Reliance Steel & Aluminum : Co. Reports Third Quarter Results
10/27/2011| 08:55am US/Eastern
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Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial
results for the third quarter and nine months ended September 30, 2011.
For the 2011 third quarter, Reliance reported net income of $84.9
million, up 74% from the 2010 third quarter net income of $48.7 million,
and down 14% from $98.7 million in the 2011 second quarter. Earnings per
diluted share were $1.13 in the 2011 third quarter, up 74% from the 2010
third quarter earnings per diluted share of $.65, and down 14% from
$1.31 in the 2011 second quarter. Sales for the 2011 third quarter were
$2.14 billion, up 29% from 2010 third quarter sales of $1.65 billion,
and up 4% from 2011 second quarter sales of $2.05 billion. The 2011
third quarter financial results include in cost of sales a pre-tax LIFO
charge, or expense, of $22.5 million, compared with a pre-tax LIFO
charge of $9.75 million for the 2010 third quarter, and a charge of
$25.0 million for the 2011 second quarter.
For the nine months ended September 30, 2011, net income amounted to
$275.9 million, up 78% compared with net income of $154.9 million for
the 2010 nine-month period. Earnings per diluted share were $3.68 for
the nine months ended September 30, 2011, up 77% compared with earnings
of $2.08 per diluted share for the nine months ended September 30, 2010.
Sales for the 2011 nine months were $6.10 billion, up 29% from 2010
nine-month sales of $4.73 billion. The 2011 nine-month financial results
include in cost of sales a pre-tax LIFO charge, or expense, of $67.5
million compared with a pre-tax LIFO charge of $24.75 million for the
2010 nine months. The LIFO adjustments, in effect, reflect cost of sales
at current replacement costs.
Reliance's tons sold for the 2011 third quarter were up 13% from the
2010 third quarter and up 4% from the 2011 second quarter. Average
prices per ton sold in the 2011 third quarter were up 16% compared to
the 2010 third quarter and were relatively flat compared to the 2011
second quarter. For the 2011 third quarter, carbon steel sales were 53%
of net sales; aluminum sales were 15%; stainless steel sales were 15%;
alloy sales were 11%; toll processing sales were 2%; and other sales
were 4%.
David H. Hannah, Chairman and CEO of Reliance, said, "Overall, during
the 2011 third quarter, we saw better demand from our customers than we
anticipated; however, there was significant downward pressure on pricing
and margins, especially during July and August as mill prices for most
all of the products we sell were declining. Our strongest markets
continued to be in energy, oil & gas, aerospace, farm and heavy
equipment, and auto (through our toll processing business). The quarter
also benefited from the strong earnings of our most recent acquisition
and a lower than anticipated tax rate; however, this was partially
offset by foreign currency losses due to the strengthening of the US
dollar."
"Effective August 1, 2011, we acquired Continental Alloys & Services,
Inc., for a transaction value of $415 million, subject to adjustment.
Continental, headquartered in Houston, Texas, and its affiliates
comprise a leading global materials management company focused on
high-end steel and alloy pipe, tube and bar products and precision
manufacturing of various tools designed for well completion programs of
global energy service companies and has 12 locations in seven countries
including the United States, Canada, United Kingdom, Singapore,
Malaysia, U.A.E. and Mexico," said Hannah.
Hannah further stated, "Our balance sheet continues to be in excellent
shape, with net debt-to-total capital of 31.0% at September 30, 2011.
Even after borrowing to fund the acquisition of Continental, we have
substantial remaining borrowing capacity with only $790 million of
outstanding borrowings on our $1.5 billion credit facility at September
30, 2011."
"Prices for the various metals that we sell remain volatile, and we
expect this to continue through the fourth quarter, with a downward
bias, resulting in overall slightly lower prices for our products. We
also expect lower tons sold during the 2011 fourth quarter because of a
reduced number of shipping days, which is our normal seasonal pattern.
Given these expectations, we currently estimate earnings per diluted
share in a range of $.70 to $.80 for the 2011 fourth quarter," concluded
Hannah.
On October 26, 2011, the Board of Directors declared a regular quarterly
cash dividend of $.12 per share of common stock. The dividend is payable
on December 20, 2011 to shareholders of record November 29, 2011. The
Company has increased its dividend 16 times since the IPO in 1994 and
has paid regular quarterly dividends for 52 consecutive years.
Reliance will host a conference call that will be broadcast live over
the Internet (listen only mode) regarding the third quarter and nine
months financial results for the period ended September 30, 2011. All
interested parties are invited to listen to the web cast on October
27, 2011 at 11:00 a.m. Eastern Time at: http://www.rsac.comon the Investor Information section or http://www.streetevents.com.
Player format: Windows Media and RealPlayer. The web cast will remain on
the Reliance web site at: www.rsac.comon the Investor Information sectionthrough November 28, 2011 and
a printed transcript will be posted on the Reliance web site after the
completion of the conference call.
Reliance Steel & Aluminum Co., headquartered in Los Angeles, California,
is the largest metals service center company in North America. Through a
network of more than 200 locations in 38 states and Belgium, Canada,
China, Malaysia, Mexico, Singapore, South Korea, the U.A.E. and the
United Kingdom, the Company provides value-added metals processing
services and distributes a full line of over 100,000 metal products to
more than 125,000 customers in a broad range of industries.
Reliance Steel & Aluminum Co.'s press releases and additional
information are available on the Company's web site at www.rsac.com.
The Company was named to the 2010 "Fortune 500" List, and the
2010 Fortune List of "The World's Most Admired
Companies."
This release may contain forward-looking statements. Actual results and
events may differ materially as a result of a variety of factors, many
of which are outside of Reliance Steel & Aluminum Co.'s control. Risk
factors and additional information are included in Reliance Steel &
Aluminum Co.'s reports on file with the Securities and Exchange
Commission, including Reliance Steel & Aluminum Co.'s Annual Report on
Form 10-K for the year ended December 31, 2010 and Quarterly Report on
Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011.
RELIANCE STEEL & ALUMINUM CO.
SELECTED FINANCIAL DATA
(in millions, except share and per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2011
2010
2011
2010
Income Statement Data:
Net sales
$
2,138.6
$
1,653.8
$
6,100.8
$
4,728.5
Gross profit1
493.9
396.2
1,511.0
1,191.1
Operating income
140.1
88.2
460.5
282.6
Pre-tax income
118.6
73.4
413.2
236.0
Net income attributable to Reliance
84.9
48.7
275.9
154.9
Diluted earnings per share attributable to Reliance shareholders
$
1.13
$
0.65
$
3.68
$
2.08
Weighted average shares outstanding - diluted
74,963,127
74,400,359
75,046,689
74,369,076
Gross profit margin1
23.1
%
24.0
%
24.8
%
25.2
%
Operating income margin
6.6
%
5.3
%
7.5
%
6.0
%
Pre-tax income margin
5.5
%
4.4
%
6.8
%
5.0
%
Net income margin - Reliance
4.0
%
2.9
%
4.5
%
3.3
%
Cash dividends per share
$
0.12
$
0.10
$
0.36
$
0.30
September 30,
December 31,
2011
2010
Balance Sheet and Other Data:
Current assets
$
2,429.7
$
1,700.9
Working capital
1,785.2
1,192.3
Property, plant and equipment, net
1,087.6
1,025.3
Total assets
5,728.0
4,668.9
Current liabilities
644.5
508.6
Long-term debt
1,463.9
855.1
Total Reliance shareholders' equity
3,084.7
2,823.7
Capital expenditures (year-to-date)
112.7
111.4
Cash provided by operations (year-to-date)
17.3
214.1
Net debt-to-total capital2
31.0
%
23.5
%
Return on Reliance shareholders' equity3
11.2
%
7.5
%
Current ratio
3.8
3.3
Book value per share4
$
41.15
$
37.83
1
Gross profit, calculated as Net sales less Cost of sales, and Gross
profit margin, calculated as Gross profit divided by Net sales, are
non-GAAP financial measures as they exclude depreciation and
amortization expense associated with the corresponding sales. The
majority of our orders are basic distribution with no processing
services performed. For the remainder of our sales orders, we
perform "first-stage" processing which is generally not labor
intensive as we are simply cutting the metal to size. Because of
this, the amount of related labor and overhead, including
depreciation and amortization, are not significant and are excluded
from our Cost of sales. Therefore, our Cost of sales is primarily
comprised of the cost of the material we sell. We use Gross profit
and Gross profit margin as shown above as measures of operating
performance. Gross profit and Gross profit margin are important
operating and financial measures, as fluctuations in our Gross
profit margin can have a significant impact on our earnings. Gross
profit and Gross profit margin, as presented, are not necessarily
comparable with similarly titled measures for other companies.
2
Net debt-to-total capital is calculated as total debt (net of cash)
divided by total Reliance shareholders' equity plus total debt (net
of cash).
3
Calculations are based on the latest twelve months net income
attributable to Reliance and beginning total Reliance shareholders'
equity.
4
Book value per share is calculated as total Reliance shareholders'
equity divided by outstanding common shares.
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
ASSETS
September 30,
2011
December 31,
2010
Current assets:
Cash and cash equivalents
$
91.1
$
72.9
Accounts receivable, less allowance for doubtful accounts of $23.4
at September 30, 2011 and $17.2 at December 31, 2010
1,019.5
697.0
Inventories
1,276.6
860.2
Prepaid expenses and other current assets
42.5
42.5
Income taxes receivable
--
28.3
Total current assets
2,429.7
1,700.9
Property, plant and equipment:
Land
142.7
137.1
Buildings
634.3
594.3
Machinery and equipment
969.3
898.1
Accumulated depreciation
(658.7
)
(604.2
)
1,087.6
1,025.3
Goodwill
1,231.6
1,109.6
Intangible assets, net
909.8
755.8
Cash surrender value of life insurance policies, net
34.6
42.0
Investments in unconsolidated entities
16.8
18.3
Other assets
17.9
17.0
Total assets
$
5,728.0
$
4,668.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
412.7
$
245.0
Accrued expenses
66.9
45.7
Accrued compensation and retirement costs
100.1
85.1
Accrued insurance costs
36.3
37.0
Current maturities of long-term debt and short-term borrowings
14.2
86.2
Income taxes payable
4.7
--
Deferred income taxes
9.6
9.6
Total current liabilities
644.5
508.6
Long-term debt
1,463.9
855.1
Long-term retirement costs
72.0
74.7
Other long-term liabilities
29.2
27.8
Deferred income taxes
425.7
372.6
Commitments and contingencies
Equity:
Preferred stock, no par value:
Authorized shares -- 5,000,000
None issued or outstanding
--
--
Common stock, no par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 74,967,048 at September 30, 2011
and 74,639,223 at December 31, 2010, stated capital
650.7
624.7
Retained earnings
2,437.3
2,188.7
Accumulated other comprehensive (loss) income
(3.3
)
10.3
Total Reliance shareholders' equity
3,084.7
2,823.7
Noncontrolling interests
8.0
6.4
Total equity
3,092.7
2,830.1
Total liabilities and equity
$
5,728.0
$
4,668.9
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2011
2010
2011
2010
Net sales
$
2,138.6
$
1,653.8
$
6,100.8
$
4,728.5
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization shown below)
1,644.7
1,257.6
4,589.8
3,537.4
Warehouse, delivery, selling, general and administrative
319.6
278.2
951.8
819.6
Depreciation and amortization
34.2
29.8
98.7
88.9
1,998.5
1,565.6
5,640.3
4,445.9
Operating income
140.1
88.2
460.5
282.6
Other income (expense):
Interest
(15.0
)
(15.3
)
(45.1
)
(46.0
)
Other (expense) income, net
(6.5
)
0.5
(2.2
)
(0.6
)
Income before income taxes
118.6
73.4
413.2
236.0
Income tax provision
32.3
24.1
133.1
78.9
Net income
86.3
49.3
280.1
157.1
Less: Net income attributable to noncontrolling interests
1.4
0.6
4.2
2.2
Net income attributable to Reliance
$
84.9
$
48.7
$
275.9
$
154.9
Earnings per share:
Diluted earnings per common share attributable to Reliance
shareholders
$
1.13
$
0.65
$
3.68
$
2.08
Basic earnings per common share attributable to Reliance shareholders
$
1.13
$
0.65
$
3.69
$
2.09
Cash dividends per share
$
0.12
$
0.10
$
0.36
$
0.30
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Nine Months Ended
September 30,
2011
2010
Operating activities:
Net income
$
280.1
$
157.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense
98.7
88.9
Deferred income tax benefit
(3.8
)
(2.9
)
(Gain) loss on sales of property, plant and equipment
(2.6
)
0.8
Equity in earnings of unconsolidated entities
(1.6
)
(0.2
)
Dividends received from unconsolidated entities
2.5
0.3
Share based compensation expense
16.4
12.7
Tax deficit (excess benefit) from share based compensation
0.2
(3.3
)
Net loss from life insurance policies
3.8
0.9
Changes in operating assets and liabilities (excluding effect of
businesses acquired):
Accounts receivable
(270.7
)
(227.2
)
Inventories
(294.6
)
(200.6
)
Prepaid expenses and other assets
29.3
38.5
Accounts payable and other liabilities
159.6
182.7
Net cash provided by operating activities
17.3
47.7
Investing activities:
Purchases of property, plant and equipment
(112.7
)
(65.8
)
Acquisition of a metals service center, net of cash acquired
(306.5
)
--
Proceeds from sales of property, plant and equipment
9.1
1.1
Net proceeds from redemption of life insurance policies
3.6
3.9
Net cash used in investing activities
(406.5
)
(60.8
)
Financing activities:
Net short-term debt (repayments) borrowings
(102.8
)
3.9
Proceeds from long-term debt borrowings
913.0
427.0
Principal payments on long-term debt
(379.5
)
(272.8
)
Debt issuance costs
(7.3
)
--
Payments to noncontrolling interest holders
(2.6
)
(1.0
)
Capital contributions from noncontrolling interests
--
0.2
Dividends paid
(26.9
)
(22.2
)
(Tax deficit) excess benefit from share based compensation
(0.2
)
3.3
Exercise of stock options
9.6
17.4
Net cash provided by financing activities
403.3
155.8
Effect of exchange rate changes on cash
4.1
0.8
Increase in cash and cash equivalents
18.2
143.5
Cash and cash equivalents at beginning of year
72.9
43.0
Cash and cash equivalents at end of period
$
91.1
$
186.5
Supplemental cash flow information:
Interest paid during the period
$
33.8
$
33.0
Income taxes paid during the period
$
111.5
$
47.1
Non-cash investing and financing activities:
Debt assumed in connection with an acquisition of a metals service
center
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