Reliance Steel & Aluminum Co. Reports 2010 Fourth Quarter and Year End Financial Results; Q4 EPS - $.53; 2010 EPS - $2.61
LOS ANGELES--(BUSINESS WIRE)-- Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the fourth quarter and year ended December 31, 2010. For the 2010 fourth quarter, Reliance reported net income of $39.5 million, compared to 2009 fourth quarter net income of $92.1 million, and net income of $48.7 million for the 2010 third quarter. Earnings per diluted share were $.53 in the 2010 fourth quarter, compared with 2009 fourth quarter earnings per diluted share of $1.25, and $.65 for the 2010 third quarter. Sales for the 2010 fourth quarter were $1.58 billion, up 24% from 2009 fourth quarter sales of $1.27 billion, and down 4% from 2010 third quarter sales of $1.65 billion. The 2010 fourth quarter financial results include in cost of sales a pre-tax LIFO charge, or expense, of $10.0 million, compared with a pre-tax LIFO credit, or income, of $87.5 million in the 2009 fourth quarter.
For the 2010 year, net income was $194.4 million, up 31% from net income of $148.2 million for the 2009 year. Earnings per diluted share were $2.61 for the 2010 year, up 30% from earnings per diluted share of $2.01 for 2009. Sales for the 2010 year were $6.31 billion, up 19% from 2009 sales of $5.32 billion. The 2010 fiscal year financial results include in cost of sales a pre-tax LIFO charge, or expense, of $34.8 million, compared with a pre-tax LIFO credit, or income, of $305.0 million for the 2009 year. The LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
Reliance's tons sold for the 2010 year were up 6% and the average price per ton sold was up 12% compared to 2009. For the 2010 year, carbon steel sales were 52% of revenues; aluminum sales were 18%; stainless steel sales were 16%; alloy sales were 8%; toll processing sales were 2% and other sales were 4%.
David H. Hannah, Chairman and CEO of Reliance said, "Our guidance for the 2010 fourth quarter did not anticipate the carbon steel price increases that were announced by the carbon steel producers consistently throughout December. Demand during the quarter was seasonably lower than the 2010 third quarter, but not by as much as we expected, as some customers purchased a little more during December to get ahead of further price increases. As a result, we sold a little more steel at generally higher prices and margins that resulted in the quarter finishing up better than we originally expected."
"Our strongest markets during 2010 were in energy, oil and gas; semiconductor and electronics; aerospace; agriculture and our toll processing business which is primarily related to the auto and appliance industries. Non-residential construction was our most difficult area last year," commented Hannah.
"Our balance sheet is strong, inventories are in line with demand, and our net debt-to-total capital ratio was only 23.5% at December 31, 2010; down from 24.7% at the end of the 2010 third quarter and 25.6% at the end of 2009. We have about $860 million available on our $1.1 billion credit facility and if we were to use it all, our net debt-to-total capital ratio would still be less than 40%," continued Hannah.
"Currently, the prices of most all the metals we sell are continuing on an upward trend. We expect pricing, in general, to remain at strong levels at least through the 2011 first quarter. The recent rapid price increases can cause changes in our customers' buying patterns that can make it difficult to determine what real end use demand is doing. While there is certainly some buying ahead of the announced increases we believe that real underlying demand is steadily improving, but not at a large or rapid rate. We expect this slow and steady growth pattern to continue as the year progresses. Given these expectations, 2011 looks like a much better year than 2010 and, at this time, we estimate earnings per diluted share in a range of $.90 to $1.00 for the 2011 first quarter," Hannah concluded.
On February 16, 2011, the Board of Directors increased the regular quarterly cash dividend by 20%, to $.12 per share from $.10 per share. The Board declared the 2011 first quarter cash dividend of $.12 per share of common stock payable on March 25, 2011 to shareholders of record March 4, 2011. The Company has paid regular quarterly dividends for 51 consecutive years and has increased its dividend 16 times since its 1994 IPO.
Reliance will host a conference call that will be broadcast live over the Internet (listen only mode) regarding the fourth quarter and 12 months financial results for the period ended December 31, 2010. All interested parties are invited to listen to the web cast on February 17, 2011 at 11:00 a.m. Eastern Time at: http://www.rsac.com on 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.com on the Investor Information section through March 17, 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, 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, the 2009 Forbes "America's Best Managed Companies" List, the 2010 Fortune List of "The World's Most Admired Companies," and the 2009 Forbes "Platinum 400 List of America's Best Big 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, 2009 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010.
RELIANCE STEEL & ALUMINUM CO.
SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)
Three Months Twelve Months
Ended December 31, Ended December 31,
2010 2009 2010 2009
Income
Statement
Data:
Net sales $ 1,584,337 $ 1,273,246 $ 6,312,795 $ 5,318,132
Gross 393,851 405,725 1,584,908 1,399,521
profit1
Operating 78,162 122,718 360,721 250,392
income
Pre-tax 60,471 112,849 296,428 195,493
income
Net income
attributable 39,454 92,070 194,353 148,158
to Reliance
Diluted
earnings per
share $ 0.53 $ 1.25 $ 2.61 $ 2.01
attributable
to Reliance
shareholders
Weighted
average
shares 74,778,975 73,919,206 74,472,380 73,701,979
outstanding
- diluted
Gross profit 24.9 % 31.9 % 25.1 % 26.3 %
margin1
Operating
income 4.9 % 9.6 % 5.7 % 4.7 %
margin
Pre-tax
income 3.8 % 8.9 % 4.7 % 3.7 %
margin
Net income
margin - 2.5 % 7.2 % 3.1 % 2.8 %
Reliance
Cash
dividends $ 0.10 $ 0.10 $ 0.40 $ 0.40
per share
December 31, December 31,
2010 2009
Balance Sheet and Other Data:
Current assets $ 1,700,897 $ 1,390,904
Working capital 1,192,302 973,335
Property, plant and equipment, 1,025,305 981,259
net
Total assets 4,668,893 4,306,777
Current liabilities 508,595 417,569
Long-term debt 855,085 849,375
Total Reliance shareholders' 2,823,732 2,606,432
equity
Capital expenditures 111,356 69,901
Cash provided by operations 214,087 942,996
Net debt-to-total capital2 23.5 % 25.6 %
Return on Reliance 7.5 % 6.1 %
shareholders' equity3
Current ratio 3.3 3.3
Book value per share4 $ 37.83 $ 35.34
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 and beginning total Reliance shareholders' equity.
4 Book value per share is calculated as total Reliance shareholders' equity divided by issued and outstanding common shares.
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
December 31, December 31,
2010 2009
Current assets:
Cash and cash equivalents $ 72,915 $ 43,002
Accounts receivable, less allowance for
doubtful accounts of $17,221 at December 697,033 533,871
31, 2010 and $21,269 at December 31, 2009
Inventories 860,215 719,915
Prepaid expenses and other current assets 42,442 37,855
Income taxes receivable 28,292 54,020
Deferred income taxes -- 2,241
Total current assets 1,700,897 1,390,904
Property, plant and equipment:
Land 137,140 131,009
Buildings 594,329 543,590
Machinery and equipment 898,077 829,154
Accumulated depreciation (604,241 ) (522,494 )
1,025,305 981,259
Goodwill 1,109,600 1,081,324
Intangible assets, net 755,768 726,255
Cash surrender value of life insurance 42,011 92,860
policies, net
Investments in unconsolidated entities 18,274 20,880
Other assets 17,038 13,295
Total assets $ 4,668,893 $ 4,306,777
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 244,988 $ 169,113
Accrued expenses 45,774 55,927
Accrued compensation and retirement costs 85,065 67,012
Accrued insurance costs 36,972 39,134
Current maturities of long-term debt and 86,232 86,383
short-term borrowings
Deferred income taxes 9,564 --
Total current liabilities 508,595 417,569
Long-term debt 855,085 849,375
Long-term retirement costs 74,749 69,277
Other long-term liabilities 27,787 26,537
Deferred income taxes 372,563 335,897
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 --
74,639,223 at December 31, 2010 and 624,732 587,612
73,750,771 at December 31, 2009, stated
capital
Retained earnings 2,188,725 2,020,343
Accumulated other comprehensive income 10,275 (1,523 )
(loss)
Total Reliance shareholders' equity 2,823,732 2,606,432
Noncontrolling interests 6,382 1,690
Total equity 2,830,114 2,608,122
Total liabilities and equity $ 4,668,893 $ 4,306,777
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
Three Months Twelve Months
Ended December 31, Ended December 31,
2010 2009 2010 2009
Net sales $ 1,584,337 $ 1,273,246 $ 6,312,795 $ 5,318,132
Costs and
expenses:
Cost of sales
(exclusive of
depreciation 1,190,486 867,521 4,727,887 3,918,611
and
amortization
shown below)
Warehouse,
delivery,
selling, 283,988 253,975 1,103,584 1,030,245
general and
administrative
Depreciation
and 31,701 29,032 120,603 118,884
amortization
1,506,175 1,150,528 5,952,074 5,067,740
Operating 78,162 122,718 360,721 250,392
income
Other income
(expense):
Interest (15,169 ) (15,593 ) (61,175 ) (67,523 )
Other
(expense) (2,522 ) 5,724 (3,118 ) 12,624
income, net
Income before 60,471 112,849 296,428 195,493
income taxes
Income tax 19,699 20,582 98,579 46,317
provision
Net income 40,772 92,267 197,849 149,176
Less: Net
income
attributable 1,318 197 3,496 1,018
to
noncontrolling
interests
Net income
attributable $ 39,454 $ 92,070 $ 194,353 $ 148,158
to Reliance
Earnings per
share:
Diluted
earnings per
common share $ 0.53 $ 1.25 $ 2.61 $ 2.01
attributable
to Reliance
shareholders
Weighted
average shares 74,778,975 73,919,206 74,472,380 73,701,979
outstanding -
diluted
Basic earnings
per common
share $ 0.53 $ 1.25 $ 2.62 $ 2.02
attributable
to Reliance
shareholders
Weighted
average shares 74,538,999 73,607,423 74,230,452 73,445,583
outstanding -
basic
Cash dividends $ 0.10 $ 0.10 $ 0.40 $ 0.40
per share
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2010 2009
Operating activities:
Net income $ 197,849 $ 149,176
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization expense 120,603 118,884
Deferred income tax expense 42,724 58,016
Loss on sales of property, plant and 1,148 138
equipment
Equity in earnings of unconsolidated (724 ) (1,395 )
entities
Dividends received from unconsolidated 320 1,120
entities
Share based compensation expense 17,334 15,530
Excess tax benefit from share based (4,039 ) (1,533 )
compensation
Net loss (gain) from life insurance 4,217 (10,482 )
policies
Changes in operating assets and
liabilities (excluding effect of
businesses acquired):
Accounts receivable (146,743 ) 322,163
Inventories (121,857 ) 569,943
Prepaid expenses and other assets 23,867 (56,439 )
Accounts payable and other liabilities 79,388 (222,125 )
Net cash provided by operating activities 214,087 942,996
Investing activities:
Purchases of property, plant and (111,356 ) (69,901 )
equipment
Acquisitions of metals service centers, (100,325 ) --
net of cash acquired and debt assumed
Proceeds from sales of property, plant 3,160 1,284
and equipment
Net borrowings from (investment in) life 42,406 (31,544 )
insurance policies
Net proceeds from redemption of life 4,332 6,576
insurance policies
Net cash used in investing activities (161,783 ) (93,585 )
Financing activities:
Net short-term debt borrowings 3,157 133
Proceeds from long-term debt borrowings 539,000 352,000
Principal payments on long-term debt (560,580 ) (1,183,301 )
Debt issuance costs -- (6,841 )
Payments to noncontrolling interest (1,778 ) (2,057 )
holders
Capital contributions from noncontrolling 142 --
interests
Dividends paid (29,692 ) (29,383 )
Excess tax benefit from share based 4,039 1,533
compensation
Exercise of stock options 21,248 10,490
Issuance of common stock -- 258
Noncontrolling interests purchased -- (2,661 )
Net cash used in financing activities (24,464 ) (859,829 )
Effect of exchange rate changes on cash 2,073 1,425
Increase (decrease) in cash and cash 29,913 (8,993 )
equivalents
Cash and cash equivalents at beginning of 43,002 51,995
year
Cash and cash equivalents at end of year $ 72,915 $ 43,002
Supplemental cash flow information:
Interest paid during the year $ 62,176 $ 76,050
Income taxes paid during the year $ 68,908 $ 49,099
Non-cash investing and financing
activities:
Debt assumed in connection with $ 22,597 $ --
acquisitions of metals service centers
Source: Reliance Steel & Aluminum Co.
Released February 17, 2011