Reliance Steel & Aluminum Co. Reports Profitable 2009 Third Quarter and Nine Month Results
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, 2009. For the 2009 third quarter, Reliance reported net income of $41.8 million, or $.57 per diluted share. For the 2008 third quarter, Reliance had net income of $152.5 million, or $2.07 per diluted share. For the 2009 second quarter, Reliance had a net loss of $5.8 million, or $0.08 per diluted share. Sales for the 2009 third quarter were $1.24 billion, down from 2008 third quarter sales of $2.57 billion, and flat with 2009 second quarter sales of $1.24 billion. The 2009 third quarter financial results include in cost of sales a pre-tax LIFO income amount of $67.5 million, compared with a pre-tax LIFO expense amount of $79.0 million for the 2008 third quarter and a pre-tax LIFO income amount of $75.0 million in the 2009 second quarter.
For the nine months ended September 30, 2009, net income amounted to $56.1 million, compared with net income of $416.5 million for the same period in 2008. Earnings per diluted share were $.76 for the nine months ended September 30, 2009, compared with earnings of $5.65 per diluted share for the nine months ended September 30, 2008. Sales for the 2009 year-to-date period were $4.04 billion, down 39% from 2008 nine month sales of $6.58 billion. The 2009 nine month financial results include in cost of sales a pre-tax LIFO income amount of $217.5 million, compared with a pre-tax LIFO expense amount of $136.5 million in the 2008 year-to-date period.
Reliance's tons sold for the 2009 third quarter were down 26% from the 2008 third quarter and down less than 1% from the 2009 second quarter. Average price per ton sold was down 34% compared to the 2008 third quarter and flat with the 2009 second quarter. For the nine months ended September 30, 2009, tons sold were down 13% and average pricing was down 29% compared to the same period of 2008. For the 2009 third quarter carbon steel sales were 54% of our revenues; aluminum sales were 19%; stainless steel sales were 14%; alloy sales were 7%; other sales were 4% and toll processing sales were 2%.
David H. Hannah, Chairman and CEO of Reliance said, "The 2009 third quarter results improved substantially from the 2009 second quarter mainly due to higher gross profit margins. Because of mill price increases for most of our products during the third quarter and our significant inventory reductions over the past twelve months, our inventory costs on hand are now more in line with current replacement costs allowing us to improve our gross profit margins from the historically low margins experienced in the 2009 second quarter. We further reduced our FIFO inventory levels by $92 million in the quarter. Demand from our customers improved slightly during the quarter from the low levels experienced in July."
"During the 2009 nine months, we generated record cash flow from operations of $807.2 million. We repaid $192 million of debt during the quarter. On September 28, 2009, we amended our existing $1.1 billion credit facility to adjust certain financial ratios and limit certain uses of cash through June 30, 2010. Pricing was adjusted and we also extended the maturity date on $1.02 billion of the $1.1 billion credit facility an additional year, through November 2012. Concurrent with the amendment and extension of the credit facility, we paid off and terminated our term loan that had an outstanding balance of $444 million, using $194 million of cash on hand and $250 million of borrowings on the credit facility. At September 30, 2009 we had cash on hand of $88 million. Our net debt-to-total capital ratio is 28% as of September 30, 2009," commented Hannah.
"We are pleased with the significant improvement in our gross profit margins; however, we are uncertain as to business activity in the 2009 fourth quarter. Although we believe that demand is fairly stable at low levels, the fourth quarter is typically seasonally slower for us. Pricing also seems to be more stable than it was earlier in the year; however, we believe there may be some slight downward pressure on pricing for many of our products in the coming months. Because of this, we are not comfortable providing earnings guidance for the 2009 fourth quarter. We will, as the quarter progresses, communicate any meaningful information regarding our operations as it becomes available. Reliance stands on solid financial footings and is well positioned for the eventual recovery in economic conditions," concluded Hannah.
On October 21, 2009, the Board of Directors declared a regular quarterly cash dividend of $.10 per share of common stock. The dividend is payable on January 6, 2010 to shareholders of record December 4, 2009. The Company has paid regular quarterly dividends for 49 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 month financial results for the period ended September 30, 2009. All interested parties are invited to listen to the web cast on October 22, 2009 at 11:00 a.m. Eastern Time at: http://www.rsac.com in 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 through November 22, 2009 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, 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 2008 "Fortune 500" List, the 2008 Forbes "America's Best Managed Companies" List and the 2009 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, 2008 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009.
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,
2009 2008 2009 2008
Income
Statement
Data:
Net sales $ 1,243,373 $ 2,572,836 $ 4,044,886 $ 6,576,074
Gross 356,469 624,048 993,796 1,703,261
profit1
Operating 74,283 269,216 127,674 726,417
income
Pre-tax 61,511 245,249 82,644 668,790
income
Net income
attributable 41,757 152,498 56,088 416,489
to Reliance
Diluted
earnings per
share $ 0.57 $ 2.07 $ 0.76 $ 5.65
attributable
to Reliance
shareholders
Weighted
average
shares 73,784,086 73,775,991 73,623,714 73,686,248
outstanding
- diluted
Gross 28.7 % 24.3 % 24.6 % 25.9 %
margin1
Operating
income 6.0 % 10.5 % 3.2 % 11.0 %
margin
Pre-tax
income 4.9 % 9.5 % 2.0 % 10.2 %
margin
Net income
margin - 3.4 % 5.9 % 1.4 % 6.3 %
Reliance
Cash
dividends $ .10 $ .10 $ .30 $ .30
per share
September 30, December 31,
2009 2008
Balance Sheet and Other Data:
Current assets $ 1,576,183 $ 2,302,372
Working capital 1,127,907 1,652,207
Property, plant and equipment, net 987,684 998,706
Total assets 4,464,342 5,195,485
Current liabilities 448,276 650,165
Long-term debt2 1,065,689 1,675,565
Total Reliance shareholders' equity 2,500,012 2,431,436
Capital expenditures (year-to-date) 55,044 151,890
Cash flow from operations 807,204 664,684
(year-to-date)
Net debt-to-total capital3 28.3 % 41.4 %
Return on Reliance shareholders' 5.0 % 22.9 %
equity4
Current ratio 3.5 3.5
Book value per share $ 34.02 $ 33.17
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, 1 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 Long-term debt includes capital lease obligations of $3,350 and $3,833 as of September 30, 2009 and December 31, 2008, respectively. 3 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). 4 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,
2009 2008
(Unaudited)
Current assets:
Cash and cash equivalents $ 87,864 $ 51,995
Accounts receivable, less allowance for
doubtful accounts of $21,254 at September 588,293 851,214
30, 2009 and $22,018 at December 31, 2008
Inventories 792,119 1,284,468
Prepaid expenses and other current assets 27,367 33,782
Income taxes receivable -- 9,980
Deferred income taxes 80,540 70,933
Total current assets 1,576,183 2,302,372
Property, plant and equipment:
Land 131,115 125,096
Buildings 530,967 506,781
Machinery and equipment 829,785 810,054
Accumulated depreciation (504,183 ) (443,225 )
987,684 998,706
Goodwill 1,079,127 1,065,527
Intangible assets, net 731,694 741,681
Cash surrender value of life insurance 56,053 57,410
policies, net
Investments in unconsolidated entities 20,190 20,605
Other assets 13,411 9,184
Total assets $ 4,464,342 $ 5,195,485
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 221,774 $ 248,312
Accrued expenses 59,842 59,982
Deferred revenue 48,785 82,949
Accrued compensation and retirement costs 61,459 123,707
Accrued insurance costs 40,006 40,700
Income taxes payable 7,930 --
Current maturities of long-term debt 7,825 93,877
Current maturities of capital lease 655 638
obligations
Total current liabilities 448,276 650,165
Long-term debt 1,062,339 1,671,732
Capital lease obligations 3,350 3,833
Long-term retirement costs and other 109,124 94,361
long-term liabilities
Deferred income taxes 339,014 340,326
Commitments and contingencies
Reliance shareholders' 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 -- 73,489,071
at
September 30, 2009 and 73,312,714 at
December 31, 2008, stated capital 577,107 563,092
Retained earnings 1,934,732 1,900,360
Accumulated other comprehensive loss (11,827 ) (32,016 )
Total Reliance shareholders' equity 2,500,012 2,431,436
Noncontrolling interests 2,227 3,632
Total equity 2,502,239 2,435,068
Total liabilities and equity $ 4,464,342 $ 5,195,485
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
Net sales $ 1,243,373 $ 2,572,836 $ 4,044,886 $ 6,576,074
Costs and
expenses:
Cost of sales
(exclusive of
depreciation 886,904 1,948,788 3,051,090 4,872,813
and
amortization
shown below)
Warehouse,
delivery,
selling, 251,761 327,822 776,270 907,024
general and
administrative
Depreciation
and 30,425 27,010 89,852 69,820
amortization
1,169,090 2,303,620 3,917,212 5,849,657
Operating 74,283 269,216 127,674 726,417
income
Other income
(expense):
Interest (15,916 ) (23,899 ) (51,930 ) (56,673 )
Other income 3,144 (68 ) 6,900 (954 )
(expense), net
Income before 61,511 245,249 82,644 668,790
income taxes
Income tax 19,434 92,127 25,735 251,605
provision
Net income 42,077 153,122 56,909 417,185
Less: Net
income
attributable 320 624 821 696
to
noncontrolling
interests
Net income
attributable $ 41,757 $ 152,498 $ 56,088 $ 416,489
to Reliance
Earnings per
share:
Diluted
earnings per
common share $ 0.57 $ 2.07 $ 0.76 $ 5.65
attributable
to Reliance
shareholders
Weighted
average shares 73,784,086 73,775,991 73,623,714 73,686,248
outstanding -
diluted
Basic earnings
per common
share $ 0.57 $ 2.08 $ 0.76 $ 5.70
attributable
to Reliance
shareholders
Weighted
average shares 73,478,197 73,238,881 73,391,043 73,038,140
outstanding -
basic
Cash dividends $ .10 $ .10 $ .30 $ .30
per share
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
2009 2008
Operating activities:
Net income $ 56,909 $ 417,185
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization expense 89,852 69,820
Deferred income tax benefit (14,120 ) (4,057 )
Loss on sales of property, plant and 62 2,212
equipment
Equity in earnings of unconsolidated (705 ) (396 )
entities
Dividends received from unconsolidated 1,120 --
entities
Stock based compensation expense 11,456 10,621
Excess tax benefits from stock based (303 ) (9,381 )
compensation
Net (gain) loss from life insurance (5,219 ) 1,733
policies
Changes in operating assets and
liabilities (excluding effect of
businesses acquired):
Accounts receivable 266,537 (230,160 )
Inventories 497,000 (294,160 )
Prepaid expenses and other assets 18,464 15,388
Accounts payable and other liabilities (113,849 ) 136,582
Net cash provided by operating 807,204 115,387
activities
Investing activities:
Purchases of property, plant and (55,044 ) (119,546 )
equipment
Acquisitions of metals service centers
and net asset purchases of metal service -- (329,402 )
centers, net of cash acquired
Tax distributions related to prior -- (1,155 )
acquisitions
Proceeds from sales of property, plant 1,173 18,917
and equipment
Net proceeds from redemptions of life 6,576 2,532
insurance policies
Net investment in life insurance -- (96 )
policies
Net cash used in investing activities (47,295 ) (428,750 )
Financing activities:
Proceeds from borrowings 354,755 1,633,897
Principal payments on long-term debt and (1,051,279 ) (1,239,310 )
short-term borrowings
Debt issuance costs (6,841 ) (3,313 )
Dividends paid (22,019 ) (21,899 )
Payments to noncontrolling interest (1,323 ) --
holders
Excess tax benefits from stock based 303 9,381
compensation
Exercise of stock options 4,059 17,081
Issuance of common stock 258 284
Noncontrolling interests purchases (2,661 ) --
Common stock repurchases -- (114,774 )
Net cash (used in) provided by financing (724,748 ) 281,347
activities
Effect of exchange rate changes on cash 708 (1,325 )
Increase (decrease) in cash and cash 35,869 (33,341 )
equivalents
Cash and cash equivalents at beginning 51,995 77,023
of period
Cash and cash equivalents at end of $ 87,864 $ 43,682
period
Supplemental cash flow information:
Interest paid during the period $ 46,832 $ 38,339
Income taxes paid during the period $ 28,260 $ 184,443
Source: Reliance Steel & Aluminum Co.
Released October 22, 2009