Reliance Steel & Aluminum Co

Greetings. Welcome to the Reliant Steel and Aluminum Company fourth quarter full year 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. If anyone should require any technical assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Kim Orlando, with Addo Investor Relations. You may begin.

Thank you, Operator. Good morning and thanks to all of you for joining our conference call to discuss Reliance's fourth quarter and full year 2020 financial results. I am joined by Jim Hoffman, CEO, Carla Lewis, President, and Arthur Ajemian, Vice President and CFO. Bill Sales, Executive Vice President, Operations will also be available during the question and answer portion of this call. A recording of this call will be posted on the Investors section of our website at investor.rsac.com. The press release and the information on this call may contain certain forward-looking statements which are based on a number of assumptions that are subject to change and involve known and unknown risks, uncertainties, or other factors, including the impacts of the COVID-19 pandemic and related economic conditions on our future operations, which may not be under the company's control, which may cause actual results, performance, or achievement of the company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those factors disclosed in the company's annual report on Form 10-K for the year ended December 31, 2019, and as updated in the company's quarterly report on Form 10-Q, for the quarter ended March 31st, 2020, the company's quarterly report on Form 10-Q for the quarter ended June 30th, 2020, and the company's quarterly report on Form 10-Q for the quarter ended September 30th, 2020, under the caption risk factors, disclosure in our press release this morning, and other documents for alliance files or furnishes with the Securities and Exchange Commission. The press release and the information on this call speak only as of today's date, and the company disclaims any duty to update the information provided therein and herein. I will now turn the call over to Jim Hoffman, CEO of Reliance.

Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2020 financial results. Despite the extraordinary challenges 2020 presented on a global scale, We're extremely pleased with the strong execution that our team has shown, not only in the field, but by all of the employees within the family of companies who demonstrated the true resiliency of the Reliance business model. I applaud each and every one of you for your tremendous efforts to quickly and nimbly adapt to the changing environments, ensure our customers are always taken care of, and most importantly, Maintain your unwavering commitment to health and safety, our most important core value. Since 2017, our Smart Safety program has been focused on embedding our culture of safety across our entire family of companies. Working together as one company, we focused on this initiative in 2020 like never before in response to the new and unique challenges presented by the COVID-19 pandemic. In addition to developing new policies and procedures to prevent the spread of the virus, we improved our safety performance in 2020 with an approximately 23% reduction in our incident rate compared to 2019. While this is a significant milestone, as I've stated in the past, we will not be satisfied until this rate reaches zero. I'd like to thank everyone at Reliance for their commitment to making it personal in 2020 in order to keep our employees, their families, our customers, suppliers, and communities safe. I'd like to take a moment to congratulate both Carl Lewis and Arthur Ajemian for the recently announced well-deserved promotion. Consistent with our board's strategic executive leadership succession plan, Carla, was promoted from CFO to President and was simultaneously appointed to our Board of Directors, effective January the 15th. Carla has demonstrated excellent judgment and leadership in each role she has held since joining Reliance in 1992, and her unique abilities and talents have earned the respect of our employees and shareholders. Carla's promotion recognizes her significant contributions to Reliance and will allow her to broaden her knowledge of Reliance's field operations and increase the diversity of her experience. In addition, Arthur Agyemian was promoted to vice president and chief financial officer effective January the 15th. Arthur has held various positions in Reliance's finance and accounting department for over 15 years and has done a phenomenal job. I congratulate both Carla and Arthur on their promotions and look forward to continuing to work closely with them in their new roles. Now let's turn to our 2020 results. We delivered a solid financial performance in 2020, driven by consistently strong operational execution despite considerable turbulence in the market. Our results demonstrate the strength and resiliency of our people and unique business model, as well as our ability to execute through both good times and bad, given the diversity of our products in markets and geographies. Our decentralized structure allowed us to respond rapidly to fluid market conditions and demand trends. These factors combined with pricing discipline and continuous improvements to our value-added processing capabilities, enabled us to achieve our second consecutive year of record annual gross profit margins at 31.5%, up 120 basis points from 2019 and exceeding our estimated sustainable range of 28 to 30%. We also maintain healthy profitability levels despite the extraordinarily volatile and challenging market conditions. For the full year, we generated non-GAAP earnings per share of $7.71 as a result of the combination of strong margin discipline and effective expense control, which helped mitigate our decline in profitability. On the heels of a record year in 2019, We maintain strong cash flow from operations of $1.17 billion in 2020, driven by our profitability and focus on working capital management. Fueled by our ongoing focus on rightsizing our inventory to reflect current demand levels and our differentiating advantage of cross-selling inventory amongst our family of companies, We achieved our company-wide inventory turn goal of 4.7 times based on tons for 2020. In line with historical trends and the cornerstone of our business model, a significant portion of our metal we purchase is from domestic suppliers. And it is paramount that we continue to support our mill partners who, in turn, have consistently been there for Reliance during challenging times. Our countercyclical cash flow generation allows us to remain flexible and opportunistic in executing our growth initiatives while concurrently returning value to our stockholders. We invested $172 million in our business through capital expenditures in 2020, including many growth opportunities, such as our recent toll processing expansion in Texas and Kentucky. Today, we are introducing our 2021 capital expenditure budget of $245 million that includes new buildings and other projects to expand, upgrade, and maintain many of our operating facilities. We are installing energy-efficient lighting and solar panels in certain of our facilities. Our 2021 budget also includes innovative new processing equipment to provide our customers with the highest quality products and services. Turning to M&A, although COVID-19 has slowed the pace of acquisitions activity in general, we continue to see a healthy pipeline of potential candidates as we've begun to broaden our view on the universe of prospective growth opportunities. As always, we evaluate opportunities based on a strict set of criteria to ensure a strong fit within the family of companies. Now turning to stockholder returns. In 2020, we repurchased $337.3 million worth of our common stock at an average cost of $91.80 per share and paid $164.1 million in dividends to our shareholders. We've maintained our payment of regularly quarterly dividends for 61 consecutive years without ever suspending payment or reducing our dividend rate. In addition, we've increased our dividend 28 times since our 1994 IPO, including the most recent increase of 10% for the first quarter of 2021. Looking forward into the remainder of 2021, Reliance will continue to execute and improve upon our tried and true model that has led us to industry-leading results for many decades. Over the past year, we've adapted to operate more efficiently than ever without sacrificing our competitive edge and the critical elements of our business that make Reliance a trusted and reliable business partner. We will maintain our focus on opportunities to enhance our products and markets in geographical diversification, along with our ongoing commitment to strong pricing discipline, diligent expense control, when needed inventory management, organic growth, and innovation. As was evident throughout the past year, our customers rely on Reliance to continue to support them through trying times. often in greater capacity and on a more frequent basis. As I continue to say, and I will say again, America is going to need reliance to rebuild. Thank you for your time and attention today. I will now turn the call over to Carla to review our operating results and demand trends. Carla?