Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2011

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                            to                            .

 

Commission file number:  001-13122

 

RELIANCE STEEL & ALUMINUM CO.

(Exact name of registrant as specified in its charter)

 

California

 (State or other jurisdiction of

 incorporation or organization)

 

95-1142616

 (I.R.S. Employer

 Identification No.)

 

350 South Grand Avenue, Suite 5100

Los Angeles, California 90071

(213) 687-7700

(Address of principal executive offices and telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  o  No  x

 

As of July 29, 2011, 74,881,048 shares of the registrant’s common stock, no par value, were outstanding.

 

 

 



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

PART I — FINANCIAL INFORMATION

1

 

 

 

 

Item 1.

Unaudited Consolidated Balance Sheets at June 30, 2011 and December 31, 2010

1

 

 

 

 

 

 

Unaudited Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2011 and 2010

2

 

 

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010

3

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

4

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26

 

 

 

 

 

Item 4.

Controls and Procedures

26

 

 

 

 

PART II — OTHER INFORMATION

27

 

 

 

 

 

Item 1A.

Risk Factors

27

 

 

 

 

 

Item 6.

Exhibits

27

 

 

 

SIGNATURES

 

28

 

 

 

EXHIBIT INDEX

 

29

 

i



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

 

 

 

June 30,
 2011

 

December 31,
 2010

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

92.0

 

$

72.9

 

Accounts receivable, less allowance for doubtful accounts of $23.0 at June 30, 2011 and $17.2 at December 31, 2010

 

958.1

 

697.0

 

Inventories

 

1,160.4

 

860.2

 

Prepaid expenses and other current assets

 

46.1

 

42.5

 

Income taxes receivable

 

¾

 

28.3

 

Total current assets

 

2,256.6

 

1,700.9

 

Property, plant and equipment:

 

 

 

 

 

Land

 

138.8

 

137.1

 

Buildings

 

612.8

 

594.3

 

Machinery and equipment

 

926.4

 

898.1

 

Accumulated depreciation

 

(639.3

)

(604.2

)

 

 

1,038.7

 

1,025.3

 

 

 

 

 

 

 

Goodwill

 

1,110.8

 

1,109.6

 

Intangible assets, net

 

741.3

 

755.8

 

Cash surrender value of life insurance policies, net

 

38.0

 

42.0

 

Investments in unconsolidated entities

 

16.5

 

18.3

 

Other assets

 

16.6

 

17.0

 

Total assets

 

$

5,218.5

 

$

4,668.9

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

398.8

 

$

245.0

 

Accrued expenses

 

55.2

 

45.7

 

Accrued compensation and retirement costs

 

84.4

 

85.1

 

Accrued insurance costs

 

36.7

 

37.0

 

Current maturities of long-term debt and short-term borrowings

 

99.6

 

86.2

 

Income taxes payable

 

18.3

 

¾

 

Deferred income taxes

 

9.6

 

9.6

 

Total current liabilities

 

702.6

 

508.6

 

Long-term debt

 

1,012.8

 

855.1

 

Long-term retirement costs

 

74.3

 

74.7

 

Other long-term liabilities

 

27.2

 

27.8

 

Deferred income taxes

 

371.0

 

372.6

 

Commitments and contingencies

 

 

 

 

 

Equity:

 

 

 

 

 

Preferred stock, no par value:

 

 

 

 

 

Authorized shares — 5,000,000 None issued or outstanding

 

¾

 

¾

 

Common stock, no par value:

 

 

 

 

 

Authorized shares — 100,000,000 Issued and outstanding shares — 74,875,228 at June 30, 2011 and 74,639,223 at December 31, 2010, stated capital

 

644.9

 

624.7

 

Retained earnings

 

2,360.7

 

2,188.7

 

Accumulated other comprehensive income

 

16.8

 

10.3

 

Total Reliance shareholders’ equity

 

3,022.4

 

2,823.7

 

Noncontrolling interests

 

8.2

 

6.4

 

Total equity

 

3,030.6

 

2,830.1

 

Total liabilities and equity

 

$

5,218.5

 

$

4,668.9

 

 

See accompanying notes to unaudited consolidated financial statements.

 

1



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,049.5

 

$

1,620.6

 

$

3,962.2

 

$

3,074.7

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

1,538.7

 

1,203.8

 

2,945.1

 

2,279.8

 

Warehouse, delivery, selling, general and administrative

 

313.7

 

272.2

 

632.2

 

541.4

 

Depreciation and amortization

 

31.5

 

30.0

 

64.5

 

59.1

 

 

 

1,883.9

 

1,506.0

 

3,641.8

 

2,880.3

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

165.6

 

114.6

 

320.4

 

194.4

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest

 

(15.5

)

(15.6

)

(30.1

)

(30.7

)

Other income (expense), net

 

4.1

 

(2.3

)

4.3

 

(1.2

)

Income before income taxes

 

154.2

 

96.7

 

294.6

 

162.5

 

Income tax provision

 

54.0

 

33.9

 

100.8

 

54.7

 

Net income

 

100.2

 

62.8

 

193.8

 

107.8

 

Less: Net income attributable to noncontrolling interests

 

1.5

 

1.3

 

2.8

 

1.6

 

Net income attributable to Reliance

 

$

98.7

 

$

61.5

 

$

191.0

 

$

106.2

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Diluted earnings per common share attributable to Reliance shareholders

 

$

1.31

 

$

0.83

 

$

2.54

 

$

1.43

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to Reliance shareholders

 

$

1.32

 

$

0.83

 

$

2.56

 

$

1.43

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share

 

$

0.12

 

$

0.10

 

$

0.24

 

$

0.20

 

 

See accompanying notes to unaudited consolidated financial statements.

 

2



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

 

Six Months Ended
 June 30,

 

 

 

2011

 

2010

 

Operating activities:

 

 

 

 

 

Net income

 

$

193.8

 

$

107.8

 

Adjustments to reconcile net income to net cash used in operating activities:

 

64.5

 

59.1

 

Depreciation and amortization expense

 

 

 

 

 

Deferred income tax benefit

 

(2.5

)

(1.8

)

(Gain) loss on sales of property, plant and equipment

 

(2.1

)

0.8

 

Equity in earnings of unconsolidated entities

 

(1.1

)

(0.6

)

Dividends received from unconsolidated entity

 

0.6

 

0.3

 

Share based compensation expense

 

10.8

 

8.1

 

Tax deficit (excess benefit) from share based compensation

 

0.3

 

(2.9

)

Net loss from life insurance policies

 

1.7

 

1.5

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(259.9

)

(202.9

)

Inventories

 

(299.0

)

(177.4

)

Prepaid expenses and other assets

 

27.2

 

48.8

 

Accounts payable and other liabilities

 

180.2

 

123.7

 

Net cash used in operating activities

 

(85.5

)

(35.5

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(66.3

)

(39.4

)

Proceeds from sales of property, plant and equipment

 

7.3

 

0.7

 

Net proceeds from redemption of life insurance policies

 

2.3

 

3.9

 

Net cash used in investing activities

 

(56.7

)

(34.8

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Net short-term debt borrowings

 

0.8

 

0.4

 

Proceeds from long-term debt borrowings

 

286.0

 

262.0

 

Principal payments on long-term debt

 

(117.1

)

(188.3

)

Payments to noncontrolling interest holders

 

(1.0

)

(0.5

)

Dividends paid

 

(17.9

)

(14.8

)

(Tax deficit) excess benefit from share based compensation

 

(0.3

)

2.9

 

Exercise of stock options

 

9.4

 

12.9

 

Net cash provided by financing activities

 

159.9

 

74.6

 

Effect of exchange rate changes on cash

 

1.4

 

0.1

 

Increase in cash and cash equivalents

 

19.1

 

4.4

 

Cash and cash equivalents at beginning of year

 

72.9

 

43.0

 

Cash and cash equivalents at end of period

 

$

92.0

 

$

47.4

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid during the period

 

$

26.4

 

$

27.0

 

Income taxes paid during the period

 

$

60.9

 

$

15.1

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1.  Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements, have been included. The results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results for the full year ending December 31, 2011. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2010, included in Reliance Steel & Aluminum Co.’s (“We”, “Reliance” or the “Company”) Annual Report on Form 10-K.

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

 

The Company’s consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. The Company’s investments in unconsolidated subsidiaries are recorded under the equity method of accounting. All significant intercompany accounts and transactions have been eliminated.

 

2.  Impact of Recently Issued Accounting Guidance

 

Accounting Guidance Recently Adopted

 

On January 1, 2011, the Company adopted changes issued by the Financial Accounting Standards Board (“FASB”) related to the calculation of the carrying amount of a reporting unit when performing the first step of a goodwill impairment test. More specifically, the changes require an entity to use an equity premise when performing the first step of a goodwill impairment test. If a reporting unit has a zero or negative carrying amount, the entity must assess and consider qualitative factors and whether it is more likely than not that a goodwill impairment exists. The adoption of these changes did not have a material impact on the Company’s financial position, results of operations or cash flows.

 

Impact of Recently Issued Accounting Standards — Not Yet Adopted

 

In June 2011, the FASB issued accounting guidance which requires companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity. The new guidance is effective for the Company’s interim and annual reporting periods beginning in the first quarter of 2012 and will be applied retrospectively, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the Company’s consolidated financial statements, other than the change in presentation described in the new guidance.

 

In May 2011, the FASB issued accounting guidance to provide a consistent definition of fair value and to ensure that the fair value measurement and disclosure requirements are similar between generally accepted accounting principles in the United States and International Financial Reporting Standards. The new guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. The new guidance is effective for the Company’s interim and annual reporting periods beginning in the first quarter of 2012 and will be applied prospectively. The Company is currently evaluating the impact of adopting the new guidance, but currently believes there will be no significant impact on its consolidated financial statements.

 

4



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

3.  Acquisitions

 

On December 1, 2010, through our subsidiary American Metals Corporation, we acquired all of the outstanding capital stock of Lampros Steel, Inc. (“LSI”) and a related interest in Lampros Steel Plate Distribution, LLC (“LSPD”). LSI specializes in structural steel shapes with a facility located in Portland, Oregon. LSPD owned a 50% interest in an unconsolidated partnership, LSI Plate, that is a distributor of carbon steel plate with locations in California and Oregon. Effective March 2011, the business conducted by LSI Plate was moved to LSI in order to achieve certain operational efficiencies. Net sales of LSI during the six months ended June 30, 2011 were approximately $17.4 million.

 

On October 1, 2010, we acquired all of the outstanding capital stock of Diamond Consolidated Industries, Inc. and affiliated companies (“Diamond”), which now operate under the corporate name Diamond Manufacturing Company. The operating divisions consist of Diamond Manufacturing Company located in Wyoming, Pennsylvania and Diamond Manufacturing Midwest in Michigan City, Indiana, both of which specialize in the manufacture and sale of specialty engineered perforated materials; Perforated Metals Plus, a distributor of perforated metals located in Charlotte, North Carolina; and Dependable Punch, a manufacturer of custom punches for tools and dies also located in Wyoming, Pennsylvania. This acquisition expanded our product and processing offerings with the addition of perforated metals. An operating division of Diamond was opened near Dallas, Texas in early 2011 to expand Diamond’s geographic reach. Net sales of Diamond during the six months ended June 30, 2011 were approximately $51.8 million.

 

4.  Goodwill

 

The change in the carrying amount of goodwill for the six months ended June 30, 2011 is as follows (in millions):

 

Balance as of December 31, 2010

 

$

1,109.6

 

Purchase price allocation adjustments

 

0.2

 

Effect of foreign currency translation

 

1.0

 

Balance as of June 30, 2011

 

$

1,110.8

 

 

The Company had no accumulated impairment losses related to goodwill as of June 30, 2011.

 

5



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

5.  Intangible Assets, net

 

The following table summarizes the Company’s intangible assets, net:

 

 

 

June 30, 2011

 

December 31, 2010

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

 

 

(in millions)

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

 

Covenants not to compete

 

$

7.1

 

$

(6.8

)

$

7.1

 

$

(6.7

)

Loan fees

 

23.9

 

(15.8

)

23.9

 

(14.1

)

Customer lists/relationships

 

380.3

 

(97.1

)

379.3

 

(83.7

)

Software — internal use

 

8.1

 

(4.3

)

8.1

 

(3.8

)

Other

 

4.9

 

(1.9

)

4.9

 

(1.7

)

 

 

424.3

 

(125.9

)

423.3

 

(110.0

)

Intangible assets not subject to amortization:

 

 

 

 

 

 

 

 

 

Trade names

 

442.9

 

 

442.5

 

 

 

 

$

867.2

 

$

(125.9

)

$

865.8

 

$

(110.0

)

 

The Company recognized amortization expense for intangible assets of approximately $15.8 million and $14.5 million for the six months ended June 30, 2011 and 2010, respectively. Other changes in intangible assets during the six months ended June 30, 2011 are due to foreign currency translation gains of $1.3 million.

 

The following is a summary of estimated aggregated amortization expense for the remaining six months of 2011 and each of the succeeding five years (in millions):

 

2011

 

$

15.6

 

2012

 

30.8

 

2013

 

28.1

 

2014

 

26.1

 

2015

 

24.6

 

2016

 

23.8

 

 

6.  Income Taxes

 

The Company’s effective tax rates for the six months ended June 30, 2011 and 2010 were 34.2% and 33.7%, respectively.  The Company’s effective income tax rates for the three months ended June 30, 2011 and 2010 were 35.0% and 35.1%, respectively. The fluctuations in the Company’s effective tax rates are mainly because of varying income levels over these periods. Permanent items that impacted the Company’s effective tax rates as compared to the U.S. federal statutory rate of 35% were not materially different in amounts during these periods and relate mainly to company-owned life insurance policies and domestic production activities deductions.

 

6



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

7.  Debt

 

Debt consists of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(in millions)

 

 

 

 

 

 

 

Unsecured revolving credit facility due November 9, 2012

 

$

365.0

 

$

195.0

 

Senior unsecured notes due from July 1, 2011 to July 2, 2013

 

135.0

 

135.0

 

Senior unsecured notes due November 15, 2016

 

350.0

 

350.0

 

Senior unsecured notes due November 15, 2036

 

250.0

 

250.0

 

Other notes and revolving credit facilities

 

14.1

 

13.1

 

Total

 

1,114.1

 

943.1

 

Less: unamortized discount

 

(1.7

)

(1.8

)

Less: amounts due within one year and short-term borrowings

 

(99.6

)

(86.2

)

Total long-term debt

 

$

1,012.8

 

$

855.1

 

 

Unsecured Revolving Credit Facility

 

The Company’s $1.1 billion unsecured revolving credit facility has 16 banks as lenders. On September 28, 2009, the Company amended its syndicated credit agreement to extend the maturity date of $1.02 billion of commitments with 14 extending lenders through November 9, 2012, while the maturity date for $80.0 million of commitments with non-extending lenders remained at November 9, 2011. Interest on borrowings from extending lenders is at variable rates based on LIBOR plus 3.50% or the bank prime rate plus 2.50% as of June 30, 2011. Interest on borrowings from non-extending lenders is at variable rates based on LIBOR plus 0.45% or the bank prime rate as of June 30, 2011. The revolving credit facility includes a commitment fee on the unused portion, at an annual rate of 0.40% and 0.10% for extending and non-extending lenders, respectively, as of June 30, 2011. The applicable margin over LIBOR rate and base rate borrowings along with commitment fees are subject to adjustment every quarter based on the Company’s leverage ratio, as defined.

 

Weighted average rates on borrowings outstanding on the revolving credit facility were 3.46% and 3.54% as of June 30, 2011 and December 31, 2010, respectively.

 

As of June 30, 2011, the Company had $41.8 million of letters of credit outstanding under the revolving credit facility with availability to issue an additional $83.2 million of letters of credit.

 

On July 26, 2011, the Company amended and restated the existing syndicated credit agreement to increase the borrowing limit to $1.5 billion and to extend the maturity date of the credit facility to July 26, 2016.  The amended and restated revolving credit facility has 26 banks as lenders.  As of July 26, 2011, under this amended and restated revolving credit facility, interest on borrowings is at variable rates based on LIBOR plus 1.50% or the bank prime rate plus 0.50% and a commitment fee on the unused portion is charged at an annual rate of 0.25%. The applicable margin over LIBOR rate and base rate borrowings along with commitment fees are subject to adjustment every quarter based on the Company’s leverage ratio, as defined.

 

Revolving Credit Facilities — Foreign Operations

 

Various other separate revolving credit facilities with a combined credit limit of approximately $24.2 million are in place for operations in Asia and Europe with combined outstanding balances of $12.8 million and $11.8 million as of June 30, 2011 and December 31, 2010, respectively.

 

7



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Senior Unsecured Notes — Private Placements

 

The Company has $135.0 million of outstanding senior unsecured notes issued in private placements of debt as of June 30, 2011. At June 30, 2011, the outstanding senior notes bear interest at a weighted average fixed rate of 5.1% and have a weighted average remaining life of 1.1 years, maturing from July 2011 to July 2013.  On July 1, 2011, $60.0 million of the notes matured and we paid off the notes with borrowings on our credit facility.

 

Senior Unsecured Notes — Publicly Traded

 

On November 20, 2006, the Company entered into an Indenture (the “Indenture”), for the issuance of $600 million of unsecured debt securities. The total debt issued was comprised of two tranches, (a) $350 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, maturing on November 15, 2016 and (b) $250 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036. The notes are senior unsecured obligations of Reliance and rank equally with all other existing and future unsecured and unsubordinated debt obligations of Reliance. The senior unsecured notes include provisions that, in the event of a change in control and a downgrade of the Company’s credit rating, require the Company to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued interest.

 

Covenants

 

The revolving credit facility and the senior unsecured note agreements collectively require the Company to maintain a minimum net worth and interest coverage ratio and a maximum leverage ratio and include a change of control provision, among other things. The Company’s interest coverage ratio for the twelve-month period ended June 30, 2011 was approximately 8.0 times compared to the debt covenant minimum requirement of 3.0 times (interest coverage ratio is calculated as net income attributable to Reliance plus interest expense and provision for income taxes and plus or minus any non-operating non-recurring loss or gain, respectively, divided by interest expense). The Company’s leverage ratio as of June 30, 2011 calculated in accordance with the terms of the revolving credit facility was 27.7% compared to the financial covenant maximum amount of 60% (leverage ratio is calculated as total debt, inclusive of capital lease obligations and outstanding letters of credit, divided by Reliance shareholders’ equity plus total debt). The minimum net worth requirement as of June 30, 2011 was $999.2 million compared to Reliance shareholders’ equity balance of $3.02 billion as of June 30, 2011.

 

Additionally, all of our wholly-owned domestic subsidiaries, which constitute the substantial majority of our subsidiaries, guarantee the borrowings under the revolving credit facility, the Indenture and the private placement notes. The subsidiary guarantors, together with Reliance, are required collectively to account for at least 80% of the Company’s consolidated EBITDA and 80% of consolidated tangible assets. Reliance and the subsidiary guarantors accounted for approximately 90% of our total consolidated EBITDA for the last twelve months and approximately 92% of total consolidated tangible assets as of June 30, 2011.

 

The Company was in compliance with all debt covenants as of June 30, 2011. There are no material modifications to the covenant requirements under the amended and restated $1.5 billion revolving credit facility.

 

8.  Equity

 

Common Stock

 

During the six months ended June 30, 2011, the Company issued 219,926 shares of common stock in connection with the exercise of stock options for total proceeds of approximately $9.4 million.

 

8



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Share Based Compensation

 

On May 18, 2011, pursuant to the May 2011 Directors Equity Plan, which has been approved by the shareholders, 16,079 shares of restricted stock were automatically granted to the non-employee members of the Board of Directors. The awards include dividend rights and vest immediately upon grant.  The recipients are restricted from trading the restricted stock for one year from date of grant.  The fair value of the restricted stock granted was $52.24 per share, determined based on the closing price of the Company’s common stock on the grant date.

 

On February 23, 2011, the Company granted 1,037,250 options to acquire its common stock to key employees with an exercise price equal to the fair market value as of the date of the grant. The stock options vest ratably over a period of four years and expire seven years after the date of grant. The fair value of stock options granted of $26.98 per share was estimated using the Black-Scholes option-pricing model with the following assumptions:  Expected life — 4.8 years; Expected volatility — 60.2%; Dividend yield — 0.9%; Risk-free interest rate — 2.2%; Exercise price - $55.73.

 

Share Repurchase Program

 

Under the Company’s current stock repurchase program 7,883,033 shares of common stock remain authorized for repurchase as of June 30, 2011. No shares were repurchased in 2011 or 2010. Repurchased shares are redeemed and treated as authorized but unissued shares.

 

Other Comprehensive Income

 

Other comprehensive income included the following:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in millions)

 

Net income

 

$

100.2

 

$

62.8

 

$

193.8

 

$

107.8

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

(0.2

)

(6.1

)

6.4

 

(1.0

)

Unrealized (loss) gain on investments, net of tax

 

 

(0.2

)

0.1

 

 

Total other comprehensive (loss) income

 

(0.2

)

(6.3

)

6.5

 

(1.0

)

Comprehensive income

 

100.0

 

56.5

 

200.3

 

106.8

 

Comprehensive income attributable to noncontrolling interests

 

(1.5

)

(1.3

)

(2.8

)

(1.6

)

Comprehensive income attributable to Reliance

 

$

98.5

 

$

55.2

 

$

197.5

 

$

105.2

 

 

Accumulated Other Comprehensive Income

 

Accumulated other comprehensive income included the following:

 

 

 

June 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(in millions)

 

Foreign currency translation gain

 

$

26.7

 

$

20.3

 

Unrealized loss on investments, net of tax

 

(0.1

)

(0.2

)

Minimum pension liability, net of tax

 

(9.8

)

(9.8

)

Total accumulated other comprehensive income

 

$

16.8

 

$

10.3

 

 

9



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Foreign currency translation adjustments are not generally adjusted for income taxes as they relate to indefinite investments in foreign subsidiaries. Unrealized loss on investments and minimum pension liability are net of taxes of $0.1 million and $6.6 million, respectively, as of June 30, 2011 and December 31, 2010.

 

9.  Commitments and Contingencies

 

The Company is currently involved with certain environmental remediation projects related to activities at former manufacturing operations of Earle M. Jorgensen Company (“EMJ”), a wholly-owned subsidiary of the Company, that were sold many years prior to Reliance’s acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ had insurance policies in place at the time they owned the manufacturing operations that are expected to cover the majority of the related costs. The Company does not expect that these obligations will have a material adverse impact on its financial position, results of operations or cash flows.

 

10.  Earnings Per Share

 

Basic earnings per share exclude any dilutive effects of options, restricted stock, warrants and convertible securities. Diluted earnings per share are calculated including the dilutive effects of options, restricted stock, warrants and convertible securities, if any.

 

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in millions, except share and per share amounts)

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income attributable to Reliance

 

$

98.7

 

$

61.5

 

$

191.0

 

$

106.2

 

Denominator:

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share:

 

 

 

 

 

 

 

 

 

Weighted average shares

 

74,773,715

 

74,220,164

 

74,697,185

 

74,042,293

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Stock options and restricted stock

 

377,083

 

297,579

 

390,572

 

312,474

 

Denominator for diluted earnings per share:

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares and assumed conversions

 

75,150,798

 

74,517,743

 

75,087,757

 

74,354,767

 

Net income per share attributable to Reliance shareholders — diluted

 

$

1.31

 

$

0.83

 

$

2.54

 

$

1.43

 

Net income per share attributable to Reliance shareholders — basic

 

$

1.32

 

$

0.83

 

$

2.56

 

$

1.43

 

 

The computations of earnings per share for the three months ended June 30, 2011 and 2010 do not include 3,084,925 and 2,186,425 shares reserved for issuance upon exercise of stock options, respectively, because their inclusion would have been anti-dilutive.

 

The computations of earnings per share for the six months ended June 30, 2011 and 2010 do not include 3,091,513 and 2,171,400 shares reserved for issuance upon exercise of stock options, respectively, because their inclusion would have been anti-dilutive.

 

10



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

11.  Subsequent Events

 

Effective August 1, 2011, the Company acquired all the outstanding capital securities of Continental Alloys & Services, Inc. (“Continental”), headquartered in Houston, Texas, and certain affiliated companies, for a total transaction value of approximately $415 million, net of cash acquired and subject to certain adjustments. We funded the acquisition with proceeds from our revolving credit facility. Continental and its affiliates combined form a leading global materials management company focused on high-end steel and alloy pipe, tube and bar products and precision manufacturing of various tools designed for well completion programs of global energy service companies and have 12 locations in seven countries including the United States, Canada, United Kingdom, Singapore, Malaysia, Dubai and Mexico. Continental and its affiliates had unaudited combined net sales of approximately $196.0 million for the six month ended June 30, 2011. There is no impact of this acquisition on our June 30, 2011 financial results.

 

On July 26, 2011, the Company amended and restated the existing syndicated credit agreement to increase the borrowing limit to $1.5 billion and to extend the maturity date of the credit facility to July 26, 2016.  See Note 7 for additional discussion.

 

12.  Condensed Consolidating Financial Statements

 

In November 2006, the Company issued senior unsecured notes in the aggregate principal amount of $600 million at fixed interest rates that are guaranteed by its wholly-owned domestic subsidiaries. The accompanying consolidating financial information has been prepared and presented pursuant to Rule 3-10 of SEC Regulation S-X “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The guarantees are full and unconditional and joint and several obligations of each of the guarantor subsidiaries. There are no significant restrictions on the ability of the Company to obtain funds from any of the guarantor subsidiaries by dividends or loans. The supplemental consolidating financial information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful.

 

11



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Balance Sheet
As of June 30, 2011

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations &
Reclassifications

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15.2

 

$

21.2

 

$

55.6

 

$

 

$

92.0

 

Accounts receivable, less allowance for doubtful accounts

 

79.4

 

807.2

 

71.5

 

 

958.1

 

Inventories

 

56.0

 

1,021.2

 

83.2

 

 

1,160.4

 

Intercompany receivables

 

0.4

 

15.5

 

0.1

 

(16.0

)

 

Other current assets

 

69.0

 

27.8

 

8.4

 

(59.1

)

46.1

 

Total current assets

 

220.0

 

1,892.9

 

218.8

 

(75.1

)

2,256.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in subsidiaries

 

1,910.5

 

221.6

 

 

(2,132.1

)

 

Property, plant and equipment, net

 

97.1

 

884.0

 

57.6

 

 

1,038.7

 

Goodwill

 

23.8

 

1,029.1

 

57.9

 

 

1,110.8

 

Intangible assets, net

 

8.1

 

668.1

 

65.1

 

 

741.3

 

Intercompany receivables

 

2,200.3

 

 

 

(2,200.3

)

 

Other assets

 

5.0

 

65.2

 

0.9

 

 

71.1

 

Total assets

 

$

4,464.8

 

$

4,760.9

 

$

400.3

 

$

(4,407.5

)

$

5,218.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities & Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

38.6

 

$

334.9

 

$

41.3

 

$

(16.0

)

$

398.8

 

Accrued compensation and retirement costs

 

13.5

 

66.0

 

4.9

 

 

84.4

 

Other current liabilities

 

40.0

 

45.4

 

6.5

 

 

91.9

 

Income taxes payable

 

 

5.9

 

5.9

 

6.5

 

18.3

 

Deferred income taxes

 

 

75.2

 

 

(65.6

)

9.6

 

Current maturities of long-term debt and short-term borrowings

 

86.8

 

 

12.8

 

 

99.6

 

Total current liabilities

 

178.9

 

527.4

 

71.4

 

(75.1

)

702.6

 

Long-term debt

 

1,012.6

 

0.2

 

 

 

1,012.8

 

Intercompany borrowings

 

 

2,165.8

 

34.5

 

(2,200.3

)

 

Deferred taxes and other long-term liabilities

 

250.9

 

216.6

 

5.0

 

 

472.5

 

Total Reliance shareholders’ equity

 

3,022.4

 

1,846.1

 

286.0

 

(2,132.1

)

3,022.4

 

Noncontrolling interests

 

 

4.8

 

3.4

 

 

8.2

 

Total equity

 

3,022.4

 

1,850.9

 

289.4

 

(2,132.1

)

3,030.6

 

Total liabilities and equity

 

$

4,464.8

 

$

4,760.9

 

$

400.3

 

$

(4,407.5

)

$

5,218.5

 

 

12



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Consolidating Balance Sheet
As of December 31, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations &
Reclassifications

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14.4

 

$

8.0

 

$

50.5

 

$

 

$

72.9

 

Accounts receivable, less allowance for doubtful accounts

 

58.1

 

586.2

 

52.7

 

 

697.0

 

Inventories

 

33.6

 

770.4

 

56.2

 

 

860.2

 

Intercompany receivables

 

0.3

 

12.4

 

 

(12.7

)

 

Other current assets

 

99.8

 

27.3

 

5.1

 

(61.4

)

70.8

 

Total current assets

 

206.2

 

1,404.3

 

164.5

 

(74.1

)

1,700.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in subsidiaries

 

1,783.2

 

202.8

 

 

(1,986.0

)

 

Property, plant and equipment, net

 

97.5

 

870.3

 

57.5

 

 

1,025.3

 

Goodwill

 

23.8

 

1,029.0

 

56.8

 

 

1,109.6

 

Intangible assets, net

 

9.8

 

681.1

 

64.9

 

 

755.8

 

Intercompany receivables

 

1,956.5

 

 

 

(1,956.5

)

 

Other assets

 

4.9

 

71.4

 

1.0

 

 

77.3

 

Total assets

 

$

4,081.9

 

$

4,258.9

 

$

344.7

 

$

(4,016.6

)

$

4,668.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities & Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

24.5

 

$

204.6

 

$

28.6

 

$

(12.7

)

$

245.0

 

Accrued compensation and retirement costs

 

14.9

 

64.8

 

5.4

 

 

85.1

 

Other current liabilities

 

37.6

 

40.2

 

4.9

 

 

82.7

 

Deferred income taxes

 

 

71.0

 

 

(61.4

)

9.6

 

Current maturities of long-term debt and short-term borrowings

 

74.4

 

 

11.8

 

 

86.2

 

Total current liabilities

 

151.4

 

380.6

 

50.7

 

(74.1

)

508.6

 

Long-term debt

 

854.9

 

0.2

 

 

 

855.1

 

Intercompany borrowings

 

 

1,926.9

 

29.6

 

(1,956.5

)

 

Deferred taxes and other long-term liabilities

 

251.9

 

218.2

 

5.0

 

 

475.1

 

Total Reliance shareholders’ equity

 

2,823.7

 

1,729.5

 

256.5

 

(1,986.0

)

2,823.7

 

Noncontrolling interests

 

 

3.5

 

2.9

 

 

6.4

 

Total equity

 

2,823.7

 

1,733.0

 

259.4

 

(1,986.0

)

2,830.1

 

Total liabilities and equity

 

$

4,081.9

 

$

4,258.9

 

$

344.7

 

$

(4,016.6

)

$

4,668.9

 

 

13



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Statement of Income
For the three months ended June 30, 2011
(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

182.8

 

$

1,804.0

 

$

116.4

 

$

(53.7

)

$

2,049.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

129.2

 

1,386.4

 

76.8

 

(53.7

)

1,538.7

 

Warehouse, delivery, selling, general and administrative

 

19.8

 

293.7

 

20.7

 

(20.5

)

313.7

 

Depreciation and amortization

 

3.5

 

26.2

 

1.8

 

 

31.5

 

 

 

152.5

 

1,706.3

 

99.3

 

(74.2

)

1,883.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

30.3

 

97.7

 

17.1

 

20.5

 

165.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(15.3

)

(12.0

)

 

11.8

 

(15.5

)

Other income, net

 

30.3

 

6.1

 

 

(32.3

)

4.1

 

Income before equity in earnings of subsidiaries and income taxes

 

45.3

 

91.8

 

17.1

 

 

154.2

 

Equity in earnings of subsidiaries

 

51.6

 

7.9

 

 

(59.5

)

 

Income before income taxes

 

96.9

 

99.7

 

17.1

 

(59.5

)

154.2

 

Income tax (benefit) provision

 

(1.8

)

51.9

 

3.9

 

 

54.0

 

Net income

 

98.7

 

47.8

 

13.2

 

(59.5

)

100.2

 

Less: Net income attributable to noncontrolling interests

 

 

1.3

 

0.2

 

 

1.5

 

Net income attributable to Reliance

 

$

98.7

 

$

46.5

 

$

13.0

 

$

(59.5

)

$

98.7

 

 

14



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Statement of Income
For the three months ended June 30, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

153.5

 

$

1,432.2

 

$

82.5

 

$

(47.6

)

$

1,620.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

110.7

 

1,085.7

 

55.0

 

(47.6

)

1,203.8

 

Warehouse, delivery, selling, general and administrative

 

21.4

 

250.0

 

18.3

 

(17.5

)

272.2

 

Depreciation and amortization

 

3.2

 

25.2

 

1.6

 

 

30.0

 

 

 

135.3

 

1,360.9

 

74.9

 

(65.1

)

1,506.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

18.2

 

71.3

 

7.6

 

17.5

 

114.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(16.0

)

(11.2

)

(0.2

)

11.8

 

(15.6

)

Other income (expense), net

 

28.7

 

(1.6

)

(0.1

)

(29.3

)

(2.3

)

Income before equity in earnings of subsidiaries and income taxes

 

30.9

 

58.5

 

7.3

 

 

96.7

 

Equity in earnings of subsidiaries

 

27.6

 

4.1

 

 

(31.7

)

 

Income before income taxes

 

58.5

 

62.6

 

7.3

 

(31.7

)

96.7

 

Income tax (benefit) provision

 

(3.0

)

35.7

 

1.2

 

 

33.9

 

Net income

 

61.5

 

26.9

 

6.1

 

(31.7

)

62.8

 

Less: Net income attributable to noncontrolling interests

 

 

1.2

 

0.1

 

 

1.3

 

Net income attributable to Reliance

 

$

61.5

 

$

25.7

 

$

6.0

 

$

(31.7

)

$

61.5

 

 

15



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Statement of Income
For the six months ended June 30, 2011
(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

358.5

 

$

3,487.9

 

$

225.7

 

$

(109.9

)

$

3,962.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

268.3

 

2,639.6

 

147.1

 

(109.9

)

2,945.1

 

Warehouse, delivery, selling, general and administrative

 

39.4

 

597.3

 

40.9

 

(45.4

)

632.2

 

Depreciation and amortization

 

6.9

 

54.1

 

3.5

 

 

64.5

 

 

 

314.6

 

3,291.0

 

191.5

 

(155.3

)

3,641.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

43.9

 

196.9

 

34.2

 

45.4

 

320.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(29.8

)

(18.6

)

(0.4

)

18.7

 

(30.1

)

Other income, net

 

62.3

 

6.1

 

 

(64.1

)

4.3

 

Income before equity in earnings of subsidiaries and income taxes

 

76.4

 

184.4

 

33.8

 

 

294.6

 

Equity in earnings of subsidiaries

 

104.7

 

15.7

 

 

(120.4

)

 

Income before income taxes

 

181.1

 

200.1

 

33.8

 

(120.4

)

294.6

 

Income tax (benefit) provision

 

(9.9

)

102.9

 

7.8

 

 

100.8

 

Net income

 

191.0

 

97.2

 

26.0

 

(120.4

)

193.8

 

Less: Net income attributable to noncontrolling interests

 

 

2.3

 

0.5

 

 

2.8

 

Net income attributable to Reliance

 

$

191.0

 

$

94.9

 

$

25.5

 

$

(120.4

)

$

191.0

 

 

16



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Statement of Income
For the six months ended June 30, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

293.0

 

$

2,715.2

 

$

155.2

 

$

(88.7

)

$

3,074.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of depreciation and amortization shown below)

 

220.5

 

2,040.1

 

108.0

 

(88.8

)

2,279.8

 

Warehouse, delivery, selling, general and administrative

 

48.5

 

496.7

 

34.1

 

(37.9

)

541.4

 

Depreciation and amortization

 

6.3

 

50.0

 

2.8

 

 

59.1

 

 

 

275.3

 

2,586.8

 

144.9

 

(126.7

)

2,880.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

17.7

 

128.4

 

10.3

 

38.0

 

194.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(31.3

)

(21.7

)

(0.4

)

22.7

 

(30.7

)

Other income (expense), net

 

60.2

 

(0.6

)

(0.1

)

(60.7

)

(1.2

)

Income before equity in earnings of subsidiaries and income taxes

 

46.6

 

106.1

 

9.8

 

 

162.5

 

Equity in earnings of subsidiaries

 

50.1

 

4.6

 

 

(54.7

)

 

Income before income taxes

 

96.7

 

110.7

 

9.8

 

(54.7

)

162.5

 

Income tax (benefit) provision

 

(9.5

)

62.6

 

1.6

 

 

54.7

 

Net income

 

106.2

 

48.1

 

8.2

 

(54.7

)

107.8

 

Less: Net income attributable to noncontrolling interests

 

 

1.5

 

0.1

 

 

1.6

 

Net income attributable to Reliance

 

$

106.2

 

$

46.6

 

$

8.1

 

$

(54.7

)

$

106.2

 

 

17



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Cash Flow Statement
For the six months ended June 30, 2011

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

191.0

 

$

97.2

 

$

26.0

 

$

(120.4

)

$

193.8

 

Equity in earnings of subsidiaries

 

(104.7

)

(16.8

)

 

120.4

 

(1.1

)

Adjustments to reconcile net income to cash provided by (used in) operating activities

 

0.4

 

(252.3

)

(26.3

)

 

(278.2

)

Cash provided by (used in) operating activities

 

86.7

 

(171.9

)

(0.3

)

 

(85.5

)

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(5.9

)

(58.6

)

(1.8

)

 

(66.3

)

Net advances to subsidiaries

 

(243.8

)

 

 

243.8

 

 

Other investing activities, net

 

2.6

 

6.9

 

0.1

 

 

9.6

 

Cash used in investing activities

 

(247.1

)

(51.7

)

(1.7

)

243.8

 

(56.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) of debt

 

170.0

 

(1.1

)

0.8

 

 

169.7

 

Dividends paid

 

(17.9

)

 

 

 

(17.9

)

Net intercompany borrowings

 

 

238.9

 

4.9

 

(243.8

)

 

Other financing activities, net

 

9.1

 

(1.0

)

 

 

8.1

 

Cash provided by financing activities

 

161.2

 

236.8

 

5.7

 

(243.8

)

159.9

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

1.4

 

 

1.4

 

Increase in cash and cash equivalents

 

0.8

 

13.2

 

5.1

 

 

19.1

 

Cash and cash equivalents at beginning of year

 

14.4

 

8.0

 

50.5

 

 

72.9

 

Cash and cash equivalents at end of period

 

$

15.2

 

$

21.2

 

$

55.6

 

$

 

$

92.0

 

 

18



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Cash Flow Statement
For the six months ended June 30, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

106.2

 

$

48.1

 

$

8.2

 

$

(54.7

)

$

107.8

 

Equity in earnings of subsidiaries

 

(50.1

)

(5.2