Reliance Steel & Aluminum Co. Reports Second Quarter Results; EPS of $.83; Sales Up 30%
LOS ANGELES--(BUSINESS WIRE)-- Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the second quarter and six months ended June 30, 2010. For the 2010 second quarter, Reliance reported net income of $61.6 million, compared to a 2009 second quarter net loss of $5.8 million. Earnings per diluted share were $.83 in the 2010 second quarter, compared to the 2009 second quarter net loss of $.08 per diluted share. Sales for the 2010 second quarter were $1.62 billion, up 30% from 2009 second quarter sales of $1.24 billion, and up 11% from 2010 first quarter sales of $1.45 billion. The 2010 second quarter financial results include in cost of sales a pre-tax LIFO charge, or expense, of $10 million, compared with a pre-tax LIFO credit, or income, of $75 million for the 2009 second quarter. The LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
For the six months ended June 30, 2010, net income amounted to $106.2 million, compared with net income of $14.3 million for the 2009 six-month period. Earnings per diluted share were $1.43 for the six months ended June 30, 2010, compared with earnings of $.19 per diluted share for the six months ended June 30, 2009. Sales for the 2010 six months were $3.07 billion, up 10% from 2009 six-month sales of $2.8 billion. The 2010 six months financial results include in cost of sales a pre-tax LIFO charge, or expense of $15 million, compared with a pre-tax LIFO credit, or income of $150 million in the 2009 six months.
Reliance's tons sold for the 2010 second quarter were up 9% from the 2009 second quarter and up 4% from the 2010 first quarter. Average prices per ton sold in the 2010 second quarter were up 19% compared to the 2009 second quarter and up 8% compared to the 2010 first quarter. For the 2010 second quarter, carbon steel sales were 52% of net sales; aluminum sales were 18%; stainless steel sales were 15%; alloy sales were 8%; other sales were 4% and toll processing sales were 3%.
David H. Hannah, Chairman and CEO of Reliance said, "In the 2010 second quarter, business conditions continued to improve at a modest rate, as we had anticipated. Overall, we were pleased with the quarter's results. We were able to maintain our FIFO gross profit margin at 26.3%, consistent with the 2010 first quarter. Our earnings improved 38% from the 2010 first quarter due to improved demand and metal pricing, with our expenses remaining fairly steady."
"Our balance sheet is strong, with a net debt-to-capital ratio of about 26% and only $189 million borrowed against our $1.1 billion syndicated credit facility as of June 30, 2010. Our receivables and inventory are in good shape and we generated cash from operations of $18.8 million in the 2010 second quarter. We have substantial capital to continue to fund our existing operations as well as anticipated growth opportunities," Hannah added.
"Metals prices have softened some from the high levels reached in the 2010 second quarter, and may decrease further during the third quarter but not to the extent that we are overly concerned. Also, we do not expect demand to change significantly in the 2010 third quarter other than some normal seasonal slowing. Given these expectations, at this time, we estimate earnings per diluted share in a range of $.65 to $.75 for the 2010 third quarter," concluded Hannah.
On July 21, 2010, the Board of Directors declared a regular quarterly cash dividend of $.10 per share of common stock. The dividend is payable on September 13, 2010 to shareholders of record August 20, 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 second quarter and six months financial results for the period ended June 30, 2010. All interested parties are invited to listen to the web cast on July 22, 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 August 22, 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 quarter ended March 31, 2010.
RELIANCE STEEL & ALUMINUM CO.
SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
2010 2009 2010 2009
Income
Statement
Data:
Net sales $ 1,620,585 $ 1,242,978 $ 3,074,660 $ 2,801,513
Gross 416,775 282,885 794,888 637,327
profit1
Operating 114,611 5,430 194,372 53,391
income
Pre-tax
income 96,728 (9,436 ) 162,533 21,133
(loss)
Net income
(loss) 61,599 (5,787 ) 106,249 14,331
attributable
to Reliance
Diluted
earnings
(loss) per
share $ 0.83 $ (0.08 ) $ 1.43 $ 0.19
attributable
to Reliance
shareholders
Weighted
average
shares 74,517,743 73,376,023 74,354,767 73,527,944
outstanding
- diluted
Gross profit 25.7 % 22.8 % 25.9 % 22.7 %
margin1
Operating
income 7.1 % 0.4 % 6.3 % 1.9 %
margin
Pre-tax
income 6.0 % (0.8 ) 5.3 % 0.8 %
(loss) %
margin
Net income
(loss) 3.8 % (0.5 ) 3.5 % 0.5 %
margin - %
Reliance
Cash
dividends $ 0.10 $ 0.10 $ 0.20 $ 0.20
per share
June 30, December 31,
2010 2009
Balance Sheet and Other Data:
Current assets $ 1,722,333 $ 1,390,904
Working capital 1,183,816 973,335
Property, plant and equipment, 982,888 981,259
net
Total assets 4,618,520 4,306,777
Current liabilities 538,517 417,569
Long-term debt 923,446 849,375
Total Reliance shareholders' 2,720,774 2,606,432
equity
Capital expenditures 39,380 69,901
(year-to-date)
Cash (used in) provided by (35,451 ) 942,996
operations (year-to-date)
Net debt-to-total capital2 26.1 % 25.6 %
Return on Reliance shareholders' 9.2 % 6.1 %
equity3
Current ratio 3.2 3.3
Book value per share $ 36.64 $ 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
June 30, December 31,
2010 2009
(Unaudited)
Current assets:
Cash and cash equivalents $ 47,403 $ 43,002
Accounts receivable, less allowance for doubtful
accounts of $17,273 at June 30, 2010 and $21,269 736,404 533,871
at December 31, 2009
Inventories 896,660 719,915
Prepaid expenses and other current assets 34,836 40,096
Income taxes receivable 7,030 54,020
Total current assets 1,722,333 1,390,904
Property, plant and equipment:
Land 133,103 131,009
Buildings 567,976 543,590
Machinery and equipment 859,332 829,154
Accumulated depreciation (577,523 ) (522,494 )
982,888 981,259
Goodwill 1,081,319 1,081,324
Intangible assets, net 711,864 726,255
Cash surrender value of life insurance policies, 87,507 92,860
net
Investments in unconsolidated entities 15,977 20,880
Other assets 16,632 13,295
Total assets $ 4,618,520 $ 4,306,777
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 291,704 $ 169,113
Accrued expenses 50,317 55,927
Accrued compensation and retirement costs 71,016 67,012
Accrued insurance costs 38,514 39,134
Current maturities of long-term debt and 86,966 86,383
short-term borrowings
Total current liabilities 538,517 417,569
Long-term debt 923,446 849,375
Long-term retirement costs 69,016 69,277
Other long-term liabilities 28,592 26,537
Deferred income taxes 334,062 335,897
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 -- 74,258,946 at
June 30, 2010
and 73,750,771 at December 31, 2009, stated 608,651 587,612
capital
Retained earnings 2,114,688 2,020,343
Accumulated other comprehensive loss (2,565 ) (1,523 )
Total Reliance shareholders' equity 2,720,774 2,606,432
Noncontrolling interests 4,113 1,690
Total equity 2,724,887 2,608,122
Total liabilities and equity $ 4,618,520 $ 4,306,777
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
2010 2009 2010 2009
Net sales $ 1,620,585 $ 1,242,978 $ 3,074,660 $ 2,801,513
Costs and
expenses:
Cost of sales
(exclusive of
depreciation 1,203,810 960,093 2,279,772 2,164,186
and
amortization
shown below)
Warehouse,
delivery,
selling, 272,187 247,875 541,461 524,509
general and
administrative
Depreciation
and 29,977 29,580 59,055 59,427
amortization
1,505,974 1,237,548 2,880,288 2,748,122
Operating 114,611 5,430 194,372 53,391
income
Other income
(expense):
Interest (15,647 ) (16,698 ) (30,730 ) (36,014 )
Other
(expense) (2,236 ) 1,832 (1,109 ) 3,756
income, net
Income (loss)
before income 96,728 (9,436 ) 162,533 21,133
taxes
Income tax
provision 33,923 (3,880 ) 54,741 6,301
(benefit)
Net income 62,805 (5,556 ) 107,792 14,832
(loss)
Less: Net
income
attributable 1,206 231 1,543 501
to
noncontrolling
interests
Net income
(loss) $ 61,599 $ (5,787 ) $ 106,249 $ 14,331
attributable
to Reliance
Earnings per
share:
Diluted
earnings
(loss) per
common share $ 0.83 $ (0.08 ) $ 1.43 $ 0.19
attributable
to Reliance
shareholders
Weighted
average shares 74,517,743 73,376,023 74,354,767 73,527,944
outstanding -
diluted
Basic earnings
(loss) per
common share $ 0.83 $ (0.08 ) $ 1.43 $ 0.20
attributable
to Reliance
shareholders
Weighted
average shares 74,220,164 73,376,023 74,042,293 73,346,744
outstanding -
basic
Cash dividends $ 0.10 $ 0.10 $ 0.20 $ 0.20
per share
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
2010 2009
Operating activities:
Net income $ 107,792 $ 14,832
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization expense 59,055 59,427
Deferred income tax benefit (1,835 ) (2,906 )
Loss (gain) on sales of property, plant and 850 (38 )
equipment
Equity in earnings of unconsolidated entities (633 ) (269 )
Dividend received from unconsolidated entity 320 --
Stock based compensation expense 8,130 7,447
Excess tax benefit from stock based compensation (2,904 ) (513 )
Net loss (gain) from life insurance policies 1,470 (2,450 )
Changes in operating assets and liabilities:
Accounts receivable (202,906 ) 291,842
Inventories (177,363 ) 470,160
Prepaid expenses and other assets 48,868 (4,793 )
Accounts payable and other liabilities 123,705 (151,480 )
Net cash (used in) provided by operating (35,451 ) 681,259
activities
Investing activities:
Purchases of property, plant and equipment (39,380 ) (40,789 )
Proceeds from sales of property, plant and 725 684
equipment
Net proceeds from redemption of life insurance 3,883 4,394
policies
Net cash used in investing activities (34,772 ) (35,711 )
Financing activities:
Net short-term debt borrowings (repayments) 405 (2,670 )
Proceeds from long-term debt borrowings 262,000 102,000
Principal payments on long-term debt (188,360 ) (603,261 )
Payments to noncontrolling interest holder (490 ) (588 )
Dividends paid (14,808 ) (14,670 )
Excess tax benefit from stock based compensation 2,904 513
Exercise of stock options 12,909 3,476
Issuance of common stock -- 258
Noncontrolling interests purchased -- (2,661 )
Net cash provided by (used in) financing 74,560 (517,603 )
activities
Effect of exchange rate changes on cash 64 (527 )
Increase in cash and cash equivalents 4,401 127,418
Cash and cash equivalents at beginning of year 43,002 51,995
Cash and cash equivalents at end of period $ 47,403 $ 179,413
Supplemental cash flow information:
Interest paid during the period $ 27,028 $ 40,731
Income taxes paid during the period $ 15,071 $ 25,466
Source: Reliance Steel & Aluminum Co.
Released July 22, 2010