Steve Koch: Timna, hi, it’s Steve. As you know, 95% at least of our material that we purchase is domestically sourced. So that’s kind of our natural hedge. We feel like the lead times that we received our inventory management by our leaders in the field, which we think they’re doing a great job because there’s been a lot of pricing challenges over the last year or so. So I think that in this type of a market, I think that we thrive and on people in the field thrive.
Arthur Ajemyan: Yes. And then Timna, in terms of pricing forecast a lot of – there’s product where you certainly – you kind of look at the futures market. But to Steve’s point, being a domestic buyer, you have a lot of visibility to those products and their pricing. So especially for a quarter out, but then with that said, there’s always – there’s volatility that could be unexpected, so that happens. And 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, yes, we consider all that information and then make some informed decisions based on what we see with the lead times and demand and with the different geographies and the products that we have. So all of that gets factored into our forecast.
Karla Lewis: Yes. And I would also just add to that, 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.
Timna Tanners: Okay. Fair enough. And just one more if I could. I thought it would 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, how do you manage in a softer market or a period of lower profitability, less incentive comp, but also the challenges of retaining and hiring people?
Karla Lewis: Yes. I mean, Timna, certainly it’s been 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 seeing more candidates, more people interested in jobs, but we’re not always the sexiest industry to some of the people out there when they’re looking at opportunities. But we have been more successful bringing people in. We think we do a good job of retaining people. Good people once we have them in, we want to treat them fairly, provide them with good benefits, pay them fairly. Certainly, when things get a little tougher, they may be bringing less home, but we’ve also had some pretty good years the last couple of years too where our people have done really well, doing more value-added processing also provides a little more stability for our workforce and the profitability and their incentives that they may take home, growing the business, which we’ve been focused on.
So there are ways to manage around that. But it’s not easy these days, but I don’t know that we’ve seen any significant reaction to those factors.
Timna Tanners: Okay. Thank you again. Best wishes.
Karla Lewis: Thanks, Timna.
Arthur Ajemyan: Thanks, Timna.
Operator: Thank you. Next question comes from the line of Phil Gibbs with KeyBanc Capital Markets. Please go ahead
Phil Gibbs: Yes. My follow-up was based largely on what you’re seeing in both the aerospace and defense side. I know you’ve got kind of a balanced mix within your portfolio. 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 just curious in terms of what your – what your forward expectations are, what you’re seeing? I know you’re serving some specific programs as well. So just curious. Thanks.
Karla Lewis: Yes, Phil, on the aerospace side, our Q1 sales, 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. We’re seeing increased demand, whether they’re specifically our aerospace business in that 9% where we’re participating on several key programs, both the U.S. and internationally, and we see order activity picking up there, but not included in the 9%. A lot of our companies we’ll sell into like missiles, munitions, that doesn’t all get picked up in that number. And that continues to be strong, and we see with the unfortunate circumstances around the world today, we see some continued demand strength in that area.
And then on the commercial side, which you know we have companies both servicing in the U.S. and Europe, the airplane manufacturers, build rates actual is 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 kind of correct for what the actual build rates are. So we do anticipate some near-term pressure on the commercial aerospace side. However, long term, there are just a lot of orders out there. We’re participating on pretty much all programs. And we’re still bullish for the long term on aerospace, but expect a little pressure in the near term.
Phil Gibbs: Thank you. And then just one more for me, on this solid CapEx budget that you have for this year? I know you’ve said in the past that they’re there’s hundreds of projects in there, but maybe if you could call out some of the larger ones that you either started or in the process of either this year or last year. And maybe where they are in the stages of maturation or commercial development? Thanks.
Karla Lewis: Yes. I mean a couple of the big ones we’ve talked about semiconductor down in Texas. We’ve got a big build there to add more capacity. That one probably maybe later this year, we’ve kind of pulled back and have had some slight delays on that, which is okay because as you’re probably aware, the actual semiconductor plants themselves, they’ve had starts and stops. And so we – so we’ve slowed a little bit there, but still long term, very bullish on that. We have, for one of our kind of specially long product companies in the Atlanta area. They’re about ready to ramp up service center business that they increase their capacity significantly moving into a newer building. On our tolling operations in the U.S., we’ve added a couple of lines that have started up recently.
They’re still ramping Mexico and our tolling businesses. Since 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 like heavier carbon products down in the Atlanta area. Steve, any?
Steve Koch: 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 the light material for we’re doing that in Decatur, Alabama and Fort Wayne 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 facilities.
Phil Gibbs: Thanks team. Have a good day.
Karla Lewis: You too.
Steve Koch: Thanks, Phil.
Operator: Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Karla Lewis for closing comments.
Karla 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. 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 and 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.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
