Greetings and welcome to the Reliance Steel & Aluminum Company Fourth Quarter and Full Year 2015 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brenda Miyamoto, with Investor Relations. Thank you. You may now begin. Brenda Sumiye Miyamoto - VP-Corporate Initiatives & Head-Investor Relations: Thank you, operator. Good morning and thanks to all of you for joining our conference call to discuss our fourth quarter and full-year 2015 financial results. I'm joined by Gregg Mollins, our President and CEO; Karla Lewis, our Senior Executive Vice President and CFO; and our Executive Vice Presidents of Operations, Jim Hoffman and Bill Sales. David Hannah, our Executive Chairman, will also be available during the question-and-answer portion of this call. A recording of this call will be posted on the Investors section of our website at investor.rsac.com. The press release and the information on this call may contain certain forward-looking statements, which are based on a number of assumptions that are subject to change and involve known and unknown risks, uncertainties or other factors, which may not be under the company's control, which 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 31, 2014 under the caption Risk Factors and other reports filed 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…

Thanks, Gregg, and good morning, everyone. Our comments today will focus both on pricing and demand for our carbon steel and alloy products, as well as our outlook on certain key end markets we sell these products into, including automotive, heavy industry, non-residential construction and energy. Bill will then address our aluminum and stainless steel products and related end markets. Demand for automotive, which we service mainly through our toll processing operations in the U.S. and Mexico, was strong throughout the year; a trend we expect to continue in 2016. In light of this, we are expanding two of our existing facilities, as well as constructing a new facility in Mexico and one in Kentucky. The new facility in Mexico will increase our existing toll processing capacity to support the increased automotive activity there and is expected to begin operating in mid-2016. We will also begin construction on a new facility in Kentucky to support our growing aluminum toll processing business. Reliance has been very successful in establishing itself through its Precision Strip, Inc. subsidiary, a toll processor of aluminum used in the U.S. automotive industry, a fast-growing market. We believe that our success in toll processing metal for the automotive end market is due to our high quality, internally engineered processing equipment, allows us to handle both steel and aluminum products that meet the high-quality standard for exposed products. With the sudden and significant decrease in aluminum used in autos, Reliance is one of the few toll processing companies that has the funds available to support this growth. For example, in 2015, we opened a new facility and installed state-of-the-art equipment which is fairly expensive. That allowed us to process two times the volume of aluminum we processed in 2014 at our toll processing operations. At Reliance, we are…

Thanks, Jim. Good morning, everyone. I'll begin with aerospace, which continues to be one of our strongest end markets for us, due to its relatively stable pricing and strong demand trends. Sales to the aerospace market represented approximately 10% of our total sales in 2015. Our same-store tons sold to the aerospace market were up 10.4% for the 2015 year compared to 2014. Demand in this market continues to be strong with healthy build rates in the commercial airline market tied to record aircraft deliveries in 2015 and a robust backlog. Over the past couple of years, we have been purposely increasing our aerospace exposure on a global basis, consistent with our customers' growth patterns. We have been successful in gaining market share through facilities expansion as well as through successful M&A activities. I'm pleased report that earlier this month we were awarded a $100 million contract by BAE Systems to provide aluminum plate to support the F-35 Joint Strike Fighter, Hawk and Typhoon programs. This five-year contract runs from 2017 through 2021 with the possibility of additional years. This contract is in addition to an award by Lockheed Martin in October of 2015 to provide aluminum products and services for the F-35 program in a five-year contract valued at an estimated $300 million. The majority of the products that we sell to the aerospace market are heat-treated aluminum products, especially plate, as well as specialty stainless steel and titanium products. Given continued strong demand, we expect pricing for aluminum aerospace plate to be stable through the first half of 2016. Lead times from the domestic mills remained extended at 25-plus weeks. Our sales of common alloy aluminum remain consistent from a volume standpoint, with most of our product being sold to sheet metal fabricators that support a variety of…

Thank you. At this time, we'll be conducting a question-and-answer session. Thank you. Our first question is from the line of Timna Tanners with Bank of America Merrill Lynch. Please go ahead with your questions.

Hello. Good morning. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Good morning. Gregg J. Mollins - President, Chief Executive Officer & Director: Good morning, Timna.

Okay. Wanted to just ask you for a little bit more refinement on the volume guidance, because on the one hand you said Q4 was particularly – a little disappointing on volume. And then we heard that – our channel checks say January is a pretty strong month. So 6% to 8% would compare with your historical 9% and MSCI at 9.6% and as you point out, you tend to beat the MSCI. So just wonder if you could tell us why you think this sequential improvement might be less than it has been in recent years? Gregg J. Mollins - President, Chief Executive Officer & Director: I'm not sure that it's going to be sequentially different than years past. If we have 9%, I'm not sure we've done that every year over the past five years.

Average for the five years, yeah. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. And, Timna, we look at how we are trending so far into 2016 and look at how January is kind of a light month. So we're using the visibility from what we've seen so far in January, which we think is healthy demand. We've seen it bounce back from where we were. There is still the energy drag on tons, which is only a small portion of our business, but we may be a bit conservative, but we tried to make what we felt was a reasonable estimate. Looking at January and the MSCI data and their comparison to January of last year, we're certainly better with what we've seen in January than that. But we think that 6% to 8% is a good reasonable estimate that shows demand coming back, the way we would expect it to. Gregg J. Mollins - President, Chief Executive Officer & Director: Really where we see the turning point, Timna, is really in the month of March. January, February is always a little bit soft in the first quarter and March really is kind of indicative of what we were going to see basically in the second quarter. So I think we will always be a little bit conservative on our guidance in the first quarter based on what we're seeing in January and partly through February with the telling point being really in the month of March.

Okay. That makes sense, lot of sense. And then separately I wanted to ask about the Tubular Steel acquisition. It looks like if we interpreted this correctly with the revolver that's capped about $370 million was the deal, correct me if I am wrong, and then revenues you said were $200 million. If you could talk about the rationale on that transaction and if you think that $200 million is depressed on a normalized basis? And it wasn't clear if it was – how much of that was related to energy markets and not related to energy markets, so a little more detail if you could. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. So, Timna, just on the number you came up with would not be the right number. So we haven't disclosed our purchase price amount for the Tubular Steel acquisition. But it was in line with the way we've consistently valued companies over the years on a normalized pre-tax income basis. And Gregg or Jim can talk a little more about Tubular. But with the markets they are in, the $200 million is their 2014 revenue, they do have some energy exposure, so their numbers are down a bit currently from that 2014 amount. Gregg J. Mollins - President, Chief Executive Officer & Director: Yeah. Their 2014 numbers, Timna, at roughly $200 million in revenue, in 2015, it was less than that. In good times, in the energy business, the percentage of their revenues are about 35% to 40% related to energy. In these times, it's roughly 25% to 30%. They sell quite a bit of their metal into the energy market through service centers as well. So we've included that in those percentages.

Timna, this is Jim. It's just a fine company. They do have energy exposure, but they also sell into a lot of other markets that are – we anticipate to do quite well. They're a well-run company, been around for a long time. They have a great name in the marketplace and they fit in very well with us. Gregg J. Mollins - President, Chief Executive Officer & Director: They have a lot of products, Timna, that are very special to themselves. Their inventory turn is and what our inventory turn is, because of these specialized products, we expect that we can help improve that. But I don't think it will ever be at the levels of which we were at, because of the specialty nature of the products that they have. But we've been admiring them from afar for many, many years now and we're very, very pleased that they're now a part of the family. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: And similar to the other Reliance companies with the specialty items where their turns are typically a little lower than the companywide average, they also typically have higher-than-average gross profit margins, which Tubular Steel certainly has.

That's it. Thanks for all that.

Our next question comes from the line of Phil Gibbs of KeyBanc Capital Markets. Please go ahead with your questions.

Good morning. Thanks very much. Gregg J. Mollins - President, Chief Executive Officer & Director: Good morning, Phil.

I had a question on what your expectations are for the toll processing business in 2016, 2017. Obviously, a lot of investments you've made, any way to couch how much incremental volume or incremental revenue you expect, anything that could help us frame that up? Gregg J. Mollins - President, Chief Executive Officer & Director: We have made, Phil, as you know, some pretty sizable investments both last year and this year going forward, primarily to support the exposed aluminum going into the automotive and truck business. To what extent their revenue growth is going to be, you know, when you look at the overall company revenue compared to what we bring in in toll processing, it's a very small portion of our overall revenue. It's a larger portion of our overall profitability. But it's hard, you know, I don't know, Karla, do you have any comments about the revenue increase? Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah, I mean, it was about 3% of our revenue in 2015. It's hard to move that a lot because of the nature of their business, where we're just charging processing fees. But as Jim stated in his comments, we basically doubled their aluminum processing in 2015 over 2014 levels. We expect to continue to increase that, because the one facility that did a lot of the new processing of aluminum didn't get started up until really I think about April of 2015. So we'll have a full year with that, and we did make more investments and are continuing to make investments. So we would certainly expect continued aluminum growth – tolling growth there. But could it get to 4% of revenue? Possibly. But it takes a lot to move that percentage. Gregg J. Mollins - President, Chief Executive Officer & Director: Just by way of volumes though, Phil, okay, as Jim pointed out, we doubled our aluminum pounds out the door starting up with that new facility in April. So really we had an eight-month run. We're adding another piece of equipment there. That should be operational towards the end of the second quarter, okay. So we would expect that our increase in volumes in aluminum would be about 50% higher in 2016 over 2015, okay? But as we pointed out before, there's no metal that we're charging for, so the actual dollars going into revenue are quite misleading. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: And also, you know, with our tolling businesses, even though the revenue dollars are light because of that, the volume that they process is significant. Once again in 2015, our toll processing operation processed more metal than the rest of the company sold on a combined basis. So if they were buying and reselling the metal, we think the tolling businesses would be at least an $8 billion-plus revenue.

Hey, Phil, this is Jim. As you well know...

Hey, Jim.

...they're not only an aluminum processor. They process a lot of steel that goes into refrigerators, dryers, all that appliance-type business too. And that's a robust business and that continues to do well as we go.

Okay. Thanks for that color. And, Karla, what were your gross margin assumptions for Q1 in terms of how we should be thinking about that FIFO-wise? Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. So, we didn't actually give those. We'd said that we expect to continue to execute well, and we think executing well is – reflects a strong FIFO gross profit margin. So we don't see any direct reason for our gross profit margin to change significantly on a FIFO basis from where we'd been running towards the end of the year.

Okay. And then lastly, I know you had mentioned in your prepared remarks, I think you said a $69.1 million lower of cost or market. How common is that? And can you give us any color as to how that flowed through the year? Because I think right now you said that the reserve went to a debit position. So, just any color that you can provide us on the timing and the flow-through, that would be helpful. Thank you. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. Phil, so it's not that common to end up in a debit LIFO reserve, but as you guys have all been writing about, prices are at levels not seen for many, many years. And so that caused – with the significant mill price reductions this year, that generated a lot of LIFO income. In the third quarter, we started to look at that. Typically your LIFO reserve is a credit and generally provides some cushion, where you don't necessarily typically record lower of cost or market reserves, because it kind of lowers your inventory cost on hand. When you flip to a debit LIFO reserve position, which we did with the $186 million worth of LIFO income in the year, that actually makes your inventory costs higher by that debit LIFO reserve. So actually in the third quarter, we started booking to a lower of cost or market reserve just because current replacement costs were lower than our inventory costs on hand. So it was about $69 million. We ended up with a net reserve between LIFO and LCM of a $26 million credit. And we think that's a pretty low number, even the $69 million lower of cost or market reserve is not that much when you look at $1.4 billion of inventory on hand.

No, I appreciate that. I just was curious given that I never heard you talk about that before. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah, it's the first time we've had it actually. I think back in 2002, we were close with some of the lower prices then. And you will see it more commonly for companies that are on FIFO instead of LIFO, because when you are in FIFO, they have to measure it more frequently. They don't have that kind of cushion in their LIFO reserve that I mentioned.

Okay. Thanks so much.

Our next question is from the line of Michael Gambardella with JPMorgan. Please proceed with your questions.

Yes. Good morning. Gregg J. Mollins - President, Chief Executive Officer & Director: Good morning, Michael.

Good morning. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Hi, Michael.

So a question – couple of questions, on aluminum where you're seeing a lot of import pressure, from what country or countries and what products, if you can give us some color on that?

Well, most of the pressure, if you are referring to heat treat products and general engineering, a lot of it's coming from Asia, coming out of China. There's several new mills there. But it comes from really all over the world. There will be some coming in from South Africa. So there is – on the general engineering side, there is a lot of import availability. Now, on the aerospace side, many of those mills are not qualified or certified to produce aerospace products, so you don't get that same pressure on the aerospace side.

And on common alloy.

Common alloy, that is – there's a lot of import product. It's a – and that again coming out of Asia, some coming in from Europe. And in that market, where a lot of the domestics have been focused more in the opportunities on the auto side, there is a lot more import coming in and being used for distributor coil.

And have you taken advantage of the low-priced imports or are you seeing some of your competitors taking advantage of it?

We do – on common alloy, it's pretty common I think as the industry, because of the – more focus on the auto from the domestic mills. The common alloy product is – a big part of that is import product, and I think both with us and our competitors. On the general engineering side, so far we're still predominantly on the domestic part of that and we will participate to a smaller extent with import product.

Okay. And just in terms of the guidance on the volumes up 6% to 8%, just a follow-up question on that. Assuming you back out the seasonality and the acquisition of Tubular's, what would that number be? Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. That's kind of hard to answer, Michael, because we're so used to the seasonality. It's always a fourth quarter to first quarter experience that we see. One of the things that does change at Reliance as we acquire companies is some of the companies traditionally have the second quarter as their strongest volume quarter, but some of the companies typically have first quarter as their strongest. So, that mix is where acquiring companies can shift those seasonal patterns a bit. I will say we're up marginally if you back out seasonality, which is really hard for us to think about, backing out seasonality.

Right. So, but backing out seasonality in the acquisition, you feel your volumes would still be up a little bit quarter-to-quarter? Karla R. Lewis - Chief Financial Officer & Senior Executive VP: Yeah. Gregg J. Mollins - President, Chief Executive Officer & Director: Yeah. Karla R. Lewis - Chief Financial Officer & Senior Executive VP: We think they'd still be up a bit quarter over quarter, yes.

Okay, great. Thank you.

Thank you. Our next question is coming from the line of Aldo Mazzaferro with Macquarie. Please go ahead with your question. Aldo Mazzaferro - Macquarie Capital (USA), Inc.: Hi, good morning everyone. Gregg J. Mollins - President, Chief Executive Officer & Director: Good morning, Aldo.

Good morning. Aldo Mazzaferro - Macquarie Capital (USA), Inc.: Say, Gregg, on the overall market outlook and when you look at the service centers, I noticed Karla mentioned, we haven't seen an inventory debit or close to it since 2002. If you look at our market today and you say, we're in this market that might be similar to that period of time or maybe the 2000 market, do you see your – you are in a position where you have cash, you have a strong balance sheet, where a lot of other service centers have either little cash or low valuations or both and weak balance sheet. I am wondering if you see the pace of acquisitions picking up in 2016. Gregg J. Mollins - President, Chief Executive Officer & Director: I think – here's just one opinion, right, there is four of us sitting in the room, so you will probably get four different opinions if you want to know the truth, but the fact of the matter is, 2015 was challenging with the prices going down basically 15 months in a row, starting in September of 2014 in each and every month going forward on basically every product that we stock. When you're going through a period of time like that, companies aren't doing as well financially and they're not as willing to shop their company in the marketplace and sell their company. They think the values are going to be undervalued for the reasons I just explained. So with stability unfortunately at a very low level, okay, but we believe that hopefully we'll get a little bit of upswing going forward in the year. When prices are more stable, profitability is a little bit better and the likelihood of them wanting to go out and maybe…

Thank you The next question is from the line of Chris Olin with Rosenblatt Securities. Please go ahead with your questions.

Hey, thanks for taking my call. Gregg J. Mollins - President, Chief Executive Officer & Director: Good morning, Chris.

I just had a quick question on aerospace. It seems like there is a bit of discussion about a potential inventory glut within the channel. Perhaps some of this relates to the recent production cuts at Boeing in some of the wide-body aircraft. And I guess – I was just wondering if you saw this impacting your business right now and is that reflected in the volume guidance as well.

Hey, Chris, it's Bill Sales. There has been a lot of discussion and a lot of articles about that. From our point of view, we really look at where mill lead times are, where the build rates will follow that, we look at the backlog. And while there have been some adjustments in the build rate, I think there is – a lot of that is tied to conversions to the next-generation aircraft. I know in one case, it's really tied to the lack of freighter activity. But we really see strong demand. Mill lead times are 25-plus weeks. And we think that demand will continue through this year. And we feel good about the programs that we're on. We feel good about our position with opening some new facilities. So, we really think that 2016 is going to be another very, very strong year for us in aerospace.

Great. Just back to lead time issue, are you having any trouble getting some of the materials? And I've heard some backing up on the titanium side. Is there any problem in terms of the supply?

Not for us. I think we've got good relationships there and programs in place, so the supply-side isn't a problem for us. You do have to, you know, have programs to work through some of these long lead times that we are dealing with. And if the question isn't about titanium specifically, I think we're in really good shape there with our mill relations. And that market we're not – from a lead time standpoint, you do need some programs in place to be sure you can get the product when you need it.

Thanks a lot.

Thank you. We've reached the end of our question-and-answer session. I will turn the floor back over to Mr. Gregg Mollins for closing remarks. Gregg J. Mollins - President, Chief Executive Officer & Director: Well, listen, thanks again for your support and for participating in today's call. And we'd like to remind everyone that in March, we will be in New York City, presenting at Macquarie's What's Next for the Non-Res Conference. So we hope to see many of you there, and have a great day. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time.