Q1 2024 Reliance Inc Earnings Call

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Greetings and welcome to Alliance, Inc. First quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference.

Operator: Greetings and welcome to Reliance Inc.'s first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please call 1-866-422-4222. Please press star zero on your telephone keypad.

Operator: Please press star zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando, with Addo Investor Relations. Thank you, Ms. Orlando. You may begin.

Operator: As a reminder, this conference is being recorded it is now my pleasure to introduce your host Kim Orlando with Investor Relations. Thank you Ms. Orlando you may begin.

Kimberly Orlando: Thank you operator, good morning, and thanks to all of you for joining our conference call to discuss Reliance's first quarter 2024 financial results.

Kimberly Orlando: Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's first quarter 2024 financial results. I am joined by Karla Lewis, President and Chief Executive Officer, Steve Koch, Executive Vice President and Chief Operating Officer, and Arthur Ajemyan, Senior Vice President and Chief Financial Officer. A recording of this call will be posted on the investor section of our website at investor.reliance.com. Please read the forward-looking statement disclosures included in our earnings release issued this morning and note that they apply to all statements made during this teleconference. The reconciliations of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release. I will now turn the call over to Karla Lewis, President and CEO of Reliance.

Kimberly Orlando: I am joined by Karla Lewis, President and Chief Executive Officer, Steve Cook Executive Vice President and Chief operating Officer, and Arthur a gem in senior Vice President and Chief Financial Officer.

Recording of this call will be posted on the investors section of our website at investor that reliant dotcom.

Kimberly Orlando: Please read the forward looking statement disclosures included in our earnings release issued this morning and note that it applies to all statements made during this teleconference.

Kimberly Orlando: The reconciliation of the adjusted numbers are included in the non-GAAP reconciliation part of our earnings release.

Kimberly Orlando: I will now turn the call over to Karla Lewis President and CEO of reliance.

Karla R. Lewis: Good morning, everyone and thank you all for joining us today to discuss our first quarter 2024 results.

Karla R. Lewis: Good morning, everyone, and thank you all for joining us today to discuss our first quarter 2024 results. Our resilient business model, most notably the diversity of our products and markets and geography, once again delivered strong performance in the first quarter. Despite a challenging pricing environment, we continued to drive smart, profitable growth, surpassing broader industry shipment levels, and maintain pricing discipline and a strong gross profit margin, all of which collectively contributed to our first quarter non-GAAP earnings per diluted share of $5.30. Our significant investments in value-added processing capabilities continue to bolster our gross profit margin throughout market cycles. Our profitable operations and consistent ability to generate cash enable us to continue allocating capital across our core priorities.

Karla R. Lewis: Our resilient business model.

Karla R. Lewis: Notably the diversity of our products end markets and geography, once again delivered strong performance in the first quarter.

Karla R. Lewis: Despite a challenging pricing environment.

Karla R. Lewis: Continue to drive smart profitable growth.

Karla R. Lewis: Passing broader industry shipment levels and maintain pricing discipline and a strong gross profit margin all of which collectively contributed to our first quarter non-GAAP earnings per diluted share of $5 and 30 sets are.

Karla R. Lewis: Our significant investments in value added processing capabilities continue to bolster our gross profit margin throughout market cycles.

Karla R. Lewis: Our profitable operations and consistent ability to generate cash enable us to continue allocating capital across our core priorities. We have completed three acquisitions to date in 'twenty 'twenty, four expanding our product offerings processing capabilities and geographic reach.

Karla R. Lewis: We have completed three acquisitions to date in 2024, expanding our product offerings, processing capabilities, and geographic reach and collectively adding nearly $500 million in annualized sales based on 2023 results. We also invested $108.7 million back into our business through capital expenditures predominantly targeted toward growth opportunities that increase capacity and value-added processing capabilities. Our CapEx budget for the calendar year 2024 is $440 million, with an expected total cash outlay of approximately $500 million, which includes certain carryover projects from prior years.

Karla R. Lewis: And collectively adding nearly $500 million in annualized sales based on 2023 results.

Karla R. Lewis: We also invested $108.7 million back into our business through capital expenditures predominantly targeted toward growth opportunities that increase capacity and value added processing capabilities, our capex budget for the calendar year 'twenty 'twenty four is 400.

Karla R. Lewis: And $40 million with an expected total cash outlay of approximately $500 million, which includes certain carryover projects from prior years. As previously noted we expect approximately two thirds of our capex spend will be used for growth projects. We also return.

Karla R. Lewis: As previously noted, we expect approximately two-thirds of our CapEx spend will be used for growth projects. We also returned $65.3 million to our valued stockholders in dividends. On the M&A side, in addition to acquiring Cooxie Steel on February 1, we completed two acquisitions earlier this month, American Alloy and Midwest Materials. American Alloy brings specialty carbon steel plate to our product portfolio, as well as new fabrication capabilities through the addition of six service center locations in the U.S. Midwest Materials increases our flat-rolled presence in and around Ohio, primarily servicing North American OEMs.

Karla R. Lewis: $65.3 million to our valued stockholders and dividends.

Karla R. Lewis: On the M&A side. In addition to acquiring Cooksey steel on February 1st we completed two acquisitions earlier this month American alloy Midwest materials American alloy it brings specialty carbon steel plate to our product portfolio as well as new fabrication capabilities.

Karla R. Lewis: Addition of six service center locations in the U S.

Karla R. Lewis: Midwest materials increases our flat rolled presence in and around Ohio, primarily servicing North American Oems all of these transactions fit our acquisition strategy of acquiring immediately accretive well run companies with strong management teams. We have now completed 75 acquisition.

Karla R. Lewis: All of these transactions fit our acquisition strategy of acquiring immediately accretive, well-run companies with strong management teams. We have now completed 75 acquisitions since our 1994 IPO, and the M&A pipeline remains strong as we continue to evaluate a wide array of potential future opportunities. And please note that our first quarter results include contributions from Cooksey, which was acquired on February 1st, but do not include American Alloy or Midwest Materials, both of which closed on April 1st.

Karla R. Lewis: Since our 1994 IPO and the M&A pipeline remains strong as we continue to evaluate a wide array of potential future opportunities.

Karla R. Lewis: Please note that our first quarter results include contributions from Cooksey that was acquired on February 1st but do not include American alloy, our Midwest materials, both of which closed on April 1st.

Karla R. Lewis: Before I close, I'd like to thank the entire Reliance team for a strong start to the year through their commitment to exceptional customer service, smart, profitable growth, and, most importantly, their commitment to safety. In the medium to long term, we believe the investments we have made and continue to make in our business position Reliance to benefit from growth opportunities under the Infrastructure Bill, the CHIPS Act, and the Inflation Reduction Act, along with the robust reshoring and nearshoring activity currently underway in several of the end markets we service. Thank you all for your time today. I'll now turn the call over to Steve, who will review our first quarter demand and pricing trends.

Speaker Change: Before I close I'd like to thank the entire reliance team for a strong start to the year through their commitment to exceptional customer service smart profitable growth and most importantly, their commitment to safety.

Steve: In the medium to long term, we believe the investments we've made and continue to make in our business position reliance to benefit from growth opportunities under the infrastructure Bill The chips Act and the inflation reduction act along with the robust re shoring and near shoring activity currently underway in.

Steve: Several of the end markets we service.

Karla R. Lewis: You all for your time today I'll now turn the call over to Steve will review, our first quarter demand and pricing trends.

Steve: Thanks, Carla and good morning, everyone.

Stephen P. Koch: Thanks, Karla. And good morning, everyone.

Stephen P. Koch: I'd also like to express my gratitude to our strong team at Reliance for a great start to the year and the continued commitment to safety. Further, I'd like to extend a warm welcome to the Reliance family of companies, the teams at Cooksey, American Alloy, and Midwest Materials. I'll now turn to our first quarter demand and pricing trend. Our tons sold increased 10.3% compared to the fourth quarter of 2023, in line with both our expectations of an increase of 9-11% and typical seasonal trends.

Steve: Like to express my gratitude to our strong team at reliance for a great start to the year and our continued commitment to safety.

Stephen P. Koch: Further I'd like to extend a warm welcome to the reliance family of companies. The teams at Cooksey American alloy and Midwest materials.

Stephen P. Koch: I'll now turn to our first quarter demand and pricing trends.

Stephen P. Koch: Our tons sold increased 10, 3% compared to the fourth quarter of 2023 in line with both our expectations of.

Stephen P. Koch: 9% to 11% and typical seasonal trends compared to the prior year quarter, our tons sold were down one 7%, but still well below the service center industry decrease of four 2% as reported by the MSCI.

Stephen P. Koch: Compared to the prior year quarter, our tons sold were down 1.7%, but still well below the service center industry decrease of 4.2%, as reported by the MSCI. We believe our continued performance above our MSCI peers is supported by both organic growth and strategic acquisitions.

Stephen P. Koch: We believe our continued outperformance of our MSCI peers is supported by both.

Stephen P. Koch: Organic growth and strategic acquisitions.

Stephen P. Koch: First quarter 2024 volumes were also impacted by Walnut Shipping Day in the first quarter of 2023. Our first quarter average selling price per ton sold of $2,442 declined by 1% compared to the fourth quarter of 2023, below our expectations of up 1-3%. We experienced lower-than-anticipated pricing across carbon and stainless steel products as the quarter progressed. Pressure on carbon steel product pricing contributed to a temporary decline in shipment activity during March as some customers delayed orders in anticipation of lower prices. While carbon steel prices increased 1% compared to the fourth quarter, they nonetheless entered the second quarter trending down. Stainless steel prices were down 6.2% compared to the fourth quarter, but they stabilized heading into the second quarter.

Stephen P. Koch: First quarter of 2024 volumes were also impacted by one less shipping day in the first quarter of 2023.

Stephen P. Koch: Our first quarter average selling price per ton sold $2442 decline by 1% compared to the fourth quarter of 2023 below our expectations of a 1% to 3%.

Stephen P. Koch: Experienced lower than anticipated pricing cross carbon and stainless steel products as the quarter progressed.

Stephen P. Koch: Pressure on carbon steel product pricing contributed to a temporary decline in shipment activity during march as some customers delayed orders in anticipation of lower prices.

Stephen P. Koch: Carbon steel prices increased 1% compared to the fourth quarter.

Stephen P. Koch: MLS and into the second quarter trending down.

Stephen P. Koch: Stainless steel prices were down six 2% compared to the fourth quarter, but stabilized heading into the second quarter.

Stephen P. Koch: Yeah.

Speaker Change: Next I will turn to an overview of trends we saw within our products.

Stephen P. Koch: End markets.

Stephen P. Koch: Carbon steel tubing plate and structural has represented about one third of our first quarter sales.

Stephen P. Koch: All these products experienced solid volume growth and outperformed industry shipment levels compared to the first quarter of 2023.

Stephen P. Koch: During the first quarter of 2024 strong nonresidential construction activity supported healthy demand for carbon steel structural and tubing products.

Stephen P. Koch: Next, I will turn to an overview of trends we saw within our products and key end markets. Carbon steel tubing, plate, and structurals represented about one third of our first quarter sales. All these products experienced solid volume growth and outperformed industry shipment levels compared to the first quarter of 2023. During the first quarter of 2024, strong non-residential construction activity supported healthy demand for carbon steel, structural, and tubing products, with plate demand softening due to declining prices.

Stephen P. Koch: Plate demand softening due to declining prices.

Stephen P. Koch: Aluminum and stainless products represented just over 30% of our first quarter sales, while stainless shows more favorable volume trends than aluminum, we outperformed industry shipment levels across both product groups year over year.

Stephen P. Koch: Aerospace products comprised about 90% of our total sales and aerospace demand remains stable year over year.

Stephen P. Koch: We primarily service the automotive market through our toll processing operations, which are not reflected in our tons sold our tolling business process for 8% more tons in the first quarter of 2024 during the prior year fueled by continuing strong demand from the automotive market and our significant investments to increase capacity.

Stephen P. Koch: Our general manufacturing market business.

Stephen P. Koch: This was roughly one third of our total sales is highly diversified across products and includes industrial machinery.

Stephen P. Koch: Aluminum and stainless steel products represented just over 30% of our first quarter sales. While stainless shows more favorable volume trends than aluminum, we outperformed industry shipment levels across both product groups year over year. Aerospace products comprise about 9% of our total sales, and aerospace demand remains stable year over year. We primarily service the automotive market through our toll processing operations, which are not reflected in our tons sold. Our tolling business processed 4.8% more tons in the first quarter of 2024 than in the prior year, fueled by continuing strong demand from the automotive market and our significant investments to increase capacity. Our general manufacturing market business, which is roughly one-third of our total sales, is highly diversified across products and includes industrial machinery, consumer products, heavy equipment, and military. Shipments declined year over year driven by weakness in agricultural equipment and consumer products, partially offset by stronger industrial machinery shipments supported by military manufacturing demands.

Stephen P. Koch: Consumer products heavy equipment and military.

Stephen P. Koch: Shipments declined year over year, driven by weakness in agricultural equipment, and consumer products, partially offset by stronger industrial machinery shipments supported by military manufacturing demand.

Stephen P. Koch: Imagine the semiconductor industry are stabilized.

Stephen P. Koch: But remained down year over year, our long term outlook for the semiconductor market remains positive reinforced by the sheer fact significant semiconductor fabrication expansion underway in the United States and we continue to invest in semiconductor capacity.

Stephen P. Koch: Overall, we see demand across the end markets, we serve remaining stable to strong in the second quarter of 2024.

Stephen P. Koch: Please refer to our earnings release for additional commentary on our end markets and product diversification.

Stephen P. Koch: Now I'll turn the call over to Arthur to review, our financial results and outlook.

Speaker Change: Thanks, Steven and good morning, everyone.

Stephen P. Koch: Our first quarter 2024, non-GAAP diluted earnings per share of $5.30 or at the low end of our guided range as our tons sold seasonally improved pricing softened more than we anticipated.

Stephen P. Koch: He successfully outperformed industry shipment levels.

Stephen P. Koch: Nearly all products, we bolstered our quarterly earnings despite the challenging pricing environment.

Stephen P. Koch: Our 31% gross profit margin for the first quarter was attributable in part to higher than anticipated LIFO benefit.

Arthur Ajemyan: Demand in the semiconductor industry has stabilized, but it remains down year over year. Our long-term outlook for the semiconductor market remains positive, reinforced by the CHIPS Act and significant semiconductor fabrication expansion underway in the United States. And we continue to invest in semiconductor capacity. Overall, we see demand across the end markets we serve remaining stable to strong in the second quarter of 2024. Please refer to our earnings release for additional commentary on our end markets and product diversification. I will now turn the call over to Arthur to review our financial results and outlook. Thanks, Stephen.

Stephen P. Koch: Alignment of costs on hand than replacement cost.

Arthur Ajemyan: Gross profit margin stability from our value added processing capabilities.

Arthur Ajemyan: We recorded LIFO income of $50 million in the first quarter compared to our guidance of $20 million.

Arthur Ajemyan: As prices declined more than we anticipated we have increased our 2024 annual LIFO income estimate of $80 million to $200 million.

Arthur Ajemyan: Accordingly, we currently expect to record approximately $50 million of LIFO income in the second quarter of 2024.

Arthur Ajemyan: On a FIFO basis, which is how we monitor our day to day operating performance, which excludes the effect of our LIFO inventory valuation method.

Arthur Ajemyan: Gross profit margin improved by roughly 80 basis points compared to the prior quarter to 29, 6% as we improve the alignment of inventory cost on hand with replacement costs.

Arthur Ajemyan: Thanks, Steve, and good morning, everyone. Our first quarter 2024 non-gap delivery earnings per share of $5.30 were at the low end of our guided range as our tons sold seasonally improved, but pricing softened more than we anticipated. We successfully outperformed industry shipment levels across nearly all products, which bolstered our quarterly earnings despite the challenging pricing environment. Our 31% gross profit margin for the first quarter was attributable, in part, to higher than anticipated life cycle benefits. Better alignment of costs on hand and replacement costs and gross profit margin stability for more value-added processing capabilities.

Arthur Ajemyan: This trend began to reverse in March and has continued in the second quarter.

Arthur Ajemyan: While most carbon product prices began to stabilize in April we'll continue to see short term gross profit margin pressures try at the second quarter as we get better alignment of costs on hand with replacement costs.

Arthur Ajemyan: As of the end of the first quarter. The LIFO reserve on our balance sheet was $529 million, which will generate LIFO income and benefit future period operating results to mitigate the impact of potential further declines in metal prices.

Speaker Change: Now on to expenses.

Arthur Ajemyan: On a year over year basis same store non-GAAP, SG&A expenses increased $7 $1 million or one 1% primarily due to the increased head count to accommodate organic growth, which was partially offset by lower incentive based compensation, resulting from lower profitability.

Arthur Ajemyan: We recorded LIFO income of $50 million in the first quarter compared to our guidance of $20 million. As prices declined more than we anticipated, we have increased our 2024 annual LIFO income estimate from $80 million to $200 million. Accordingly, we currently expect to record approximately $50 million of LIFO income in the second quarter of 2024. On a FIFO basis, which is how we monitor our day-to-day operating performance and which excludes the effect of our LIFO inventory valuation method, our gross profit margin improved by roughly 80 basis points compared to the prior quarter to 29.6% as we saw improved alignment of inventory costs on hand with replacement costs. This trend began to reverse in March and has continued in the second quarter.

Arthur Ajemyan: As a reminder, our model normalizes expenses by right sizing incentives as profit trend down.

Speaker Change: I'll now move on to discuss balance sheet and cash flow.

Arthur Ajemyan: For the first quarter, we generated $126 $3 million in operating cash flow, which helps fund hundreds and $8 $7 million in capital expenditures.

Arthur Ajemyan: $53 $7 million for an acquisition and the return of $65 $3 million to our stockholders through dividends.

Arthur Ajemyan: While we did not have any share repurchases in the first quarter of 2024, we have $1.44 billion remaining under our share repurchase authorization and ample liquidity for opportunistic purchases.

Speaker Change: Turning now to our second quarter outlook.

Arthur Ajemyan: Overall, we expect a better than normal seasonal recovery in demand in the second quarter of 2024, despite prevailing macroeconomic uncertainty and geopolitical matters.

Arthur Ajemyan: While most carbon product prices begin to stabilize in April, we'll continue to see short-term gross profit margin pressures throughout the second quarter as we get better alignment of costs on hand with replacement costs. As of the end of the first quarter, the LIFO reserve on our balance sheet was $529 million, which will generate LIFO income and benefit future period operating results to mitigate the impact of potential further declines in metal prices. Moving along to expenses. On a year-over-year basis, same-store non-GAAP SG&A expenses increased $7.1 million, or 1.1%, primarily due to increased headcount to accommodate organic growth, which was partially offset by lower incentive-based compensation resulting from lower profitability.

Arthur Ajemyan: We also expect shipping volumes to increase.

Arthur Ajemyan: 2.5% to 4.5% sequentially in the second quarter.

Arthur Ajemyan: Approximately 2% of the sequential growth coming from recently completed acquisitions.

Arthur Ajemyan: On the pricing side.

Arthur Ajemyan: Expect our average selling price per ton sold for the second quarter to be down 1% to 3% compared to the first quarter, which will generate some short term pressure on our gross profit margin as we work through higher cost inventory on hand.

Arthur Ajemyan: Based on these expectations, we anticipate non-GAAP earnings per diluted share in the range of $4 70 to $4.90 for the second quarter of 2020 for.

Speaker Change: This concludes our prepared remarks, thank you for your participation.

Speaker Change: This time, we'll now open the call up to questions operator.

Speaker Change: Thank you.

Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Arthur Ajemyan: As a reminder, our model normalizes expenses by right-sizing incentives as profits trend down. I'll now move on to discuss the balance sheet and cash flow. For the first quarter, we generated $126.3 million in operating cash flow, which helped fund $108.7 million in capital expenditures, $53.7 million for an acquisition, and a return of $65.3 million to our stockholders through dividends. While we did not have any share repurchases in the first quarter of 2024, we have $1.44 billion remaining under our share repurchase authorization and ample liquidity for opportunistic repurchases.

Arthur Ajemyan: Information tone will indicate your line is in the question queue.

Arthur Ajemyan: Start to if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please poll for questions.

Arthur Ajemyan: The first question comes from the line of Phil Gibbs with Keybanc capital markets. Please go ahead.

Speaker Change: Hey, good morning.

Speaker Change: Hey, Phil.

Arthur Ajemyan: You you mentioned the short term gross margin pressures in the second quarter.

Arthur Ajemyan: From some of the higher cost inventory that you'll you'll have to let them.

Arthur Ajemyan: Are you expecting.

Arthur Ajemyan: Should we expect assuming.

Arthur Ajemyan: Turning now to our second quarter outlook, overall, we expect a better than normal seasonal recovery in demand in the second quarter of 2024, despite prevailing macroeconomic uncertainty and geopolitical matters. We also expect shipping volumes to increase 2.5 to 4.5% sequentially in the second quarter, with approximately 2% of the sequential growth coming from recently completed acquisitions. On the pricing side, we expect our average selling price per ton sold for the second quarter to be down 1 to 3 percent compared to the first quarter, which will generate some short-term pressure on our gross profit margin as we work through higher-cost inventory on hand. Based on these expectations, we anticipate non-GAAP earnings per diluted share in the range of $4.70 to $4.90 for the second quarter of 2024.

Arthur Ajemyan: That prices generally level out.

Arthur Ajemyan: With a product that you sell the FIFO gross margins will begin to improve in the third quarter.

Speaker Change: Yeah. So you know so as as has been consistent in our business for decades, and the service center business, we have to manage through different pricing fluctuations and it. It's part of what we do prices deteriorated a little more than we anticipated.

Arthur Ajemyan: In the first quarter.

Arthur Ajemyan: But early in the quarter for certain products. There were some price hikes. So just with the normal lag we have to work through as we receive the higher priced material in.

Arthur Ajemyan: If you know selling prices continue to decline and so that just takes a little bit for a correction, but we do expect it to be temporary as you stated as prices level out.

Arthur Ajemyan: Then we should see some margin expansion you know also with our gross profit margins. They certainly are impacted by the base metal price. However, you know as we've we have and do continue to increase the amount of value added processing that we perform for our customers.

Operator: This concludes our prepared remarks. Thank you for your participation. At this time, we'll now open the call to questions. Operator.

Operator: We do have a little more cushion in there to make our margins a little more stable you know by taking out it's not just the base price fluctuations.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area. You may press star 2 if you would like to remove your questions from the question area. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please; I'll be polled for questions. The first question comes from the line of Phil Gibbs with KeyBank Capital Markets.

Philip Ross Gibbs: Fluctuations, we can maintain a consistent margin on the value added processing portion.

Operator: Okay.

Operator: Okay.

Philip Ross Gibbs: And then when I look at operating expenses, they were a little bit higher than what we were.

Philip Ross Gibbs: Anticipating do you have do you have contractual rethought sort of labor labor renegotiations that you do every January 1st or their insurance picking up or something along those lines.

Philip Ross Gibbs: Or was it more of as more of the same relative to the fourth quarter, where you talked about the fact that you do have some infrastructure in the in the form of new new plants.

Philip Ross Gibbs: You mentioned the short-term gross margin pressures in the second quarter from some of the higher cost inventory that you'll have to let go. Are you expecting, or should we expect, assuming... that prices generally level out for the product that you sell, that FIFO gross margins will begin to improve in the third quarter?

Philip Ross Gibbs: What you're not contributing to revenue quite yet I'm, just trying to understand that.

Speaker Change: Yeah. So you know we have you know different.

Philip Ross Gibbs: Timing on kind of wage increases throughout the year, but Jan one is you know.

Philip Ross Gibbs: Probably about half of our company has probably increased wages at that time, there was a little more broad based and our volumes were up so more expense comes along with increased volumes just packaging supplies you know various warehouse expenses you know.

Stephen P. Koch: Yeah, Phil, as has been consistent in our business for, you know, decades, in the service center business, we have to manage through different pricing fluctuations. And it's part of what we do.

Stephen P. Koch: Prices deteriorated a little more than we anticipated in the first quarter, but early in the quarter for certain products, there were some, you know, price hikes. So just with the normal lag, we have to work through as we receive the higher-priced material in, if, you know, selling prices continue to decline. And so that just takes a little bit of a correction. But we do expect it to be temporary, as you stated; as prices level out, then we should see some margin expansion.

Stephen P. Koch: Trucking delivering more so it was a little broad based I don't think there was anything in particular, but your point is right to filled that we commented before we do have some some greenfields and some expansions have a process.

Stephen P. Koch: Where you know where it does take a little time to ramp up so the expense load could be a little heavy so there is a little bit of that we also I think commented last quarter that you know safety is our number one priority and that takes a lot of training, especially in you know today's world with the war.

Stephen P. Koch: For us and so it probably takes us longer to onboard employees and you'd have to carry a little more to be able to get them properly trained.

Stephen P. Koch: You know, also with our gross profit margins; they are certainly impacted by the base metal price. However, you know, as we've and do continue to increase the amount of value-added processing that we perform for our customers, you know, we do have a little more cushion in there to make our margins a little more stable. By taking out not just the base price fluctuations, we can maintain a consistent margin on the value-added processing portion.

Stephen P. Koch: And so this is Arthur I would just add that you know year over year on a same store basis, we're only up 1%.

Stephen P. Koch: So and we talk about our incentive pay structure that kind of moderates expenses, so and yeah head count up a little bit, but then incentive comp is down. So net net you know year over year on a same store basis, we're only up 1%.

Stephen P. Koch: And then when you exclude the the same store.

Stephen P. Koch: And then when I looked at operating expenses, they were a little bit higher than what we were anticipating. Do you have contractual resets or labor renegotiations that you do every January 1st, or is there insurance picking up or something along those lines? or is it more of the same relative to the fourth quarter, where you talked about the fact that you do have some infrastructure in the form of new plans, which are not contributing to revenue quite yet? I'm just trying to understand that.

Stephen P. Koch: Do you keep that out what what I guess it would be incremental.

Stephen P. Koch: Incremental operating expense that may not be.

Stephen P. Koch: That may not be completely I guess overcome through revenue at this point from some of these greenfield and talking about it.

Stephen P. Koch: Is it upwards of 15 to 20 million at this point that might be under absorbed.

Speaker Change: No no it wouldn't be that much.

Stephen P. Koch: Yeah.

Stephen P. Koch: Okay, and then lastly, as you guys look at Capex.

Stephen P. Koch: You talked about the $4 40.

Stephen P. Koch: And then some some carryover and get it getting into 500 cash as the as the two thirds growth Capex based on the 440 number.

Stephen P. Koch: Yeah, so, you know, we have different timing for different kinds of wage increases throughout the year. But Jan 1 is, you know, probably about half of our companies probably increase wages at that time. So a little more broad based, you know; our volumes were up. So more expense comes along with increased volume, just packaging, supplies, you know, various warehouse expenses, you know, trucking, delivering more. So it was a little broad. I don't think there was anything in particular, but your point is right to say that we commented before.

Stephen P. Koch: Yeah, he's downhole maintenance level okay.

Speaker Change: Yeah, and that's been a pretty consistent you know the last at least I'd say, probably four or five years, you know the majority of our of our Capex spend is growth related.

Speaker Change: Thank you.

Speaker Change: I think so.

Stephen P. Koch: Okay.

Stephen P. Koch: Your next question comes from the line of Martin Englert with Seaport Research partners. Please go ahead.

Speaker Change: Hello, Good morning, how are you.

Speaker Change: Good morning Martin.

Stephen P. Koch: Okay.

Stephen P. Koch: What where the same store volumes into Q3 Q of last year I think you reported them again this quarter I think it might have gone a couple of quarters, where it wasn't reported perhaps.

Stephen P. Koch: Differ.

Stephen P. Koch: So you reported tons sold.

Stephen P. Koch: Martin.

Stephen P. Koch: We only had one relatively small acquisition last year, and so and another one okay, they're not sort of story changing numbers or at least the two completed ones that would affect the same store numbers.

Stephen P. Koch: We do have some greenfields and some expansions in process where it does take a little time to ramp up. So the expense load could be a little heavy. So there is a little bit of that. We also, I think, commented last quarter that, you know, safety is our number one priority. And that takes a lot of training, especially in today's world with the workforce. And so it probably takes us longer to onboard employees, and you have to carry a little more to be able to get them properly trained.

Speaker Change: I don't have that.

Stephen P. Koch: Number of anybody if you go to our public filings, you'll see it yeah. I mean, yeah. We report it if it's I mean, we always report it in our SEC filings, but we don't necessarily talk about it. If it's you know if there's not a meaningful difference as Arthur indicated.

Stephen P. Koch: Okay, so pretty something pretty close to what.

Stephen P. Koch: The volumes for that group reported when you look at the midpoint.

Stephen P. Koch: The volume guide.

Stephen P. Koch: Slide around 4% growth year on year.

Stephen P. Koch: Level, including acquisitions versus the negative contraction of 2% for one.

Arthur Ajemyan: And Phil, this is Arthur. I'll just add that, you know, year over year on the same store basis, we're only up 1%. So, and we talk about our incentive pay structure that kind of moderates expenses. So, you know, head counts are up a little bit, but then incentive comp is down. So net net, year over year on the same store basis, we're only up 1%.

Stephen P. Koch: Right.

Phil: Yeah, I think you're in the right ballpark, that's correct, yeah, and Martin maybe one of the things that you're kind of focusing on on our shipment levels.

Speaker Change: And certainly the acquisitions will add to that you know Q1 like we felt pretty good about.

Arthur Ajemyan: I looked at our stock price. This morning that we thought we had a good first quarter absent at being a little more difficult from a pricing standpoint than we had anticipated from a shipment standpoint, something we saw and we've heard from others in our industry and the broad.

Stephen P. Koch: And then when you exclude the same store, and you beat that out, what, what I guess is the incremental Incremental Operating Expense that may not be completely, I guess, overcome through revenue at this point from some of these greenfields we're talking about. I mean, is it upwards of 15, 20 million at this point that might be underabsorbed?

Stephen P. Koch: Industrials, we were probably a little surprised in March March is typically typically a pretty strong shipment month for us and in the industry and really the second half of March we saw more of a falloff in our tons shipped than we had anticipated.

Stephen P. Koch: No, no, it wouldn't be that much.

Stephen P. Koch: Okay, and then lastly, as you guys look at CapEx, talked about the 440, and then some carryover getting into 500 cash. Is the two-thirds growth capex based on the 440 number? www.larryweaver.com Yeah, and that's been pretty consistent.

Stephen P. Koch: You know good Friday actually fell in March this year, which obviously, we can look at the calendar, we understood that but it seemed that like spring break Easter people buyers.

Stephen P. Koch: Yeah, and that's been pretty consistent, you know, the last, at least, I'd say probably four or five years. The majority of our CapEx spend is growth related.

Stephen P. Koch: Buyers waiting for prices to go down, especially on the carbon flat rolled side, they kind of pulled back a bit they were on vacation. We just saw we were a little surprised by those last couple of weeks of March.

Martin John Englert: Thank you. The next question comes from the line of Martin Englert with Seaport Search Partners.

Speaker Change: The good news is right that pushes into into April in the second quarter, which is why we feel that we we we are anticipating more than seasonal improvement in our second quarter tons shipped this year.

Martin John Englert: Hello, good morning.

Unknown Speaker: Good day. Morning.

Martin John Englert: Unknown Speaker What were the same store volumes in 2Q and 3Q of last year? I think you reported them again this quarter. I think it might have gone a couple quarters where it wasn't reported, or perhaps they didn't differ from the reported times sold.

Martin John Englert: Typically the second quarter is somewhat flat with the first quarter. So.

Martin John Englert: And our guidance now implies on a same store basis, yeah, some uptick in sequential township.

Unknown Speaker: Martin said that we only had one relatively small acquisition last year. And so in another one, they're not sort of story changing numbers, at least the two completed ones that would affect the same store numbers. I don't have that.

Unknown Speaker: When you look at it on a same store basis the growth rate.

Unknown Speaker: So that's positive.

Unknown Speaker: I think a couple of percent, which aligns with.

Unknown Speaker: What youre, saying see were expecting with a sequential uptick.

Unknown Speaker: Yeah, I mean, yeah, we report it if it's, I mean, we always report it in the SEC filings, but we don't necessarily talk about it if it's, you know, if there's not a meaningful difference, as Arthur indicated.

Unknown Speaker: And then the 2% growth from acquisition on the quarter I think that implies something like 29000 tons from the acquisition like a quarterly number or is that reasonable for modeling purposes.

Unknown Speaker: Okay, so something pretty close to what the volumes were that were reported. When you look at the midpoint of the volume guide, I think it implied around 4% growth year-on-year at the group level, including acquisitions versus the negative contraction of 2% for 1Q. Is that right?

Unknown Speaker: And that's not unreasonable.

Unknown Speaker: For the.

Unknown Speaker: Repurchase no repurchases in the quarter was.

Unknown Speaker: Mostly due because of the acquisition opportunities.

Unknown Speaker: Other color.

Unknown Speaker: You can provide on the acquisition pipeline.

Speaker Change: Yes, I think kind of two things in there in that question Martin So from a repurchase standpoint, you know we continue to monitor the market and opportune opportunistically repurchase our shares the fact that we acquired acquisitions.

Unknown Speaker: Yeah, I think you're in the right ballpark. That's correct.

Unknown Speaker: Yeah, and Martin, maybe one of the things, if you're kind of focusing on our shipment levels, and certainly the acquisitions, we'll add to that. You know, Q1 we felt pretty good about until I looked at our stock price this morning, but we thought we had a good first quarter, absent it being a little more difficult from a pricing standpoint than we had anticipated. From a shipment standpoint, something we saw and heard from others in our industry and the broader industrials, we were probably a little surprised in March.

Unknown Speaker: We did complete some acquisitions in the first quarter Didnt impact our repurchase activity our balance sheet. Our balance sheet is strong enough that as we've said for the last you know.

Unknown Speaker: A couple of years, we're able to execute on all four of our capital allocation buckets at the same time. So we just we're not in the market for repurchases in Q1, but we will continue to opportunistically.

Unknown Speaker: March is typically a pretty strong shipment month for us and in the industry, and really, the second half of March, we saw more of a fall off in our tonnage than we had anticipated. You know, Good Friday actually fell in March this year, which, obviously, we can look at the calendar. We understood that. But it seemed that like spring break and Easter, buyers waiting for prices to go down, especially on the carbon flat rolled side, they kind of pulled back a bit.

Unknown Speaker: Repurchase our shares are again, you know perspective irrespective of what we have going on on the acquisition side, we were very unhappy to to welcome Cooksey American alloy and Midwest materials to the reliance family.

Unknown Speaker: So far this year in 'twenty 'twenty four we've seen good activity, we continue to see good activity opportunities out there are in the accurate in the acquisition market. So we expect to continue to be active there as well.

Unknown Speaker: They were on vacation. We just saw, we were a little surprised by those last couple weeks of March. The good news is, right, that pushes into April and the second quarter, which is why we feel that we are anticipating more than seasonal improvement in our second quarter ton ship this year. And typically

Unknown Speaker: Yeah.

Unknown Speaker: I wanted to come back one last one on the expectation.

Unknown Speaker: You know there was some delay at the end of the quarter.

Unknown Speaker: The man maybe.

Unknown Speaker: In March and maybe some of it was cause so or you anticipate.

Unknown Speaker: Instead of maybe historically flattish Q on Q, you expect some improvement.

Unknown Speaker: Yeah, and typically, the second quarter is somewhat flat with the first quarter. So, and our guidance, you know, implies, on a same store basis, some uptake in sequential tonship.

Unknown Speaker: Because of that dynamic are you seeing that in your order entry in your order intakes.

Unknown Speaker: No.

Speaker Change: So far I guess, maybe another way to ask it is.

Unknown Speaker: How are you seeing activity in April to date here as far as volumes.

Unknown Speaker: When you look at it on a same-store basis, the growth rate, it still pivots positive, which I think is a couple percent, which aligns with what you're seeing or expecting with the sequential uptick. And then the 2% growth from acquisition in the quarter, I think that implied something like 29,000 tons from the acquisition, like a quarterly number. Is that reasonable for modeling purposes?

Speaker Change: Yeah, and that's Martin or a good point, because remember 40% of our orders the customer calls US today, we've delivered tomorrow. So I'm you know, we don't have backlogs and things that other people talk about you know certain of our companies depending on the end markets. They sell into you know they may have a little more backlog vis.

Unknown Speaker: [noise] ability. So we have seen a little bump in April from March levels, I think general sentiment across a lot of our F. O sees is it pretty positive coming into the second quarter.

Unknown Speaker: That's not unreasonable. Yeah

Martin John Englert: for the Repurchase. No repurchases during the quarter. Was this mostly due to the acquisition opportunities and any other color you can provide on the acquisition pipeline?

Unknown Speaker: Yes, I think there are kind of two things in that question, Martin. So from a repurchase standpoint, you know, we continue to monitor the market and opportunistically repurchase our shares. The fact that we acquired acquisitions that we did complete some acquisitions in the first quarter didn't impact our repurchase activity, our balance... Our balance sheet is strong enough that, as we've said for the last several years, We were very happy to welcome Cooksey, American Alloy, and Midwest Materials to the Reliance family. So far this year, in 2024, we've seen good activity. We continue to see good opportunities out there in the acquisition market, so we expect to continue to be active there as well.

Speaker Change: Okay I appreciate that.

Unknown Speaker: There was a nice job managing the FIFO gross margins on the quarter.

Speaker Change: Thanks, Martin Thanks for that.

Unknown Speaker: Thank you a reminder to all the participants that you May Press Star then one to ask a question next question comes from the line of Timna Tanners with Wolfe Research. Please go ahead.

Speaker Change: Oh, Hey, good morning, everyone I wanted to follow up with the second quarter outlook and kind of ask what drives the low end versus the high end of how you're looking at the guidance.

Speaker Change: Hi, Timna.

Speaker Change: Yeah, I mean in general it's kind of with our business model, we think when we do our best to generally anticipate both volumes and pricing dynamics.

Martin John Englert: I wanted to come back one last one on the expectation that, you know, there was some delay at the end of the quarter with demand, maybe, and in March, and maybe some of it was pushed. So you anticipate Instead of maybe a historically flattish queue on queue, you expect some improvement because of that dynamic. Are you seeing that in your order entry and your order intakes? So, so far, like, I guess another way to ask. How are you seeing activity in April to date here as far as volumes are concerned?

Martin John Englert: Dynamics and <unk>.

Martin John Englert: You know, we never know with her broad product mix are you know next day orders.

Martin John Englert: So it's really just that combination of within that range of ton of shipments within that range of pricing. How much pressure is around margins. You know margins are big driver I'm getting down to the EPS line as well as pricing. So we just tried to give a little room in there for those different there.

Unknown Speaker: Yeah, and that's, Martin, a good point. Because remember, 40% of our orders, the customer calls us today, and we deliver tomorrow. So, you know, we don't have backlogs and things that other people talk about. You know, certain of our companies, depending on the end markets they sell into, they may have a little more backlog visibility. So we have seen a little bump in April from March levels. I think general sentiment across a lot of our FOCs is pretty positive coming into the second quarter.

Unknown Speaker: Bowls.

Unknown Speaker: Okay.

Speaker Change: In terms of trying to manage some of that variation as you mentioned do you ever consider either the futures market to kind of temper some of that volatility at least on the carbon flat rolled side and do you think about the stronger dollar changing your appetite for imports.

Unknown Speaker: Timna Hi, it's Steve as you know, 95% at least of our material that we purchases domestically sourced so that's kind of our natural hedge we feel like that.

Unknown Speaker: The lead times that we received our inventory management.

Unknown Speaker: Okay, I appreciate that. And it was a nice job managing the FIFO gross margins for the quarter. Thanks, Martin.

Unknown Speaker: Our leaders in the field, which we think they're doing a great job because theres been a lot of pricing.

Unknown Speaker: Thanks, Martin. I appreciate that.

Unknown Speaker: Challenges over the last year or so so I think that in you know in this type of a market I think that we thrive on people in the field trials.

Operator: Thank you. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Timna Tanners with Wolf Research.

Timna Beth Tanners: And then Timna I in terms of you know what pricing you know forecast a lot of yeah, there's product where you certainly you you kind of look at the futures market, but to Steve's point, you know being a domestic buyer you have a lot of visibility due to those products and their pricing so, especially for you now for a quarter out, but then with that said there's always about theirs.

Timna Beth Tanners: Oh hey, good morning everyone. Wanted to follow up with the second quarter outlook and kind of ask what drives the low-end versus the high-end of how you're looking at the guidance.

Unknown Speaker: Hi Timna, yeah, I mean, in general, it's kind of with our business model; we think when we do our best to generally anticipate both volumes and pricing dynamics. And, you know, we never know with our broad product mix and our, you know, next day orders. So it's really just that combination of within that range of shipments, within that range of pricing, how much pressure is there on margins, you know, margins a big driver getting down to the EPS line as well as pricing. So we just try to give a little room in there for those different variables.

Unknown Speaker: Volatility that could be unexpected so that happens just like we had this quarter, where we thought pricing was going to be up a little bit, but we ended up down a little so but I mean again, you know that we consider all of that information and then make some informed decisions based on what we see with the lead times.

Unknown Speaker: Demand and.

Unknown Speaker: You know them.

Unknown Speaker: What are the different geographies and the products that we have so all of that gets factored into our forecast and I would also just add to that you know, we're primarily buying and selling in the spot market. We don't have a lot of longer term.

Unknown Speaker: Okay, in terms of trying to manage some of that variation, as you mentioned, do you ever consider the futures market to kind of temper some of that volatility, at least on the carbon flat rolled side? And do you think about the stronger dollar changing your appetite for imports?

Unknown Speaker: Price contracts, which if that's your model you know you probably didn't need consider to consider hedging more but that's just not our model.

Unknown Speaker: Okay fair enough and just one more if I could I I thought it'd be interesting to touch on the labor market I thought it was interesting to hear you talk about incentive comp and how you adjust for that given that the labor market is tighter you know how do you manage it in a softer market or in a period of lower profitability.

Steve: Timna, hi, it's Steve. As you know, 95%, at least, of the material that we purchase is domestically sourced. So that's kind of our natural hedge. We feel like the lead times that we receive are inventory management by our leaders in the field, which we think they're doing a great job because there have been a lot of pricing challenges over the last year or so. So I think that in this type of market, I think that we will thrive, and our people in the field will thrive.

Steve: Less incentive comp, but also the challenges of retaining and hiring people.

Steve: Yeah, I mean Timna is certainly it then you know one more challenge all of our people out in the field have had to deal with over the last few years.

Unknown Speaker: Timna, in terms of pricing, there are products where you look at the futures market, but to Steve's point, being a domestic buyer, you have a lot of visibility into those products and their pricing, especially for a quarter out. With that said, there's volatility that could be unexpected, so that happens. Just like we had this quarter, where we thought pricing was going to be up a little bit, but we ended up down a little.

Steve: We have seen the labor market improve a bit as far as you know.

Unknown Speaker: Being more candidates are more people interested in jobs, but.

Unknown Speaker: No. We're we're not always the sexiest industry to some other people out there when they're there looking at opportunities, but we have been more successful bringing people in we think we do a good job of retaining people one good people once we have them in our we want to treat them fairly provide them.

Unknown Speaker: We consider all that information and then make some informed decisions based on what we see with the lead times and demand, the different geographies, and the products that we have. All of that gets factored into our forecast.

Unknown Speaker: Good benefits you know pay them fairly certainly you know when when things get a little tougher they may be bringing you know less home, but we've also had some pretty good years. The last couple of years to where where our people have done really well are doing more value added processing also provides.

Unknown Speaker: Yeah, and I would also just add to that, you know, we're primarily buying and selling in the spot market. We don't have a lot of longer-term fixed sale price contracts, which, if that's your model, you probably do need to consider hedging more, but that's just not our model.

Unknown Speaker: A little more stability for our workforce and in the profitability and their incentives that they may take home you know growing the business, which we've been focused on so you know there are ways to manage around that but you know it's not easy these days, but I don't know that we've seen any significant.

Unknown Speaker: Okay, fair enough. And just one more, if I could, I thought it'd be interesting to touch on the labor market. I thought it was interesting to hear you talk about incentive comp and how you adjust for that. Given that the labor market is tighter, you know, how do you manage in a softer market or in a period of lower profitability, you know, less incentive comp, but also the challenges of retaining and hiring people?

Unknown Speaker: No reaction to to those factors.

Speaker Change: Okay. Thank you again best wishes.

Speaker Change: Alright, thanks to an extent.

Unknown Speaker: Thank you next question comes from the line of Phil Gibbs with Keybanc capital markets. Please go ahead.

Unknown Speaker: Yeah. My my follow up was based largely on what you're seeing in both the aerospace and defense side I know, you've got a kind of a balanced mix within your portfolio.

Unknown Speaker: Yeah, I mean, Timna, certainly it's been, you know, one more challenge all of our people out in the field have had to deal with over the last few years. We have seen the labor market improve a bit as far as, you know, certainly, when things get a little tougher, they may be bringing less home, but we've also had some pretty good years in the last couple of years, too, where people have done really well.

Unknown Speaker:

Unknown Speaker: You know I think we're trying to parse through all the all the headlines on the commercial aerospace volatility with Boeing but also trying to recognize that strengthens our funds market. So.

Timna: Just curious in terms of what your what your forward expectations are what you're seeing.

Unknown Speaker: I know your survey some specific programs as well so just curious thanks.

Unknown Speaker: Yeah, Phil on the aerospace side, you know our our Q1.

Unknown Speaker: Doing more value-added processing also provides a little more stability for our workforce in terms of profitability and their incentives that they may take home, growing the business, which we've been focused on, you know, reaction to those.

Unknown Speaker: Sales aerospace represented about 9% of that about half of that commercial about half defence and space.

Unknown Speaker: On the defense and space side space as a whole smaller but its a its strong and growing the defense continues to be strong. We're seeing you know increased demand whether you know there specifically our aerospace business in that 9% where we.

Unknown Speaker: Okay. Thank you again, Beatrice. All right, thanks, Timna.

Philip Ross Gibbs: Thank you. The next question comes from the line of Phil Gibbs with KeyBank Capital Markets.

Philip Ross Gibbs: Yeah, my follow up was based largely on what you're seeing on both the aerospace and defense side. I know you've got kind of a balanced mix within your portfolio. Unknown Attendee, You know, I think we're trying to parse through all the headlines on the commercial aerospace volatility with Boeing but also trying to recognize the strength in the defense market. So I'd just curious in terms of what your forward expectations are, what you're seeing. I know you're serving on some specific programs as well, so just curious. Thanks.

Unknown Attendee: We're participating on several key programs, both U S and internationally and we see order activity picking up there, but not included in the 9% a lot of our companies well sell into like you know missiles munitions that doesn't all get picked up in that number.

Philip Ross Gibbs: And that continues to be strong and we see no unfold with the unfortunate circumstances or around the world today, we see some continued.

Philip Ross Gibbs: Demand strength in that area and then on the commercial side, which you know we have we have companies both servicing in the U S and Europe the airplane manufacturers.

Unknown Speaker: Yeah, Phil, on the aerospace side, you know, our Q1 sales for aerospace represented about 9% of that, about half of that commercial, about half defense and space. On the defense and space side, space is a little smaller, but it's strong and growing. The defense continues to be strong.

Unknown Speaker: Build rates are actual is much less than than what is announced and what the targets are right. Now. So we do see some built up a little pressure starting in our supply chain on the commercial side is as the whole <unk>.

Unknown Speaker: Apply chain has to really kind of correct for what the actual build rates are so we do anticipate some near term pressure on the commercial aerospace side.

Unknown Speaker: We're seeing increased demand, whether it's specifically our aerospace business in that 9% where we're participating in several key programs, both U.S. and internationally, and we see order activity picking up there, but not included in the 9%. A lot of our companies will sell into missiles, and munitions. That doesn't all get picked up in that number, and that continues to be strong.

Unknown Speaker: However, long term there are just a lot of orders out there. We're participating you know on on pretty much all programs and we're still bullish.

Unknown Speaker: Bullish for the long term on aerospace, but expect a little a little pressure in the near term.

Speaker Change: Thank you and then just one more for me.

Unknown Speaker: With the unfortunate circumstances around the world today, we see some continued demand strength in that area. On the commercial side, which we have companies both servicing in the U.S. and Europe, the airplane manufacturers, build rates are actually much less than what is announced and what the targets are right now, so we do see some buildup, a little pressure starting in the supply chain on the commercial side as the whole supply chain has to really correct for what the actual build rates are, so we do anticipate some near-term pressure on the commercial side. However, long-term, there are just a lot of orders out there. We're participating in pretty much all programs, and we're still bullish for the long-term on aerospace, but expect a little pressure in the near-term.

Unknown Speaker: On this.

Unknown Speaker: All of the Capex budget that you have for this year I know you said in the past that there you know there's hundreds of projects in there, but maybe if you could call out some of the larger ones that have either started or are in the process of either this year or last year and.

Unknown Speaker: Maybe where they are in the stages of.

Unknown Speaker: Maturation or or a commercial development.

Unknown Speaker: Yes, I mean, a couple of the big ones. We've taught them you know about semiconductor down in Texas, We've got a big build there to add more capacity that one you know probably maybe later this year, we we've kind of pulled back end and they've had some.

Unknown Speaker: Some slight delays on that which is okay, because as you're probably aware the the actual semiconductor plants themselves you know they've had starts and stops and so we.

Philip Ross Gibbs: Thank you. And then just one more for me on this solid CapEx project that you have for this year. I know you've said in the past that there are hundreds of projects in there, but maybe if you could call out some of the larger ones that you either started or are in the process of either this year or last year, and maybe where they are in the stages of maturation or commercial development. Thanks.

Philip Ross Gibbs: So we've slowed a little bit there, but its still long term very bullish on that we have for one of our kind of especially long product companies in the Atlanta area, they're about ready to ramp up test service center business that they increase their capacity.

Philip Ross Gibbs: They significantly moving into a newer building you know on our tolling operations in the U S. We've added a couple lines that have started up recently, they're still ramping our Mexico and our tolling business. It says we've also added some equipment down.

Unknown Speaker: Yes, I mean, a couple of the big ones we've talked about, about semiconductors down in Texas, we've got a big build there to add more capacity. That one, you know, probably, maybe later this year, we've kind of pulled back and have had some, some slight delays on that, which is okay, because, as you're probably aware, the actual semiconductor plants themselves, you know, they've had starts and stops. And so we, you know, on our tolling operations in the US, we've added a couple of lines that have started up recently.

Unknown Speaker: There are we've got a greenfield its still a little early in the stages for some of our like heavier carbon products down in the Atlanta area, Steve any.

Speaker Change: I would just add it's not a big headline or Phil, but we do a lot of upgrades it doesn't have to be greenfield, but oh upgrade some of our really important couple of life material for we're doing that in Decatur, Alabama, and Portage, Indiana. So that was offline for a little bit in the first quarter and we're seeing a nice bounce back in.

Unknown Speaker: They're still ramping up Mexico and our tolling businesses. We've also added some equipment down there. We've got a greenfield that's still a little early in the stages for some of our heavier carbon products down in the Atlanta area. I would just add, it's not a big headline or so, but we do a lot

Unknown Speaker: And production in those two key facilities.

Speaker Change: Thank you team have a good day.

Speaker Change: Yeah, I think so.

Speaker Change: Thank you ladies and gentlemen, we have reached the end of question and answer session.

Unknown Speaker: I'd now like to turn the floor over to Karla Lewis for closing comments.

Unknown Speaker: I would just add, it's not a big headliner, Phil, but we do a lot of upgrades. It doesn't have to be Greenfield, but we'll upgrade some of our really important cut-to-life material. We're doing that in Decatur, Alabama, and Portage, Indiana. So that was offline for a little bit in the first quarter, and we're seeing a nice bounce back in production in those two key

Speaker Change: Thank you and thanks again to everyone for joining our call today.

Speaker Change: And I would like to tell our reliance family that we think you guys did a really good job managing through a tough environment in the first quarter and we're very proud of what you did.

Speaker Change: And I'd also like to remind everyone that next month, we'll be in Miami presenting at the Bofa Global metals mining and steel conference in Boston presenting at the Keybanc basic materials conference and we hope to see many of you there and thanks again, everyone for your continued support of reliance.

Karla R. Lewis: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Karla Lewis for closing comments.

Karla R. Lewis: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Karla R. Lewis: Thank you and thanks again to everyone for joining our call today, and I would like to tell our Reliance family that we think you guys did a really good job managing through a tough environment in the first quarter, and we're very proud of what you did. I'd also like to remind everyone that next month we'll be in Miami presenting at the B of A Global Metals, Mining, and Steel Conference and in Boston presenting at the KeyBank Basic Materials Conference, and we hope to see many of you there. And thanks again, everyone, for your continued support of Reliance.

Karla R. Lewis: [music].

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Operator: BF-WATCH TV 2021