-- Fourth quarter GAAP EPS of $4.09; non-GAAP EPS
of $1.22 increased 45.2% year-over-year-- Second highest annual net
sales of $9.72 billion increased $1.1 billion, or 12.9%,
year-over-year-- Highest ever annual gross profit dollars of $2.79
billion; gross profit margin of 28.7%-- Repurchased $25 million of
Reliance common stock-- Increased quarterly dividend by 11.1% to
$0.50 per share
Reliance Steel & Aluminum Co. (NYSE:RS) today reported its
financial results for the fourth quarter and full year ended
December 31, 2017.
Fourth Quarter 2017 Financial Highlights
- Net sales were $2.38 billion, up 15.3% from $2.06 billion in
the fourth quarter of 2016 and down 3.0% from $2.45 billion in the
third quarter of 2017.
- Tons sold were up 6.3% from the fourth quarter of 2016 and down
4.6% from the third quarter of 2017, with the average selling price
per ton sold up 8.8% from the fourth quarter of 2016 and up 1.8%
from the third quarter of 2017.
- Gross profit margin was 28.6%, compared to 29.8% in the fourth
quarter of 2016 and 28.0% in the third quarter of 2017. FIFO gross
profit margin was 28.7%, compared to 29.0% in the fourth quarter of
2016 and 28.2% in the third quarter of 2017.
- Net income attributable to Reliance was $301.4 million,
compared to $61.7 million in the fourth quarter of 2016 and $97.3
million in the third quarter of 2017. The enactment of the Tax Cuts
and Jobs Act (“Tax Reform”) in December 2017 resulted in a
provisional/one-time income tax benefit of $207.3 million in the
fourth quarter of 2017, or a benefit of $2.81 per diluted share.
The Tax Reform impact reflects a provisional tax on accumulated
overseas profits and the revaluation of deferred tax assets and
liabilities. Excluding the impact of Tax Reform, net income
attributable to Reliance was $94.1 million for the fourth quarter
of 2017.
- Earnings per diluted share were $4.09, compared to $0.84 in the
fourth quarter of 2016 and $1.32 in the third quarter of 2017.
Excluding the impact of Tax Reform, earnings per diluted share were
$1.28 for the fourth quarter of 2017, up 52.4% from the fourth
quarter of 2016.
- Non-GAAP earnings per diluted share were $1.22, up 45.2% from
$0.84 in the fourth quarter of 2016 and down 6.2% from $1.30 in the
third quarter of 2017.
- Excluding the impact of Tax Reform, the Company’s effective tax
rate would have been 20.0% for the fourth quarter of 2017, compared
to 35.8% in the fourth quarter of 2016 and 30.4% in the third
quarter of 2017.
- Reliance recorded a pre-tax net LIFO inventory valuation
charge, or expense, of $4.5 million in the fourth quarter of 2017
and $6.3 million in the third quarter of 2017, included in cost of
sales. Reliance recorded a pre-tax net LIFO inventory valuation
credit adjustment, or income, of $16.2 million in the fourth
quarter of 2016.
- Cash flow from operations was $200.7 million in the fourth
quarter of 2017 and net debt-to-total capital was 27.2% at December
31, 2017.
- Reliance repurchased $25.0 million of its common stock, or 0.3
million shares, at an average cost of $74.27 per share during
the fourth quarter of 2017.
- A quarterly cash dividend of $0.50 per share, an increase of
11.1%, was declared on February 13, 2018 for stockholders of record
as of March 16, 2018 and will be payable on March 30, 2018.
Full Year 2017 Financial Highlights
- Net sales were $9.72 billion, up 12.9% from $8.61 billion in
2016 and the second highest in the Company’s history.
- Tons sold were up 3.8% from 2016 and the average selling price
per ton sold was up 9.1%.
- Gross profit margin was 28.7%, compared to 30.1% in 2016. FIFO
gross profit margin was 29.0%, compared to 29.8% in 2016. Highest
ever gross profit dollars in the Company’s history at $2.79
billion.
- Net income attributable to Reliance was $613.4 million,
compared to $304.3 million in 2016. Excluding the impact of Tax
Reform, net income attributable to Reliance was $406.1 million in
2017, up 33.5% from 2016, and the third highest net income in the
Company’s history.
- Earnings per diluted share were $8.34, compared to $4.16 in
2016. Excluding the impact of Tax Reform, earnings per diluted
share were $5.52 in 2017, up 32.7% from 2016.
- Non-GAAP earnings per diluted share were $5.44, up 21.4% from
$4.48 in 2016, and the second highest annual earnings per diluted
share in the Company’s history.
- Excluding the impact of Tax Reform, the Company’s effective tax
rate would have been 29.1% for 2017, compared to 28.0% in
2016.
- Reliance recorded a pre-tax net LIFO inventory valuation
charge, or expense, of $30.7 million, included in cost of sales. In
2016, Reliance recorded a pre-tax net LIFO inventory valuation
credit adjustment, or income, of $27.4 million.
- Cash flow from operations was $399.0 million, compared to
$626.5 million in 2016.
Management Commentary“2017 was a fantastic year
for Reliance,” said Gregg Mollins, President and Chief Executive
Officer of Reliance. “Our strong annual gross profit margin of
28.7% is near the high-end of our target range of 27% to 29%, and
produced the highest gross profit dollars in our history of $2.79
billion. Continued modest growth in demand along with a positive
pricing environment throughout most of the year enabled us to grow
our 2017 net sales to $9.72 billion, $1.11 billion more than 2016
and second highest annual net sales in our Company’s history. Our
managers in the field did an excellent job managing pricing
fluctuations, growing our value-added services to our customers,
controlling expenses and managing working capital. This resulted in
our second highest annual diluted earnings per share of $5.44
(non-GAAP excluding the impact of Tax Reform), surpassed only by
2008.”
Mr. Mollins continued, “Although we experienced the normal
seasonality we had expected in the fourth quarter with our tons
sold down 4.6% compared to the third quarter of 2017, overall
demand remained stronger than in 2016, with our shipments up 6.3%
compared to the fourth quarter of 2016. Our average selling price
in the fourth quarter of 2017 was higher than we had anticipated,
increasing 1.8% compared to the third quarter of 2017 and
outperforming our guidance of flat to down 2%. The higher selling
prices resulted from continued mill price increases in the fourth
quarter that have continued into 2018 and contributed to our
stronger than anticipated earnings. For the full year, our tons
sold were up 3.8% and our average selling price was up 9.1%
compared to 2016 with overall customer sentiment growing
increasingly optimistic in nearly all of the end markets we
serve.”
Mr. Mollins concluded, “Looking ahead, while uncertainty still
exists in the market, overall customer sentiment and demand have
been substantially improving and we anticipate that an ongoing
reduction in imports will continue to support higher metal pricing.
We believe these factors, as well as the potential for meaningful
infrastructure spending, would increase metal demand and pricing,
which we expect will enhance our profitability and strong cash
flows. Over the past five years, we have invested $2.26 billion to
further our growth through capital expenditures and acquisitions
and returned over $1.00 billion to our shareholders through
dividends and share repurchases. We look forward to returning even
greater value from these investments and continuing our strong
shareholder return activities.”
|
|
|
|
|
|
Fourth Quarter
2017 Business Metrics |
|
|
|
|
|
(tons in thousands; percentage
change) |
|
|
|
|
|
Q4 2017 |
Q3 2017 |
Sequential Quarter
Change |
Q4 2016 |
Year-Over- Year
Change |
Tons sold |
|
1,451.0 |
|
1,521.7 |
(4.6%) |
|
1,365.0 |
6.3% |
Tons sold (same-store) |
|
1,429.8 |
|
1,500.1 |
(4.7%) |
|
1,346.1 |
6.2% |
Average selling price per ton sold |
$1,632 |
$1,603 |
1.8% |
$1,500 |
8.8% |
Average selling price per ton sold
(same-store) |
$1,620 |
$1,595 |
1.6% |
$1,495 |
8.4% |
|
|
|
|
|
|
Fourth Quarter 2017 Major Commodity Metrics |
|
|
|
Tons Sold (tons in thousands; percentage
change) |
Average Selling Price per Ton Sold (percentage
change) |
|
Q4 2017 Tons Sold |
Q3 2017 Tons Sold |
Sequential Quarter Change |
Q4 2016 Tons Sold |
Year-Over- Year Change |
Sequential Quarter Change |
Year-Over- Year Change |
Carbon steel |
1,158.8 |
1,220.3 |
(5.0%) |
1,096.1 |
5.7% |
0.0% |
8.1% |
Aluminum |
86.9 |
89.8 |
(3.2%) |
82.3 |
5.6% |
2.4% |
6.6% |
Stainless steel |
75.6 |
79.1 |
(4.4%) |
72.5 |
4.3% |
5.9% |
14.4% |
Alloy |
53.5 |
54.8 |
(2.4%) |
44.9 |
19.2% |
1.0% |
5.6% |
|
|
Sales ($'s in millions; percentage
change) |
|
Q4 2017 Sales |
Q3 2017 Sales |
Sequential Quarter Change |
Q4 2016 Sales |
Year-Over- Year
Change |
Carbon steel |
$1,252.8 |
$1,319.5 |
(5.1%) |
$1,096.1 |
14.3% |
Aluminum |
$470.7 |
$475.3 |
(1.0%) |
$418.5 |
12.5% |
Stainless steel |
$347.7 |
$343.3 |
1.3% |
$291.1 |
19.4% |
Alloy |
$147.4 |
$149.3 |
(1.3%) |
$117.1 |
25.9% |
|
|
|
|
|
|
Full Year 2017
Business Metrics |
|
|
|
(tons in thousands; percentage change) |
|
|
|
|
|
2017 |
|
2016 |
Year-Over- Year
Change |
Tons sold |
|
6,053.4 |
|
5,832.9 |
3.8% |
Tons sold (same-store) |
|
5,967.3 |
|
5,761.9 |
3.6% |
Average selling price per ton sold |
$1,599 |
$1,465 |
9.1% |
Average selling price per ton sold
(same-store) |
$1,590 |
$1,458 |
9.1% |
|
Full Year 2017 Major Commodity Metrics |
|
|
Tons Sold (tons in thousands;
percentage change) |
Average Selling Price per Ton Sold
(percentage change) |
|
2017 Tons Sold |
2016 Tons Sold |
Year-Over- Year
Change |
Year-Over-Year
Change |
Carbon steel |
4,851.4 |
4,714.1 |
2.9% |
10.2% |
Aluminum |
362.6 |
350.6 |
3.4% |
4.3% |
Stainless steel |
313.1 |
309.6 |
1.1% |
13.0% |
Alloy |
218.3 |
180.2 |
21.1% |
2.6% |
|
|
|
|
|
|
Sales ($'s in millions; percentage
change) |
|
2017 Sales |
2016 Sales |
Year-Over-Year Change |
Carbon steel |
$5,189.6 |
$4,579.5 |
13.3% |
Aluminum |
$1,916.9 |
$1,777.6 |
7.8% |
Stainless steel |
$1,386.3 |
$1,212.5 |
14.3% |
Alloy |
$587.8 |
$473.3 |
24.2% |
|
|
|
|
End Market CommentaryCustomer demand and
sentiment remained positive throughout the fourth quarter of 2017.
This positive momentum has carried into 2018. Reliance continues to
benefit from its strategy of serving a broad spectrum of diverse
end markets and providing superior quality products and processing
services, generally in small quantities on a just-in-time basis.
Reliance remains committed to investing in value-added processing
equipment to support customer needs and further drive organic
growth.
- Aerospace remains one of the Company’s top-performing end
markets as demand remains strong. Reliance maintains its positive
outlook for this market as build rates and the backlog for orders
of commercial planes continues to improve. Reliance expects to
continue growing its market share in aerospace given its increased
exposure to the defense market and international expansion
activities.
- Automotive demand remains strong. Reliance services the
automotive market mainly through its toll processing operations in
the U.S. and Mexico. Through recent investments in new facilities
and equipment, Reliance has increased its tolling capacity,
enabling the Company to process increased volumes as the usage of
aluminum in the automotive industry continues to increase.
- Non-residential construction demand, including infrastructure,
continues to experience steady growth. Reliance remains optimistic
that the Administration’s stated focus on infrastructure spending
will bolster demand in this market. Reliance is well positioned to
absorb increased volume into its existing facilities and cost
structure as this important end market improves.
- Heavy industry demand remains relatively stable, with the
outlook improving. Reliance is continuing to experience slight
improvements in activity levels in the industrial equipment
markets, primarily related to construction equipment.
- Energy (oil and gas) demand continues to gradually recover for
the products Reliance sells into this end market. Rig counts and
drilling activity continue to progress and completion activity is
gaining strength. Reliance expects to see quoting and overall
activity in this market continue to gain traction.
Balance Sheet & LiquidityReliance ended
2017 with total debt outstanding of $1.91 billion, for a net
debt-to-total capital ratio of 27.2%. The Company had $908.7
million available for borrowings on its $1.5 billion revolving
credit facility at December 31, 2017.
“We remain pleased with our overall financial position,”
commented Karla Lewis, Senior Executive Vice President and Chief
Financial Officer of Reliance. “Our higher average selling price
and strong gross profit margin contributed to our solid cash flow
from operations of $399.0 million in 2017. We ended the year with a
strong balance sheet that provides the foundation for us to
continue executing our growth and stockholder return activities.
Our repurchase of $25.0 million of our common stock during the
fourth quarter of 2017 and the 11.1% increase in our quarterly
dividend effective in the first quarter of 2018 reflect the
confidence our Board and management team have in the Company’s
outlook and anticipated strong execution in the current favorable
environment for both demand and pricing.”
Stockholder Return ActivityOn February 13,
2018, the Board of Directors declared an 11.1% increase to the
Company’s quarterly cash dividend to $0.50 per share of common
stock, payable on March 30, 2018 to stockholders of record as of
March 16, 2018. Reliance has paid regular quarterly dividends for
58 consecutive years and has increased the dividend 25 times since
its 1994 IPO.
During the three months ended December 31, 2017, the Company
repurchased $25.0 million of its common stock under its existing
share repurchase program at an average cost of $74.27 per
share. The Company did not repurchase any shares of its common
stock during the first nine months ended September 30, 2017. At
December 31, 2017, approximately 8.1 million shares remained
available for repurchase under the Company’s share repurchase
program. Reliance expects to opportunistically repurchase shares of
its common stock going forward.
Business Outlook Reliance management remains
optimistic about business activity levels in the first quarter of
2018 and anticipates that the end markets in which the Company
operates will continue to grow. As a result, the Company estimates
tons sold will be up 6% to 8% in the first quarter of 2018 compared
to the fourth quarter of 2017, which includes the normal seasonal
increase in shipping volumes compared to the fourth quarter.
Reliance management also believes that metal pricing for most of
the products the Company sells has the potential to further
increase from current levels. Accordingly, the Company expects its
average selling price will be up 4% to 6% compared to the fourth
quarter of 2017. As a result, management currently expects earnings
per diluted share to be in the range of $1.90 to $2.00 for the
first quarter of 2018.
Tax Reform ActThe Company continues to assess
the impacts of Tax Reform and currently expects its effective tax
rate for the full year of 2018 to be in the range of 24% to 25%.
Given the substantial changes to the Internal Revenue Code as a
result of the Tax Reform Act, the estimated financial impacts for
fourth quarter and the full year 2017 are provisional and subject
to further analysis, interpretation and clarification of the act,
which could result in changes to these estimates in 2018.
Conference Call DetailsA conference call and
simultaneous webcast to discuss the fourth quarter and full year
2017 financial results and business outlook will be held today,
February 15, 2018 at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific
Time. To listen to the live call by telephone, please dial (877)
407-0792 (U.S. and Canada) or (201) 689-8263 (International)
approximately 10 minutes prior to the start time and use conference
ID: 13675505. 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, March 1, 2018 by dialing (844) 512-2921 (U.S. and Canada)
or (412) 317-6671 (International) and entering the conference ID:
13675505. The webcast will remain posted on the Investors section
of Reliance’s website 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
thirteen 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 2017, Reliance’s average order size was $1,740, approximately
48% 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 website 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 industry and its end markets, its 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, 2016, filed with the SEC.
CONTACT: Brenda MiyamotoInvestor
Relations(213) 576-2428investor@rsac.com
or Addo Investor Relations(310) 829-540
(Tables to follow)
|
RELIANCE STEEL & ALUMINUM
CO. |
SELECTED UNAUDITED FINANCIAL
DATA |
(in millions, except share and per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Twelve Months |
|
|
Ended December 31, |
|
Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016* |
|
Income
Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
2,376.4 |
|
|
$ |
2,061.6 |
|
|
$ |
9,721.0 |
|
|
$ |
8,613.4 |
|
|
Gross
profit1 |
|
678.6 |
|
|
|
613.9 |
|
|
|
2,787.8 |
|
|
|
2,590.3 |
|
|
Operating income2 |
|
142.3 |
|
|
|
117.5 |
|
|
|
662.4 |
|
|
|
517.8 |
|
|
Pre-tax
income |
|
120.7 |
|
|
|
97.9 |
|
|
|
583.8 |
|
|
|
429.2 |
|
|
Net
income attributable to Reliance |
|
301.4 |
|
|
|
61.7 |
|
|
|
613.4 |
|
|
|
304.3 |
|
|
Diluted
earnings per share attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
Reliance
stockholders |
$ |
4.09 |
|
|
$ |
0.84 |
|
|
$ |
8.34 |
|
|
$ |
4.16 |
|
|
Non-GAAP
diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
attributable to Reliance stockholders3 |
$ |
1.22 |
|
|
$ |
0.84 |
|
|
$ |
5.44 |
|
|
$ |
4.48 |
|
|
Weighted
average shares outstanding – |
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
73,624,388 |
|
|
|
73,338,628 |
|
|
|
73,539,424 |
|
|
|
73,120,918 |
|
|
Gross
profit margin1 |
|
28.6% |
|
|
|
29.8% |
|
|
|
28.7% |
|
|
|
30.1% |
|
|
Operating income margin2 |
|
6.0% |
|
|
|
5.7% |
|
|
|
6.8% |
|
|
|
6.0% |
|
|
Pre-tax
income margin |
|
5.1% |
|
|
|
4.7% |
|
|
|
6.0% |
|
|
|
5.0% |
|
|
Net
income margin – Reliance |
|
12.7% |
|
|
|
3.0% |
|
|
|
6.3% |
|
|
|
3.5% |
|
|
Cash dividends per
share |
$ |
0.45 |
|
|
$ |
0.425 |
|
|
$ |
1.80 |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
2017 |
|
2016* |
|
|
|
|
|
|
|
Balance Sheet
and Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets |
$ |
3,051.3 |
|
|
$ |
2,688.5 |
|
|
|
|
|
|
|
|
Working
capital |
|
2,347.6 |
|
|
|
2,032.5 |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
1,656.3 |
|
|
|
1,662.2 |
|
|
|
|
|
|
|
|
Total
assets |
|
7,751.0 |
|
|
|
7,411.3 |
|
|
|
|
|
|
|
|
Current
liabilities |
|
703.7 |
|
|
|
656.0 |
|
|
|
|
|
|
|
|
Long-term debt |
|
1,809.4 |
|
|
|
1,846.7 |
|
|
|
|
|
|
|
|
Total
Reliance stockholders’ equity |
|
4,667.1 |
|
|
|
4,148.8 |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
161.6 |
|
|
|
154.9 |
|
|
|
|
|
|
|
|
Cash provided by
operations |
|
399.0 |
|
|
|
626.5 |
|
|
|
|
|
|
|
|
Net debt-to-total
capital4 |
|
27.2% |
|
|
|
30.3% |
|
|
|
|
|
|
|
Return on Reliance
stockholders' equity5 |
|
14.8% |
|
|
|
7.8% |
|
|
|
|
|
|
|
Current ratio |
|
4.3 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
Book value per
share6 |
$ |
64.29 |
|
|
$ |
57.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
substantially 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 The 2016 amounts have been retrospectively
adjusted pursuant to our adoption of accounting changes related to
the presentation of net periodic pension cost and net periodic
postretirement benefit cost.3 See accompanying Non-GAAP earnings
and adjusted gross profit reconciliation.4 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). 5
Calculations are based on the latest twelve months net income
attributable to Reliance and beginning total Reliance stockholders’
equity.6 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) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016* |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
154.4 |
|
|
$ |
122.8 |
|
|
Accounts
receivable, less allowance for doubtful accounts |
|
|
|
|
|
|
of $15.5
at December 31, 2017 and $15.3 at December 31, 2016 |
|
1,087.3 |
|
|
|
960.2 |
|
|
Inventories |
|
1,726.0 |
|
|
|
1,532.6 |
|
|
Prepaid
expenses and other current assets |
|
80.7 |
|
|
|
72.9 |
|
|
Income
taxes receivable |
|
2.9 |
|
|
|
— |
|
|
Total
current assets |
|
3,051.3 |
|
|
|
2,688.5 |
|
|
Property, plant and equipment: |
|
|
|
|
|
|
Land |
|
229.7 |
|
|
|
228.2 |
|
|
Buildings |
|
1,095.3 |
|
|
|
1,059.2 |
|
|
Machinery
and equipment |
|
1,738.6 |
|
|
|
1,647.3 |
|
|
Accumulated depreciation |
|
(1,407.3 |
) |
|
|
(1,272.5 |
) |
|
Property,
plant and equipment, net |
|
1,656.3 |
|
|
|
1,662.2 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
1,842.6 |
|
|
|
1,827.4 |
|
|
Intangible assets, net |
|
1,112.1 |
|
|
|
1,151.3 |
|
|
Cash
surrender value of life insurance policies, net |
|
47.8 |
|
|
|
46.9 |
|
|
Other
assets |
|
40.9 |
|
|
|
35.0 |
|
|
Total
assets |
$ |
7,751.0 |
|
|
$ |
7,411.3 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts
payable |
$ |
346.7 |
|
|
$ |
302.2 |
|
|
Accrued
expenses |
|
83.6 |
|
|
|
83.7 |
|
|
Accrued
compensation and retirement costs |
|
139.3 |
|
|
|
140.8 |
|
|
Accrued
insurance costs |
|
42.1 |
|
|
|
40.6 |
|
|
Current
maturities of long-term debt and short-term borrowings |
|
92.0 |
|
|
|
82.5 |
|
|
Income
taxes payable |
|
— |
|
|
|
6.2 |
|
|
Total
current liabilities |
|
703.7 |
|
|
|
656.0 |
|
|
Long-term debt |
|
1,809.4 |
|
|
|
1,846.7 |
|
|
Long-term retirement costs |
|
85.4 |
|
|
|
89.6 |
|
|
Other
long-term liabilities |
|
11.8 |
|
|
|
13.0 |
|
|
Deferred income taxes |
|
440.8 |
|
|
|
626.9 |
|
|
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 – 72,609,540 at December 31, 2017 and
72,682,793 |
|
|
|
|
|
|
at
December 31, 2016 |
|
594.6 |
|
|
|
590.3 |
|
|
Retained
earnings |
|
4,144.1 |
|
|
|
3,663.2 |
|
|
Accumulated other comprehensive loss |
|
(71.6 |
) |
|
|
(104.7 |
) |
|
Total
Reliance stockholders’ equity |
|
4,667.1 |
|
|
|
4,148.8 |
|
|
Noncontrolling interests |
|
32.8 |
|
|
|
30.3 |
|
|
Total
equity |
|
4,699.9 |
|
|
|
4,179.1 |
|
|
Total
liabilities and equity |
$ |
7,751.0 |
|
|
$ |
7,411.3 |
|
|
|
|
|
|
|
|
* 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 |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016* |
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
2,376.4 |
|
|
$ |
2,061.6 |
|
$ |
9,721.0 |
|
|
$ |
8,613.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales (exclusive of depreciation |
|
|
|
|
|
|
|
|
|
|
|
and
amortization shown below) |
|
1,697.8 |
|
|
|
1,447.7 |
|
|
6,933.2 |
|
|
|
6,023.1 |
Warehouse, delivery, selling, general and |
|
|
|
|
|
|
|
|
|
|
|
administrative |
|
480.7 |
|
|
|
440.4 |
|
|
1,902.8 |
|
|
|
1,798.1 |
Depreciation and amortization |
|
54.2 |
|
|
|
55.3 |
|
|
218.4 |
|
|
|
222.0 |
Impairment of long-lived assets |
|
1.4 |
|
|
|
0.7 |
|
|
4.2 |
|
|
|
52.4 |
|
|
2,234.1 |
|
|
|
1,944.1 |
|
|
9,058.6 |
|
|
|
8,095.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
142.3 |
|
|
|
117.5 |
|
|
662.4 |
|
|
|
517.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
19.0 |
|
|
|
19.0 |
|
|
73.9 |
|
|
|
84.6 |
Other
expense, net |
|
2.6 |
|
|
|
0.6 |
|
|
4.7 |
|
|
|
4.0 |
Income
before income taxes |
|
120.7 |
|
|
|
97.9 |
|
|
583.8 |
|
|
|
429.2 |
Income
tax (benefit) provision |
|
(183.1 |
) |
|
|
35.0 |
|
|
(37.2 |
) |
|
|
120.1 |
Net
income |
|
303.8 |
|
|
|
62.9 |
|
|
621.0 |
|
|
|
309.1 |
Less: Net
income attributable to noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
interests |
|
2.4 |
|
|
|
1.2 |
|
|
7.6 |
|
|
|
4.8 |
Net
income attributable to Reliance |
$ |
301.4 |
|
|
$ |
61.7 |
|
$ |
613.4 |
|
|
$ |
304.3 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share attributable to Reliance stockholders: |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
$ |
4.09 |
|
|
$ |
0.84 |
|
$ |
8.34 |
|
|
$ |
4.16 |
Basic |
$ |
4.14 |
|
|
$ |
0.85 |
|
$ |
8.42 |
|
|
$ |
4.21 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share |
$ |
0.45 |
|
|
$ |
0.425 |
|
$ |
1.80 |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
* Amounts were derived from audited financial
statements.
RELIANCE STEEL & ALUMINUM CO. |
UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in millions) |
|
|
Twelve Months Ended |
|
December 31, |
|
2017 |
|
2016* |
Operating
activities: |
|
|
|
|
|
Net income |
$ |
621.0 |
|
|
$ |
309.1 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
Depreciation and amortization expense |
|
218.4 |
|
|
|
222.0 |
|
Impairment of long-lived assets |
|
4.2 |
|
|
|
52.4 |
|
Deferred
income tax benefit |
|
(192.6 |
) |
|
|
(0.5 |
) |
Gain on
sales of property, plant and equipment |
|
(9.5 |
) |
|
|
(1.2 |
) |
Stock-based compensation expense |
|
33.4 |
|
|
|
24.4 |
|
Other |
|
7.7 |
|
|
|
7.7 |
|
Changes
in operating assets and liabilities (excluding effect of businesses
acquired): |
|
|
|
|
|
Accounts
receivable |
|
(119.7 |
) |
|
|
(31.2 |
) |
Inventories |
|
(186.6 |
) |
|
|
(30.4 |
) |
Prepaid
expenses and other assets |
|
(11.5 |
) |
|
|
26.7 |
|
Accounts
payable and other liabilities |
|
34.2 |
|
|
|
47.5 |
|
Net cash provided by
operating activities |
|
399.0 |
|
|
|
626.5 |
|
|
|
|
|
|
|
Investing
activities: |
|
|
|
|
|
Purchases
of property, plant and equipment |
|
(161.6 |
) |
|
|
(154.9 |
) |
Acquisitions, net of cash acquired |
|
(37.8 |
) |
|
|
(348.7 |
) |
Proceeds
from sales of property, plant and equipment |
|
27.6 |
|
|
|
8.9 |
|
Other |
|
(7.6 |
) |
|
|
(10.4 |
) |
Net cash used in
investing activities |
|
(179.4 |
) |
|
|
(505.1 |
) |
|
|
|
|
|
|
Financing
activities: |
|
|
|
|
|
Net
short-term debt borrowings (repayments) |
|
8.4 |
|
|
|
(12.6 |
) |
Proceeds
from long-term debt borrowings |
|
875.0 |
|
|
|
2,073.0 |
|
Principal
payments on long-term debt |
|
(915.3 |
) |
|
|
(2,061.4 |
) |
Debt
issuance costs |
|
— |
|
|
|
(6.8 |
) |
Dividends
and dividend equivalents paid |
|
(132.0 |
) |
|
|
(120.4 |
) |
Exercise
of stock options |
|
5.2 |
|
|
|
37.5 |
|
Share
repurchases |
|
(25.0 |
) |
|
|
— |
|
Other |
|
(14.4 |
) |
|
|
(9.5 |
) |
Net cash used in
financing activities |
|
(198.1 |
) |
|
|
(100.2 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
10.1 |
|
|
|
(2.7 |
) |
Increase in cash and
cash equivalents |
|
31.6 |
|
|
|
18.5 |
|
Cash and cash
equivalents at beginning of year |
|
122.8 |
|
|
|
104.3 |
|
Cash and cash
equivalents at end of year |
$ |
154.4 |
|
|
$ |
122.8 |
|
|
|
|
|
|
|
Supplemental
cash flow information: |
|
|
|
|
|
Interest paid during
the year |
$ |
72.5 |
|
|
$ |
81.4 |
|
Income taxes paid
during the year, net |
$ |
171.1 |
|
|
$ |
95.1 |
|
|
|
|
|
|
|
Non-cash
investing and financing activities: |
|
|
|
|
|
Debt assumed in
connection with acquisition |
$ |
— |
|
|
$ |
6.1 |
|
|
|
|
|
|
|
* Amounts were derived from audited financial
statements.
|
RELIANCE STEEL & ALUMINUM
CO. |
NON-GAAP EARNINGS AND ADJUSTED GROSS PROFIT
RECONCILIATION |
(in millions, except per share
amounts) |
|
|
Net Income |
|
Diluted EPS |
|
Three Months Ended |
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
September 30, |
|
December 31, |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Reliance |
$ |
301.4 |
|
|
$ |
97.3 |
|
|
$ |
61.7 |
|
|
$ |
4.09 |
|
|
$ |
1.32 |
|
|
$ |
0.84 |
|
Tax reform |
|
(207.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2.81 |
) |
|
|
— |
|
|
|
— |
|
Net income attributable
to Reliance excluding the impact |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of tax
reform |
|
94.1 |
|
|
|
97.3 |
|
|
|
61.7 |
|
|
|
1.28 |
|
|
|
1.32 |
|
|
|
0.84 |
|
Non-recurring
settlement gains |
|
— |
|
|
|
— |
|
|
|
(1.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
(0.02 |
) |
Impairment and
restructuring charges |
|
1.7 |
|
|
|
2.1 |
|
|
|
1.8 |
|
|
|
0.02 |
|
|
|
0.03 |
|
|
|
0.03 |
|
Income tax benefit
related to above items |
|
(0.7 |
) |
|
|
(0.8 |
) |
|
|
(0.5 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Gain related to sales
of non-core assets |
|
(0.6 |
) |
|
|
(4.6 |
) |
|
|
— |
|
|
|
(0.01 |
) |
|
|
(0.06 |
) |
|
|
— |
|
Income tax (benefit)
expense related to sales of non-core assets |
|
(4.5 |
) |
|
|
1.8 |
|
|
|
— |
|
|
|
(0.06 |
) |
|
|
0.02 |
|
|
|
— |
|
Non-GAAP net income
attributable to Reliance |
$ |
90.0 |
|
|
$ |
95.8 |
|
|
$ |
61.7 |
|
|
$ |
1.22 |
|
|
$ |
1.30 |
|
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
Diluted EPS |
|
|
|
|
|
|
|
Twelve Months Ended |
|
Twelve Months Ended |
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Reliance |
|
|
|
$ |
613.4 |
|
|
$ |
304.3 |
|
|
$ |
8.34 |
|
|
$ |
4.16 |
|
|
|
|
Tax reform |
|
|
|
|
(207.3 |
) |
|
|
— |
|
|
|
(2.82 |
) |
|
|
— |
|
|
|
|
Net income
attributable to Reliance excluding the impact |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of tax
reform |
|
|
|
|
406.1 |
|
|
|
304.3 |
|
|
|
5.52 |
|
|
|
4.16 |
|
|
|
|
Non-recurring
settlement charges (gains) |
|
|
|
|
2.8 |
|
|
|
(3.5 |
) |
|
|
0.04 |
|
|
|
(0.05 |
) |
|
|
|
Impairment and
restructuring charges |
|
|
|
|
4.1 |
|
|
|
69.1 |
|
|
|
0.06 |
|
|
|
0.95 |
|
|
|
|
Income tax benefit
related to above items |
|
|
|
|
(2.7 |
) |
|
|
(24.7 |
) |
|
|
(0.04 |
) |
|
|
(0.34 |
) |
|
|
|
Gain related to sales
of non-core assets |
|
|
|
|
(8.7 |
) |
|
|
— |
|
|
|
(0.12 |
) |
|
|
— |
|
|
|
|
Income tax benefit
related to sales of non-core assets |
|
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
|
|
|
Resolution of certain
tax matters |
|
|
|
|
— |
|
|
|
(17.6 |
) |
|
|
— |
|
|
|
(0.24 |
) |
|
|
|
Non-GAAP net income
attributable to Reliance |
|
|
|
$ |
400.2 |
|
|
$ |
327.6 |
|
|
$ |
5.44 |
|
|
$ |
4.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
Gross profit -
LIFO |
$ |
678.6 |
|
|
$ |
685.5 |
|
|
$ |
613.9 |
|
|
$ |
2,787.8 |
|
|
$ |
2,590.3 |
|
|
|
|
Net LIFO/LCM expense
(income) |
|
4.5 |
|
|
|
6.3 |
|
|
|
(16.2 |
) |
|
|
30.7 |
|
|
|
(27.4 |
) |
|
|
|
Gross profit -
FIFO |
|
683.1 |
|
|
|
691.8 |
|
|
|
597.7 |
|
|
|
2,818.5 |
|
|
|
2,562.9 |
|
|
|
|
Restructuring charges
(credits) |
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
(0.2 |
) |
|
|
12.8 |
|
|
|
|
Adjusted gross profit -
FIFO |
$ |
683.1 |
|
|
$ |
691.8 |
|
|
$ |
598.8 |
|
|
$ |
2,818.3 |
|
|
$ |
2,575.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin -
LIFO |
|
28.6 |
% |
|
28.0 |
% |
|
29.8 |
% |
|
28.7 |
% |
|
30.1 |
% |
|
|
|
Net LIFO/LCM expense
(income) as a % of sales |
|
0.1 |
% |
|
|
0.2 |
% |
|
|
(0.8 |
%) |
|
|
0.3 |
% |
|
|
(0.3 |
%) |
|
|
|
Gross profit margin -
FIFO |
|
28.7 |
% |
|
|
28.2 |
% |
|
|
29.0 |
% |
|
|
29.0 |
% |
|
|
29.8 |
% |
|
|
|
Restructuring charges
(credits) as a % of sales |
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.1 |
% |
|
|
|
Adjusted gross profit
margin - FIFO |
|
28.7 |
% |
|
|
28.2 |
% |
|
|
29.0 |
% |
|
|
29.0 |
% |
|
|
29.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reliance Steel & Aluminum Co.'s presentation of non-GAAP or
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 tax reform,
pension settlement, settlement gains, impairment and restructuring
charges (credits) related to certain of the Company's
energy-related businesses and the closure or sale of some of its
locations, a debt restructuring-related charge, sales of non-core
property, plant, and equipment, and the resolution of certain tax
matters, which make comparisons of the Company's operating results
between periods difficult using GAAP measures. Reliance Steel &
Aluminum Co.'s presentation of gross profit margin - FIFO, which is
calculated as gross profit plus net LIFO/LCM expense (or minus net
LIFO/LCM 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. For further information on
the Company's gross profit and gross profit margin, see footnote 1
to the accompanying Selected Unaudited Financial Data. |
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