Reliance Steel & Aluminum Co

Greetings and welcome to the Reliance Steel and Aluminum Company second quarter 2022 earnings 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 operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kim Orlando, with Addo Invest Relations. Thank you. You may begin.

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's second quarter 2022 financial results. I am joined by Jim Hoffman, CEO, Carla Lewis, President, and Arthur Jemmian, Senior Vice President and CFO. Steve Cook, Executive Vice President and Chief Operating Officer, will also be available during the question and answer portion of today's call. A recording of this call will be posted on the investor 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 inflation, geopolitics, and the COVID-19 pandemic and related economic conditions on our future operations, which may not be under the company's control and may cause the 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 31st, 2021, under the caption, Risk Factors. Disclosure in our press release this morning, and other documents Reliance 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.

Thanks, Kim. Good morning, everyone, and thank you for joining us today to discuss our second quarter 2022 financial results. I will begin with an overview of our performance and capital allocation activities. Carla will then speak to our operating results and demand trends by end market, and Arthur will conclude with a review of our financials. Reliance delivered an exceptional second quarter with record-setting financial performance and outstanding operational execution. we achieved all-time high quarterly net sales of $4.68 billion, which combined with an enhanced gross profit margin of 31.9% and continued strong operational leverage resulted in record quarterly earnings per share of $9.15, as well as significant cash flow to fuel our growth and stockholder return priorities. These results, were supported by ongoing healthy demand in most of the end markets we serve and continued elevated pricing levels for the majority of the products we sell. Our earnings for the first half of 2022 of $17.49 per share were near the record annual earnings per share of $21.97 we attained in 2021 and we are on pace to achieve another year of record profitability. Our model continues to prove resilient amidst challenging macroeconomic circumstances bolstered by our diverse array of products and markets, geographies, as well as consistent support of our domestic suppliers to secure ample inventory for our customers. Our commitment to customer service has solidified our position as a partner of choice, with our deep-rooted relationships driving approximately 97% of our orders from repeat customers and 50% of our orders including value-added processing. Our broad geographic footprint of approximately 315 service centers strategically located in close proximity to our end customers provides us a unique competitive advantage by enabling quick turnaround with approximately 40% of our orders delivered within 24 hours. In addition, our proprietary fleet of over 1,700 trucks mitigates the impact of increased transportation costs in the current inflationary environment. Continued improvement in our strong gross profit margin combined with our record-setting quarterly sales produce record gross profit of $1.50 billion. Our managers in the field once again did a tremendous job of appropriately pricing the value we provided to our customers, even as we saw pricing begin to decline for many of our products in the latter parts of the second quarter. Looking ahead, as we begin to navigate an environment with overall declining metals pricing, the core tenets of our model, including our value-added processing capabilities, product and markets, and geographic diversity, and smaller order sizes with quick turnaround supported by our proprietary fleet of trucks will collectively help provide a stabilizing effect in our selling prices and margins. Our customers also tend to hold less inventory in times of declining prices and increase their reliance on us to provide the metal they need quickly and more frequently, as well as to fulfill their value-added processing needs. Our record second quarter earnings helped us generate strong cash flow from operations of $270.2 million, fueling our strategic priorities of growth and stockholder returns. We continue to see numerous organic growth and acquisition opportunities. The majority of our capital expenditures in 2022 target expansion in growing end markets, most notably the semiconductor industry. As additional reshoring opportunities come to fruition, we continue to believe our strong cash flow generation positions us well to support enhanced growth in the semiconductor space as well as other end markets. While our full-year capital expenditure budget is $455 million, we believe our cash outlays in 2022 will be in the $300 to $350 million range given extended lead times throughout the supply chain. On the M&A front, the pipeline remains strong, and we continue to evaluate potential targets on a regular basis, applying our stringent criteria. Turning to stockholder returns, we have returned over $2.3 billion in capital to our valued stockholders since 2017 through regularly quarterly cash dividends and share repurchases. We have paid regular quarterly cash dividends for 63 consecutive years without reduction or suspension and have increased our quarterly dividend 29 times since our 1994 IPO. Arthur will elaborate on our stockholder return activity shortly. Before I conclude, I'd like to take a moment to recognize some well-deserved promotions as well as the retirement of Mike Shanley, as Senior Vice President of Operations following his 44 years of service to Reliance. Mike transitioned to the role of Special Advisor at the beginning of July to facilitate the transition of his responsibilities and to support other special projects in advance of his retirement by the end of the year. On behalf of the entire Reliance team, I'd like to thank Mike for his tremendous efforts, including his strong leadership skills and dedication to growth, innovation, and customer service, which have been integral to our success. We wish him all the best in his upcoming retirement. I'd also like to congratulate Steve Cook and Mike Hines on their promotions. Consistent with our board's strategic executive leadership succession plan, Steve was promoted from Senior Vice President of Operations to Executive Vice President and Chief Operating Officer, effective July 1st, 2022. Steve's industry knowledge, passion for operational execution, exemplary leadership skills has earned him the respect of his colleagues throughout the Reliance family of companies, as well as our key domestic suppliers. In his new role, Steve will oversee operations throughout our company with an emphasis on safety and organic growth. Mike Hines was promoted from President of the Phoenix Metals, a Reliance subsidiary, to Senior Vice President of Operations, effective July 1st, 2022. In his new role, Mike will oversee the performance of a number of Reliance's operations, as well as providing strategic direction and general management guidance, drawing on his wealth of industry and product knowledge earned in his 34 years in the industry. I look forward to continuing to work closely with both Steve and Mike in their new roles. In summary, our relentless focus on operational execution produced another quarter of record financial performances. Looking ahead, we will continue to execute our model as we always have and maintain our focus on continuous improvement despite macroeconomic challenges, including inflation, recessionary concerns, and labor and supply-related pressures. We're committed to our bi-domestic philosophy and long-standing supply relationships, which have supported our ability to uphold superior service standards by ensuring access to metal we need to support our customers' needs. Finally, I'd like to reiterate that Reliance remains well-positioned to navigate challenging environments, as we have done so successfully in the past, and we are prepared to help America rebuild as every increase in infrastructure needs persist. Thank you for your time and attention today. I will now turn the call over to Carla, who will review our second quarter operating results and demand trends.