Reliance, Inc. (RS) Earnings Call Transcript & Summary

Welcome to the Reliance Steel & Aluminum Company 2020 Annual Meeting of Stockholders. Our host for today's call is Mark Kaminski, Chairman of the Board of Reliance Steel & Aluminum Company. [Operator Instructions] I will now turn the call over to Mr. Kaminski. You may begin, sir.

Thank you, Paul. Well I'd like to good morning or good afternoon or good evening to everyone, depending on what time zone you are in right now. As Paul said, my name is Mark Kaminski, and as Chairman of the Board of Directors of Reliance Steel & Aluminum Company, it is my pleasure to welcome you to our 2020 Annual Meeting of Stockholders. We hope you and your loved ones are safe and healthy in these extraordinary times, and we are grateful for your attendance at our first virtual annual meeting of stockholders in 81 years as a company. I sincerely hope this is our first and last virtual shareholder meeting, and I look forward to seeing you, hopefully, next May in Los Angeles. We will proceed with the required annual meeting agenda and then Reliance's CEO, Jim Hoffman; and CFO, Karla Lewis, will respond to any questions submitted through the web portal. Please note that only stockholders who have properly registered to attend this virtual annual meeting will be able to submit questions using the designated field on the web portal. With us today is a representative of Broadridge Financial Solutions Inc., our inspector of elections. Also attending are representatives from KPMG LLP, our independent registered public accounting firm, including our lead audit partner, Michelle Wroan. We are now ready to begin the business portion of the annual meeting. Will Smith, our Corporate Secretary, will record the proceedings of this meeting. Before we can proceed with the annual meeting, our bylaws require the presence in person or by proxy of a majority of the shares entitled to vote at the meeting in order for a quorum to exist. Our inspector of elections has informed me that the shares of those present or represented by proxy are in excess of the quorum requirements, and I now declare a quorum present. As you know from the proxy materials, our first order of business is the election of directors. The Board of Directors has nominated a slate of 10 directors to serve for a 1-year term and until their successors have been duly elected and qualified. I would like to now introduce my colleagues on the Board of Directors, each of whom is present today and has been nominated to serve another 1-year term. Sally Anderson, Chair of the Audit Committee; Lisa Baldwin; Karen Colonias; John Figueroa, Chair of the Compensation Committee; David Hannah, former Chairman and CEO of Reliance; Jim Hoffman, President and CEO of Reliance; Rob McEvoy; Andrew Sharkey, III; and Douglas Stotlar, Chair of the Nominating and Governance Committee. There are 5 other proposals to be considered today: a nonbinding advisory vote to approve the compensation of the company's named executive officers. Ratification of the appointment of KPMG LLP as our independent registered public accounting firm to perform the audit of our 2020 financial statements. Consideration of an amendment and restatement of Reliance Steel & Aluminum Company amended and restated 2015 Incentive Award Plan to increase the number of shares available for issuance under the plan by 1.5 million and implement other features designed to protect shareholder interest and reflect our compensation philosophy. Consideration of an amendment to the Reliance Steel & Aluminum Company Directors Equity Plan to extend the duration of the plan for 10 years. And lastly, consideration of a stockholder proposal to amend the company's proxy access bylaw submitted by Mr. John Chevedden. Before we proceed to voting, Mr. Chevedden is on the phone today to present his stockholder proposal. Operator, we are now ready for Mr. Chevedden.

This is John Chevedden. Can you hear me okay?

Yes, Mr. Chevedden. Please present your stockholder proposal.

Okay. Proposal 6, to make shareholder proxy access more accessible. Shareholders request that our Board of Directors take the steps necessary to enable as many shareholders as may be needed to combine their shares to equal 3% of our stock owned continuously for 3 years in order to enable shareholder proxy access. The proxy access for shareholders enables shareholders to put their own director candidates on the company ballot to see if they can be elected. A competitive election is good for everyone. This proposal can help ensure that our management will nominate directors with better qualifications in order to avoid giving shareholders a reason to exercise their right to use proxy access. Currently, proxy access at Reliance Steel is limited to 20 shareholders, who must together own $150 million of 100 -- of Reliance Steel stock continuously for 3 years at a time when many shares are held for less than 1 year. The requirement of owning stock for 3 continuous years may exclude the vast majority of Reliance Steel stock from participation. Under this proposal, it's likely that the number of shareholders who participated in the aggregation process would still be a modest number due to the administrative burden on shareholders to qualify as one of the aggregation participants. Plus it is a swift process for management to reject potential aggregating shareholders because the administrative burden on shareholders leads to a number of technical errors by shareholders that management can then swiftly reject. The largest shareholders of a company can be the least likely shareholders to use shareholder proxy access. It can be more complicated for large shareholders to use shareholder proxy access. There is a growing awareness of this reality. Aggregating shareholders should be able to select the ownership structure of a group that requests proxy access. Shareholders are in the best position to know whether it will be more practical to have a few big shareholders or a greater number of smaller shareholders and should not be settled within flexible rules. The directors of many companies will claim that one size does not fit all in their annual meeting proxies, and this principle should apply to shareholders at Reliance Steel. The shareholders who ask for proxy access must use substantial administrative work to initiate proxy access. Management said in effect that it's too much to accept -- to management to do a proportional amount of administrative work when that is part of their day job. Plus much of the administrative work can be outsourced by management to a low-cost provider, and 1 proxy access Director candidate is not the end of the world for management. The candidate still has a long road to get shareholder support. Please vote, yes, make shareholder proxy excess more accessible on proposal 6.

Thank you, Mr. Chevedden. We will now proceed with the vote on all of these matters. If you returned a proxy, your votes have automatically been recorded in accordance with your instructions. Any stockholders who are properly registered for the virtual meeting and who have not yet voted or wish to change their votes may do so by clicking on the voting button on the web portal and following the instructions. I'll pause for a moment now to allow our shareholders time to vote. [Voting]

The polls are now closed for voting. Will the inspector of elections, Mike, please provide the voting results.

Thank you, Mr. Chairman. Of the 63,640,761 shares of the company's common stock outstanding and eligible to vote at this meeting, 58,031,444 shares or 91.19% of the outstanding shares are represented here today. Votes were cast for the following -- for the 6 matters being considered in the following manner. Regarding proposal #1, the election of directors. At least 97.97% of the votes cast were voted in favor of each of the 10 director nominees. 98.38% of the votes present voted in favor of proposal 2: to consider a nonbinding advisory vote to approve the compensation of the company's named executive officers. And 98.95% of the votes present voted in favor of proposal 3: to ratify the appointment of KPMG LLP as the company's independent registered public accounting firm for 2020. 97.37% of the votes present voted in favor of proposal 4: to approve the amendment and restatement of the Reliance Steel & Aluminum Company's amended and restated 2015 incentive awards plan. 98% of the votes present voted in favor of proposal 5: to approve an amendment to the Reliance Steel & Aluminum company Directors Equity Plan to, in part, extend the duration of the plan for 10 years. And finally, regarding proposal 6: to consider a stockholder proposal regarding changes to the company's proxy access bylaw. 29.12% of the votes present voted in favor of the proposal, 70.67% of the votes present voted against this proposal and 0.2% of the votes present abstained. I respectively -- I respectfully submit my inspector's oath and report to be filed with the minutes of this meeting.

Thank you, Mike. As a result of this voting, I hereby declare that all nominees for Director have been elected for a term of 1 year; the nonbinding advisory vote to approve the compensation of the company's named executive officers has been approved; the appointment of KPMG LLP as our independent registered public accounting firm to perform the annual audit of our 2020 financial statement has been ratified; the amendment and restatement of the Reliance Steel & Aluminum Company amended and restated 2015 Incentive Award Plan has been approved; the proposal -- the proposed amendment of the Reliance Steel & Aluminum Company Directors Equity Plan has been approved; and lastly, the stockholder proposal has not been approved. With the results now officially announced and recorded by the Corporate Secretary and there being no further business, I hereby declare the 2020 Annual Meeting of Stockholders adjourned. Thank you for your attendance and for your continued support of Reliance, particularly in these extraordinary times. At this time, Jim and Karla will respond to questions from our stockholders. As a reminder, only stockholders who have properly registered to attend this virtual meeting are able to ask questions using the designated field on the web portal.

Hi, this is Karla Lewis. Thank you all for joining our call today, and thank you to those who have submitted questions. So I will start responding to the questions now. The first question we're going to address is the question, do you plan 2020 share buybacks? And how much? So as we disclosed in our first quarter earnings report in the first quarter of 2020, we repurchased $300 million worth of our common stock. That was about 3.3 million shares. And then as far as additional share repurchases, we will remain consistent with our capital allocation strategy. That really includes 4 buckets. The first 2 I'll talk about are focused on long-term growth of the company, which we typically execute through both acquisitions and also through organic growth with our capital expenditures. We are continuing to look at both of those opportunities this year. And then on the other 2 buckets are more in the stockholder return area, which is a dividend, and we have for 61 years, paid a regular quarterly dividend. We increased it again in the first quarter of 2020, and we plan to continue to pay our quarterly dividend. And then we will also look at additional share repurchases throughout the year. We do that on an opportunistic basis, looking at what opportunities are in front of us, what our share price is, what our cash position is. Given the COVID-19 situation we're all currently in, we did mention on our first quarter call that we were in somewhat of a cash preservation mode. So we still expect to look at these buckets and execute opportunistically. But with a focus on cash preservation while we go through these uncertain times until we're further along with a little more visibility. So the next question, there was a question, when was the last in-person Board meeting? Reliance's last Board meeting was held in person in February of 2020. And our April Board meeting, it was a call in. So we have continued with all of our Board meetings, but we did the last one by phone due to COVID-19 and travel restrictions. The third question was how many attended today's shareholder meeting. So we show 39 attendees for the meeting today. And then the final question that was submitted is what was the selection process for Lisa Baldwin, who is our newest Board member, and Jim is going to respond to that.

Yes. Thanks, Karla. Yes, we have a matrix of skill and ability for each one of our Board members. And we believe at the time that it would be a great asset to have somebody with Lisa's background and expertise in IT and cybersecurity. We thought she would be a great asset to the team, then the none -- and Government committee came up with candidates. By the way, came up with a list of candidates without the expense of a placement, so we were able to get a fine addition to our Board in the form of Lisa Baldwin with the background that we were lacking. So we're glad to have her.

Okay. That was the final question that was submitted. So once again, thank you all for joining us, and we're going to sign off now. Thank you.

Seeing no further questions at this time. We thank you again for attending this Annual Meeting of Stockholders and for your continued support of Reliance. Good evening.

This concludes Reliance's 2020 Annual Meeting of Stockholders. Thank you for joining. And have a pleasant evening.