First Time Loading...

Reliance Steel & Aluminum Co
NYSE:RS

Watchlist Manager
Reliance Steel & Aluminum Co Logo
Reliance Steel & Aluminum Co
NYSE:RS
Watchlist
Price: 335.47 USD -0.42% Market Closed
Updated: Mar 29, 2024

Earnings Call Analysis

Q4-2023 Analysis
Reliance Steel & Aluminum Co

Strong 2023 Performance, Positive 2024 Outlook by Reliance

Reliance, Inc. (formerly known for steel and aluminum) reported remarkable results, second-highest in company history, with earnings per share (EPS) of $22.64 in a tough year. With a name change and expansion into diversified metal solutions, Reliance showcased resilience. Achieving a 3.7% increase in annual tons sold, the company maintained a high gross profit margin of 30.7% and invested a record $468.8 million back into growth and upgrades. The semiconductor market offers potential growth, boosted by the CHIPS Act. Looking ahead to Q1 2024, expectations are set for healthy demand, 9-11% volume increase, and EPS between $5.30 to $5.50.

Reliance, Inc.—Navigating Through Growth and Market Dynamics

As Reliance, Inc., formerly known for its focus on steel and aluminum, steps into the future with a new identity, it aims to shake off the limiting perceptions tied to its old name. The company has grown beyond just metals, now priding itself in offering diversified solutions, taking care of its people, and delivering consistent returns to shareholders.

Financial Robustness with Room for Growth

Reliance reported a laudable earnings per share (EPS) of $22.64, marking the second-highest in its history. With a sharp eye on operational efficiency and disciplined pricing, the company sustained a healthy gross profit margin of 30.7%, a near-peak performance given its historical range. This success stems from an inclination towards capital reinvestment, which bolsters the capacity and capability for advanced value-added processing, a factor in staving off margin compression during downward price pressures.

Strategic Acquisitions and Market Penetration

Inorganic growth forms a core aspect of Reliance's strategy, as evidenced by the Cooksey Iron & Metal and American Alloy Steel acquisitions, elevating its stance in the Southeastern market and diversifying its offerings. These moves not only extend its product portfolio but also bring $400 million in net sales and promising bottlenecks for further expansion.

Tangible Market Share Gains Amidst Competitive Environment

With tons sold up by 4.9% in Q4 and 3.7% for the year 2023, Reliance is outpacing industry growth, seizing market share, and thriving in key sectors like nonresidential construction and aerospace. Despite a slight drop in selling prices, the company's adept handling of market dynamics ensures continued outperformance and optimizes its profitability.

Facing Headwinds with a Long-term Vision

Even as semiconductor industry sales dip, Reliance is looking ahead, banking on the CHIPS Act and reshoring initiatives to drive future growth. The firm remains committed to substantial investments in capacity to capitalize on emerging opportunities within this sector.

Solid Earnings Accompanied by Prudent Inventory and Expense Management

The company closed Q4 with EPS exceeding expectations at $4.73, partly due to favorable tax rates and LIFO income. It continues to exhibit financial discipline, as showcased by a slight uptick in SG&A expenses aligned with higher shipment volumes while maintaining a close watch on incentives and headcount as profitability adjusts. The effective use of the LIFO inventory valuation method has proven advantageous, bringing in significant LIFO income and aiding in managing gross profit margin volatility amidst changing metal prices.

Constructive Outlook with Positive Revenue and Profit Expectations

For Q1 of 2024, Reliance projects a healthy continuation of market demand with a 9% to 11% increase in shipping volumes. Minor pricing improvements forecasted to range between 1% to 3% affirm the stability sought after in the dynamic pricing environment they navigate. This optimistic outlook is encapsulated by an anticipated earnings per share of $5.30 to $5.50, reflecting the company's confidence in its operational excellence and market positioning.

Earnings Call Transcript

Earnings Call Transcript
2023-Q4

from 0
Operator

Greetings, and welcome to Reliance, Inc. Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Kim Orlando, ADDO, Investor Relations. Thank you. You may begin.

K
Kimberly Orlando

Thank you, operator. Good morning, and thanks to all of you for joining our conference call to discuss Reliance's Fourth Quarter and Full Year 2023 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 Investors 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 it applies 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.

K
Karla Lewis
executive

Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2023 results. Before I dive into our performance, I'd like to begin by highlighting today's exciting announcement of our corporate name change to Reliance, Inc. To coincide with this announcement, please note that our website has also been updated to reflect our new domain name, reliance.com. Over the years, retaining the words steel and aluminum in our corporate name has limited the perception of our company because Reliance has evolved to be so much more than metal. We are a family of companies committed to providing diversified metal solutions and increasing levels of value to our customers, opportunities to our employees and returns to our stockholders.

Reliance has made investments in our business far in excess of our peers while consistently generating industry-leading results. We have become stronger and more diversified, collaborative and focused as we further differentiate Reliance as a best-in-class company. We believe these developments as well as our long-standing reputation for credibility with all of our stakeholders have made Reliance a name that stands alone. We are proud of our 85-year history and 30 years as a public company and will remain anchored to our core business model and values as we move forward into the future.

Turning to our results. Reliance delivered strong operational and financial performance in 2023 in a challenging environment. I'd like to recognize and thank our dedicated team throughout our family of companies for consistently executing our resilient business model and providing increasing levels of value to our customers while maintaining their focus on keeping each other safe.

These collective efforts led to annual earnings per share of $22.64, the second highest in our history. We increased our volumes through continued market share gains while maintaining our full year gross profit margin of 30.7%, near the top end of our estimated sustainable range due to our strong pricing discipline and significant capital reinvestment to increase our capacity and value-added processing capabilities.

Reliance generated annual cash flow from operations of $1.67 billion and invested a record $468.8 million back into our business through capital expenditures. Our CapEx budget for calendar year 2024 is $425 million, with approximately 2/3 dedicated to growth projects that will further enhance our value-added capabilities, upgrade and improve our operating facilities and fund expansion into new markets. We expect our total 2024 CapEx cash outlay will be approximately $500 million, which includes some carryover projects from 2023 and prior years due to extended lead times throughout the supply chain. We also continue to execute on our capital return priorities in 2023, returning $717.6 million to our stockholders through dividends and share repurchases. In addition to our organic growth efforts, we announced 2 acquisitions in the first quarter of 2024. On February 1, we welcomed Cooksey Iron & Metal to the Reliance family of companies. Cooksey is a well-known metal service center based in Tifton, Georgia with a strong reputation for premium customer service and rapid delivery standards, which is in direct alignment with the Reliance model. Cooksey's 3 locations generated approximately $90 million of net sales in 2023, and their addition to the Reliance family of companies strengthens and expands our position in the fast-growing Southeastern market.

And on February 14, 2024, we announced that we had entered into a definitive agreement to acquire American Alloy Steel, a leading distributor of specialty carbon and alloy steel plate and round bar, including pressure vessel quality material. American Alloy adds specialty carbon steel plate to our product portfolio as well as new fabrication capabilities. American Alloy's 6 locations generated approximately $310 million of net sales in 2023. The transaction is expected to close within the next 60 days, subject to regulatory approval and customary closing conditions. We continue to see a broad array of M&A opportunities in the pipeline, and we'll pursue those that meet our disciplined criteria for well-managed companies that enhance our diversification by product, end market and geography and are immediately accretive to our earnings.

In summary, we are very pleased with our 2023 results that were achieved in a challenging operating environment. Our long-standing and continuously improving business model enables resilient execution throughout economic cycles, including both pricing and end market demand fluctuations present in the metals industry. In addition, the increasing level of collaboration we continue to see across our family of companies creates excitement for our future as we work together to capitalize on the many opportunities in front of us.

2024 is another milestone year for Reliance. We will celebrate our 85th anniversary and our 30th anniversary as a public company. While we are changing our company name and logo, Reliance captures the essence of who we always have been and always will be to our suppliers, customers, investors and employees. We are more than metal. We are a family of companies. We are industrial strength. Thank you all for your time today. I'll now turn the call over to Steve, who will review our 2023 demand and pricing trends.

S
Stephen Koch
executive

Thanks, Karla, and good morning, everyone. I would also like to express my gratitude to the entire Reliance family for a strong finish to the year and for prioritizing safety at the forefront of our strategy. Our performance was also made possible by our valued customers who rely on us for quick deliveries of high-quality products as well as our suppliers who continue to support us through all market cycles and remain instrumental to our growth initiatives.

I'll now turn to our demand and pricing trends. Our fourth quarter tons sold were up 4.9% from the prior period, within our expected range of up to 3.5% to 5.5%. For the full year, tons sold were up 3.7% compared to 2022, reflecting solid underlying demand in several key markets, including nonresidential construction, aerospace, automotive as well as contributions from our organic growth activities across carbon plate, structural and flat-rolled products.

We were particularly pleased with the market share we captured in 2023 by growing our tons sold by 3.7% annually, well in excess of a 1.5% increase reported by the MSCI. Our fourth quarter average selling price per ton sold of $2,466 was down 3.4% from the third quarter, which came in slightly better than our expected range of down 4% to 6% as carbon steel and aluminum prices stabilized.

Next, I'll turn to an overview of the trends we saw within our products and key end markets. Carbon steel tubing, plate and structures, our 3 largest product groups, represented about 1/3 of our fourth quarter sales. All these products experienced strong growth and outperformed industry shipment levels compared to the prior year quarter. For the full year, sales volume growth in carbon plate and structural products fueled by strong nonresidential construction supported our industry outperformance. We are cautiously optimistic nonresidential construction, including infrastructure, activity will remain at healthy levels in the first quarter of 2024. And in the medium to long term, we believe industrial reassuring efforts for new public infrastructure projects under various federal and state programs will support continued nonresidential construction and infrastructure demand.

Aluminum and stainless products represented approximately 30% of our total fourth quarter sales, with aluminum and stainless aerospace products comprising about 10%. Stainless steel prices and volumes continued to decline in the fourth quarter of 2023, both sequentially and year-over-year. However, our fourth quarter 2023 shipments of aluminum products increased compared to the prior year as prices stabilized on strengthened aerospace demand. We are optimistic aerospace demand for commercial, military, defense and space will remain healthy in the first quarter of 2024.

We primarily service the automotive market through our toll processing operations, which as a reminder, are not reflected in our tons sold. Our tolling business processed 7.5% more tons in 2023 compared to last year on increased processing demand from the automotive market and our continued investments to increase capacity. Our fourth quarter shipments improved modestly year-over-year as demand quickly recovered after the UAW strike concluded in late October. Our first quarter outlook for the automotive market remains positive.

We saw a wide range of products through diverse sectors in the general manufacturing market, including industrial machinery, consumer products and heavy equipment, among others, which collectively represent 1/3 of sales. Shipments improved modestly year-over-year, driven by strength in heavy equipment. We expect demand in the broader manufacturing sector will remain at healthy levels in the first quarter of 2024.

Sales for the semiconductor industry declined year-over-year but stabilized sequentially in the fourth quarter. We are excited about the growth prospects we anticipate arising under the CHIPS Act as well as reshoring activities that give us confidence in our long-term outlook for this market and further justify the investments we are continuing making to increase our capacity to support active and anticipated opportunities.

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.

A
Arthur Ajemyan
executive

Thanks, Steve, and good morning, everyone. Our fourth quarter 2023 non-GAAP diluted earnings per share came in at $4.73, with some benefit from a lower-than-expected tax rate and a higher-than-expected LIFO income. Adjusting for these items, our non-GAAP earnings per share would have been $4.04, surpassing our guidance of $3.70 to $3.90. Better-than-anticipated pricing and gross profit margin resilience, along with solid execution on all fronts, including effective inventory management, further contributed to the outperformance.

We finished 2023 with $14.8 billion in sales and $22.64 in earnings per share, both representing our second highest historical results. We successfully outperformed industry shipment levels across nearly all products and grew sales volumes in both fourth quarter and the full year compared to 2022. We maintained gross profit margin of 30.6% in the fourth quarter and 30.7% for the full year, near the high end of our sustainable range, mitigating some of the impact of declining prices prevailing in 2023.

Our long-term investments in value-added processing capabilities were key to these outcomes as value-added processing gross profit margins are less susceptible to compression in declining price environment. In 2023, we performed value-added processing on 50.6% of sales orders, up from 50.2% in 2022. 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, our gross profit margin improved by roughly 30 basis points to 28.8% compared to the third quarter of 2023 due to improved alignment between inventory costs and replacement costs, particularly in carbon and stainless steel products.

Our use of the LIFO inventory valuation method benefited both our gross profit margin and earnings in 2023. We recorded LIFO income of $59.5 million in the fourth quarter and $164.5 million for the full year, exceeding our $140 million annual estimate. We ended the year with a LIFO reserve of $579.3 million in our balance sheet, which will be used to generate LIFO income and reduce the volatility of our gross profit margin and earnings as metal prices trend lower in 2024 or future periods. We currently estimate LIFO income of $80 million in 2024. As always, we will update our expectations quarterly to account for actual inventory cost and metal pricing trends.

Moving on to expenses. Our full year 2023 non-GAAP same-store SG&A expenses increased by $55.2 million or 2.2% over last year from incremental variable costs associated with higher tons shipped, which were partially offset by lower incentive-based compensation resulting from lower profitability. As a reminder, our model normalized -- normalizes expenses by rightsizing incentives as profit trends down. This decline in incentives is partially offset by increased headcount to support organic growth in the business. On a per ton basis, our expenses decreased slightly compared to last year due to better operating leverage and were relatively stable compared to the same quarter of 2022.

I'll now switch gears to our balance sheet and cash flow discussion. Our inventory turn rate based on tons came in at 4.7x in 2023, meeting our company-wide goal of 4.7x compared to 4.4x in 2022. Our healthy inventory turn rate not only helped lessen the impact of declining prices on our gross profit margin, but also contributed to strong cash flow generation of $1.67 billion in 2023, the second highest level in our history. For the fourth quarter, operating cash flow of $525.6 million funded $110.2 million in capital expenditures, $58.8 million of cash dividends and $240.3 million of share repurchases, resulting in a 1.6% reduction in common shares outstanding.

On February 13, our Board of Directors increased our regular quarterly dividend 10% to an annual rate of $4.40 per share, marking the 31st dividend increase since our 1994 IPO. We have paid regular cash dividends for 64 consecutive years without reduction or suspension.

Our strong balance sheet, consistent cash flow generation and recently announced $1.5 billion share repurchase authorization allow us to be opportunistic. We are very proud of the fact that our strong financial position has enabled us to invest back into our business to support growth, while concurrently returning approximately 45% of our net income and 58% of free cash flow to our stockholders over the past 3 years.

I'll conclude with our first quarter outlook. Overall, we expect underlying end market demand will remain relatively healthy in the first quarter of 2024. We also expect shipping volumes to increase 9% to 11% sequentially in the first quarter, consistent with typical seasonality. On the pricing side, we expect our average selling price per ton sold for the first quarter will increase slightly, up 1% to 3% compared to the fourth quarter based on stabilizing pricing trends for many of our products. Based on these expectations, we anticipate non-GAAP earnings per diluted share in the range of $5.30 to $5.50 for the first quarter of 2024.

To close, I'd like to thank the entire Reliance team for its collaborative efforts to drive industry-leading performance in 2023. This concludes our prepared remarks. Thank you for your participation. And at this time, we'll now open the call to questions. Operator?

Operator

[Operator Instructions] Our first question comes from the line of Katja Jancic with BMO Capital Markets.

K
Katja Jancic
analyst

In 4Q, your gross profit margin was at the higher end of your sustainable range. I would assume that in a declining pricing and volume environment, it would get at least a bit compressed. Is it fair to say that, in general, your sustainable gross profit margin is moving higher?

K
Karla Lewis
executive

Katja, thanks for being on the call this morning. So it is our intent to continue to drive our gross profit margin higher as we're continuing to invest in more and more advanced processing equipment, doing more for our customers, we're able to drive our gross profit margin higher. We also benefit from being on the LIFO inventory costing method with being able to hold our margin more sustainable. But it certainly is our intent. And I think if you look back over the past 8 to 10 years, you will see our sustainable gross profit margin at a steady improvement. We continue to see a lot of opportunity with our customers to do more with them, for them, which is why we're continuing to invest in CapEx. And so it is our intent to drive that higher, but I know all of you ask us to try to quantify when and how much, but we can't do that, but we do want to continue to move higher in that. Arthur, do you want to add anything?

A
Arthur Ajemyan
executive

Yes. Sure, Katja. And fourth quarter typically has the annual kind of LIFO catch-up. And when we talk sustainable margins, we refer to that on an annual basis as on a quarterly basis, you could have certain bumps that move the margin up or down. So on an annual basis, we're still 30.5 -- I beg your pardon, we were above 30%, 30.7%. So yes, your point is well taken. And a reminder that LIFO for us effectively resets cost of sales make to replacement costs. So it effectively takes out inventory gains and losses from our results. So it's a better metric of operating results, at least that's been our view. And it's -- it actually helps us navigate pricing cycles and takes out the volatility from our operating results.

K
Katja Jancic
analyst

And maybe just a follow-up on this? Because Arthur, as you said, this year, the gross profit margin was at 30.7%. I think last year, it was around the same level, 30.8%. What would you -- and this is at the higher end of the range, right? What would you have to see to be comfortable to really raise it above current level?

K
Karla Lewis
executive

When the time comes, Katja, we'll let you know.

K
Katja Jancic
analyst

Okay. One more, if I may. Can you remind us what is your exposure to aerospace?

A
Arthur Ajemyan
executive

It's roughly 10%.

K
Karla Lewis
executive

Of sales.

A
Arthur Ajemyan
executive

Sales. Correct.

Operator

Our next question comes from the line of Phil Gibbs with KeyBanc Capital Markets.

P
Philip Gibbs
analyst

Did you provide any color on what you expected 2024 CapEx to be? And also how much do you have left on the buyback?

K
Karla Lewis
executive

Yes. So our current 2024 approved CapEx budget is $425 million. So those are projects, will initiate this year. Because of lead times, we probably won't have all of that completed. But we do have carryover from prior years. So from a cash spend, we're estimating about $500 million going out the door for prior and current-year projects. A lot of that -- most of that is growth-related, as it has been the last several years. As I just mentioned with Katja, we continue to find more ways to provide value to our customers, go into new greenfields in new geographic areas, broaden our products and processing capabilities. So we see a lot of opportunity to continue to do that. And then on our share repurchase, we've got $1.4 billion, Arthur?

A
Arthur Ajemyan
executive

Correct. $1.4 billion, left, yes.

P
Philip Gibbs
analyst

And unusually, the OpEx levels, at least in my model, were up sequentially in the fourth quarter, which is not seasonally typical. Did you have some accrual catch-up? I think we're just trying to figure out what the right baseline is.

A
Arthur Ajemyan
executive

Yes. So, good question. Normally, it's a little bit of a decline. But as we talked about, we've been growing the business organically in fourth quarter volumes shipped. Well, yes, they declined sequentially. There is over 4% growth year-over-year. So some of that is just our organic growth. And I think if you look at it, the sequential increases in terms of absolute dollars is a relatively small amount.

P
Philip Gibbs
analyst

So nothing unusual in terms of catching up from the rest of the year. You're just building -- probably building a little bit more infrastructure?

A
Arthur Ajemyan
executive

Correct.

P
Philip Gibbs
analyst

Okay. I did have one more in here. You did make a couple of deals recently. And I know, just generally speaking, given history that a lot of deals don't contribute right away given mark-to-markets in the first quarter on inventory, but would you expect these to start being accretive in the second quarter?

K
Karla Lewis
executive

Yes. Well, Phil, one of our criteria for acquisitions are that they're immediately accretive. So Reliance's strategy on acquisitions hasn't changed that we buy good, well-run, profitable businesses. So we expect them -- and hopefully, they're listening. We expect them to be immediately accretive based on their past results. We have no reason to think that, that would not be the case. We're excited about welcoming them to the family.

P
Philip Gibbs
analyst

The revenue splice between these 2 deals is largely in carbon or mixed amongst metals?

K
Karla Lewis
executive

Yes, primarily carbon. And just a reminder, Cooksey, we did already close February 1, so they come into our numbers -- they're in our numbers now. American Alloy has to go through regulatory approval, so that is not yet closed. And at the time that we are able to close that, we'll make an announcement and then their numbers would begin rolling in then.

Operator

[Operator Instructions] Our next question comes from the line of Martin Englert with Seaport Research Partners.

M
Martin Englert
analyst

Question on sequential volume guidance at the high end of the range. I think that it implies that it would be down marginally year-on-year with volumes. The end market commentary was generally positive in the release and prepared remarks. Could you just touch on where that weakness could be year-on-year? Or am I misinterpreting that?

A
Arthur Ajemyan
executive

No, you asked a very good question, Martin. As you may recall, last year, our first quarter increase sequentially from the fourth quarter was unusually strong, and we called it out as we had some demand pull forward in the first quarter from rising carbon flat-rolled prices. So going from Q4 of '22 to Q1 of '23, our tons increased almost 18%. And then sequentially as we navigated the rest of the year, there were declines, which were sort of a little atypical from a seasonality perspective. So when you look at it from Q1 of '24 to Q1 of '23 perspective, you're going to see a little bit of that decline, which is again due to that unusually really strong Q1 of '23.

K
Karla Lewis
executive

Yes. I would say it was more buying patterns of some of our customers. And I just want to make sure we're not implying weakness. We still see healthy demand in Q1 2024.

M
Martin Englert
analyst

I guess, following on that -- okay, so there was noise in the comparison year-on-year in 1Q and some atypical seasonal trend after that. But based on what you see today, would you expect, I guess, more fundamental underlying demand to be exhibited in the volumes in the remaining quarters? Meaning if it was comparing negatively marginally in 1Q and you're rather positive on these end markets, meaning we should expect some growth in volumes year-on-year?

K
Karla Lewis
executive

I mean that's certainly our intent and what we're pushing for. We've been making investments to continue to grow organically. And our teams out in the field did a great job in 2023. We outperformed the MSCI shipment levels. That was strategic. It was because of investments we've made because of our companies going after smart profitable business that's out there, and they were very successful in doing that.

We think underlying demand at this time, we are positive. We think there are a lot of good tailwinds coming through the infrastructure, the chip, the reshoring and nearshoring, that is all still out there. So we only give guidance a quarter out, but we are positive about the opportunities that are out there that we expect to see in 2024, but we've also been in this business long enough that we know there are certain things we can't control, but we're excited and we're positive at this time.

M
Martin Englert
analyst

That's very helpful. Can you touch on the corresponding volumes to the sales of the 2 acquisitions? And I understand one of them is pending, but what you saw in 2023 for each?

K
Karla Lewis
executive

Yes. I mean we've disclosed their sales numbers, Martin, but nothing beyond that, nothing on volumes at this time. And it won't be -- overall, we're -- they are important businesses, important additions to the family, and we're excited about that. But it's not going to materially move our tons.

M
Martin Englert
analyst

Are you able to qualitatively comment on the gross margin profile relative to Reliance?

K
Karla Lewis
executive

Yes. I mean we don't -- we do not typically talk about individual companies unless it's a very material transaction. But we -- I will say that they are good performing profitable businesses. But we do -- we're excited that there -- we do see some opportunities to help expand their gross profit margins from where they are currently. Some of the expertise we have throughout the Reliance family and value-added processing, we think we can bring to the companies and really help them work on that and pricing discipline. So we think there's upside to their already solid profitability levels, but we're not going to give specific numbers.

M
Martin Englert
analyst

Okay. That's helpful. If I could, one last one on the repurchases. The average repurchase price is lower quarter-on-quarter in 4Q. The volume repurchase increased to $0.9 million versus $0.5 million. And I think earlier in your prepared remarks, you did highlight you typically opportunistically repurchased, but how are you thinking about repurchases looking ahead, both in the near term and 1Q with more of the share prices today?

K
Karla Lewis
executive

Yes. So Martin, we look at share repurchases like all of our -- all of our capital allocation buckets where we try to opportunistically be active in each of those buckets. And we don't have any one holding back another one. The fact that we have announced a couple of acquisitions doesn't change. We've got the -- we're in a financial position where that doesn't impact our ability to repurchase shares or how we view that. So we expect to continue to be active when we think it's the right timing in the market, which is consistent with Q3, Q4. A lot depends on how the stock trades during that period.

A
Arthur Ajemyan
executive

And Martin, just a quick reminder. We refreshed our authorization back in October to $1.5 billion, and we have $1.4 billion remaining on that authorization. So in our prepared remarks, we provided some 3-year historical figures on total returns, which was roughly 58% of free cash flows over the last 3 years. Does that mean that's the number that we're guiding to going forward? No. As Karla said, we kind of look at that largely opportunistically, and we have the authorization and the balance sheet and the cash flows to be able to act on that when the opportunities present themselves.

M
Martin Englert
analyst

Is there any -- well, that might not necessarily be the target or the last 3 years have trended? Is there some lower bound that -- I guess, lower bound to the framework as a minimum that you would like to return by dividends and repurchases? Or not necessarily, it's really based on the best opportunity set?

K
Karla Lewis
executive

Yes. Martin, because as I just mentioned, we try to be opportunistic in all of our capital allocation buckets, whether it's acquisitions, organic growth, dividends, share repurchases. We don't set formal policies because we are selling into cyclical markets. So we want to have the flexibility to allow us to do what we think is the best use of capital at the time. So we don't have any formal policies established for that other than trying to be a good capital allocator and reward our stockholders and grow our company.

Operator

Our next question is a follow-up question from the line of Phil Gibbs.

P
Philip Gibbs
analyst

Just broadly speaking, what are you seeing in the automotive market right now? Because I know there was a lot of volatility in the headlines in the back half of last year from the auto strike.

K
Karla Lewis
executive

Yes, Phil. So we service the automotive market predominantly through toll processing, where we do not take ownership of the metal, which we like servicing that market that way, taking out any metal price risk for us. And we're processing, inspecting, delivering, storing the metal. Typically, our customers in that business are the mills selling to the automakers. And our companies that do that are very good at what they do. They've done a great job servicing the markets, also shifting to be able to process aluminum as there's more and more aluminum content. We've been continuing to invest in those companies.

And last year, our processing volumes in our toll processing businesses, which are about 65% automotive-related were up 7.5%. And so it was a good year for us, again, partly because of our investments for growth, but also because even though there were a few stoppages and it was a little erratic for certain periods during the strikes, it didn't hit us on a broad basis. It was typically one customer, one platform that would be down. So it wasn't too broad-based for us. A lot of our customers were anticipating the strike coming. And so we worked with them to try to build up a little more inventory for them prior to that, and it came back pretty quickly when the strike ended. So we didn't see a big impact from that. And we continue to be busy. We're continuing to invest to increase capacity there, and we're positive on automotive going forward.

P
Philip Gibbs
analyst

And then just a question for modeling clarity. The other income was pretty robust in Q4. Does that capture largely the interest income on your cash balance?

A
Arthur Ajemyan
executive

That's correct, Phil. And there's some life insurance income in there, but the vast majority of that is interest income on our cash.

P
Philip Gibbs
analyst

Perfect. And then if I could sneak in one more just on semis infrastructure. I know you've made some good investments there in the last couple of years. Are you starting to see some of that spending come back? Or is that not a market that you're looking for growth in '24?

K
Karla Lewis
executive

Yes. So I think for the year 2024, we would look for some growth, our smaller investment in a new facility in Texas, they're ramping up now. They're in production mode, but with where the industry is right now, they're starting a little slower. The equipment side of the business is more negatively impacted than kind of the construction project side of the semiconductor business. Our larger facility capacity expansion in Texas is not yet live. So they're still in build mode. So we haven't seen anything out of that new investment yet.

But we did see in Q4, the semiconductor industry really -- they're still busy, but there was a bit of an inventory buildup. So they've been working through that. And we're positive going into 2024 that we'll start to see some improvement. A lot of it, though, on the construction side is dependent upon the pace that our customers build because there have been some stops and starts on some of the projects.

Operator

That concludes our question-and-answer session. I'd like to hand it back to Karla Lewis for closing remarks.

K
Karla Lewis
executive

Thanks again, everyone, for joining our call today. And before we close out the call, I'd like to remind everyone that we will be in Florida later this month presenting at the BMO 33rd Annual Global Metals, Mining and Critical Materials Conference, and we hope to see many of you there. Thank you again to all of you for your continued support of Reliance.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.