Reliance Steel & Aluminum Co. Reports Third Quarter Results; Sales Up 33% and Net Income Up 17%
LOS ANGELES--(BUSINESS WIRE)-- Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the third quarter and nine months ended September 30, 2010. For the 2010 third quarter, Reliance reported net income of $48.7 million, up 17%, compared to 2009 third quarter net income of $41.8 million. Earnings per diluted share were $.65 in the 2010 third quarter, up 14% compared to $.57 in the 2009 third quarter. Sales for the 2010 third quarter were $1.65 billion, up 33% from 2009 third quarter sales of $1.24 billion, and up 2% from 2010 second quarter sales of $1.62 billion. The 2010 third quarter financial results include in cost of sales a pre-tax LIFO charge, or expense, of $9.75 million, compared with a pre-tax LIFO credit, or income, of $67.5 million for the 2009 third quarter. The LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
For the nine months ended September 30, 2010, net income amounted to $154.9 million, up 176% compared to 2009 nine-month net income of $56.1 million. Earnings per diluted share were $2.08 for the nine months ended September 30, 2010, compared with earnings of $.76 per diluted share for the nine months ended September 30, 2009. Sales for the 2010 nine months were $4.73 billion, up 17% from 2009 nine-month sales of $4.04 billion. The 2010 nine months financial results include in cost of sales a pre-tax LIFO charge, or expense of $24.75 million, compared with a pre-tax LIFO credit, or income of $217.5 million in the 2009 nine months.
Reliance's tons sold for the 2010 third quarter were up 11% from the 2009 third quarter and up 1% from the 2010 second quarter. Average prices per ton sold in the 2010 third quarter were up 20% compared to the 2009 third quarter and up 1% compared to the 2010 second quarter. For the 2010 third quarter, carbon steel sales were 52% of net sales; aluminum sales were 18%; stainless steel sales were 16%; alloy sales were 8%; other sales were 4% and toll processing sales were 2%.
David H. Hannah, Chairman and CEO of Reliance said, "The operating environment during the 2010 third quarter was pretty steady with the 2010 second quarter. Mill pricing declined a bit more than we had anticipated during the quarter, pressuring our selling prices and causing our gross profit margins to narrow somewhat. Demand was a little better than we had expected as we typically see a seasonal decline in the third quarter compared to the second quarter. Overall we are pleased with our performance during the quarter in light of the existing market conditions."
"Our balance sheet continues to be strong with our net debt-to-capital ratio at 25% as of September 30, 2010. We generated cash from operations of $83 million in the 2010 third quarter due to our stable profit levels and stringent working capital management," stated Hannah.
"The non-residential construction market is still our weakest end market, and below even last year's poor levels. It appears, though, that we have reached bottom. Business activity in most all of our other markets is better than a year ago; especially in the semiconductor and electronics, energy, agriculture, and aerospace industries. Acquisition opportunities have also improved," continued Hannah.
"In the 2010 fourth quarter, we expect demand to decline somewhat due to normal holiday closures at our customers and we expect pricing to be steady to down for most products that we sell. Given these expectations, at this time, we estimate earnings per diluted share in a range of $.35 to $.45 for the 2010 fourth quarter," Hannah concluded.
On October 1, 2010, Reliance acquired the outstanding capital securities of Diamond Consolidated Industries, Inc. and affiliated companies. The operating entities consist of Diamond Manufacturing Company located in Wyoming, Pennsylvania and Diamond Manufacturing Midwest in Michigan City, Indiana that specialize in the manufacture and sale of specialty engineered perforated materials; Perforated Metals Plus, a distributor of perforated metals located in Charlotte, North Carolina; and Dependable Punch Corporation, a manufacturer of custom punches for tools and dies also located in Wyoming, Pennsylvania. The original business was founded in 1915. Primary end markets are agriculture; office equipment; electronics; appliance; automotive and architectural. The combined sales of Diamond and its affiliated companies for the nine months ended September 30, 2010 were approximately $75 million.
On October 20, 2010, the Board of Directors declared a regular quarterly cash dividend of $.10 per share of common stock. The dividend is payable on December 22, 2010 to shareholders of record December 3, 2010. The Company has paid regular quarterly dividends for 51 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, 2010. All interested parties are invited to listen to the web cast on October 21, 2010 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 November 21, 2010 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 Report on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.
RELIANCE STEEL & ALUMINUM CO.
SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
2010 2009 2010 2009
Income
Statement
Data:
Net sales $ 1,653,798 $ 1,243,373 $ 4,728,458 $ 4,044,886
Gross 396,169 356,469 1,191,057 993,796
profit1
Operating 88,187 74,283 282,559 127,674
income
Pre-tax 73,424 61,511 235,957 82,644
income
Net income
attributable 48,650 41,757 154,899 56,088
to Reliance
Diluted
earnings per
share $ 0.65 $ 0.57 $ 2.08 $ 0.76
attributable
to Reliance
shareholders
Weighted
average
shares 74,400,359 73,784,086 74,369,076 73,623,714
outstanding
- diluted
Gross profit 24.0 % 28.7 % 25.2 % 24.6 %
margin1
Operating
income 5.3 % 6.0 % 6.0 % 3.2 %
margin
Pre-tax
income 4.4 % 4.9 % 5.0 % 2.0 %
margin
Net income
margin - 2.9 % 3.4 % 3.3 % 1.4 %
Reliance
Cash
dividends $ 0.10 $ 0.10 $ 0.30 $ 0.30
per share
September 30, December 31,
2010 2009
Balance Sheet and Other
Data:
Current assets $ 1,921,157 $ 1,390,904
Working capital 1,262,223 973,335
Property, plant and 985,360 981,259
equipment, net
Total assets 4,817,523 4,306,777
Current liabilities 658,934 417,569
Long-term debt 944,231 849,375
Total Reliance 2,775,588 2,606,432
shareholders' equity
Capital expenditures 65,784 69,901
(year-to-date)
Cash provided by
operations 47,685 942,996
(year-to-date)
Net debt-to-total 24.7 % 25.6 %
capital2
Return on Reliance 9.5 % 6.1 %
shareholders' equity3
Current ratio 2.9 3.3
Book value per share $ 37.26 $ 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.
RELIANCE STEEL & ALUMINUM CO.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
September 30, December 31,
2010 2009
(Unaudited)
Current assets:
Cash and cash equivalents $ 186,463 $ 43,002
Accounts receivable, less allowance for doubtful
accounts of $18,862 at September 30, 2010 and 761,955 533,871
$21,269 at December 31, 2009
Inventories 921,225 719,915
Prepaid expenses and other current assets 38,181 40,096
Income taxes receivable 13,333 54,020
Total current assets 1,921,157 1,390,904
Property, plant and equipment:
Land 136,099 131,009
Buildings 574,708 543,590
Machinery and equipment 860,136 829,154
Accumulated depreciation (585,583 ) (522,494 )
985,360 981,259
Goodwill 1,082,256 1,081,324
Intangible assets, net 707,664 726,255
Cash surrender value of life insurance policies, 88,013 92,860
net
Investments in unconsolidated entities 15,641 20,880
Other assets 17,432 13,295
Total assets $ 4,817,523 $ 4,306,777
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 326,359 $ 169,113
Accrued expenses 65,782 55,927
Accrued compensation and retirement costs 78,022 67,012
Accrued insurance costs 37,955 39,134
Current maturities of long-term debt and 150,816 86,383
short-term borrowings
Total current liabilities 658,934 417,569
Long-term debt 944,231 849,375
Long-term retirement costs 71,572 69,277
Other long-term liabilities 28,307 26,537
Deferred income taxes 333,029 335,897
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 -- 74,501,093 at
September 30, 2010 and 73,750,771 at December 616,300 587,612
31, 2009, stated capital
Retained earnings 2,156,322 2,020,343
Accumulated other comprehensive income (loss) 2,966 (1,523 )
Total Reliance shareholders' equity 2,775,588 2,606,432
Noncontrolling interests 5,862 1,690
Total equity 2,781,450 2,608,122
Total liabilities and equity $ 4,817,523 $ 4,306,777
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
2010 2009 2010 2009
Net sales $ 1,653,798 $ 1,243,373 $ 4,728,458 $ 4,044,886
Costs and
expenses:
Cost of sales
(exclusive of
depreciation 1,257,629 886,904 3,537,401 3,051,090
and
amortization
shown below)
Warehouse,
delivery,
selling, 278,135 251,761 819,596 776,270
general and
administrative
Depreciation
and 29,847 30,425 88,902 89,852
amortization
1,565,611 1,169,090 4,445,899 3,917,212
Operating 88,187 74,283 282,559 127,674
income
Other income
(expense):
Interest (15,276 ) (15,916 ) (46,006 ) (51,930 )
Other income 513 3,144 (596 ) 6,900
(expense), net
Income before 73,424 61,511 235,957 82,644
income taxes
Income tax 24,139 19,434 78,880 25,735
provision
Net income 49,285 42,077 157,077 56,909
Less: Net
income
attributable 635 320 2,178 821
to
noncontrolling
interests
Net income
attributable $ 48,650 $ 41,757 $ 154,899 $ 56,088
to Reliance
Earnings per
share:
Diluted
earnings per
common share $ 0.65 $ 0.57 $ 2.08 $ 0.76
attributable
to Reliance
shareholders
Weighted
average shares 74,400,359 73,784,086 74,369,076 73,623,714
outstanding -
diluted
Basic earnings
per common
share $ 0.65 $ 0.57 $ 2.09 $ 0.76
attributable
to Reliance
shareholders
Weighted
average shares 74,292,161 73,478,197 74,126,497 73,391,043
outstanding -
basic
Cash dividends $ 0.10 $ 0.10 $ 0.30 $ 0.30
per share
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
2010 2009
Operating activities:
Net income $ 157,077 $ 56,909
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 88,902 89,852
Deferred income tax benefit (2,906 ) (14,120 )
Loss on sales of property, plant and equipment 779 62
Equity in earnings of unconsolidated entities (244 ) (705 )
Dividends received from unconsolidated entity 320 1,120
Share based compensation expense 12,715 11,456
Excess tax benefit from share based compensation (3,316 ) (303 )
Net loss (gain) from life insurance policies 964 (5,219 )
Changes in operating assets and liabilities:
Accounts receivable (227,156 ) 266,537
Inventories (200,610 ) 497,000
Prepaid expenses and other assets 38,498 18,464
Accounts payable and other liabilities 182,662 (113,849 )
Net cash provided by operating activities 47,685 807,204
Investing activities:
Purchases of property, plant and equipment (65,784 ) (55,044 )
Proceeds from sales of property, plant and 1,067 1,173
equipment
Net proceeds from redemption of life insurance 3,883 6,576
policies
Net cash used in investing activities (60,834 ) (47,295 )
Financing activities:
Net short-term debt borrowings (repayments) 3,906 (1,107 )
Proceeds from long-term debt borrowings 427,000 352,000
Principal payments on long-term debt (272,789 ) (1,047,417 )
Debt issuance costs -- (6,841 )
Payments to noncontrolling interest holder (980 ) (1,323 )
Capital contributions from noncontrolling 142 --
interests
Dividends paid (22,236 ) (22,019 )
Excess tax benefit from share based compensation 3,316 303
Exercise of stock options 17,434 4,059
Issuance of common stock -- 258
Noncontrolling interests purchased -- (2,661 )
Net cash provided by (used in) financing 155,793 (724,748 )
activities
Effect of exchange rate changes on cash 817 708
Increase in cash and cash equivalents 143,461 35,869
Cash and cash equivalents at beginning of year 43,002 51,995
Cash and cash equivalents at end of period $ 186,463 $ 87,864
Supplemental cash flow information:
Interest paid during the period $ 33,026 $ 46,832
Income taxes paid during the period $ 47,100 $ 28,260
Source: Reliance Steel & Aluminum Co.
Released October 21, 2010