Reliance Steel & Aluminum Co. Reports Second Quarter Results

  Reliance Steel & Aluminum Co. Reports Second Quarter Results

                           Sales Up 8%, EPS Up 10%

                       Quarterly Dividend Increased 67%

Business Wire

LOS ANGELES -- July 26, 2012

Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results
for the second quarter and six months ended June 30, 2012. For the 2012 second
quarter, Reliance reported net income of $108.8 million, up 10% from 2011
second quarter net income of $98.7 million, and down 6% from 2012 first
quarter net income of $116.2 million. Earnings per diluted share were $1.44 in
the 2012 second quarter, up 10% from 2011 second quarter earnings per diluted
share of $1.31 and down 6% from $1.54 in the 2012 first quarter. Sales for the
2012 second quarter were $2.21 billion, up 8% from 2011 second quarter sales
of $2.05 billion, and down 3% from 2012 first quarter sales of $2.29 billion.
The 2012 second quarter financial results include in cost of sales a pre-tax
LIFO credit, or income, of $7.5 million, compared with a pre-tax LIFO charge,
or expense, of $25.0 million for the 2011 second quarter and a charge of $7.5
million for the 2012 first quarter.

For the six months ended June 30, 2012, net income amounted to $225.0 million,
up 18% compared with net income of $191.0 million for the 2011 six-month
period. Earnings per diluted share were $2.98 for the six months ended June
30, 2012, up 17% compared with earnings of $2.54 per diluted share for the six
months ended June 30, 2011. Sales for the 2012 six months were $4.50 billion,
up 14% from 2011 six-month sales of $3.96 billion. The 2012 six-month
financial results include no charge related to LIFO compared with a pre-tax
LIFO charge of $45.0 million for the 2011 six months. LIFO adjustments, in
effect, reflect cost of sales at current replacement costs.

Reliance’s tons sold for the 2012 second quarter were up 10% from the 2011
second quarter and down 2% from the 2012 first quarter. The average price per
ton sold in the 2012 second quarter was down 2% compared to both the 2011
second quarter and the 2012 first quarter. For the 2012 second quarter, carbon
steel sales were 52% 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 5%.

David H. Hannah, Chairman and CEO of Reliance, said, “We were pleased with our
2012 second quarter results which were in line with our expectations, although
general economic uncertainty in the marketplace along with declining costs for
most all of our products negatively pressured both volumes and pricing. At the
operating income level, our 2012 second quarter was up 1% over the 2012 first
quarter, and up 12% compared to the 2011 second quarter. Underlying demand
slowed slightly from the 2012 first quarter, but still represents solid
improvement when compared to the 2011 periods. The declines in the costs of
our products were supply, not demand, driven, as underlying cost inputs at the
producer level decreased, imports were plentiful, and domestic overcapacity
persisted.”

“We continue to see strength in energy (oil and gas), aerospace, farm and
heavy equipment, and auto (through our toll processing business), and expect
continued growth in these markets. Additionally, we grew further with our 2012
acquisitions of National Specialty Alloys, LLC (effective April 3, 2012) and
McKey Perforating Co., Inc. (effective February 1, 2012) plus two strategic
asset purchases. We grew in specialty products and high value-added
processing, as well as expanded into Australia,” Hannah continued.

“Our balance sheet remains strong, with only $845 million outstanding on our
$1.5 billion credit facility and net debt-to-total capital at 30% at June 30,
2012. We have ample liquidity to continue our growth strategies as well as
enhance our return to shareholders with our increased dividend,” Hannah
further commented.

“At this time, we expect economic uncertainty to persist through the 2012
third quarter, which is seasonally softer from a demand perspective even under
normal circumstances. Additionally, we do not expect any significant pricing
changes for our products during the 2012 third quarter. Given these
expectations, and considering there will be one less shipping day than in the
2012 second quarter, we currently estimate earnings per diluted share in a
range of $1.15 to $1.25 for the 2012 third quarter,” concluded Hannah.

Effective April 3, 2012, the Company further extended its footprint in the
energy market with the acquisition of National Specialty Alloys, LLC, a
processor and distributor of premium stainless steel and nickel alloy bars and
shapes based in Houston, Texas. Also in April, the assets of the Vonore,
Tennessee Worthington Steel plant were purchased by the Company’s Precision
Strip, Inc. subsidiary, which expanded our toll processing network into that
area.

Effective June 30, 2012, Reliance, through its newly-formed subsidiary Bralco
Metals (Australia) Pty Ltd, acquired substantially all of the assets of
Airport Metals (Australia) Pty Ltd, a subsidiary of Samuel Son & Co., Limited.
Airport Metals (Australia), based in Melbourne, operates as a stocking
distributor of aircraft materials and supplies. Terms were not disclosed.

On July 24, 2012, the Board of Directors increased the regular quarterly cash
dividend 67%, declaring a dividend of $.25 per share of common stock, up from
$.15 per share in the 2012 first half and $.12 per share in 2011. The dividend
is payable on September 14, 2012 to shareholders of record August 17, 2012.
The Company has increased its dividend 18 times since the IPO in 1994 and has
paid regular quarterly dividends for 53 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-month
financial results for the period ended June 30, 2012. All interested parties
are invited to listen to the web cast on July 26, 2012 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 27, 2012 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 220 locations in 38 states and Australia, 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 2012 “Fortune 500” List and the 2012 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,
2011 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.

                                                        
RELIANCE STEEL & ALUMINUM CO.

UNAUDITED SELECTED FINANCIAL DATA

(in millions, except share and per share amounts)
                                                                 
                   Three Months                                  Six Months
                   Ended June 30,                                Ended June 30,
                   2012              2011                     2012              2011
Income
Statement
Data:
Net sales          $ 2,209.7            $ 2,049.5                $ 4,498.0            $ 3,962.2
Gross                569.4                510.8                    1,147.2              1,017.1
profit^1
Operating            186.2                165.6                    370.8                320.4
income
Pre-tax              167.7                154.2                    344.3                294.6
income
Net income
attributable         108.8                98.7                     225.0                191.0
to Reliance
Diluted
earnings per
share              $ 1.44               $ 1.31                   $ 2.98               $ 2.54
attributable
to Reliance
shareholders
Weighted
average
shares               75,511,249           75,150,798               75,468,969           75,087,757
outstanding
– diluted
Gross profit         25.8       %         24.9       %             25.5       %         25.7       %
margin^1
Operating
income               8.4        %         8.1        %             8.2        %         8.1        %
margin
Pre-tax
income               7.6        %         7.5        %             7.7        %         7.4        %
margin
Net income
margin -             4.9        %         4.8        %             5.0        %         4.8        %
Reliance
Cash
dividends          $ 0.15               $ 0.12                   $ 0.30               $ 0.24
per share
                                                                                      
                                                                                      

                                   June 30,            December 31,
                                      2012                        2011^*
Balance Sheet and Other Data:
Current assets                        $ 2,608.2                   $  2,274.7
Working capital                         2,032.8                      1,698.3
Property, plant and equipment,          1,151.8                      1,105.5
net
Total assets                            6,035.3                      5,605.9
Current liabilities                     575.4                        576.4
Long-term debt                          1,519.0                      1,319.0
Total Reliance shareholders’            3,365.4                      3,143.9
equity
Capital expenditures                    86.8                         156.4
(year-to-date)
Cash provided by operations             21.2                         234.8
(year-to-date)
Net debt-to-total capital^2             29.9    %                    28.4    %
Return on Reliance                      12.0    %                    12.2    %
shareholders’ equity^3
Current ratio                           4.5                          3.9
Book value per share^4                $ 44.69                     $  41.92
                                                                  

^* Amounts were derived from audited financial statements.

^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
                                      June 30,                    December 31,
                                                      
                                      2012                        2011^*
Current assets:
Cash and cash equivalents             $ 93.6                      $  84.6
Accounts receivable, less
allowance for doubtful accounts         1,013.5                      896.2
of $22.7 at June 30, 2012 and
$22.2 at December 31, 2011
Inventories                             1,424.0                      1,212.8
Prepaid expenses and other              39.7                         47.8
current assets
Income taxes receivable                 2.1                          --
Deferred income taxes                  35.3                       33.3    
Total current assets                    2,608.2                      2,274.7
Property, plant and equipment:
Land                                    149.5                        145.8
Buildings                               672.7                        656.8
Machinery and equipment                 1,056.3                      982.9
Accumulated depreciation               (726.7  )                   (680.0  )
                                        1,151.8                      1,105.5
                                                                  
Goodwill                                1,277.6                      1,244.3
Intangible assets, net                  915.6                        895.9
Cash surrender value of life            37.6                         41.9
insurance policies, net
Investments in unconsolidated           16.7                         16.2
entities
Other assets                           27.8                       27.4    
Total assets                          $ 6,035.3                  $  5,605.9 
                                                                  
LIABILITIES AND EQUITY
                                                                  
Current liabilities:
Accounts payable                      $ 375.2                     $  335.2
Accrued expenses                        56.7                         54.0
Accrued compensation and                90.3                         111.0
retirement costs
Accrued insurance costs                 41.0                         42.1
Current maturities of long-term         12.2                         12.2
debt and short-term borrowings
Income taxes payable                   --                         21.9    
Total current liabilities               575.4                        576.4
Long-term debt                          1,519.0                      1,319.0
Long-term retirement costs              88.9                         88.6
Other long-term liabilities             27.4                         30.1
Deferred income taxes                   449.4                        439.8
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 — 200,000,000
Issued and outstanding shares –
75,278,455 at June 30, 2012 and         678.3                        657.1
75,007,694 at December 31,
2011, stated capital
Retained earnings                       2,697.5                      2,495.6
Accumulated other comprehensive        (10.4   )                   (8.8    )
loss
Total Reliance shareholders’            3,365.4                      3,143.9
equity
Noncontrolling interests               9.8                        8.1     
Total equity                           3,375.2                    3,152.0 
Total liabilities and equity          $ 6,035.3                  $  5,605.9 
                                                                  

^* Amounts were derived from audited financial statements.

                                                    
RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)
                                                             
                     Three Months                            Six Months
                     Ended June 30,                          Ended June 30,
                     2012           2011                  2012           2011
Net sales            $ 2,209.7         $ 2,049.5             $ 4,498.0         $ 3,962.2
                                                                               
Costs and
expenses:
Cost of sales
(exclusive of
depreciation           1,640.3           1,538.7               3,350.8           2,945.1
and
amortization
shown below)
Warehouse,
delivery,
selling,               346.7             313.7                 704.4             632.2
general and
administrative
Depreciation
and                   36.5            31.5                72.0            64.5    
amortization
                       2,023.5           1,883.9               4,127.2           3,641.8
                                                                               
Operating              186.2             165.6                 370.8             320.4
income
                                                                               
Other income
(expense):
Interest               (15.0   )         (15.5   )             (29.5   )         (30.1   )
Other
(expense)             (3.5    )        4.1                 3.0             4.3     
income, net
Income before          167.7             154.2                 344.3             294.6
income taxes
Income tax            57.5            54.0                116.2           100.8   
provision
Net income             110.2             100.2                 228.1             193.8
Less: Net
income
attributable          1.4             1.5                 3.1             2.8     
to
noncontrolling
interests
Net income
attributable         $ 108.8          $ 98.7               $ 225.0          $ 191.0   
to Reliance
                                                                               
Earnings per
share:
Diluted
earnings per
common share         $ 1.44           $ 1.31               $ 2.98           $ 2.54    
attributable
to Reliance
shareholders
                                                                               
Basic earnings
per common
share                $ 1.45           $ 1.32               $ 3.00           $ 2.56    
attributable
to Reliance
shareholders
                                                                               
Cash dividends       $ 0.15           $ 0.12               $ 0.30           $ 0.24    
per share
                                                                               
                                                                               

                                     
RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)
                                         
                                         Six Months Ended

                                         June 30,
                                         2012               2011
Operating activities:
Net income                               $ 228.1                    $ 193.8
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization              72.0                       64.5
expense
Deferred income tax benefit                (2.5   )                   (2.5   )
Gain on sales of property, plant           (0.2   )                   (2.1   )
and equipment
Equity in earnings of                      (1.1   )                   (1.1   )
unconsolidated entities
Dividends received from                    0.6                        0.6
unconsolidated entities
Share-based compensation expense           11.5                       10.8
Tax (benefit) deficit from                 (0.2   )                   0.3
share-based compensation
Net loss from life insurance               1.0                        1.7
policies and other investments
Changes in operating assets and
liabilities (excluding effects of
businesses acquired):
Accounts receivable                        (98.6  )                   (259.9 )
Inventories                                (183.4 )                   (299.0 )
Prepaid expenses and other assets          8.8                        27.2
Accounts payable and other                (14.8  )                  180.2  
liabilities
Net cash provided by (used in)             21.2                       (85.5  )
operating activities
                                                                    
Investing activities:
Purchases of property, plant and           (86.8  )                   (66.3  )
equipment
Acquisitions of metals service             (82.3  )                   --
centers, net of cash acquired
Proceeds from sales of property,           2.8                        7.3
plant and equipment
Investment in marketable                   (1.7   )                   --
securities
Net proceeds from redemption of           0.7                      2.3    
life insurance policies
Net cash used in investing                 (167.3 )                   (56.7  )
activities
                                                                    
Financing activities:
Net short-term debt (repayments)           (29.4  )                   0.8
borrowings
Proceeds from long-term debt               458.0                      286.0
borrowings
Principal payments on long-term            (259.5 )                   (117.1 )
debt
Payments to noncontrolling                 (1.4   )                   (1.0   )
interest holders
Dividends paid                             (22.5  )                   (17.9  )
Tax benefit (deficit) from                 0.2                        (0.3   )
share-based compensation
Exercise of stock options                 9.7                      9.4    
Net cash provided by financing             155.1                      159.9
activities
Effect of exchange rate changes on        --                       1.4    
cash
Increase in cash and cash                  9.0                        19.1
equivalents
Cash and cash equivalents at              84.6                     72.9   
beginning of year
Cash and cash equivalents at end         $ 93.6                    $ 92.0   
of period
                                                                    
Supplemental cash flow
information:
Interest paid during the period          $ 29.0                     $ 26.4
Income taxes paid during the             $ 142.4                    $ 60.9
period
                                                                    
Non-cash investing and financing
activities:
Debt assumed in connection with an
acquisition of a metals service          $ 29.5                     $ --
center

Contact:

Reliance Steel & Aluminum Co.
Brenda Miyamoto
Investor Relations
(213) 576-2428
investor@rsac.com