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Reliance Steel & Aluminum Co. Reports 2012 Third Quarter Financial Results



  Reliance Steel & Aluminum Co. Reports 2012 Third Quarter Financial Results

                     * EPS of $1.30, up 15% year-over-year
                * Sales of $2.06 billion, down 4% year-over-year
                        * Tons sold up 2% year-over-year
  * Anticipates Q4 2012 EPS of $.90 - $1.00

Business Wire

LOS ANGELES -- October 25, 2012

Reliance Steel & Aluminum Co. (NYSE:RS) today reported its financial results
for the third quarter and nine months ended September 30, 2012.

Third Quarter 2012 Financial Highlights

  * Sales were $2.06 billion, down 3.9% from $2.14 billion in the third
    quarter of 2011 and down 7.0% from $2.21 billion in the second quarter of
    2012. Tons sold were up 2.0% from the third quarter of 2011 and down 3.5%
    from the second quarter of 2012.
  * Net income was $98.1 million, up 15.5% from $84.9 million in the third
    quarter of 2011 and down 9.8% from $108.8 million in the second quarter of
    2012.
  * Earnings per diluted share were $1.30, up 15.0% from $1.13 in the third
    quarter of 2011 and down 9.7% from $1.44 in the second quarter of 2012.
  * The 2012 third quarter financial results include in cost of sales a
    pre-tax LIFO credit, or income, of $27.0 million, compared with a pre-tax
    LIFO charge, or expense, of $22.5 million for the third quarter of 2011
    and a credit of $7.5 million for the second quarter of 2012.
  * Cash flow from operations was $247.6 million in the 2012 third quarter.
  * Quarterly dividend rate was increased to $.25 per share, an increase of
    67%.

Management Commentary

“Overall demand in the third quarter was in-line with expectations after
taking into account normal seasonal fluctuations and one less shipping day
compared to the prior quarter and same period last year,” said David H.
Hannah, Chairman and CEO of Reliance. “Driven mostly by increased sales of our
stainless steel and aluminum products, as well as contributions from our 2011
and 2012 acquisitions, total tons sold increased 2.0% over last year’s third
quarter. Additionally, our sales related to the auto industry through our toll
processing operations were up significantly compared to last year. However,
our net sales reflect downward pressure on pricing, as our average price per
ton sold fell 3.8% sequentially and 6.3% year-over-year. While we expected
economic uncertainty to continue as we entered the third quarter, price
decreases in the quarter were greater than expected for all of our products.
Similar to last quarter, pricing trends for our products were supply—not
demand—driven, as underlying cost inputs at the producer level continued to
decrease, imports remained at high levels and domestic overcapacity persisted.
As such, sales momentum continued to decelerate in the quarter relative to the
second quarter of 2012. On a year-to-date basis, our tons sold are up 8.5%,
operating income is up 13.7%, net income of $323.1 million is up 17.1%, and
earnings per diluted share of $4.28 were up 16.3%.”

Mr. Hannah continued, “Looking at our balance sheet, Reliance continues to
operate from a position of financial strength. At September 30, 2012, our net
debt-to-total capital ratio improved to 26.4% with $788 million available on
our $1.5 billion credit facility. Moreover, our cash flow from operations was
$247.6 million during the 2012 third quarter. The liquidity available on our
credit facility provides ample room to re-invest in our business and create
long-term shareholder value. In addition to completing the recent acquisitions
of GH Metal Solutions, Inc. and Sunbelt Steel Texas, LLC, during the third
quarter, we maintained our recently increased quarterly cash dividend of $0.25
per share.”

Third Quarter 2012 Business Metrics

(tons in thousands)                                                                 
          Q3           Q2           Sequential       Q3           Year-Over-Year
                                    Quarter                       change
          2012         2012         Change           2011
Tons      1,106        1,146        (3.5%)           1,084        2.0%
sold
                                                                   
Avg.
price
per       $1,848       $1,921       (3.8%)           $1,973       (6.3%)
ton
sold
                                                                 

Third Quarter 2012 Major Commodity Metrics

          Tons Sold (tons in thousands; percent            Average Selling Price
          change)                                          per Ton Sold (percent
                                                           change)
          Q3     Q2     Sequential   Q3     Year-Over-     Sequential   Year-Over-
          2012   2012   Quarter      2011   Year           Quarter      Year
          Tons   Tons   Change       Tons   Change         Change       Change
          Sold   Sold                Sold
Carbon    887    921    (3.7%)       876    1.3%           (4.7%)       (8.2%)
steel
Aluminum  59     62     (4.8%)       57     3.5%           (2.5%)       (5.7%)
Stainless 59     60     (1.7%)       53     11.3%          (3.7%)       (9.3%)
steel
Alloy     74     77     (3.9%)       77     (3.9%)         (4.2%)       1.4%
                                                                       

End-market Commentary

Relative strength in aerospace, energy (oil and gas), farm and heavy
equipment, and auto (through the Company’s toll processing business), continue
to offset weakness in non-residential construction.

  * Commercial aerospace, consistent with the first half of 2012, continues to
    perform well, led by strength in both demand and pricing.
  * Energy (oil and gas) continues to be among the Company’s strongest
    end-markets. Demand, while still solid, has softened compared to the first
    half of the year. Pricing has also weakened.
  * Heavy industry performed well in the third quarter of 2012, albeit at a
    slower pace than the first half of 2012, due partly to increasingly
    conservative inventory management among industry OEM’s, as well as a
    general slowing in the industrial economy.
  * Automotive, supported by the company’s toll processing businesses in the
    U.S. and Mexico, exhibited robust demand in the third quarter.
  * Non-residential construction continued to show signs of a recovery,
    although at significantly reduced demand levels from its peak in 2006.
    Consistent with the first half of 2012, North American industrial
    construction related to manufacturing and energy continued to exhibit the
    most improvement.

Balance Sheet & Liquidity

As of September 30, 2012, total debt outstanding at quarter end was $1.37
billion, or a net debt-to-total capital ratio of 26.4%. The Company currently
has $788 million available on its $1.5 billion credit facility. The Company is
pleased with its overall financial position and believes it has sufficient
liquidity and financial flexibility to continue executing on its growth
strategy and enhancing shareholder returns.

Corporate Developments

Effective October 1, 2012, Reliance completed the acquisition of all the
outstanding capital stock of GH Metal Solutions, Inc. (formerly known as Gas
House, Inc.), a value added processor and fabricator of carbon steel products
located in Fort Payne, Alabama. For the year 2011, GH’s sales were
approximately $44 million.

Effective October 1, 2012, Reliance acquired all the outstanding limited
liability company interests of Sunbelt Steel Texas, LLC (“Sunbelt”), a value
added distributor of special alloy steel bar and heavy-wall tubing products to
the oil and gas industry. Sunbelt was founded in 1986 and is now headquartered
in Houston, Texas with an additional location in Lafayette, Louisiana. Net
sales of Sunbelt for the year 2011 were approximately $48 million.

On July 24, 2012, Reliance’s Board of Directors increased the Company’s
regular quarterly cash dividend by 67% to $.25 per share of common stock from
$.15 per share for the first and second quarters of 2012. The new quarterly
cash dividend rate is more than double the 2011 rate.

On October 23, 2012, the Board of Directors declared a regular quarterly cash
dividend of $0.25 per share of common stock. The dividend is payable on
December 20, 2012 to shareholders of record November 29, 2012. The Company has
increased its dividend 18 times since its initial public offering in 1994 and
has paid regular quarterly dividends for 53 consecutive years.

Business Outlook

The Company expects that global economic uncertainty will continue to impact
the industry in the fourth quarter. In addition, fewer shipping days because
of the holidays and extended holiday-related closures at various of our
customers will lower our tons sold in the fourth quarter as compared to the
2012 third quarter, which is a normal seasonal trend. Carbon steel prices are
still fragile, while stainless and aluminum prices are anticipated to increase
slightly. As a result, for the fourth quarter ending December 31, 2012,
management currently expects earnings per diluted share to be in the range of
$.90 to $1.00.

Conference Call Details

A conference call and simultaneous webcast to discuss third quarter financial
results and business outlook will be held today, October 25, 2012, at 11:00
a.m. Eastern / 8:00 a.m. Pacific. David Hannah, Reliance Steel & Aluminum
Co.'s Chairman of the Board and Chief Executive Officer, Gregg Mollins,
President and Chief Operating Officer and Karla Lewis, Executive Vice
President and Chief Financial Officer, will host the call. To listen to the
live call by telephone, please dial (973) 413-6104 approximately 10 minutes
prior to the start time and use the conference entry code: 1799. Additionally,
a live webcast of the call will be available on Reliance Steel & Aluminum
Co.’s web site at www.rsac.com. Participants are encouraged to visit the web
site at least 15 minutes prior to the start of the call to register and to
download and install any necessary audio software.

For those unable to participate during the live broadcast, a replay of the
call will also be available beginning that same day at 1:30 p.m. Eastern Time
until 11:59 p.m. Eastern Time on Thursday, November 8, 2012 by dialing (973)
528-0005 and entering the conference entry code: 1799. The webcast will remain
posted on the investor relations portion of Reliance’s web site at
www.rsac.com for 90 days.

About Reliance Steel & Aluminum Co.

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 Reports on Form 10-Q for the quarters ended March 31, 2012
and June 30, 2012.

UNAUDITED SELECTED FINANCIAL DATA
(in millions, except share and per share amounts)
 
                 Three Months                            Nine Months
                 Ended September 30,                     Ended September 30,
                   2012                 2011               2012                 2011        
Income
Statement
Data:
Net sales        $ 2,055.3            $ 2,138.6          $ 6,553.3            $ 6,100.8
Gross              535.3                493.9              1,682.5              1,511.0
profit^1
Operating          152.6                140.1              523.4                460.5
income
Pre-tax            143.8                118.6              488.1                413.2
income
Net income
attributable       98.1                 84.9               323.1                275.9
to Reliance
Diluted
earnings per
share            $ 1.30               $ 1.13             $ 4.28               $ 3.68
attributable
to Reliance
shareholders
Weighted
average
shares             75,710,040           74,963,127         75,549,903           75,046,689
outstanding
– diluted
Gross profit       26.0       %         23.1       %       25.7       %         24.8       %
margin^1
Operating
income             7.4        %         6.6        %       8.0        %         7.5        %
margin
Pre-tax
income             7.0        %         5.5        %       7.4        %         6.8        %
margin
Net income
margin -           4.8        %         4.0        %       4.9        %         4.5        %
Reliance
Cash
dividends        $ 0.25               $ 0.12             $ 0.55               $ 0.36
per share
                                                                                            

                                               September 30,     December 31,
                                                  2012           2011^*
Balance Sheet and Other Data:
Current assets                                 $  2,580.2        $  2,274.7
Working capital                                   1,880.3           1,698.3
Property, plant and equipment, net                1,174.7           1,105.5
Total assets                                      6,030.4           5,605.9
Current liabilities                               699.9             576.4
Long-term debt                                    1,278.8           1,319.0
Total Reliance shareholders’ equity               3,475.1           3,143.9
Capital expenditures (year-to-date)               137.4             156.4
Cash provided by operations (year-to-date)        268.8             234.8
Net debt-to-total capital^2                       26.4     %        28.4    %
Return on Reliance shareholders’ equity^3         12.4     %        12.2    %
Current ratio                                     3.7               3.9
Book value per share^4                         $  46.03          $  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
                                              September 30,       December 31,
                                                                 
                                              2012                2011^*
Current assets:
Cash and cash equivalents                     $  120.6            $  84.6
Accounts receivable, less allowance for
doubtful accounts of $23.5 at September          978.5               896.2
30, 2012 and $22.2 at December 31, 2011
Inventories                                      1,382.5             1,212.8
Prepaid expenses and other current assets        31.6                47.8
Income taxes receivable                          33.3                --
Deferred income taxes                            33.7                33.3     
Total current assets                             2,580.2             2,274.7
Property, plant and equipment:
Land                                             148.3               145.8
Buildings                                        677.5               656.8
Machinery and equipment                          1,097.0             982.9
Accumulated depreciation                         (748.1   )          (680.0  )
                                                 1,174.7             1,105.5
                                                                   
Goodwill                                         1,281.2             1,244.3
Intangible assets, net                           909.9               895.9
Cash surrender value of life insurance           37.9                41.9
policies, net
Investments in unconsolidated entities           16.8                16.2
Other assets                                     29.7                27.4     
Total assets                                  $  6,030.4          $  5,605.9  
                                                                   
LIABILITIES AND EQUITY
                                                                   
Current liabilities:
Accounts payable                              $  381.9            $  335.2
Accrued expenses                                 84.1                54.0
Accrued compensation and retirement costs        103.9               111.0
Accrued insurance costs                          41.2                42.1
Current maturities of long-term debt and         88.8                12.2
short-term borrowings
Income taxes payable                             --                  21.9     
Total current liabilities                        699.9               576.4
Long-term debt                                   1,278.8             1,319.0
Long-term retirement costs                       88.7                88.6
Other long-term liabilities                      27.3                30.1
Deferred income taxes                            450.2               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 –
75,540,898 at September 30, 2012 and             694.9               657.1
75,007,694 at December 31, 2011, stated
capital
Retained earnings                                2,776.5             2,495.6
Accumulated other comprehensive gain             3.7                 (8.8    )
(loss)
Total Reliance shareholders’ equity              3,475.1             3,143.9
Noncontrolling interests                         10.4                8.1      
Total equity                                     3,485.5             3,152.0  
Total liabilities and equity                  $  6,030.4          $  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                    Nine Months
                   Ended September 30,             Ended September 30,
                     2012            2011            2012            2011     
Net sales          $ 2,055.3       $ 2,138.6       $ 6,553.3       $ 6,100.8
                                                                    
Costs and
expenses:
Cost of sales
(exclusive of
depreciation
and
amortization         1,520.0         1,644.7         4,870.8         4,589.8
shown below)
Warehouse,
delivery,
selling,             345.4           319.6           1,049.8         951.8
general and
administrative
Depreciation
and                  37.3            34.2            109.3           98.7     
amortization
                     1,902.7         1,998.5         6,029.9         5,640.3
                                                                    
Operating            152.6           140.1           523.4           460.5
income
                                                                    
Other income
(expense):
Interest             (14.7   )       (15.0   )       (44.2   )       (45.1   )
Other income         5.9             (6.5    )       8.9             (2.2    )
(expense), net
Income before        143.8           118.6           488.1           413.2
income taxes
Income tax           44.4            32.3            160.6           133.1    
provision
Net income           99.4            86.3            327.5           280.1
Less: Net
income
attributable         1.3             1.4             4.4             4.2      
to
noncontrolling
interests
Net income
attributable       $ 98.1          $ 84.9          $ 323.1         $ 275.9    
to Reliance
                                                                    
Earnings per
share:
Diluted
earnings per
common share       $ 1.30          $ 1.13          $ 4.28          $ 3.68     
attributable
to Reliance
shareholders
                                                                    
Basic earnings
per common
share              $ 1.30          $ 1.13          $ 4.30          $ 3.69     
attributable
to Reliance
shareholders
                                                                    
Cash dividends     $ 0.25          $ 0.12          $ 0.55          $ 0.36     
per share
                                                                              

RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
                                                   Nine Months Ended
                                                  
                                                   September 30,
                                                     2012             2011    
Operating activities:
Net income                                         $ 327.5          $ 280.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense                109.3            98.7
Deferred income tax benefit                          (2.8   )         (3.8   )
Gain on sales of property, plant and equipment       (3.1   )         (2.6   )
Equity in earnings of unconsolidated entities        (1.6   )         (1.6   )
Dividends received from unconsolidated               1.0              2.5
entities
Share-based compensation expense                     17.2             16.4
Tax deficit from share-based compensation            —                0.2
Net loss from life insurance policies and            2.1              3.8
other investments
Changes in operating assets and liabilities
(excluding effects of businesses acquired):
Accounts receivable                                  (60.6  )         (270.7 )
Inventories                                          (136.9 )         (294.6 )
Prepaid expenses and other assets                    (16.3  )         29.3
Accounts payable and other liabilities               33.0             159.6   
Net cash provided by operating activities            268.8            17.3
                                                                     
Investing activities:
Purchases of property, plant and equipment           (137.4 )         (112.7 )
Acquisitions of metals service centers, net of       (83.0  )         (306.5 )
cash acquired
Proceeds from sales of property, plant and           6.7              9.1
equipment
Net investment in marketable securities              (1.1   )         --
Net investment in life insurance policies            (1.8   )         --
Net proceeds from redemptions of life                2.8              3.6     
insurance policies
Net cash used in investing activities                (213.8 )         (406.5 )
                                                                     
Financing activities:
Net short-term debt repayments                       (28.1  )         (102.8 )
Proceeds from long-term debt borrowings              531.0            913.0
Principal payments on long-term debt                 (497.9 )         (379.5 )
Debt issuance costs                                  —                (7.3   )
Payments to noncontrolling interest holders          (2.1   )         (2.6   )
Dividends paid                                       (41.3  )         (26.9  )
Tax deficit from share-based compensation            —                (0.2   )
Exercise of stock options                            20.6             9.6     
Net cash (used in) provided by financing             (17.8  )         403.3
activities
Effect of exchange rate changes on cash              (1.2   )         4.1     
Increase in cash and cash equivalents                36.0             18.2
Cash and cash equivalents at beginning of year       84.6             72.9    
Cash and cash equivalents at end of period         $ 120.6          $ 91.1    
                                                                     
Supplemental cash flow information:
Interest paid during the period                    $ 35.6           $ 33.8
Income taxes paid during the period                $ 218.6          $ 111.5
                                                                     
Non-cash investing and financing activities:
Debt assumed in connection with acquisitions       $ 29.5           $ 104.8
of metals service centers

Contact:

Reliance Steel & Aluminum Co.
Brenda Miyamoto
Investor Relations
(213) 576-2428
investor@rsac.com
or
Addo Communications
(310) 829-5400
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