Reliance Steel & Aluminum Co. (NYSE:RS) today reported its
financial results for the third quarter ended September 30, 2016.
Third Quarter 2016 Financial Highlights
- Sales were $2.19 billion, down 4.4% from $2.29 billion in the
third quarter of 2015 and down 0.8% from $2.20 billion in the
second quarter of 2016.
- Tons sold were down 2.7% from the third quarter of 2015 and
down 4.9% from the second quarter of 2016, with the average selling
price per ton sold down 1.8% from the third quarter of 2015 and up
4.4% from the second quarter of 2016.
- Net income attributable to Reliance was $49.5 million, compared
to $51.4 million in the third quarter of 2015 and $100.9 million in
the second quarter of 2016. Net income attributable to Reliance
included a pre-tax impairment and restructuring charge of $67.3
million, or $0.57 per diluted share, in the third quarter of 2016,
and $55.5 million, or $0.47 per diluted share, in the third quarter
of 2015. These charges were primarily related to certain of
the Company’s businesses serving the energy industry.
- Earnings per diluted share were $0.68, compared to $0.69 in the
third quarter of 2015 and $1.38 in the second quarter of 2016.
- Non-GAAP earnings per diluted share were $1.25, compared to
$1.16 in the third quarter of 2015 and $1.36 in the second quarter
of 2016.
- Reliance recorded a pre-tax LIFO inventory valuation credit
adjustment, or income, of $11.3 million in the third quarter of
2016, compared to $35.0 million in the third quarter of 2015,
included in cost of sales. In the second quarter of 2016,
Reliance did not record a LIFO inventory valuation adjustment.
- The effective tax rate was 28.2%, compared to 32.1% in the
third quarter of 2015, and 32.7% in the second quarter of
2016.
- Cash flow from operations was $182.4 million in the third
quarter of 2016 and net debt-to-total capital was 32.2% at
September 30, 2016.
- A quarterly cash dividend of $0.425 per share was declared on
October 19, 2016 for stockholders of record as of November 18, 2016
and will be payable on December 16, 2016.
Management Commentary “I continue to be very
pleased with our operational performance,” said Gregg Mollins,
President and Chief Executive Officer of Reliance. “Although
our Non-GAAP FIFO gross profit margin declined slightly from 31.1%
in the prior quarter to 30.0% in the third quarter of 2016, our
managers in the field continued to execute our business model
effectively, despite both metals demand and pricing softening more
than we had originally expected. We anticipated a decline in
our FIFO gross profit margin as we were able to capitalize on mill
price increases during the second quarter that were not present in
the third quarter. Given this environment, we are very proud of our
managers’ ability to achieve these strong gross profit margin
levels, which are supported by our diligent inventory management
and significant investments in innovative, value-added processing
equipment.”
Mr. Mollins continued, “As a result of the multiple price
increases that were announced throughout the second quarter of
2016, our third quarter average selling price per ton sold was up
4.4% over the prior quarter, though still below 2015 levels. That
said, the positive metals pricing environment began to lose
momentum as the third quarter progressed and prices have continued
to decline thus far into the fourth quarter. The trade cases
filed by U.S. producers coupled with production capacity discipline
by these same mills continue to be supportive of domestic
pricing. However, overall softer demand and the normal
seasonal factors heading into the fourth quarter have contributed
to current pricing pressure.”
“We continuously evaluate each of our 300 plus operations to
determine if they meet our profitability standards. Given our
updated long-term outlook for the energy market, we recorded a
pre-tax impairment and restructuring charge of $67.3 million in the
third quarter of 2016 primarily related to certain of our
operations servicing the energy end market. The
charge includes the planned closure of a few of our locations,
which we believe is necessary to enhance our overall operating
efficiencies and long-term profitability,” Mr. Mollins further
stated.
Mr. Mollins concluded, “I commend our managers for their
phenomenal ability to execute throughout all cycles. I am
pleased with our financial performance for the quarter which
benefitted from our ongoing pricing discipline as well as effective
expense and inventory management. For the balance of the year
and into 2017, we plan to continue our strong operational execution
of our successful business model, while also maintaining our focus
on growth through both organic investments and acquisitions.”
Third Quarter 2016 Business
Metrics |
|
|
|
|
|
(tons in thousands; percentage
change) |
|
Q3 2016 |
Q2 2016 |
Sequential Quarter Change |
Q3 2015 |
Year-Over- Year Change |
Tons sold |
|
1,445.5 |
|
|
1,519.4 |
|
|
(4.9 |
%) |
|
1,485.9 |
|
|
(2.7 |
%) |
Tons sold (same-store) |
|
1,426.3 |
|
|
1,501.6 |
|
|
(5.0 |
%) |
|
1,485.9 |
|
|
(4.0 |
%) |
Average selling price per ton sold |
$ |
1,501 |
|
$ |
1,438 |
|
|
4.4 |
% |
$ |
1,529 |
|
|
(1.8 |
%) |
Average selling price per ton sold
(same-store) |
$ |
1,494 |
|
$ |
1,431 |
|
|
4.4 |
% |
$ |
1,529 |
|
|
(2.3 |
%) |
Third Quarter 2016 Major Commodity Metrics |
|
|
|
Tons Sold (tons in thousands; percentage
change) |
Average Selling Price per Ton Sold (percentage
change) |
|
Q3 2016 Tons Sold |
Q2 2016 Tons Sold |
Sequential Quarter Change |
Q3 2015 Tons Sold |
Year-Over- Year Change |
Sequential Quarter Change |
Year-Over- Year Change |
Carbon steel |
1,167.4 |
1,233.9 |
|
(5.4 |
%) |
1,216.0 |
|
(4.0 |
%) |
|
6.7 |
% |
|
0.8 |
% |
Aluminum |
86.3 |
91.9 |
|
(6.1 |
%) |
85.7 |
|
0.7 |
% |
|
1.1 |
% |
|
(2.2 |
%) |
Stainless steel |
78.0 |
80.9 |
|
(3.6 |
%) |
76.3 |
|
2.2 |
% |
|
4.0 |
% |
|
(6.2 |
%) |
Alloy |
44.6 |
41.7 |
|
7.0 |
% |
56.0 |
|
(20.4 |
%) |
|
(3.4 |
%) |
|
(4.1 |
%) |
|
Sales ($'s in millions; percentage
change) |
|
Q3 2016 Sales |
Q2 2016 Sales |
Sequential Quarter Change |
Q3 2015 Sales |
Year-Over- Year Change |
Carbon steel |
$ |
1,183.9 |
|
$ |
1,172.6 |
|
|
1.0 |
% |
$ |
1,223.4 |
|
|
(3.2 |
%) |
Aluminum |
$ |
439.2 |
|
$ |
462.8 |
|
|
(5.1 |
%) |
$ |
446.2 |
|
|
(1.6 |
%) |
Stainless steel |
$ |
311.0 |
|
$ |
310.1 |
|
|
0.3 |
% |
$ |
324.4 |
|
|
(4.1 |
%) |
Alloy |
$ |
114.2 |
|
$ |
110.6 |
|
|
3.3 |
% |
$ |
149.6 |
|
|
(23.7 |
%) |
Year-to-Date (9 months) 2016 Business Metrics |
|
(tons in thousands; percentage
change) |
|
|
2016 |
|
|
2015 |
|
Year-Over- Year Change |
Tons sold |
|
4,467.9 |
|
|
4,538.6 |
|
|
(1.6 |
%) |
Tons sold (same-store) |
|
4,415.8 |
|
|
4,538.6 |
|
|
(2.7 |
%) |
Average selling price per ton sold |
$ |
1,454 |
|
$ |
1,607 |
|
|
(9.5 |
%) |
Average selling price per ton sold
(same-store) |
$ |
1,447 |
|
$ |
1,607 |
|
|
(10.0 |
%) |
Year-to-Date (9 months) 2016
Major Commodity Metrics |
|
|
Tons Sold (tons in thousands; percentage
change) |
Average Selling Price per Ton Sold (percentage
change) |
|
2016 Tons Sold |
2015 Tons Sold |
Year-Over- Year Change |
Year-Over-Year Change |
Carbon steel |
3,617.9 |
3,703.8 |
|
(2.3 |
%) |
|
(9.7 |
%) |
Aluminum |
268.3 |
261.7 |
|
2.5 |
% |
|
(4.3 |
%) |
Stainless steel |
237.1 |
231.9 |
|
2.2 |
% |
|
(14.7 |
%) |
Alloy |
135.3 |
183.1 |
|
(26.1 |
%) |
|
(5.6 |
%) |
|
Sales ($'s in millions; percentage
change) |
|
2016 Sales |
2015 Sales |
Year-Over-Year Change |
Carbon steel |
$ |
3,483.4 |
|
$ |
3,946.9 |
|
|
(11.7 |
%) |
Aluminum |
$ |
1,359.1 |
|
$ |
1,385.1 |
|
|
(1.9 |
%) |
Stainless steel |
$ |
921.4 |
|
$ |
1,056.5 |
|
|
(12.8 |
%) |
Alloy |
$ |
356.2 |
|
$ |
510.5 |
|
|
(30.2 |
%) |
|
|
|
|
|
|
|
|
|
|
End Market CommentaryConsistent with normal
seasonal patterns, Reliance’s shipments declined in the third
quarter of 2016 compared to the second quarter of 2016. In
addition, overall metals demand weakened more than expected.
Despite these factors, however, Reliance continues to benefit from
its strategy of serving diverse end markets and providing superior
quality and processing services through its extensive capital
investments. The Company’s same-store tons sold were down
2.7% in the nine months ended September 30, 2016, compared to the
MSCI industry decline of 6.8%.
- Automotive demand remains strong. Reliance supports the
automotive market mainly through the Company’s toll processing
operations in the U.S. and Mexico and continues to increase its
toll processing volume through investments in new facilities and
processing equipment primarily to support incremental demand from
the increased usage of aluminum by the automotive industry.
- Aerospace demand also remains strong. Reliance maintains
its positive outlook in aerospace and expects to continue growing
its market share in this end market given the capital investments
and key acquisitions it has made in this space.
- Heavy industry demand declined further. However, the
Company remains optimistic that the five year infrastructure bill,
which was passed in December 2015, should help improve future
demand trends in the infrastructure and road construction equipment
markets.
- Non-residential construction demand remains relatively
steady. Reliance believes that this important end market will
continue to experience gradual, positive growth in the coming
quarters and that Reliance is well positioned to absorb increased
volume into its existing cost structure as this market improves
over time.
- Energy (oil and gas) demand for the products Reliance sells
remains weak. Reliance expects drilling activity levels to remain
under pressure for the foreseeable future but has recently begun to
see early signs of new activity in the market.
Balance Sheet & LiquidityThe Company
generated cash flow from operations of $387.6 million in the first
nine months of 2016. Total debt outstanding was $2.1 billion
at September 30, 2016, for a net debt-to-total capital ratio of
32.2%. The Company had $1.1 billion available for borrowings
on its $1.5 billion revolving credit facility at September 30,
2016.
As previously announced, on September 30, 2016, Reliance entered
into a new $2.1 billion credit agreement comprised of a $1.5
billion unsecured revolving credit facility and a $600 million
unsecured term loan. The new credit agreement, which has a term of
five years, replaces the Company's existing credit agreement with
substantially consistent terms. Both facilities allow for
prepayments, and the credit agreement includes an option to
increase the revolving credit facility for up to an additional $500
million.
“We are very pleased with our overall liquidity position which
provides us with the flexibility and resources to continue
investing in the growth of our business, both organically and
through M&A opportunities, as well as to return value to our
stockholders,” commented Karla Lewis, Senior Executive Vice
President and Chief Financial Officer of Reliance. “During
the first nine months of the year, we were able to use our strong
cash from operations and borrowings on our credit facility to fund
$110.6 million of capital expenditures and $349.0 million for our
three acquisitions, as well as to pay $89.5 million in dividends to
our valued stockholders. In addition, we intend to use
proceeds from the revolving credit facility to retire $350.0
million of 6.2% senior unsecured notes when they mature on November
15, 2016, which will result in pro forma interest savings of
approximately $15.0 million per year.”
Impairment and RestructuringReliance recorded a
pre-tax impairment and restructuring charge of $67.3 million, or
$0.57 per diluted share, in the third quarter of 2016 mainly due to
the Company's long-term outlook for the energy market, as well as
the Company's planned closure or sale of certain locations.
In the third quarter of 2015, the Company recorded a pre-tax
impairment and restructuring charge of $55.5 million, or $0.47 per
share, also related mainly to its businesses serving the energy
market.
Corporate DevelopmentsAs previously announced,
effective August 1, 2016, Reliance acquired all of the capital
stock of Alaska Steel Company (“Alaska Steel”), a full-line metal
distributor founded in 1982 and headquartered in Anchorage, Alaska.
Alaska Steel represents Reliance's entry into the significant
Alaskan market and furthers Reliance’s geographic, customer and
product diversification. The Company provides steel, aluminum,
stainless and specialty metals and related processing services to a
variety of customers in diverse industries throughout Alaska
including infrastructure, energy and mining. Alaska Steel's net
sales were approximately $33 million for the year ended December
31, 2015.
During the nine months ended September 30, 2016, the Company did
not repurchase any shares of its common stock under its existing
share repurchase program. In 2015, Reliance repurchased 6.2
million shares at an average price of $57.39 per share, for a total
of $355.5 million. At September 30, 2016, approximately 8.4
million shares remained available for repurchase under the share
repurchase program. The Company expects to opportunistically
repurchase shares of its common stock going forward.
On October 4, 2016, the Company expanded its Board of Directors
from nine to 11 members with the appointment of Karen W. Colonias
and Douglas W. Stotlar as independent directors. Both Ms. Colonias
and Mr. Stotlar were also appointed to the Audit Committee and the
Compensation Committee of Reliance’s Board of Directors. Ms.
Colonias and Mr. Stotlar have extensive board and management
experience which complements Reliance’s existing Board membership.
Reliance believes Ms. Colonias and Mr. Stotlar will provide
valuable perspectives and insights to enhance the execution of the
Company’s successful growth and operational strategies.
Business Outlook Reliance management continues
to believe the U.S. economy is generally healthy and anticipates a
continued slow recovery. However, given increased uncertainty in
the market at this time, along with normal seasonal patterns that
result in fewer shipping days in the fourth quarter due to
holiday-related customer closures, the Company is cautious in
regard to both business activity levels and metals pricing in the
fourth quarter of 2016. Reliance management estimates
tons sold to be down 5% to 7% in the fourth quarter of 2016
compared to the third quarter of 2016. Further, management believes
that metals pricing for most of the Company’s products will
experience continued downward pressure in the fourth quarter of
2016 and therefore expects its average selling price will be down
1% to 3% from the third quarter of 2016. As a result, management
currently expects Non-GAAP earnings per diluted share to be in the
range of $0.65 to $0.75 for the fourth quarter of 2016.
Conference Call DetailsA conference call and
simultaneous webcast to discuss the third quarter 2016 financial
results and business outlook will be held today, October 20, 2016
at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. To
listen to the live call by telephone, please dial (877) 407-0789
(U.S. and Canada) or (201) 689-8562 (International) approximately
10 minutes prior to the start time and use conference ID:
13645950. The call will also be broadcast live over the
Internet hosted on the Investors section of the Company's website
at investor.rsac.com.
For those unable to participate during the live broadcast, a
replay of the call will also be available beginning that same day
at 2:00 p.m. Eastern Time until 11:59 p.m. Eastern Time on
Thursday, November 3, 2016 by dialing (844) 512-2921 (U.S. and
Canada) or (412) 317-6671 (International) and entering the
conference ID: 13645950. The webcast will remain posted on the
Investors section of Reliance’s web site at investor.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 300 locations in 40 states and
twelve countries outside of the United States, Reliance 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 focuses on small orders
with quick turnaround and increasing levels of value-added
processing. In 2015, Reliance’s average order size was
$1,660, approximately 47% of orders included value-added processing
and approximately 40% of orders were delivered within 24 hours.
Reliance Steel & Aluminum Co.’s press releases and additional
information are available on the Company’s web site at
www.rsac.com.
Forward-Looking StatementsThis press release
contains certain statements that are, or may be deemed to be,
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may include, but are not limited to, discussions of
Reliance’s business strategies and its expectations concerning
future demand and metals pricing and the Company’s results of
operations, margins, profitability, impairment charges, liquidity,
litigation matters and capital resources. In some cases, you
can identify forward-looking statements by terminology such as
"may," "will," "should," "could," "would," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" and
"continue," the negative of these terms, and similar
expressions.
These forward-looking statements are based on management's
estimates, projections and assumptions as of today’s date that may
not prove to be accurate. Forward-looking statements involve
known and unknown risks and uncertainties and are not guarantees of
future performance. Actual outcomes and results may differ
materially from what is expressed or forecasted in these
forward-looking statements as a result of various important
factors, including, but not limited to, those disclosed in reports
Reliance has filed with the Securities and Exchange Commission (the
"SEC"). As a result, these statements speak only as of the
date that they are made, and Reliance disclaims any and all
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Important risks and uncertainties about
Reliance’s business can be found in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2015, filed with the
SEC.
(Tables to follow)
RELIANCE STEEL & ALUMINUM
CO.SELECTED UNAUDITED FINANCIAL
DATA(in millions, except share and per share
amounts) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
|
2,185.2 |
|
|
$ |
|
2,286.2 |
|
|
$ |
|
6,551.8 |
|
|
$ |
|
7,324.3 |
|
Gross profit1 |
|
|
654.6 |
|
|
|
|
638.3 |
|
|
|
|
1,976.4 |
|
|
|
|
1,964.9 |
|
Operating income |
|
|
93.5 |
|
|
|
|
101.7 |
|
|
|
|
396.4 |
|
|
|
|
431.2 |
|
Pre-tax income |
|
|
70.5 |
|
|
|
|
77.7 |
|
|
|
|
331.3 |
|
|
|
|
364.2 |
|
Net income attributable to Reliance |
|
|
49.5 |
|
|
|
|
51.4 |
|
|
|
|
242.6 |
|
|
|
|
242.9 |
|
Diluted earnings per share attributable to |
|
|
|
|
|
|
|
|
|
|
|
Reliance
stockholders |
$ |
|
0.68 |
|
|
$ |
|
0.69 |
|
|
$ |
|
3.32 |
|
|
$ |
|
3.21 |
|
Non-GAAP diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
attributable
to Reliance stockholders2 |
$ |
|
1.25 |
|
|
$ |
|
1.16 |
|
|
$ |
|
3.64 |
|
|
$ |
|
3.67 |
|
Weighted average shares outstanding – |
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
73,280,797 |
|
|
|
|
74,136,193 |
|
|
|
|
73,034,938 |
|
|
|
|
75,673,596 |
|
Gross profit margin1 |
|
|
30.0 |
% |
|
|
|
27.9 |
% |
|
|
|
30.2 |
% |
|
|
|
26.8 |
% |
Operating income margin |
|
|
4.3 |
% |
|
|
|
4.4 |
% |
|
|
|
6.1 |
% |
|
|
|
5.9 |
% |
Pre-tax income margin |
|
|
3.2 |
% |
|
|
|
3.4 |
% |
|
|
|
5.1 |
% |
|
|
|
5.0 |
% |
Net income margin – Reliance |
|
|
2.3 |
% |
|
|
|
2.2 |
% |
|
|
|
3.7 |
% |
|
|
|
3.3 |
% |
Cash dividends per share |
$ |
|
0.425 |
|
|
$ |
|
0.400 |
|
|
$ |
|
1.225 |
|
|
$ |
|
1.200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, |
|
December
31, |
|
|
|
|
|
2016 |
|
2015* |
|
|
|
|
|
|
Balance Sheet and Other
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
$ |
|
2,848.9 |
|
|
$ |
|
2,554.2 |
|
|
|
|
|
|
|
Working capital |
|
|
1,845.2 |
|
|
|
|
1,564.5 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
1,665.4 |
|
|
|
|
1,635.5 |
|
|
|
|
|
|
|
Total assets |
|
|
7,584.9 |
|
|
|
|
7,121.6 |
|
|
|
|
|
|
|
Current liabilities |
|
|
1,003.7 |
|
|
|
|
989.7 |
|
|
|
|
|
|
|
Long-term debt |
|
|
1,679.7 |
|
|
|
|
1,427.9 |
|
|
|
|
|
|
|
Total Reliance stockholders’ equity |
|
|
4,123.4 |
|
|
|
|
3,914.1 |
|
|
|
|
|
|
|
Capital expenditures
(year-to-date) |
|
|
110.6 |
|
|
|
|
172.2 |
|
|
|
|
|
|
|
Cash provided by
operations (year-to-date) |
|
|
387.6 |
|
|
|
|
1,025.0 |
|
|
|
|
|
|
|
Net debt-to-total
capital3 |
|
|
32.2 |
% |
|
|
|
31.8 |
% |
|
|
|
|
|
|
Return on Reliance
stockholders' equity4 |
|
|
8.0 |
% |
|
|
|
7.6 |
% |
|
|
|
|
|
|
Current ratio |
|
|
2.8 |
|
|
|
|
2.6 |
|
|
|
|
|
|
|
Book value per
share5 |
$ |
|
56.80 |
|
|
$ |
|
54.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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, is not significant and is 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 their
fluctuations 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 See
accompanying Non-GAAP earnings reconciliation. |
3 Net
debt-to-total capital is calculated as total debt (net of cash)
divided by total Reliance stockholders’ equity plus total debt (net
of cash). |
4
Calculations are based on the latest twelve months net income
attributable to Reliance and beginning total Reliance stockholders’
equity. |
5 Book value
per share is calculated as total Reliance stockholders’ equity
divided by outstanding common shares. |
RELIANCE
STEEL & ALUMINUM CO.UNAUDITED CONSOLIDATED
BALANCE SHEETS(in millions, except share
amounts) |
|
|
September 30, |
|
December 31, |
|
2016 |
|
2015* |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
|
143.3 |
|
|
$ |
|
104.3 |
|
Accounts receivable, less allowance
for doubtful accounts of |
|
|
|
|
|
$17.2 at September 30, 2016 and
$16.3 at December 31, 2015 |
|
|
1,042.9 |
|
|
|
|
916.6 |
|
Inventories |
|
|
1,600.1 |
|
|
|
|
1,436.0 |
|
Prepaid expenses and other current
assets |
|
|
57.5 |
|
|
|
|
60.8 |
|
Income taxes receivable |
|
|
5.1 |
|
|
|
|
36.5 |
|
Total current assets |
|
|
2,848.9 |
|
|
|
|
2,554.2 |
|
Property, plant and equipment: |
|
|
|
|
|
Land |
|
|
226.8 |
|
|
|
|
196.2 |
|
Buildings |
|
|
1,045.7 |
|
|
|
|
1,006.3 |
|
Machinery and equipment |
|
|
1,643.4 |
|
|
|
|
1,569.8 |
|
Accumulated depreciation |
|
|
(1,250.5 |
) |
|
|
|
(1,136.8 |
) |
|
|
|
1,665.4 |
|
|
|
|
1,635.5 |
|
|
|
|
|
|
|
Goodwill |
|
|
1,828.9 |
|
|
|
|
1,724.8 |
|
Intangible assets, net |
|
|
1,166.2 |
|
|
|
|
1,125.4 |
|
Cash
surrender value of life insurance policies, net |
|
|
36.8 |
|
|
|
|
45.8 |
|
Other
assets |
|
|
38.7 |
|
|
|
|
35.9 |
|
Total assets |
$ |
|
7,584.9 |
|
|
$ |
|
7,121.6 |
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
|
312.2 |
|
|
$ |
|
247.0 |
|
Accrued expenses |
|
|
101.8 |
|
|
|
|
83.0 |
|
Accrued compensation and retirement
costs |
|
|
120.0 |
|
|
|
|
118.7 |
|
Accrued insurance costs |
|
|
43.5 |
|
|
|
|
40.2 |
|
Current maturities of long-term
debt and short-term borrowings |
|
|
426.2 |
|
|
|
|
500.8 |
|
Total current liabilities |
|
|
1,003.7 |
|
|
|
|
989.7 |
|
Long-term debt |
|
|
1,679.7 |
|
|
|
|
1,427.9 |
|
Long-term retirement costs |
|
|
105.9 |
|
|
|
|
103.8 |
|
Other
long-term liabilities |
|
|
14.8 |
|
|
|
|
30.4 |
|
Deferred income taxes |
|
|
627.6 |
|
|
|
|
627.1 |
|
Commitments and contingencies |
|
|
|
|
|
Equity: |
|
|
|
|
|
Preferred stock, $0.001 par
value: |
|
|
|
|
|
Authorized shares — 5,000,000 |
|
|
|
|
|
None issued or outstanding |
|
|
- |
|
|
|
|
- |
|
Common stock and additional paid-in
capital, $0.001 par value: |
|
|
|
|
|
Authorized shares —
200,000,000 |
|
|
|
|
|
Issued and outstanding shares –
72,563,344 at September 30, 2016 and 71,739,072 |
|
|
|
|
|
at December 31, 2015 |
|
|
582.2 |
|
|
|
|
533.8 |
|
Retained earnings |
|
|
3,633.2 |
|
|
|
|
3,480.0 |
|
Accumulated other comprehensive
loss |
|
|
(92.0 |
) |
|
|
|
(99.7 |
) |
Total Reliance
stockholders’ equity |
|
|
4,123.4 |
|
|
|
|
3,914.1 |
|
Noncontrolling interests |
|
|
29.8 |
|
|
|
|
28.6 |
|
Total equity |
|
|
4,153.2 |
|
|
|
|
3,942.7 |
|
Total liabilities and equity |
$ |
|
7,584.9 |
|
|
$ |
|
7,121.6 |
|
|
|
|
|
|
|
* Amounts
were derived from audited financial statements. |
RELIANCE STEEL & ALUMINUM
CO.UNAUDITED CONSOLIDATED STATEMENTS OF
INCOME(in millions, except per share
amounts) |
|
|
Three Months
Ended |
|
Nine
Months Ended |
|
September 30, |
|
September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
|
2,185.2 |
|
|
$ |
|
2,286.2 |
|
|
$ |
|
6,551.8 |
|
|
$ |
|
7,324.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of
depreciation |
|
|
|
|
|
|
|
|
|
|
|
and amortization shown below) |
|
|
1,530.6 |
|
|
|
|
1,647.9 |
|
|
|
|
4,575.4 |
|
|
|
|
5,359.4 |
|
Warehouse, delivery, selling,
general and |
|
|
|
|
|
|
|
|
|
|
|
administrative |
|
|
454.3 |
|
|
|
|
428.9 |
|
|
|
|
1,361.6 |
|
|
|
|
1,315.8 |
|
Depreciation and amortization |
|
|
55.1 |
|
|
|
|
54.4 |
|
|
|
|
166.7 |
|
|
|
|
164.6 |
|
Impairment of long-lived
assets |
|
|
51.7 |
|
|
|
|
53.3 |
|
|
|
|
51.7 |
|
|
|
|
53.3 |
|
|
|
|
2,091.7 |
|
|
|
|
2,184.5 |
|
|
|
|
6,155.4 |
|
|
|
|
6,893.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
93.5 |
|
|
|
|
101.7 |
|
|
|
|
396.4 |
|
|
|
|
431.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
(22.2 |
) |
|
|
|
(21.2 |
) |
|
|
|
(65.6 |
) |
|
|
|
(63.3 |
) |
Other (expense) income, net |
|
|
(0.8 |
) |
|
|
|
(2.8 |
) |
|
|
|
0.5 |
|
|
|
|
(3.7 |
) |
Income before income taxes |
|
|
70.5 |
|
|
|
|
77.7 |
|
|
|
|
331.3 |
|
|
|
|
364.2 |
|
Income tax provision |
|
|
19.9 |
|
|
|
|
24.9 |
|
|
|
|
85.1 |
|
|
|
|
116.9 |
|
Net income |
|
|
50.6 |
|
|
|
|
52.8 |
|
|
|
|
246.2 |
|
|
|
|
247.3 |
|
Less: Net income attributable
to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
interests |
|
|
1.1 |
|
|
|
|
1.4 |
|
|
|
|
3.6 |
|
|
|
|
4.4 |
|
Net income attributable to Reliance |
$ |
|
49.5 |
|
|
$ |
|
51.4 |
|
|
$ |
|
242.6 |
|
|
$ |
|
242.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Reliance
stockholders: |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
|
0.68 |
|
|
$ |
|
0.69 |
|
|
$ |
|
3.32 |
|
|
$ |
|
3.21 |
|
Basic |
$ |
|
0.68 |
|
|
$ |
|
0.70 |
|
|
$ |
|
3.36 |
|
|
$ |
|
3.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
$ |
|
0.425 |
|
|
$ |
|
0.400 |
|
|
$ |
|
1.225 |
|
|
$ |
|
1.200 |
|
RELIANCE
STEEL & ALUMINUM CO.UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS(in
millions) |
|
|
Nine Months
Ended |
|
September 30, |
|
2016 |
|
2015 |
Operating activities: |
|
|
|
|
|
Net income |
$ |
|
246.2 |
|
|
$ |
|
247.3 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
Depreciation and amortization
expense |
|
|
166.7 |
|
|
|
|
164.6 |
|
Impairment of long-lived
assets |
|
|
51.7 |
|
|
|
|
53.3 |
|
Deferred income tax provision
(benefit) |
|
|
0.5 |
|
|
|
|
(3.2 |
) |
Gain on sales of property, plant
and equipment |
|
|
(1.1 |
) |
|
|
|
(1.9 |
) |
Stock-based compensation
expense |
|
|
17.8 |
|
|
|
|
17.6 |
|
Other |
|
|
5.9 |
|
|
|
|
7.7 |
|
Changes in operating assets and
liabilities (excluding effect of businesses acquired): |
|
|
|
|
|
Accounts receivable |
|
|
(112.0 |
) |
|
|
|
65.4 |
|
Inventories |
|
|
(95.5 |
) |
|
|
|
156.8 |
|
Prepaid expenses and other
assets |
|
|
35.2 |
|
|
|
|
(16.1 |
) |
Accounts payable and other
liabilities |
|
|
72.2 |
|
|
|
|
24.8 |
|
Net cash provided by operating
activities |
|
|
387.6 |
|
|
|
|
716.3 |
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
Purchases of property, plant and
equipment |
|
|
(110.6 |
) |
|
|
|
(119.4 |
) |
Acquisitions, net of cash
acquired |
|
|
(349.0 |
) |
|
|
|
— |
|
Other |
|
|
1.6 |
|
|
|
|
5.6 |
|
Net cash used in investing activities |
|
|
(458.0 |
) |
|
|
|
(113.8 |
) |
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
Net short-term debt (repayments)
borrowings |
|
|
(11.9 |
) |
|
|
|
9.9 |
|
Proceeds from long-term debt
borrowings |
|
|
1,713.0 |
|
|
|
|
510.0 |
|
Principal payments on long-term
debt |
|
|
(1,525.2 |
) |
|
|
|
(729.0 |
) |
Debt issuance costs |
|
|
(6.8 |
) |
|
|
|
— |
|
Dividends and dividend equivalents
paid |
|
|
(89.5 |
) |
|
|
|
(90.7 |
) |
Exercise of stock
options |
|
|
31.3 |
|
|
|
|
11.0 |
|
Share repurchases |
|
|
— |
|
|
|
|
(313.9 |
) |
Other |
|
|
(4.1 |
) |
|
|
|
(5.5 |
) |
Net cash provided by (used in) financing
activities |
|
|
106.8 |
|
|
|
|
(608.2 |
) |
Effect of exchange rate changes on
cash |
|
|
2.6 |
|
|
|
|
(6.4 |
) |
Increase (decrease) in cash and cash
equivalents |
|
|
39.0 |
|
|
|
|
(12.1 |
) |
Cash and cash equivalents at beginning of
year |
|
|
104.3 |
|
|
|
|
106.2 |
|
Cash and cash equivalents at end of period |
$ |
|
143.3 |
|
|
$ |
|
94.1 |
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
Interest paid during the period |
$ |
|
47.0 |
|
|
$ |
|
46.5 |
|
Income taxes paid during the period, net |
$ |
|
67.2 |
|
|
$ |
|
168.3 |
|
|
|
|
|
|
|
Non-cash
investing and financing activities: |
|
|
|
|
|
Debt assumed in
connection with acquisition |
$ |
|
6.1 |
|
|
$ |
|
— |
|
RELIANCE STEEL & ALUMINUM
CO.NON-GAAP EARNINGS AND GROSS PROFIT
RECONCILIATION(in millions, except per share
amounts) |
|
|
Net Income |
|
Diluted EPS |
|
Three Months Ended |
|
Three Months Ended |
|
September
30, |
|
June 30, |
|
September
30, |
|
September
30, |
|
June 30, |
|
September
30, |
|
2016 |
|
2016 |
|
2015 |
|
2016 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Reliance |
$ |
|
49.5 |
|
|
$ |
|
100.9 |
|
|
$ |
|
51.4 |
|
|
$ |
|
0.68 |
|
|
$ |
|
1.38 |
|
|
$ |
|
0.69 |
|
Non-recurring settlement gain |
|
|
- |
|
|
|
|
(2.2 |
) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
(0.03 |
) |
|
|
|
- |
|
Impairment and restructuring charges |
|
|
67.3 |
|
|
|
|
- |
|
|
|
|
55.5 |
|
|
|
|
0.91 |
|
|
|
|
- |
|
|
|
|
0.75 |
|
Income tax (benefit) expense, related
to above items |
|
(25.0 |
) |
|
|
|
0.8 |
|
|
|
|
(21.1 |
) |
|
|
|
(0.34 |
) |
|
|
|
0.01 |
|
|
|
|
(0.28 |
) |
Non-GAAP net income attributable to Reliance |
$ |
|
91.8 |
|
|
$ |
|
99.5 |
|
|
$ |
|
85.8 |
|
|
$ |
|
1.25 |
|
|
$ |
|
1.36 |
|
|
$ |
|
1.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
Diluted EPS |
|
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
September
30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
|
|
|
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Reliance |
|
|
|
$ |
|
242.6 |
|
|
$ |
|
242.9 |
|
|
$ |
|
3.32 |
|
|
$ |
|
3.21 |
|
|
|
|
Non-recurring settlement gain |
|
|
|
|
|
(2.2 |
) |
|
|
|
- |
|
|
|
|
(0.03 |
) |
|
|
|
- |
|
|
|
|
Impairment and restructuring charges |
|
|
|
|
|
67.3 |
|
|
|
|
56.3 |
|
|
|
|
0.92 |
|
|
|
|
0.74 |
|
|
|
|
Income tax benefit, related to above items |
|
|
|
|
|
(24.2 |
) |
|
|
|
(21.4 |
) |
|
|
|
(0.33 |
) |
|
|
|
(0.28 |
) |
|
|
|
Resolution of certain tax matters |
|
|
|
|
|
(17.6 |
) |
|
|
|
- |
|
|
|
|
(0.24 |
) |
|
|
|
- |
|
|
|
|
Non-GAAP net income attributable to Reliance |
|
|
|
$ |
|
265.9 |
|
|
$ |
|
277.8 |
|
|
$ |
|
3.64 |
|
|
$ |
|
3.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
September
30, |
|
June 30, |
|
September
30, |
|
September
30, |
|
September
30, |
|
|
|
|
2016 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
Gross profit -
LIFO |
$ |
|
654.6 |
|
|
$ |
|
685.1 |
|
|
$ |
|
638.3 |
|
|
$ |
|
1,976.4 |
|
|
$ |
|
1,964.9 |
|
|
|
|
LIFO/LCM income |
|
|
(11.3 |
) |
|
|
|
- |
|
|
|
|
(35.0 |
) |
|
|
|
(11.3 |
) |
|
|
|
(75.0 |
) |
|
|
|
Gross profit -
FIFO |
|
|
643.3 |
|
|
|
|
685.1 |
|
|
|
|
603.3 |
|
|
|
|
1,965.1 |
|
|
|
|
1,889.9 |
|
|
|
|
Restructuring
charges |
|
|
11.7 |
|
|
|
|
- |
|
|
|
|
1.6 |
|
|
|
|
11.7 |
|
|
|
|
1.6 |
|
|
|
|
Non-GAAP gross profit -
FIFO |
$ |
|
655.0 |
|
|
$ |
|
685.1 |
|
|
$ |
|
604.9 |
|
|
$ |
|
1,976.8 |
|
|
$ |
|
1,891.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin -
LIFO |
|
|
30.0 |
% |
|
|
|
31.1 |
% |
|
|
|
27.9 |
% |
|
|
|
30.2 |
% |
|
|
|
26.8 |
% |
|
|
|
LIFO/LCM income as a %
of sales |
|
|
(0.6 |
%) |
|
|
|
0.0 |
% |
|
|
|
(1.5 |
%) |
|
|
|
(0.2 |
%) |
|
|
|
(1.0 |
%) |
|
|
|
Gross profit margin -
FIFO |
|
|
29.4 |
% |
|
|
|
31.1 |
% |
|
|
|
26.4 |
% |
|
|
|
30.0 |
% |
|
|
|
25.8 |
% |
|
|
|
Restructuring
charges |
|
|
0.6 |
% |
|
|
|
0.0 |
% |
|
|
|
0.1 |
% |
|
|
|
0.2 |
% |
|
|
|
0.0 |
% |
|
|
|
Non-GAAP gross profit
margin - FIFO |
|
|
30.0 |
% |
|
|
|
31.1 |
% |
|
|
|
26.5 |
% |
|
|
|
30.2 |
% |
|
|
|
25.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reliance Steel & Aluminum Co.'s presentation of adjusted
net income, EPS, gross profit and gross profit margin over certain
time periods is an attempt to provide meaningful comparisons to the
Company's historical performance for its existing and future
stockholders. Adjustments include a settlement gain, impairment and
restructuring charges related to certain of the Company's energy
related-businesses and the anticipated closure or sale of some of
its locations, a debt restructuring-related charge, and the
resolution of certain tax matters, which make comparisons to the
Company's operating results between periods difficult using GAAP
measures. Reliance Steel & Aluminum Co.'s presentation of gross
profit - FIFO, which is calculated as gross profit plus LIFO
expense (or minus LIFO income) divided by net sales, is presented
in order to provide a means of comparison amongst its competitors
who may not use the same inventory valuation method. Gross profit
and gross profit margin, as presented, are not necessarily
comparable with similarly titled measures for other companies. |
CONTACT:
Brenda Miyamoto
Investor Relations
(213) 576-2428
investor@rsac.com
or Addo Investor Relations
(310) 829-5400
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