Prompt:
Human: You will also find our 10-Q on Range's website under the Investors tab, or you can access it using the SEC's EDGAR system.
For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins, and other non-GAAP measures.
The first quarter of 2021 saw Range made continued progress toward our key strategic objectives, improving margins through cost controls and thoughtful marketing, generating free cash flow, enhancing liquidity and extending our maturity profile, operating safely and efficiently, and ultimately positioning the company to return capital to shareholders as the most efficient natural gas and NGL producer in Appalachia.
I'll touch briefly on each of these before turning it over to Dennis and Mark to cover in more detail.
I'll start with unit costs and margin improvements.
Range's unit costs for the quarter were right on track and ahead of our expectations with G&A, LOE, exploration expense, and production taxes, coming in at the low end of our guidance and expectations.
Additionally, we reported a significant gain in our marketing activities for the quarter.
As expected, GP&T increased versus the prior quarter but was more than offset by the significant improvements we saw in NGL and natural gas realizations, resulting in the vast improvements to Range's margins.
In fact Range's unhedged realized price for the quarter was approximately $3.20 per mcfe, which was $0.51 above the NYMEX Henry Hub equivalent price of $2.69.
This premium to Henry Hub is a result of our diversified marketing portfolio and liquids production.
This liquids uplift improve margins and reduces Range's breakeven costs when compared to producing only dry gas.
In fact Range's pre-hedge margin improved by over $1 per mcfe in the first quarter when compared to the 2020 average.
Given the improved fundamental backdrop for natural gas liquids with approximately 65% of our activity in the liquids-rich window this year, Range is very well positioned to continue to benefit from this dynamic.
During the quarter, Range was also able to benefit from improved daily prices in the natural gas market, realizing a natural gas differentials that was $0.08 better than the midpoint of guidance only partially offset by higher transportation fuel costs, again benefiting margins and cash flow.
On the back with this improved pricing, Range generated $193 million in cash flow from operations before changes in working capital, and with capital spending, coming in at just $105 million for the quarter, Range generated solid free cash flow.
As shown on slide 14, we expect this to continue with significant growth in EBITDAX this year versus last.
When combined with absolute debt reduction, this organic free cash flow generation puts us well on our way toward our longer-term balance sheet targets.
Touching on the all-in capital investment of $105 million on the quarter, it's clear that the team's operational execution was superb.
And we continue to find ways to lower costs, once again leveraging our large contiguous acreage position to find ways to complete the operational plan with peer-leading capital efficiency.
After delivering on operational plans below budget for the last three years, Range remains on track to do the same for the fourth consecutive year in 2021.
The operational team safely delivered this capital-efficient plant with an eye toward our long-term environmental goals.
Range closed out 2020 with class-leading emissions intensity, reducing greenhouse gas emissions intensity and putting us right on track toward our 2025 goal of net-zero.
As we strive for this goal, it all starts with efficient operations that minimize our operating footprint and importantly, generates competitive returns.
We believe Range's peer-leading capital efficiency and maintenance capital are key differentiators among peers.
As we've discussed in the past, Range's large blocky acreage position affords us operational and financial efficiencies on multiple fronts including water recycling, infrastructure, rig mobilization, and equally optimization, just to name a few.
Dennis will cover a good example of how this combination of these benefits, benefit range from both an ongoing development and corporate return standpoint in addition to strengthening our environmental efforts.
When combining our low well costs, strong recoveries, and shallow base decline of under 20%, Range is operating at a high level of capital efficiency that provides a solid foundation for generating sustainable free cash flow, what further differentiate Range is our ability to deliver this level of efficiency for an extended period of time giving our multi-decade core inventory.
For some added context on our inventory, Range is turning to sales approximately 60 wells this year, but we have approximately 2,000 Marcellus locations with EURs that are greater than 2 Bcfe per 1,000 foot of lateral.
The average recovery of these wells is very similar to the wells Range has turned to sales for the last several years providing Range an unmatched runway of high-quality wells that's measured in decades.
This is not the case for many of our peers, which we believe positions Range as well as any upstream company to benefit from improving commodity price environment over the medium and long-term.
Before turning it over to Dennis and Mark, I'll just reiterate that Range remains committed to sustainable free cash flow.
Over time, we believe Range will stand out among peers as a result of our low sustaining capital, competitive cost structure, marketing strategies, and importantly our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come as other operators exhaust their core inventories.
We will continue to focus on safe, efficient, and environmentally sound operations, prudent capital allocation, and generating sustainable returns to shareholders.
Importantly, these are all reflected in our updated compensation metrics that can be found in our most recent proxy statement.
Over to you, Dennis.
When we communicated the operational details for our 2021 program, our framework was built around improving both operational and capital efficiencies, enhancing margins, all while striving to further improve our environmental and safety performance.
As we look at our first quarter results, our operating teams are off to a strong start delivering on our objectives for the year, beginning with Q1 production above our communicated guidance and capital spending in line with our 2021 plan.
First quarter capital spending came in at $105 million or approximately 25% of our 2021 program budget.
As we discussed on the prior call, our capital spending program is front-end loaded for the year and is a consistent approach with previous years.
As we look forward, our second quarter capital spending is expected to be approximately one-third of the annual budget for the year, mainly driven by activity timing for completions and turn in lines shifting to Q2.
The reduced capital investments in the second half of 2021 are aligned with our activity cadence reducing to one drilling rig and one frac crew during the third and fourth quarters.
Our first quarter production level of 2.08 Bcf equivalent per day was a direct result of recent strong well results combined with exceptional field run time for the quarter due in large part to the near flawless winter operations planning and execution by our production operations team.
Underpinning our first quarter production including turning to sales, 16 wells spread across are dry, wet, and super-rich acreage.
Our Q1 turn-in lines consisted of an average horizontal length in excess of 11,500 feet and added just under 200,000 producing lateral feet to Range's Appalachia assets.
During the fourth quarter of last year, through the first quarter of 2021, our activity shifted toward wells located across our processable gas footprint.
The results of these turn-in lines increased Range's average oil production to a level exceeding 8,000 barrels per day in Q1 and, has increased overall liquids production in similar levels seen during the first half of 2020.
This level of wet production contribution is expected to continue through the end of this year with second quarter production projected at approximately 2.1 Bcfe per day.
This will position us to achieve our 2021 maintenance target of 2.15 Bcfe per day through additional margin enhancing liquids production while spending $425 million or less.
Shifting to our operational highlights.
During the first quarter, 15 wells were drilled across our dry, wet, and super-rich footprint.
Four of these wells are in the top 20 lateral links for Range's Marcellus program history with all four exceeding 17,800 feet.
Drilling efficiencies continued with nearly three-quarters of the new wells drilled on pads with existing production, coupled with a 5% increase in daily lateral footage drilled compared to 2020.
On the completion side, 16 wells were completed during the quarter.
Overall, the team completed just under 1,200 frac stages while setting a first quarter winter operations efficiency record by averaging over eight frac stages per day.
This efficiency level exceeds Range's previous best first quarter in winter operations record by 14%.
The water operations team built upon prior water recycling successes by utilizing nearly 2 million barrels of third-party produced water, a first quarter record and as a result, reduced overall completion costs for the quarter by more than $4.5 million.
Despite cold weather conditions and heavy snowfalls, the team produced some of our best operational results in our program to date.
All while keeping safety and environmental performance at the forefront.
Lease operating expense for the first quarter was consistent with our prior year's Appalachia level and remained low at $0.09 per Mcfe.
Achieving this LOE level is in large part due to a well-coordinated proactive winter operations plan with the objective of minimizing weather-related production impacts and associated costs.
These efforts generated a field runtime that exceeded 99% with a weather-related production impact of less than 0.5 million cubic feet per day for the quarter, a remarkable achievement.
Looking at the operational successes and milestones achieved during the first quarter, involves a focused, continuous improvement approach, and it's anchored by four key areas.
Range's water recycling program, long lateral development, utilization of existing infrastructure, and lastly optimize the use of drilling and completions equipment.
Each of these are key drivers in delivering on our operational and capital efficiency and our integrated part of achieving our ESG or more specifically our environmental objectives.
We often touch on the benefits each of these bring to our program ranging from a reduction in operating costs, efficiency gains, minimizing our environmental footprint, and reductions in emissions.
Today, I'd like to take a moment and walk through how these four strategies are being implemented by our operations and support teams along with the positive impacts.
I'll use three of the wells that were turned to sales in the first quarter as an example.
These three wells were drilled on an existing surface location with producing wells that were originally developed and turn to sales in 2013.
The average lateral length of the original wells was just over 3,000 feet per well.
In stark contrast, the average lateral length of the new wells is nearly 16,000 feet per well, more than 5 times longer.
No additional earth disturbance was needed for 5 times the acreage development and no additional production, gathering, and processing infrastructure was required to add these new wells.
To put this into perspective, Range has close to 250 developed pads in Southwest PA and as of today, we've returned 84 of these locations to drill additional wells.
Additional wells are planned for these same pad sites along with the approximate other two-thirds of Range's pads that we've yet to return to for added activity.
Simply put, we're only scratching the surface of this opportunity.
The three new wells were completed late last year, utilizing our contracted electric fracturing fleet which displaced 470,000 gallons of diesel fuel.
This reduced our cost by approximately $300,000 per well along with large reductions and associated emissions.
40% of the water used to complete these new wells was recycled water from Range's producing wells along with third-party water, sourced from our water sharing process.
The balance of the water was pumped from our water pipeline network, which was installed nearly a decade ago, further reducing emissions associated with truck traffic by more than 13, 400 truck trips.
The average initial production of these wells exceeded 44 million cubic feet equivalent per day including more than 9,700 barrels per day of combined condensate and natural gas liquids per well, placing them in the top tier of wells in our Marcellus program history.
This is just one of many examples we could share from our development during the past several years with results such as this.
These efforts have underpinned our operational efficiency gains and give us confidence in the durability around keeping our drilling complete cost below $600 per foot, all while achieving our environmental goals and producing best-in-class wells.
These benefits highlight the importance and value of having a high- quality contiguous acreage position and forward-thinking technical team.
Before moving on to marketing, I'd like to touch on Range's environmental and safety performance.
To further reduce production facility emissions, in 2020, Range transitioned to a quarterly leak detection program doubling the number of inspections conducted.
As a result of this increased inspection frequency, an additional 7,400 metric tons of CO2 equivalent emissions was removed from our program, resulting in a 67% reduction for those related components.
This effort along with the continued advancements in our production facility design and utilization of an electric frac fleet has resulted in further reductions in Range's reported emissions, reaching a new low CO2 equivalent level.
This level of performance is competitive with any natural gas play in North America and puts Range in an enviable position globally.
Consistent with our environmental results, Range's safety performance saw similar improvements delivering an over 30% improvement in recordable incidents for the quarter, which was the best Q1 performance versus the prior five years.
Switching to marketing, Range's NGL and condensate business benefited from a strong first quarter.
Market prices improved across the board and our advantaged portfolio of contracts enabled Range to capture premium pricing and a pre-hedge NGL realization in Q1, that was the highest level since late 2018.
The primary driver for improved pricing across both NGLs and condensate was strong demand in a market that saw decreased supply.
Preliminary results for US propane and butane or LPG reveal that Q1 2021 domestic demand was 13% higher year-on-year while supply decreased by 4%.
Similarly, condensate supply in the Northeast is estimated to have decreased by 15% to 20% year-on-year.
As a result of these improved fundamentals, the market average NGL barrel price improved significantly during the quarter.
At $24.83 per barrel, Range's Mont Belvieu equivalent barrel was at 38% over the prior quarter and 83% compared to the first quarter of 2020.
Propane prices led the way, increasing nearly 60% versus the prior quarter and 140% versus Q1 of 2020.
Additionally Range's premium to a Mont Belvieu equivalent barrel increased by approximately $1.50 per barrel versus the prior quarter as Range realizes this highest premium to Mont Belvieu in the company's history.
Looking forward, we see propane and butane market prices continuing to post strong year-on-year gains as storage balances of these NGLs are much tighter relative to last year.
This past winter, propane posted its largest seasonal withdrawal and well over a decade, leaving the end of March propane stocks at a 33% deficit to last year and a 17% deficit to the five-year average.
Given the strong international demand that we are seeing with new chemical capacity coming online and recovering global economies, we believe it will be challenging for propane to replenish US stocks to a comfortable level by fall.
As a result, we expect propane prices to transact at levels at or above 60% of WTI crude this fall and the upcoming winter.
On the commercial side, beginning April 1st, Range entered into a set of new and diverse LPG export-related contracts.
These contracts will add flexibility, reduce cost and further enhance realized propane and butane prices continuing Range's momentum of achieving strong price premiums, relative to the market.
Finally, we continue to optimize Range's condensate sales portfolio by adding flexibility, improving margins, and assuring product placement.
As this year progresses and optimization continues via a diverse set of counterparties, we expect that our condensate differentials to WTI will continue to improve, further benefiting our liquids area development plan discussed earlier in the call.
On the natural gas side, cold weather during mid-Q1 equated to the third coldest February, when looking at the past 10 years.
And despite milder conditions in both January and March, Q1 gas weighted heating degree days finished slightly above the five-year average.
Through utilization of our diverse transportation portfolio, Q1 resulted in a differential of $0.14 under NYMEX, including basis hedging.
Looking ahead, we see potential for additional positive improvements for natural gas pricing, given that a high percentage of operators are targeting maintenance production levels this year, coupled with year-over-year improvements in storage, the fundamentals point toward an undersupplied natural gas market.
Within this constructive outlook for natural gas, Range is on track with its differential guidance of $0.30 to $0.40 for the year.
As we close out our operations and marketing updates, the first quarter results clearly reflect our operations are off to a strong start for the year with the team further building on our operational and capital efficiency performance, all while delivering on our environmental and safety objectives.
Consistent delivery on stated objectives, that is Range's fundamental strategy.
And as you've heard from Jeff and Dennis something the team successfully executed during the first quarter; efficient operations delivering production, efficient drilling and completions activity with capital spending trending in line to better than budget, combined with margin enhancing expense management, all resulted in significant free cash flow.
Our ultimate goal is to repeat this quarter in and quarter out.
Results for the first quarter reflect the benefits of reliable operations, productive wells, and diversity in sales points for natural gas, natural gas liquids, and condensate.
Cash flow from operations before working capital was $193 million compared to $105 million in capital spending.
Significant improvements in free cash flow compared to past periods were driven by a 50% improvement in pre-hedge realized prices per unit of production versus the prior-year period, which reached $3.20 per mcfe in the first quarter.
This realized price per unit is $0.51 above NYMEX Henry Hub, driven by improved natural gas basis and importantly further enhanced by a 77% increase in NGL price per barrel, which reached $26.35 pre-hedge.
Realized NGL price on Mmcfe [Phonetic] basis equates to $4.39 per mcfe and condensate realizations equate to $8.17 per mcfe.
Hence the realized premium to Henry Hub.
Additionally, Range's NGL prices exceeded a Mont Belvieu NGL barrel by $1.52 due to our unique portfolio of domestic and international sales contracts.
Margin enhancing focus on unit cost is a constant state of mind for Range.
Lease operating expenses declined over 40% year-over-year to $0.09 per unit on the back of consistent, efficient, Marcellus operations, despite the winter weather and the divestiture of higher-cost assets.
Cash G&A expenses declined to $28 million or $0.15 per unit in the first quarter.
The decline results primarily from lower compensation costs of a leaner organization, coupled with targeted value-focused spending on IT, data services, safety, environmental, and other essential areas.
Cash interest expense was roughly $55 million.
Higher interest expense is the result of our most recent refinancing activity, which dramatically and positively reshaped the debt maturity profile of the company and enhanced liquidity.
Gathering, processing, and transportation expense increased, but it is important to keep in mind that this is a positive byproduct of strong NGL prices that resulted in significantly higher NGL margins.
Recall that Range's processing costs are the percent of proceeds contracts such that we pay a percentage of NGL revenues as the fee.
Consequently, a fraction of the material higher prices received for NGLs is paid as higher processing cost in that quarter.
For perspective, an increase of $1 per NGL barrel equates to approximately $0.01 per mcfe and cost.
This structure is unique to range in the Appalachian Basin and is a right way risk arrangement that has led to reduce costs for several quarters of lower prices and now continues to drive material margin expansion.
As a result of rising NGL prices in recent months, GP&T expense in 2021 is trending toward the high end of guidance.
However, this is more than offset by expected higher NGL revenue, forecasted at current strip pricing relative to earlier this year.
Turning to the balance sheet, Range has diligently and successfully managed the debt profile, such that liability management projects reduced bond maturities through 2024 by almost $1.2 billion while at the same time improving liquidity to nearly $2 billion.
During the first quarter, we issued new bonds due 2029 in the amount of $600 million, which combined with the reaffirmation of our facilities, $3 billion borrowing base and $2.4 billion in commitments provide substantial liquidity and a strong evidence of what we believe is durable asset value.
Cash flows are expected to retire debt maturities in coming years and are backstopped by ample liquidity.
During the first quarter, we called in $63 million in near-term maturities of senior and senior subordinated notes closing on the redemption in early April.
There has been substantial improvement in the debt markets, and it's evident in the trading levels of Range's bonds that both access to and cost of capital has improved.
Future debt retirement is expected to be funded primarily by organic free cash flow.
We will be cost-conscious in effectively managing debt retirement, while also being mindful of any potential refinancing risk of debt maturities.
Being opportunistic in bond redemptions, this prices in early redemption options become economic on a risk-adjusted basis.
Liability management over the last two years has as expected temporarily increased interest expense, however, this avoided much higher cost forms of capital that would have diluted shareholder ownership and participation, and what we see is a steadily improving natural gas and natural gas liquids business.
While we're proud of the steps taken to date, further improving our balance sheet remains a principal objective.
As can be seen in the recently filed proxy, leverage metrics have been incorporated into long-term compensation criteria with the target of 1.5 times debt to EBITDA were better.
Shareholder value creation through the generation of free cash flow and its prudent redeployment is our focus.
To be clear, we believe this is an achievable goal.
At current commodity prices by the end of 2022, Range's leverage is approaching target levels.
On the topic of hedging, we have a glide path or common range in which we add positions over the course of the year.
Within that path, we intentionally moved at a deliberate pace during 2020, as we added 2021 hedge positions.
We plan to follow similar principles this year in adding hedges for 2022 and beyond.
By that I mean, we'll seek to balance the twin goals of prudently derisking cash flows while not hedging away the improved supply demand balance into backward dated price curves.
Our strategic actions over the last three years have been focused on reducing risk while maintaining and enhancing the intrinsic value of the asset base.
We believe Range holds the largest portfolio of quality inventory in Appalachia.
Exposure to that inventory on a per-share basis has been preserved and enhanced by our actions.
We believe steps taken represent material progress in positioning Range as a more resilient business and as evidenced by first quarter results primed to participate in improved market dynamics.
Jeff, back to you.
Operator, we'll be happy to answer questions.
 Assistant:

Chosen response:
compname reports q1 adjusted non-gaap earnings per share of $0.30.
production for full-year 2021 is expected to average about 2.15 bcfe per day, with about 30% attributed to liquids production.
q1 adjusted non-gaap earnings per share $0.30.
range's 2021 all-in capital budget is $425 million.


Prompt:
Human: Jon Vander Ark, our Chief Executive Officer; and Brian DelGhiaccio, our Chief Financial Officer, are joining me as we discuss our performance.
The material that we discuss today is time sensitive.
If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is October 28, 2021.
I want to remind you that Republic management team routinely participates in investor conferences.
We are pleased with our strong performance in the third quarter.
We continue to execute on our strategic priorities of customer zeal, digital and sustainability to drive growth and value for our stakeholders.
During the third quarter, we delivered revenue and EBITDA growth of approximately 14% compared to the prior year.
Generated adjusted earnings per share of $1.11, which represents an increase of 11% over the prior year and produced $1.4 billion of adjusted free cash flow on a year-to-date basis.
We continue to effectively allocate capital by investing in value-creating acquisitions and returning excess cash to our shareholders.
Year-to-date, we've invested over $900 million in acquisitions to further enhance our market position and increase free cash flow.
This is the highest level of acquisition investment in over a decade.
On August 31, we completed the acquisition of ACV Enviro.
This strategic acquisition broadens our capabilities and offerings in the environmental services industry.
It also provides us with a platform to pursue additional growth.
Our acquisition pipeline remains robust with opportunities in both the recycling and solid waste and the environmental solutions businesses.
We now expect to invest over $1 billion in acquisitions through the full year.
In addition to investing in acquisitions, we have returned $622 million to our shareholders through dividends and share repurchases.
We continue to prioritize customer zeal to drive profitable growth.
This includes increasing customer loyalty, driving willingness to pay and attracting new volume as the provider of choice.
Our customer retention rate remains at a record-setting level of 95%.
During the third quarter, we delivered outsized revenue growth throughout our business.
Total core price remained at an all-time high of 5.2%, and average yield increased to 3.2%.
Volume increased 4.3% compared to the prior year, which exceeded our expectations.
And acquisitions contributed an incremental 350 basis points to total revenue growth.
The outlook for organic and acquisition growth for the remainder of the year is strong.
We continue to realize the benefits of our investments in technology.
In the third quarter, we made meaningful progress on the rollout of the next phase of our RISE platform.
We have now implemented tablets in approximately 70% of our large and small container fleet.
We expect to be substantially complete by the end of this year with plans to further deploy to the residential fleet beginning in 2022.
Next, turning to our sustainability platform.
We continue to partner with developers to capitalize on landfill gas to energy opportunities.
We currently have 17 projects in the pipeline with more opportunities thereafter.
On top of the royalty revenue, these plants will generate a majority of equity investment opportunities to further participate in the project economics.
We also recently opened a solar project on one of our closed landfills in Belleville, Illinois.
This project consists of 30,000 solar panels and will produce enough energy to power 2,200 homes annually.
We remain committed to increasing the recycling and circularity of key materials as part of our ambitious 2030 sustainability goal.
We recently opened the first solar-powered compost facility in California to further our progress and address the growing community needs.
This facility will provide critical organic processing capabilities to residents and businesses in the greater San Diego area.
Our strong financial and operational results will not have been possible without our dedicated Republic employees.
We continue to invest in developing both existing and new talent and creating innovative solutions for the increased demand for skilled workers.
We recently unveiled our Republic Services Technical Institute, which is the industry's first ever diesel technician school.
This subsidized program is already building a strong pipeline of high demand technician talent for Republic.
Additionally, graduates will have upskilling opportunities to further grow their career with Republic.
These types of innovative investments in talent lead to external recognition for our company.
Republic was recently certified as a great place to work for the fifth consecutive year.
This is a meaningful achievement as employee recruiting and retention remains a prominent focus in today's labor market.
Finally, turning to our outlook for the remainder of the year.
Given the continued strength in our business, we now expect to exceed the full year guidance we upwardly revised last quarter.
Accordingly, we are increasing 2021 full year financial guidance as follows: adjusted earnings per share is now expected to be in the range of $4.10 to $4.13; and adjusted free cash flow is now expected to be in the range of $1.475 billion to $1.5 billion.
Core price during the third quarter was 5.2%, which included open market pricing of 6.5% and restricted pricing of 2.9%.
The components of core price included small container of 8.2%, large container of 5% and residential of 5%.
Average yield was 3.2%, which increased 60 basis points from the second quarter.
Third quarter volume increased 4.3%.
The components of volume included an increase in small container of 5.4%, an increase in large container of 3.9% and an increase in landfill of 6.6%.
For reference, small container and MSW volumes in the third quarter were both above a 2019 pre-pandemic baseline.
Moving on to recycling.
Commodity prices increased to $230 per ton in the third quarter.
This compares to $99 per ton in the prior year.
Recycling processing and commodity sales contributed 160 basis points to internal growth during the third quarter.
Next, turning to our environmental solutions business.
Third quarter Environmental Solutions revenue increased $27 million from the prior year.
This was driven by both organic growth from increased activity and the contribution from acquisitions.
On a same-store basis, environmental solutions contributed 20 basis points to internal growth during the third quarter.
Adjusted EBITDA margin for the third quarter was 30.4%, and increased 10 basis points over the prior year.
This included a 90 basis point increase from recycled commodity prices, a 50 basis point headwind from net fuel and a 30 basis point headwind from the impact of recent acquisitions, primarily driven by deal and integration costs.
SG&A was 10.2% of revenue.
This represents an increase of 20 basis points over the prior year, which was exclusively due to higher incentive compensation accruals.
Year-to-date adjusted free cash flow was $1.4 billion and increased $247 million or 22% compared to the prior year.
This was primarily driven by EBITDA growth in the business.
With respect to our full year cash flow guidance, we expect to spend a disproportionate amount of our full year capex and cash taxes during the fourth quarter.
It should also be noted that we increased our expected full year capital spending in our upwardly revised guidance by over $50 million.
This increase relates to capital to support growth opportunities.
Free cash flow conversion through September continued to track ahead of our original expectations and increased 330 basis points over the prior year.
During the quarter, total debt was $9.3 billion, and total liquidity was $2.4 billion.
Interest expense decreased $11 million due to refinancing activities completed last year, and our leverage ratio was 2.8 times.
With respect to taxes, our third quarter adjusted effective tax rate was 25.5%.
We had an equivalent tax impact of 27% when you include noncash charges from solar investments.
We expect our fourth quarter equivalent tax impact to be approximately 25%.
This includes the effective tax rate and noncash solar charges.
We continue to create value for our stakeholders by executing our strategic priorities, which drives profitable growth and increases returns.
We are expecting the positive momentum in our business to continue to produce profitable growth in 2022.
At this point, we anticipate producing above-average revenue growth, leading to high single-digit adjusted free cash flow growth compared to our full year 2021 performance.
As usual, we will provide full year detailed 2022 guidance on our fourth quarter earnings call.
With that, operator, I would like to open the call to questions.
 Assistant:

Chosen response:
q3 adjusted non-gaap earnings per share $1.11.
sees fy adjusted earnings per share $4.10 to $4.13.
raised 2021 full-year financial guidance.
qtrly revenue $2,933.9 million versus $2,572.1 million.


Prompt:
Human: We are very pleased with our third quarter results, which once again demonstrates the strength of Reliance's resilient business model.
Our diverse product mix and end-market exposures, along with our decentralized operating structure, enabled us to quickly respond to varying fluid market conditions.
Our gross profit margin expanded 200 basis points from the prior quarter to a record 32.4%, significantly exceeding our estimated sustainable range of 28% to 30% on net sales of $2.09 billion.
Our increased gross profit margin, combined with diligent expense control, increased our non-GAAP earnings per diluted share to $1.80, a 37.5% increase from the prior quarter, and generated strong cash flow from operations of $296.3 million.
Even more importantly, we would once again like to express our gratitude to all of our outstanding folks for their hard work and perseverance through one of the most challenging time in our company's history.
Our people are truly the key ingredient of the secret sauce of Reliance, and we would not be where we are today without their unwavering commitment and support.
Our managers maintain their focus on the employee health and safety, including adherence to strict procedures to prevent the spread of COVID-19 and improve our safety performance on a year-to-date basis compared to the same period in 2019.
We continue to support our employees and their families as well as our customers, suppliers and communities in a safe, positive, sustainable manner.
Getting back to our third quarter financial results.
Our shipments surpassed our expectations, increasing 5.9% over the prior quarter despite typical third quarter normal seasonal customer shutdowns and vacation schedules.
Improved demand in the major in the majority our end markets as the economy continued to slowly reopen following COVID-19-related shutdowns and project delays in the second quarter of 2020 drove this strength.
In addition, our toll processing volumes increased materially compared to the second quarter levels as automotive production continued to ramp up.
As a reminder, since we do not take ownership of the metal, our toll processing volumes are not reflected in our tons sold metric.
Metal pricing began to improve in the third quarter as mill price increases from many of the products we sell were implemented, with announcements for further price increases continuing into the fourth quarter.
Despite these mill price increases, our average selling price per ton sold in the third quarter was down 4.3% compared to the second quarter, primarily as a result of product mix changes that Karla will discuss in more detail.
The 200 basis points improvement in our gross profit margin to a record 32.4% was the major highlight of our third quarter financial performance, which drove a 40.6% increase in our non-GAAP pre-tax income over the prior quarter.
The primary contributor to our record gross profit margin was a significant rebound in our tolling businesses that service the automotive market, which generally operate at higher gross profit margins than our companywide average.
In addition, shifts in our diverse product mix, along with our ability to implement price increases at the time of mill announcements, collectively drove incremental increases in our third quarter gross profit margin.
While we expect that the impact of certain of these factors will be temporary, we believe our managers will continue to successfully leverage the significant investments we have made to expand our value-added processing capabilities to support a sustainable higher gross profit margin.
In regard to conditions in our key end markets.
Demand in nonresidential construction, the largest market we serve, continue to slowly increase during the third quarter due to healthy bidding activity for new projects and the restart of projects that had previously been put on hold.
Quoting activity remains strong for projects related to transmission towers and military, schools and municipalities as well as large warehouses, data processing centers and assisted living facilities.
We have also seen an increase in certain infrastructure projects, such as roads and highways and water treatment plants.
As such, we remain cautiously optimistic that demand for nonresidential construction activity will continue to improve through the end of the year based on healthy backlogs and positive customer sentiment.
Demand for the toll processing services we provide to the automotive market rebounded significantly in the third quarter as automotive OEMs and steel and aluminum mills continued to ramp up production following COVID-19 shutdowns in the second quarter.
We simultaneously increased our processing volumes at our toll processing operations in both the U.S. and Mexico to support increased activities, and we were pleased to be able to recall the majority of our furloughed employees to our tolling operations.
We remain committed to expanding our presence in toll processing in response to ongoing solid demand trends.
Earlier this month, we commenced operations at a new facility in Kentucky.
We will also soon break ground on a new greenfield tolling facility in Texas.
These new facilities expand our carbon steel tolling capacity and will position us to better service our toll processing customers, primarily metals producers and their end users in the Ohio Valley and the Eastern United States as well as in the Southwestern U.S. and Mexico.
Needless to say, our outlook for our tolling operations remains positive.
Demand in heavy industry for both agriculture and construction equipment remained generally consistent with the second quarter.
Production schedules in some areas have begun to increase, and we remain cautiously optimistic our businesses servicing the large industrial market should improve from current levels through the remainder of the year.
Semiconductor demand steadily improved from the second quarter of 2020, and the market continues to be strong.
Leading indicators for semiconductor space currently points to a more positive development in the fourth quarter and early 2021, and we believe we are very well positioned to participate in any improvement.
I'd like to start by noting that our aerospace businesses service diverse segments.
Commercial aerospace represents about half of our aerospace exposure.
In the third quarter, commercial aerospace demand continued to decline as reductions in travel due to COVID-19 persisted.
In response to reduced commercial airline build rates that we expect to continue at low levels in the near term, we recorded impairment and restructuring charges related to facility closures, workforce reductions and a negative outlook at certain of our businesses servicing the commercial aerospace market.
Conversely, demand remains strong in the military, defense and space portions of our aerospace business, which represents the other half of our aerospace exposure.
We continue to see opportunities to expand our participation in defense, which will help offset some of the weakness on the commercial side.
We will continue to monitor and assess the health of each of our aerospace businesses and take appropriate cost-reduction actions, if and when needed, to ensure the continued long-term profitability of these businesses.
Finally, demand in the energy sector, which is mainly oil and natural gas, remains under significant pressure.
As I highlighted on our last call, we have taken proactive cost reduction measures throughout 2020, including the consolidation of certain facilities and head count reduction.
As a result, we believe we are well positioned to maintain our presence as a dominant player in the energy spaces and support any further recovery in that market.
One bright spot, in particular, is the renewable energy space in which we sell a significant amount of metal for solar and wind power projects.
Turning to capital allocation.
Our countercyclical cash flow generation enables us to remain flexible and opportunistic as we allocate capital for both growth and stockholder return opportunities in both good times and bad.
Our capital expenditure budget for 2020 is weighted toward growth activities that supports our customers through the addition of innovative equipment and advanced technology to further expand and strengthen our value-added processing capabilities.
We have increased our 2020 capital expenditure budget by $80 million to a total of $270 million in response to opportunities to better service our customers, including the toll processing expansion in Texas and to maintain and upgrade our equipment to provide our customers with the highest-quality products and services.
On the M&A front, we continue to see a healthy pipeline of prospective opportunities.
As always, we evaluate potential candidates using stringent criteria to ensure the best possible fit within our family of companies.
We continue to seek well-run profitable businesses that possess strong management teams and superior levels of customer service with a focus on safety.
Acquisitions must also complement our product and end-market diversification strategy and be immediately accretive to our earnings.
In regard to stockholder returns, we are pleased to maintain our payment of a regularly quarterly dividend, as we have for 61 consecutive years, without ever suspending payment or reducing our dividend rate.
We've increased our dividend 27 times since our 1994 IPO, including the most recent increase of 13.6% in the first quarter of 2020.
We also repurchased a small amount of our common stock during the third quarter of 2020.
Another key highlight during the quarter was our diligent inventory management.
We continue to rightsize our inventory to reflect current demand levels through reduced buying as well as cross-selling inventory within our expansive network of service centers.
And we are pleased to have achieved our companywide goal of 4.7 inventory turns during the third quarter.
In summary, we are very proud to have improved our financial results amid the unprecedented global uncertainty that continues to materially impact the economy.
Our decentralized structure afforded us the flexibility to immediately respond to rapidly changing demand trends and help preserve our long-term profitability.
It is through their efforts that the unique aspects of our business model were able to really shine through, enabling us to achieve significant gross profit margin expansion to a record 32.4%.
The consistent execution our -- of our resilient business model is a testament to, not only the diversity of our products, end markets and geographies, but also our commitment to: strong pricing discipline; diligent expense control, when needed; inventory management and leveraging our investments in organic growth and innovation.
We believe customers realize increased value in our model during challenging markets as they confidently rely on us to do more for them, often in smaller sizes or on a more frequent basis.
As Reliance continues to evolve as a leading diversified metal solution provider, we will leverage both the knowledge we have acquired while navigating the pandemic and our commitment to continuous improvement and innovation to provide enhanced solutions to our customers and drive stockholder value through increased efficiencies and profitability.
America is going to need Reliance to rebuild.
Our net sales of $2.09 billion for the third quarter of 2020 decreased 22.4% from the third quarter of 2019, with our tons sold down 13.1% and our average selling price down 11%.
Compared to the second quarter of 2020, net sales increased 3.3%, with our tons sold up 5.9% and our average selling price per ton sold down 4.3%.
Our tons sold exceeded our expectations of flat to up 2% from the prior quarter as demand in many of our end markets improved, with the most notable strength in nonresidential construction.
Although not included in our tons sold metric, the significant rebound in our toll processing operations contributed meaningfully to our increased sales, with toll processing volumes up 81.5% from the lows experienced in the second quarter of 2020.
And our average selling price per ton sold declined 4.3% compared to the second quarter.
Our lower average selling price in the third quarter was mainly due to shifts in our product mix rather than overall metal pricing trends.
The most significant shift was a 14.9% decrease in our aerospace tons sold in the third quarter, the majority of which was heat-treated aluminum and titanium products, which represent some of the higher-priced products we sell.
Meanwhile, our shipments of flat-rolled carbon steel, which are among our lowest-priced products, increased as a percent of our total shipments, which also reduced our average selling price.
And lastly, our alloy sales now represent a lower portion of our total tons shipped due to the closure of certain of our energy businesses.
Our gross profit margin for the third quarter of 2020 was a record at 32.4% and well above our estimated sustainable range of 28% to 30%.
This ties our record gross profit margin set in the fourth quarter of 2019 when we recorded LIFO income of $81 million compared to LIFO income of $12.5 million in the current quarter.
On a non-GAAP FIFO basis, which we believe is the best measure of our day-to-day operations, our gross profit margin of 31.8% increased 300 basis points from 28.8% in the third quarter of 2019 and increased 160 basis points from 30.2% in the second quarter of 2020.
As Jim highlighted, this is a direct result of the outstanding performance by our managers in the field who, despite challenging circumstances, maintained pricing discipline by focusing on higher-margin orders and providing more value to our customers through our expanded value-added processing capabilities.
And these actions are the key drivers behind our ability to increase and sustain our strong gross profit margin.
During the third quarter, certain other factors contributed to our increased gross profit margin, the impacts of which we believe may be more temporary.
First, a significant rebound in our toll processing volumes drove a meaningful increase in our gross profit margin as our tolling businesses operate at higher margins than our companywide average.
Second, changes in our product mix contributed as our lower-margin contractual commercial aerospace sales declined, while shipments of lower-priced carbon flat-rolled products increased.
Given a lower average overall selling price, value-added charges are a larger component of our sales, which has a positive impact on our gross profit margin.
And third, we were able to enhance our gross profit margin for certain of our carbon steel products as mills announced price increases late in the third quarter.
We recorded LIFO income of $12.5 million or $0.15 of earnings per diluted share in the third quarter of 2020 compared to LIFO income of $40 million or $0.44 of earnings per share in the third quarter of 2019 and LIFO income of $5 million or $0.06 of earnings per share in the second quarter of 2020.
And given our current estimate of $50 million of annual LIFO income in 2020, we expect to record $12.5 million of LIFO income in the fourth quarter of 2020.
As a reminder, we will true-up to our actual LIFO adjustment at December 31.
And our LIFO reserve was $100.1 million at September 30.
Our third quarter non-GAAP SG&A expenses decreased $75.2 million or 14.5% compared to the third quarter of 2019 on a 13.1% reduction in shipments.
The decline in SG&A expense was mainly due to reduced variable expenses, such as plant supplies and freight costs, along with lower average head count, which was down 13.8%; as well as lower performance-based compensation.
When compared to the second quarter of 2020, our non-GAAP SG&A expenses increased only 2.6% on a 5.9% increase in our tons shipped, demonstrating the efficiencies gained through our state-of-the-art processing equipment along with our continuous improvement and innovation initiative.
During the third quarter of 2020, we recorded impairment and restructuring charges of $14.6 million as we continued to close or merge a few of our smaller locations and wrote off certain intangibles due to our outlook for a more challenging environment in certain markets.
We recorded an additional $14.6 million in nonrecurring charges, comprised of settlement charges related to the termination of multiple small, frozen, defined benefit plans and settlement of an obligation in our SERP plan.
We also recorded $1.8 million in debt restructuring charges related to our financing activities in the quarter for total nonrecurring charges of $31 million in the third quarter of 2020.
We remain solidly profitable in the third quarter of 2020, with non-GAAP pre-tax income of $158 million and a non-GAAP pre-tax margin of 7.6%.
Our effective income tax rate for the third quarter was 22.6%, down from 25% in the third quarter of 2019 and up from 20.9% in the second quarter of 2020.
Our lower tax rate was driven by reduced income levels in 2020 attributable to the impacts of COVID-19.
And at this time, we estimate our effective tax rate for the full year of 2020 will be approximately 22.5%.
Non-GAAP net income attributable to Reliance for the third quarter of 2020 was $120.9 million, resulting non-GAAP earnings per diluted share of $1.87, down from $2.39 in the third quarter of 2019 and mainly due to lower pricing, demand levels; and up from $1.36 in the second quarter of 2020 due to our strong gross profit margin and recovering demand.
On a GAAP basis, our earnings per diluted share were $1.51 in the third quarter 2020.
Turning to our balance sheet cash flow.
We generated strong cash flow of -- from operations of $296.3 million during the third quarter and $942.8 million during the first nine months of 2020 due to our continued profitable operations and effective working capital management, including a continued focus on rightsizing our inventory levels, which resulted in achieving our inventory turn goal of 4.7 times.
During the quarter, we issued $400 million of 1.3% 5-year senior notes and $500 million of 2.15% 10-year senior notes through a public offering.
We used a portion of the proceeds to repay all of our outstanding indebtedness under our unsecured revolving credit facility and term loan, and we'll utilize the remaining proceeds for general corporate purposes.
Additionally, in early September, we entered into an amended and restated $1.5 billion five year unsecured revolving credit facility that replaced our previous credit agreement and includes an increase option for up to an additional $1 billion.
The facility amendment, combined with the proceeds from the notes offering, have significantly enhanced our liquidity position and extended our debt maturity profile.
At September 30, 2020, our total debt outstanding was $1.66 billion, resulting in a net-debt-to-total-capital ratio of 17.3%.
Our net debt-to-EBITDA multiple was 1.1 times.
And as of the end of the third quarter, no borrowings were outstanding on our $1.5 billion revolving credit facility.
In regard to capital allocation, our increased 2020 capital expenditure budget of $270 million includes additional strategic investments to address our customers' needs and drive organic growth.
We will continue to pay our regular quarterly dividend and selectively execute attractive acquisition and share repurchase opportunities.
In the third quarter of 2020, we invested $38.2 million in capital expenditures and returned $41.2 million to our stockholders through dividends and share repurchases.
Turning to our outlook.
While macroeconomic uncertainty stemming from the COVID-19 pandemic continues, based on current expectations and market conditions, we anticipate that overall demand will continue to slowly improve in the fourth quarter of 2020.
We expect shipping volumes will decline in the fourth quarter due to normal seasonal factors, including customer holiday-related shutdowns and fewer shipping days in the fourth quarter compared to the third quarter.
But we believe the impact of seasonal factors in the fourth quarter may be less significant than in prior years.
As a result, we estimate our tons sold will be down 4% to 6% in the fourth quarter of 2020 compared to the third quarter of 2020.
We anticipate metals pricing, primarily for carbon steel products, will improve due to mill price increases.
However, similar to the drivers behind our average selling price decline in the third quarter, we believe the impact of these price increases will be partially offset by our diverse product mix and declining sales in certain markets, such as aerospace, which typically involves higher-priced products.
As a result, we expect our average selling price in the fourth quarter of 2020 will be flat to up 2% compared to the third quarter of 2020.
Based on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $1.30 to $1.40 for the fourth quarter of 2020.
Looking ahead, we will continue to execute our business model and remain focused on managing the elements of our business that are within our control.
In closing, we are very pleased with our third quarter results amid the broader macroeconomic uncertainty the pandemic has caused.
Our managers in the field delivered excellent execution as demand began to slowly recover throughout the quarter, maintaining their strategic focus on high levels of customer service and value-added processing.
This, combined with our emphasis on expense control and our ability to respond quickly to market conditions, resulted in yet another quarter of solid profitability and cash flow, enabling us to support our growth and stockholder return priorities.
We believe our people, along with our proven business model, are the keys to the strength and resiliency of our business.
We look forward to improved conditions in the quarters ahead as we work with our employees, customers, suppliers and communities to mitigate the ongoing impact of COVID-19.
 Assistant:

Chosen response:
sees q4 2020 non-gaap earnings per share $1.30 to $1.40.
q3 non-gaap earnings per share $1.87.
q3 earnings per share $1.51.
qtrly tons sold 1.3 million, down 13.1%.
qtrly average selling price per ton sold $1,609, down 11%.
anticipates overall demand to continue its slow improvement in q4 of 2020.
estimates that tons sold will be down 4% to 6% in q4 of 2020 compared to prior quarter.
estimates its average selling price per ton sold for q4 will be flat to up 2% versus q3.
believes remaining businesses servicing energy sector are well positioned to support any future recovery in this market.
qtrly net sales $2,085.6 million, down 22.4%.
cautiously optimistic demand for non-residential construction activity will continue to improve in q4 2020.


Prompt:
Human: Despite the extraordinary challenges 2020 presented on a global scale, we are extremely pleased with the strong execution of our team -- that our team has shown, not only in the field, but by all of the employees within the family of companies, who demonstrated the true resiliency of the Reliance business model.
I applaud each and every one of you for your tremendous efforts to quickly and nimbly adapt to the changing environments, ensure our customers were always taken care of, and most importantly, maintain your unwavering commitment to health and safety, our most important core value.
Since 2017, our SMART Safety program has been focused on embedding our culture of safety across our entire family of companies.
Working together as one company, we focused on this initiative in 2020 like never before in response to the new and unique challenges presented by the COVID-19 pandemic.
In addition to developing new policies and procedures to prevent the spread of the virus, we improved our safety performance in 2020 with an approximately 23% reduction in our incident rate compared to 2019.
While this is a significant milestone, as I've stated in the past, we will not be satisfied until this rate reaches 0.
I'd like to take a moment to congratulate both Karla Lewis and Arthur Ajemyan for the recently announced well-deserved promotions.
Consistent with our Board's strategic executive leadership succession plan, Karla was promoted from CFO to President and was simultaneously appointed to our Board of Directors effective January 15.
Karla has demonstrated excellent judgment and leadership in each role she has held since joining Reliance in 1992, and her unique abilities and talents have earned the respect of our employees and shareholders.
Karla's promotion recognizes her significant contributions to Reliance.
It will allow her to broaden her knowledge of Reliance's field operations and increase the diversity of her experience.
In addition, Arthur Ajemyan was promoted to Vice President and Chief Financial Officer effective January 15.
Arthur has held various positions in Reliance's finance and accounting department for over 15 years and has done a phenomenal job.
I congratulate both Karla and Arthur on their promotions and look forward to continuing to work closely with them in their new roles.
Now let's turn to our 2020 results.
We delivered a solid financial performance in 2020, driven by consistently strong operational execution despite considerable turbulence in the market.
Our results demonstrate the strength and resiliency of our people and unique business model as well as our ability to execute through both good times and bad given the diversity of our products, end markets and geographies.
Our decentralized structure allowed us to respond rapidly to fluid market conditions and demand trends.
These factors, combined with pricing discipline and continuous improvements to our value-added processing capabilities, enabled us to achieve our second consecutive year of record annual gross profit margins at 31.5%, up 120 basis points from 2019 and exceeding our estimated sustainable range of 28% to 30%.
We also maintained healthy profitability levels despite the extraordinarily volatile and challenging market conditions.
For the full year, we generated non-GAAP earnings per share of $7.71 as a result of the combination of strong margin discipline and effective expense control, which helped mitigate our decline in profitability.
On the heels of a record year in 2019, we maintained strong cash flow from operations of $1.17 billion in 2020 driven by our profitability and focus on working capital management.
Fueled by our ongoing focus on rightsizing our inventory to reflect current demand levels and our differentiating advantage of cross-selling inventory among our family of companies, we achieved our companywide inventory turn goal of 4.7 times based on tons for 2020.
In line with historical trends and the cornerstone of our business model, a significant portion of our metal we purchase is from domestic suppliers.
And it is paramount that we continue to support our mill partners who, in turn, have consistently been there for Reliance during challenging times.
Our countercyclical cash flow generation allows us to remain flexible and opportunistic in executing our growth initiatives while concurrently returning value to our stockholders.
We invested $172 million in our business through capital expenditures in 2020, including many growth opportunities such as our recent toll processing expansion in Texas and Kentucky.
Today, we are introducing our 2021 capital expenditure budget of $245 million that includes new buildings and other projects to expand, upgrade and maintain many of our operating facilities.
We are installing energy-efficient lighting and solar panels in certain of our facilities.
Our 2021 budget also includes innovative new processing equipment to provide our customers with the highest-quality products and services.
Although COVID-19 has slowed the pace of acquisitions activity in general, we continue to see a healthy pipeline of potential candidates as we've begun to broaden our view on the universe of prospective growth opportunities.
As always, we evaluate opportunities based on a strict set of criteria to ensure a strong fit within the family of companies.
Now turning to stockholder returns.
In 2020, we repurchased $337.3 million worth of our common stock at an average cost of $91.80 per share and paid $164.1 million in dividends to our shareholders.
We've maintained our payment of regularly quarterly dividends for 61 consecutive years without ever suspending payment or reducing our dividend rate.
In addition, we've increased our dividend 28 times since our 1994 IPO, including the most recent increase of 10% for the first quarter of 2021.
Looking forward into the remainder of 2021.
Reliance will continue to execute and improve upon our tried-and-true model that has led us to industry-leading results for many decades.
Over the past year, we've adapted to operate more efficiently than ever before without sacrificing our competitive edge and the critical elements of our business that make Reliance a trusted and reliable business partner.
We will maintain our focus on opportunities to enhance our products, end markets and geographical diversification, along with our ongoing commitment to strong pricing discipline, diligent expense control, when-needed inventory management, organic growth and innovation.
As was evident throughout the past year, our customers rely on Reliance to continue to support them through trying times, often in greater capacity and on a more frequent basis.
As I continue to say, and I will say again, America is going to need Reliance to rebuild.
As an essential business, we were able to continue operating throughout the pandemic, with our 2020 tons sold decreasing only 10.8% compared to 2019.
Our average selling price was down 9.6% in 2020 compared to 2019 due to declining mill prices for most of the products we sell during the first nine months of the year.
Despite these negative trends, we achieved record gross profit margin in 2020.
In the fourth quarter of 2020, healthy demand conditions in the majority of our end markets resulted in our tons sold declining only 1.3% compared to the prior quarter.
This was the lowest Q4 seasonal decline we've experienced in the last 10 years and exceeded our guidance by a significant margin.
Despite customer holiday-related closures and less shipping days typical of the fourth quarter, we experienced solid demand trends throughout the fourth quarter as the economy continued to regain momentum.
Supported by solid demand and rising input costs, metal pricing improved as mill price increases for many of the products we sell accelerated throughout the fourth quarter with prices for certain carbon steel products almost doubling, which led to our average selling price increasing 4.6% compared to the third quarter of 2020, again, exceeding our expectations.
The favorable demand and pricing conditions in the fourth quarter contributed to our record gross profit margin of 33%, a 60 basis point improvement from the third quarter of 2020.
And on a non-GAAP FIFO basis, which we believe is the best measure of our day-to-day operating performance, our gross profit margin of 33.6% increased 180 basis points from 31.8% in the third quarter of 2020.
Our record gross profit margin reflects the outstanding performance by our managers in the field who effectively implemented price increases at the time of mill announcement prior to receiving the higher-cost metal into inventory, pushing our gross profit margin above already strong levels, resulting from our focus on higher-margin orders.
While we are very pleased with our record Q4 and full year gross profit margin, we continue to believe our estimated sustainable gross profit margin range of 28% to 30% is appropriate as we navigate the ongoing COVID-19 pandemic and operate through this uncertain environment.
That said, maintaining our strong gross profit margin remains a cornerstone of our business model.
We believe our managers will continue to successfully leverage the significant investments we have made to expand and improve our value-added processing capabilities.
In fact, one of the key factors contributing to our record gross profit margin for the full year was our value-added processing capabilities, which have increased in recent years as a result of our significant investments in state-of-the-art equipment.
While the percentage of orders with value-added processing declined to approximately 49% from 51% in 2019 due to changes in product mix caused by the pandemic, process orders continue to serve as a stabilizer to our margins in challenging markets with declining demand and pricing trends.
I'll now turn to a high-level overview of the conditions in our key end markets.
Demand in nonresidential construction, the largest market we serve, remained relatively steady during the fourth quarter due to ongoing healthy bidding activity for new projects and the restart of projects that had been put on hold earlier in the year.
We've been seeing quoting activity in the areas you might expect such as infrastructure projects, schools, utilities, water and power, strip malls and data and distribution centers.
Demand for the toll processing services we provide to the automotive market was strong, with activity back to pre-pandemic levels in the fourth quarter as automotive OEMs and steel and aluminum mills continued to ramp production as a result of reopenings following COVID-19 shutdowns in the second quarter of 2020.
We commenced operations at our new facility in Kentucky in late November and also recently broke ground on a new greenfield tolling facility in Texas, with both focused on carbon steel tolling to support increased capacity of our toll processing customers, who are primarily metal producers and their end users.
Demand in heavy industry for both agricultural and construction equipment rebounded to solid levels in the fourth quarter as production schedules continued to ramp following customer reopenings from COVID-19-related shutdowns and to meet equipment dealer restocking needs.
Semiconductor demand steadily improved from the third quarter of 2020, and the market continues to be one of our strongest.
Demand in commercial aerospace further declined in the fourth quarter as a direct result of reduced air travel due to COVID-19, which has reduced airplane build rates.
We believe the fourth quarter represented the trough.
That said, demand in the military, defense and space portions of our aerospace business remained stable at solid levels throughout the fourth quarter.
Finally, demand in the energy sector, which is mainly oil and natural gas, remained under pressure in the fourth quarter of 2020.
And throughout 2020, we took prudent cost-reduction measures, including the closure of certain facilities, which helped strengthen our overall efficiency and position us to support a recovery in this market.
We are optimistic on both demand and pricing trends in the first quarter of 2021 as we have experienced strength in both so far in the first quarter.
And Arthur will now review our financial results.
I'll start with our sales discussion.
Fourth quarter 2020 sales were down 12.8% from the prior year period as our markets continued to recover following the reopening of the economy.
Approximately half of the decline in our sales can be attributed to our businesses supporting the commercial aerospace and energy end markets, as evidenced by the disproportionately higher declines in our sales of aluminum and alloy products.
For the full year of 2020, sales were down 19.7% from 2019.
Approximately half of the decline in sales was due to lower shipping volumes across all major end markets we sell to, and the remaining half was due to lower average selling prices.
However, both recovering demand and pricing from the reopening of the economy in the third and fourth quarters of 2020 helped to mitigate the annual decline in our sales.
As Jim and Karla highlighted, we generated a record quarterly gross profit margin of 33% in the fourth quarter of 2020, up 60 basis points from both Q3 2020 and Q4 2019 and a record gross profit margin of 31.5% for the full year of 2020, up 120 basis points from our previous annual record of 30.3% in 2019.
Our non-GAAP FIFO gross profit margin in the fourth quarter of 2020 was up 450 basis points from Q4 2019, and for the full year of 2020 was up to 280 basis points from 2019.
We incurred LIFO expense of $15.5 million in the fourth quarter of 2020 due to rapidly increasing mill costs for most of our products.
However, for the full year of 2020, we still recognized LIFO income of $22 million as our cost of inventory on hand at the end of the year was still below the levels at the beginning of the year.
This compares to LIFO income in the fourth quarter and full year of 2019 of $81 million and $156 million, respectively.
We ended 2020 with a LIFO reserve of $115.6 million on our balance sheet.
Based on current market conditions, we expect to incur an annual LIFO expense of $340 million in 2021.
Consistent with our accounting policy, we allocate our annual estimate on a pro rata basis in each quarter.
As such, our current projected Q1 2021 LIFO expense is $85 million.
As in prior years, we will update our expectations each quarter based upon our inventory cost and metal pricing trends.
Our fourth quarter non-GAAP SG&A expenses decreased $51 million or 9.9% compared to the fourth quarter of 2019 on a 7.9% reduction in shipments.
For the full year, same-store SG&A expenses declined $241 million or 11.5% on a 10.8% reduction in shipments.
The decline in SG&A expenses was due to reduced spend across every major expense category.
As you've heard us say before, approximately 60% to 65% of our SG&A expenses are people related.
When looking at the 11.5% year-over-year decline in same-store SG&A expenses, approximately half of the decrease was people-related as our headcount declined 14% compared to the prior year.
In addition, lower incentive pay due to lower gross profit and pre-tax income levels also contributed to the decline in our compensation costs.
Although we are entering the first quarter of 2021 with a more efficient expense structure because of strong volume and pricing trends, we expect our expenses will increase in the first quarter of 2021 from the fourth quarter of 2020, consistent with seasonal trends.
I will address our Q1 2021 outlook for demand and pricing shortly.
For the full year of 2020, our effective income tax rate declined to 22.1% from 24% in 2019 mainly due to our lower pre-tax income level in 2020.
We currently anticipate our full year 2021 effective income tax rate will be 24%.
Our strong gross profit margin and effective expense management resulted in $2.01 of earnings per diluted share in the fourth quarter of 2020, well above our outlook of $1.30 to $1.40 per diluted share but down 17.6% from $2.44 in the fourth quarter of 2019 mainly due to reduced demand levels related to the pandemic, with commercial aerospace and energy end market sales being significant contributors to the decline in our sales.
In comparison to the third quarter of 2020, fourth quarter non-GAAP earnings per diluted share of $2.01 was up 7.5% from $1.87 due to improved pricing, strong gross profit margin and recovering demand in most end markets.
Turning to our balance sheet and cash flow.
We generated strong cash flow from operations of $230.2 million during the fourth quarter due to our profitable operations and effective working capital management, including our focus on rightsizing our inventory levels.
At the end of the year, our total debt outstanding was $1.66 billion, resulting in net debt-to-EBITDA multiple of 1.1 times.
Also at the end of the year, no borrowings were outstanding on our $1.5 billion revolving credit facility.
As mentioned last quarter, we significantly strengthened our liquidity position through the successful completion of both our $900 million senior notes offering and amended/restated $1.5 billion five-year unsecured revolving credit facility.
The facility amendment, combined with the proceeds from the notes offering, provides us with ample liquidity and an improved debt maturity profile.
I'll now turn to our outlook.
While macroeconomic uncertainty stemming from the COVID-19 pandemic continues, favorable market conditions have persisted so far into the first quarter of 2021, with improving demand and additional mill price increases on many carbon and stainless steel products.
This environment allows us to maintain higher gross profit margin levels as we increase our selling price prior to receiving the higher-cost metal in our inventory.
We expect these favorable conditions to continue for the remainder of the first quarter.
As a result of these favorable conditions and the normal seasonal improvement, we estimate our tons sold will be up 10% to 12% in the first quarter of 2021 compared to the fourth quarter of 2020.
We also expect our average selling price in the first quarter of 2021 will be up 12% to 14% compared to the fourth quarter of 2020.
Based on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $3.40 to $3.50 for the first quarter of 2021.
In closing, we are very pleased with our fourth quarter 2020 financial and operational results.
Outstanding execution by all of our employees greatly contributed to our success in 2020.
Their efforts, coupled with our resilient business model and disciplined execution of our strategy, resulted in yet another quarter of solid profitability and cash flow, enabling us to continue supporting our growth and stockholder return priorities.
 Assistant:

Chosen response:
reliance steel & aluminum q4 earnings per share $2.01.
q4 non-gaap earnings per share $2.01.
qtrly average selling price per ton sold $1,683 up 4.6% versus q3.
sees q1 non-gaap earnings per share $3.40 to $3.50.
qtrly diluted earnings per share $2.01.
experienced ongoing improvements in demand in nearly all of end markets it serves in quarter.
cautiously optimistic demand for non-residential construction activity in co's space will continue at q4 levels in q1.
maintains its positive outlook for aerospace defense market.
cautiously optimistic that demand in commercial aerospace may begin to slowly recover in latter half of 2021.
demand in energy market remained under pressure in q4 with modest improvement expected in q1.
estimates that tons sold will be up 10% to 12% in q1 of 2021 compared to q4 of 2020.
estimates its average selling price per ton sold for q1 of 2021 will be up 12% to 14% compared to q4 of 2020.