we've got model it. we we But And a When done I I guess resilient when -- thing

So it work. might

Tyler Kenyon

Maybe about us you've the the fourth should expect as should help from follow the Thanks have just called of wondering to come for if of improved. context. the all folks to the of the more of back you SG&A trend third kind quarter can into a activity as moving we expect Karla know quarter. levels kind some trajectory flattish I dollars we Or volume some fourth And costs quarter? trend of back?

Karla Lewis

Yes.

to probably it's the that's lighter Overall which at days when part have I is we're we're QX it. those paying But a most affects percent of though fewer think holidays our looking look volume. we still probably Tyler, volume shipping think, because of even sales of way are decent I So -- wages. shipping

I So volume. wouldn't line bring it necessarily with down in

So you look I we the point. if probably at you guide think is give dollars best consistently pretty that this QX with can

Tyler Kenyon

could. Great. one And last then Thanks I one if that. just for

currently? landscape update maybe on And what to excuse the your Just are environment seeing of in seeing wanted provide an if temperature take what you out competitors? there. you're or -- in us your just customer some you Thanks. M&A What seeing the on you're your me could competitive among

Jim Hoffman

know. don't I Yeah. I'll --

competitors Our not even nowadays. -- are competitors we're how seeing our

But a looked a sometimes it's at of changed doing we don't bless into little -- on we on a M&A sometimes I of out a and we they're of I criterion They're it skip I I times activity. very target-rich at far were environment. just fit that doing. companies they're as -- the would hope had not all. a a for what week. wonder all join lot daily; those And How's to changed We important earlier. But horizon. is of a mentioned don't that nothing's we changed. doing. whatever of time really companies. that? really very -- It's that all they're healthy. don't them. I its God we're they're the The I because go to But sometimes, a them. don't have -- family it they doing. think haven't works a So safe hope stay it's day; like don't I problem. -- I we to is don't lot It's spend We of -- do. as I wondering couple -- we're We There's anything's of lot what we criteria stringent. choose mentioned we've few that's a problem And again, And kind not our selective a mean And just haven't that mean of lot it's there's -- -- things who got in. what know. the

quickly. will news looking out but eliminate there, good at of some seems there's pretty we're some things the there's you a -- that Now, what is, lot

want nothing forces you're because really we -- sale acquisition forces back small it's for if customer compete that. biggest of If there's sync If best into it's that's lot or there's that's that with customers, keep a don't just we potential them the not a We're be company goes a us If with suppliers, our customer. want our -- out. -- really us can we everybody's to that. we to compete to we effort to very like that that do

they our the we're -- just kind of But didn't fire -- a because well job do fixer-uppers. is. to and them what we just of we've is explaining And had sal-ing are there's them. those up eliminate some M&A -- we're matter always during our appetite of ones -- change. It's of a got that come we'll that's have very we we ways And changed. don't into -- And still participate pops of hasn't of wonderful rolls companies types appetite So, again, the is And And with cash. And good that what what right Karla we do when did -- to things. money then cash. our don't that of problem, COVID. different do on one explaining there's not all going -- not cash. the kind And going it we've to I a use your not fact think plenty -- as we'll our to got along. But

say, we we'll if and good work the So, out, jump ones come things could in. suffice along to

Bill Sales

this is Bill. Yes. Tyler,

competitors said, the in value-added so, competition, more obviously this of do our customers I are environment. of well, we out at our there. But model orders, market plays That have Just jumping we've mean mean, back in time to and this processing. fits faster I to it smaller needing delivery where kind hand generally kind looking really as of kind right

Tyler Kenyon

Thanks again.

Karla Lewis

Thanks, Tyler.

Jim Hoffman

Tyler. Thanks,

Operator

time, Hoffman, the over concluding I'd the and we question-and-answer have to gentlemen, of and Jim end back this At for remarks. CEO the Ladies like reached session. call to turn President

Jim Hoffman

to all your on attention again and of you Thanks, the call time for today.

remind and stay for I November Sachs Reliance all which again at be Conference webcast the Citi Mining we Basic Materials present Thanks, Conference Goldman virtually to held continued live conclude, Metals to over plan and will in and and that support the commitment the Internet. to and healthy. Before like I'd your you

Operator

This concludes today's conference.

You may thank and we participation. you at lines time your your this disconnect for