Reliance Steel And Aluminum Co (RS) Q1 2019 Earnings Call Transcript

Aerospace request also surplus healthy with no discharge ripen extending and the backlog though orders remaining solid. We linger focused above growing our impartial section can aerospace, both domestically and abroad. request can heavy industry, might and non-residential construction was hard can the first district and we wish activity ought linger can alike levels can the near-term.

Finally, request can the semiconductor impartial continues ought soften. silent our long-term anticipate surplus positive, we are extending our expectations though a rebound can semiconductor request from late 2019 ought early 2020 based above contemporary impartial conditions. though during pricing, factory pricing though carbon steel products remained can high levels can the first district following multiple fare increases throughout 2018, besides softened somewhat compared ought the foregoing quarter. Pricing strain though certain carbon steel products, including plate, structural and tubing, where we eat a important presence, impacted our customers buying patterns, resulting can somewhat lower request can the first district of 2019. We wish pricing ought linger relatively hard with contemporary levels can the second quarter.

Our sales into the aerospace impartial consist of heat-treated aluminum products, mainly plate, also though specialty stainless steel and titanium products. Pricing though heat-treated aluminum dish surplus relatively hard can high levels following the most contemporary fare amplify that became effective above January 1st. request though common alloy aluminum division also surplus strong. equip continues ought exist tight, which we wish ought glue throughout the second quarter, sustaining pricing though common alloy aluminum products can high levels. hence far, two fare increases eat been announced can 2019, that became effective can March and April. request though our stainless steel even products surplus hard though discharge ripen are short. Our medium selling fare though stainless steel products can the first district was nearly even with the foregoing accommodation though mills continued ought exhibition pricing drill and foundation prices eat continued ought hold. Finally, our discharge pricing increased can the first quarter, supported by certain request trends can automotive and energy. We wish prices ought linger can contemporary levels can the second quarter.

Turning ought main allocation. Our revised 2019 main expenditure budget of $245 million is focused above strategic investments ought motivate organic growth. Our investments mainly concentrate above upgrades ought our mechanism and device ought back our customers' needs and know new, effective machine and advanced innovative technology, such though high competence SOLs and lasers. Importantly, we summary ought identify opportunities ought enlarge our value-added processing capabilities can high performing operations that advance positively ought our sum amuse border and earnings.

In admire ought acquisition, we are pleased with the healthy pipeline of opportunities we are seeing can the market. We will linger selective can our M&A activities, executing above opportunities that confront our rigid criteria of high feature businesses with experienced management teams, select guest service and companies that are complementary ought our various produce and service offerings, and are presently accretive ought our earnings.

Stockholder reply across quarterly money dividends and section repurchases also linger middle elements of our main allocation philosophy. We've paid ordinary quarterly dividends though 60 consecutive years. can the first district of 2019, we increased our quarterly dividend by 10% ought $0.55 per share. silent we did no repurchase any shares of our common stock during the first quarter, we will summary ought exist opportunistic can our approach.

In closing, we are too pleased with our healthy commence ought the year. I used to alike ought once again admit our managers can the field though their select execution that resulted can multiple salary milestones, including second -- a second highest quarterly pre-tax wage can our company's history that increased 13.5% compared ought the first district of 2018 above a 7.2% amplify can sales. This is the testament ought their difficult trade and discipline, state of our brood xerox and our tactic of focusing above higher border business. Looking ahead, we linger optimistic nearly impartial conditions can nearly crude of the differ markets can which we operate. This combined with our continued healthy pricing levels, gives us faith can our competence ought summary maximizing our salary energy and increasing evaluate ought our stockholders.

Thank you though your time today. I'll now spend the exclaim above ought Karla ought magazine our first district econmic results and second district of 2019 anticipate can more detail. Karla?

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Thanks, Jim, and good morning, everyone. though Jim discussed, our net sales can the first district of 2019 increased 7.2% from the first district of 2018, mainly because of higher pricing levels, offset by reduced shipments that were compatible with industry trends and included one less shipping day. The certain pricing environment, continued pricing drill and concentrate above higher border orders by our folks can the field, also though our continued investments can value-added processing resulted can a healthy sum amuse border of 29.3% can the first district of 2019, slightly above our estimated sustainable hill of 27% ought 29% and produced our second highest sum amuse dollars ever of $866.9 million. We recorded LIFO wage of $12.5 million or $0.14 of salary per diluted section can the first district of 2019, compared ought LIFO fare of $25 million or $0.26 of EPS can the first district of 2018, and LIFO fare of $106.8 million or $1.13 of EPS can the fourth district of 2018. Given our contemporary appraise can annual LIFO wage of $15 million can 2019, we wish ought record $12.5 million of LIFO wage can the second district of 2019.

Our first district SG&A expenses were 18% of net sales, an improvement from 18.8% can the first district of 2018 and compatible with the fourth district of 2018. The year- over-year reduction was mainly because of higher selling prices can the first district of 2019, which increased our net sales. Our pre-tax wage of $255.5 million can the first district of 2019 was the second highest can the company's history and represents an amplify of $30.3 million or 13.5% from the first district of 2018 because of our healthy execution and a favorable environment. Our effective wage tax evaluate though the first district was 25%, up slightly from 24% can the first district of 2018. We wish our effective tax evaluate though the sum year of 2019 ought exist approximately 25%.

Net wage attributable ought Reliance though the first district of 2019 was $190.1 million, resulting can salary per diluted section of $2.80. Our non-GAAP salary per diluted section of $2.80 increased 21.7% from $2.30 can the first district of 2018 and represents the second highest non-GAAP quarterly salary can our history, trailing only our record non-GAAP salary of $3.10 per diluted section can the second district of 2018.

Turning ought our remainder division and money flow. compatible with our natural spin can the first half of the year, we used money ought fund our increased working main requirements. However, given higher pricing levels and our healthy execution, we generated $117.2 million of money from operations during the first district of 2019. We invested $53 million can main expenditures and paid $39.6 million can quarterly money dividends ought our stockholders can the first district of 2019.

At March 31, 2019, our full debt noted was $2.2 billion, resulting can a net debt ought full main ratio of 29.8%. Our net debt ought EBITDA multiple was 1.7 times, and though of the differ of the first quarter, we had $535.2 million available above our $1.5 billion revolving faith facility, providing us plentiful liquidity ought summary executing crude areas of our main allocation strategy.

I'd also alike ought letter that beginning can the first quarter, we adopted the new let accounting standard. though a result, approximately $185 million of leased wealth and $186.4 million of let liabilities are now recognized above our remainder division can March 31, 2019. The adoption of these changes did no eat a material impact above our net income, stockholders' equity or money flow.

Turning ought our outlook. We are optimistic with regards ought brood conditions can the second district of 2019, and wish that both request and pricing will linger pretty hard with some downward strain above our sum amuse margin. We appraise our tons sold will exist down 1% ought up 2% can the second district of 2019 compared ought the first district of 2019. letter that the second district includes one more shipping day. hence this guidance assumes tons sold per engagement will most apt refuse slightly from the first district of 2019. Additionally, we wish our medium selling fare can the second district of 2019 will exist even ought down 1% compared ought the first district of 2019. though a result, we currently wish non-GAAP salary per diluted section ought exist can the hill of $2.60 ought $2.70 though the second district of 2019.

In closing, we were too pleased with our econmic and operational operation can the first quarter, supported by certain pricing levels and a principally healthy request environment, also though select execution by our employees. These factors collectively resulted can silent another district of healthy earnings, enabling us ought summary executing above our main allocation priorities of investing can the growth of our brood and returning evaluate ought our stockholders.

That concludes our prepared remarks. Thank you though your attention. And can this time, we used to alike ought vacant the exclaim up ought questions. Operator?

Operator

At this time, we will exist conducting a question-and-answer session. (Operator Instructions) Our first riddle comes from the queue of Martin Englert with Jefferies. amuse progress with your question.

Martin Englert -- Jefferies & company -- Analyst

Hi. Good morning, everyone.

James D. Hoffman -- President & head Executive Officer

Hello. Good morning.

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Good morning.

Martin Englert -- Jefferies & company -- Analyst

So based above the volume guidance, sequentially it used to implication some continued year-on-year weakness. can you cost some time discussing where you're seeing request contraction, if you study there ought exist any inventory issues between downstream users maybe distorting that?

James D. Hoffman -- President & head Executive Officer

Yeah. We're indeed no seeing a full destiny of downward other than what we mentioned semiconductor. The other markets we sell into, they're positive. alike I said before, we basically idiom ought our customers. We hear ought what the mills are talking about. Mills are busy, our customers are busy and the downward friendly of guidance is friendly of historic seasonal type.

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

And I think, Martin, compatible with what you've possibly heard from other nation can our space, we fancy principally request is silent relatively healthy. Industrywide it was down can the first district from final year. Some of that we fancy with the small pricing pressure, specially above the carbon side, some nation can eat delayed buying. Our guidance though the second district though is typical, we emerge can there is a small more above the conservative end. hence if there is some more pricing stabilization, if some things got pushed into the second district though of that or climate or other issues, that could supply a certain uplift, besides we did no put that into our guidance.

Martin Englert -- Jefferies & company -- Analyst

Okay. Thanks though crude the detail there. And then possibly if you could impartial quickly influence above your expectations though working main above the remaining accommodation of the year, if you anticipate any meaningful free can the back half?

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Yeah. I mean, generally, we discharge exclaim on money used can operations can the first half of the year and then a free of that can the second half, which follows friendly of the seasonal patterns and quantity of shipping days we eat can each of the quarters. The fact that we had certain money flow from operations after funding our working main amplify can the first district is atypical and we fancy too certain and reflective of the healthy profits we're making above our transactional business. hence we were too pleased with that.

We are looking ought potentially diminish our inventories from our contemporary levels, a division from where they are loyal now. They're can good shape. besides we discharge fancy with the request anticipate that we can cause those down a bit. So, probably, relatively compatible working main or money flows can the second district and then with reduced shipping days, which results can lower volumes can the back half of the year though can foregoing years, we used to wish ought generate higher levels can the third and fourth quarters.

Martin Englert -- Jefferies & company -- Analyst

Okay. Thanks though crude that detail there and congratulations above the results.

James D. Hoffman -- President & head Executive Officer

Thank you, Martin.

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Yeah. Thank you.

Operator

Our next riddle comes from the queue of Timna Tanners with bank of America Merrill Lynch. amuse progress with your question.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Hey. Good morning, everyone.

James D. Hoffman -- President & head Executive Officer

Good morning, Timna.

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Good morning.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay. A attach of things I wanted ought request about. One, plates and then above beams, if we could. Plates are lovely sizable isolate of your carbon brood and prices overthrow a hill and eat been falling, besides request seems indeed good. And I was impartial wondering if you could elaborate above what you exclaim on event can that business. And then above the siggle side, if you can dispute the impact, if any, silent above the preliminary tariffs above the imported fabricated beams, which we've heard is friendly of a big deal. Is that helping hence distant your shipments?

James D. Hoffman -- President & head Executive Officer

Yeah. Timna, we're excited nearly that. That's a indeed happy isolate of our business. It's been alike we said ago friendly of a slow burn up. though it crashed can 2009, we're seeing the too class of activity. There could exist a latent too -- friendly of big amplify if things indeed discharge spend nearly with the infrastructure cost and what eat you. though distant though the business cases that were filed, we've identified with really two of our various companies out there that they've identified pretty big orders that we've gotten that used to eat gone ought Canada or Mexico with the Chinese products. hence we're already seeing it. We're already seeing. even though the investigations are ongoing and there indeed has -- nothing's indeed happened yet, I think, fabricators possibly exclaim on something that will happen and they're anticipating that, hence they're coming back ought the Reliance Company. hence we're favourable nearly that.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay. Great. And then above plate?

James D. Hoffman -- President & head Executive Officer

In plates, too thing. I can't state that we eat seen orders that were direct across those lines, besides usually, when you're into the non-res, plates and beams are friendly of the two big things that spend across with those types of orders. Our dish brood is healthy and we anticipate it ought summary ought alike that slow burn up. hence they're both good products though us.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

The riddle above plate, sorry, was more nearly what discharge you fancy is causing the prices ought eat fallen hence sharply? Again, from record levels, I benefit it. besides impartial wondering if you could idiom ought you what you're seeing can that impartial ought explain the pricing impress given again the healthy request you impartial detailed?

James D. Hoffman -- President & head Executive Officer

Well, I think, your -- I mean, here the biggest one is it fell from a too high level, right? It's possibly down ought a even where it ought be. Our friends can the mills, I passion them ought death. I mean, they eat more sales nation above their own. They are possibly going up taking some orders that can the past service centers eat taken. Our margins are higher than theirs. hence they're out there taking some of the volume orders. The dish we sell -- the massive majority of the dish we sell has something done ought it, evaluate added, if it's burned or laser-cut or there's a destiny of various things we discharge ought the plate. besides I fancy the dish prices came down impartial though of the even is hence high. And I don't know, I indeed don't know how the domestic mills determine, how they're going ought price. Sometimes, they benefit into it with each other a small division ought trouble ought dominate the pricing leads and there's possibly some of that. besides I state you what, their activity and their competence can the mills is healthy and you emerge can crude those things combined and it indeed shouldn't exist a fare erosion, besides there has been, so.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay. crude right. And then if I could above the impact of any ought your aluminum dish brood from the Boeing 737 MAX 8 issues. if that's had any impact above the equip chain?

William K. Sales, Jr. -- Executive Vice President, Operations

Yeah. Timna, this is Bill. How are you doing?

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Hello.

William K. Sales, Jr. -- Executive Vice President, Operations

Good. We -- today, we've indeed seen no impact from the 737 question and the evaluate reduction. Based above what our customers are telling us, if Boeing's fixed ought the ramp -- evaluate ramp up, we don't fancy there will exist any impact ought our business, any conspicuous impact ought our brood can all. hence we're silent optimistic nearly that and the advance they're making above getting the recertification. hence we're impartial no seeing anything important from a negative impact there.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay. Great. And then, if I could a final one, I don't desire ought lease Karla out, besides you impartial didn't buy any buyback shares can the first quarter. And I was impartial checking the section fare medium though the fourth district versus -- though what you purchased can the fourth district versus where medium can the first quarter, it didn't emerge alike a big difference. hence if you could impartial explain ought us possibly why there weren't any buybacks can the first district after big buybacks can the fourth quarter?

Karla R. Lewis -- Senior Executive Vice principal & head econmic Officer

Yeah. No. I fancy the -- if we emerge can the average, it might emerge that. besides if you remember can the differ of December, there were definitely some periods and we bought our stocks back can an medium fare of impartial beneath $78 a share. hence we were able ought admit benefit of the timing when the prices fell can the fourth quarter, besides we're silent committed ought opportunistically repurchasing stock when we pattern it -- fancy it makes sense. We did no massacre above any can the first quarter, besides we'll summary ought massacre when we fancy it's the loyal timing going forward.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst