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 September 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

 

95-1142616

(State or other jurisdiction of

incorporation or organization)

 

(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 October 31, 2011, 74,972,573 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 September 30, 2011 and December 31, 2010

1

 

 

 

 

Unaudited Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2011 and 2010

2

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 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

27

 

 

 

Item 4.

Controls and Procedures

27

 

 

 

PART II — OTHER INFORMATION

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 6.

Exhibits

28

 

 

 

SIGNATURES

 

29

 

 

 

EXHIBIT INDEX

 

30

 



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

 

 

 

September 30,
2011

 

December 31,
2010

 

ASSETS

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

91.1

 

$

72.9

 

Accounts receivable, less allowance for doubtful accounts of $23.4 at September 30, 2011 and $17.2 at December 31, 2010

 

1,019.5

 

697.0

 

Inventories

 

1,276.6

 

860.2

 

Prepaid expenses and other current assets

 

42.5

 

42.5

 

Income taxes receivable

 

¾

 

28.3

 

Total current assets

 

2,429.7

 

1,700.9

 

Property, plant and equipment:

 

 

 

 

 

Land

 

142.7

 

137.1

 

Buildings

 

634.3

 

594.3

 

Machinery and equipment

 

969.3

 

898.1

 

Accumulated depreciation

 

(658.7

)

(604.2

)

 

 

1,087.6

 

1,025.3

 

 

 

 

 

 

 

Goodwill

 

1,231.6

 

1,109.6

 

Intangible assets, net

 

909.8

 

755.8

 

Cash surrender value of life insurance policies, net

 

34.6

 

42.0

 

Investments in unconsolidated entities

 

16.8

 

18.3

 

Other assets

 

17.9

 

17.0

 

Total assets

 

$

5,728.0

 

$

4,668.9

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

412.7

 

$

245.0

 

Accrued expenses

 

66.9

 

45.7

 

Accrued compensation and retirement costs

 

100.1

 

85.1

 

Accrued insurance costs

 

36.3

 

37.0

 

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

 

14.2

 

86.2

 

Income taxes payable

 

4.7

 

¾

 

Deferred income taxes

 

9.6

 

9.6

 

Total current liabilities

 

644.5

 

508.6

 

Long-term debt

 

1,463.9

 

855.1

 

Long-term retirement costs

 

72.0

 

74.7

 

Other long-term liabilities

 

29.2

 

27.8

 

Deferred income taxes

 

425.7

 

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 — 74,967,048 at September 30, 2011 and 74,639,223 at December 31, 2010, stated capital

 

650.7

 

624.7

 

Retained earnings

 

2,437.3

 

2,188.7

 

Accumulated other comprehensive (loss) income

 

(3.3

)

10.3

 

Total Reliance shareholders’ equity

 

3,084.7

 

2,823.7

 

Noncontrolling interests

 

8.0

 

6.4

 

Total equity

 

3,092.7

 

2,830.1

 

Total liabilities and equity

 

$

5,728.0

 

$

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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,138.6

 

$

1,653.8

 

$

6,100.8

 

$

4,728.5

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

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

 

1,644.7

 

1,257.6

 

4,589.8

 

3,537.4

 

Warehouse, delivery, selling, general and administrative

 

319.6

 

278.2

 

951.8

 

819.6

 

Depreciation and amortization

 

34.2

 

29.8

 

98.7

 

88.9

 

 

 

1,998.5

 

1,565.6

 

5,640.3

 

4,445.9

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

140.1

 

88.2

 

460.5

 

282.6

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest

 

(15.0

)

(15.3

)

(45.1

)

(46.0

)

Other (expense) income, net

 

(6.5

)

0.5

 

(2.2

)

(0.6

)

Income before income taxes

 

118.6

 

73.4

 

413.2

 

236.0

 

Income tax provision

 

32.3

 

24.1

 

133.1

 

78.9

 

Net income

 

86.3

 

49.3

 

280.1

 

157.1

 

Less: Net income attributable to noncontrolling interests

 

1.4

 

0.6

 

4.2

 

2.2

 

Net income attributable to Reliance

 

$

84.9

 

$

48.7

 

$

275.9

 

$

154.9

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Diluted earnings per common share attributable to Reliance shareholders

 

$

1.13

 

$

0.65

 

$

3.68

 

$

2.08

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share attributable to Reliance shareholders

 

$

1.13

 

$

0.65

 

$

3.69

 

$

2.09

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share

 

$

0.12

 

$

0.10

 

$

0.36

 

$

0.30

 

 

See accompanying notes to unaudited consolidated financial statements.

 

2



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

Operating activities:

 

 

 

 

 

Net income

 

$

280.1

 

$

157.1

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

98.7

 

88.9

 

Deferred income tax benefit

 

(3.8

)

(2.9

)

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

 

(2.6

)

0.8

 

Equity in earnings of unconsolidated entities

 

(1.6

)

(0.2

)

Dividends received from unconsolidated entities

 

2.5

 

0.3

 

Share based compensation expense

 

16.4

 

12.7

 

Tax deficit (excess benefit) from share based compensation

 

0.2

 

(3.3

)

Net loss from life insurance policies

 

3.8

 

0.9

 

Changes in operating assets and liabilities (excluding effect of businesses acquired):

 

 

 

 

 

Accounts receivable

 

(270.7

)

(227.2

)

Inventories

 

(294.6

)

(200.6

)

Prepaid expenses and other assets

 

29.3

 

38.5

 

Accounts payable and other liabilities

 

159.6

 

182.7

 

Net cash provided by operating activities

 

17.3

 

47.7

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(112.7

)

(65.8

)

Acquisition of a metals service center, net of cash acquired

 

(306.5

)

¾

 

Proceeds from sales of property, plant and equipment

 

9.1

 

1.1

 

Net proceeds from redemption of life insurance policies

 

3.6

 

3.9

 

Net cash used in investing activities

 

(406.5

)

(60.8

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Net short-term debt (repayments) borrowings

 

(102.8

)

3.9

 

Proceeds from long-term debt borrowings

 

913.0

 

427.0

 

Principal payments on long-term debt

 

(379.5

)

(272.8

)

Debt issuance costs

 

(7.3

)

¾

 

Payments to noncontrolling interest holders

 

(2.6

)

(1.0

)

Capital contributions from noncontrolling interests

 

¾

 

0.2

 

Dividends paid

 

(26.9

)

(22.2

)

(Tax deficit) excess benefit from share based compensation

 

(0.2

)

3.3

 

Exercise of stock options

 

9.6

 

17.4

 

Net cash provided by financing activities

 

403.3

 

155.8

 

Effect of exchange rate changes on cash

 

4.1

 

0.8

 

Increase in cash and cash equivalents

 

18.2

 

143.5

 

Cash and cash equivalents at beginning of year

 

72.9

 

43.0

 

Cash and cash equivalents at end of period

 

$

91.1

 

$

186.5

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid during the period

 

$

33.8

 

$

33.0

 

Income taxes paid during the period

 

$

111.5

 

$

47.1

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

Debt assumed in connection with an acquisition of a metals service center

 

$

104.8

 

$

¾

 

 

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 nine months ended September 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 September 2011, the FASB amended its guidance regarding the disclosure requirements for employers participating in multiemployer pension and other postretirement benefit plans (“multiemployer plans”) to improve transparency and increase awareness of the commitments and risks involved with participation in multiemployer plans. The new accounting guidance requires employers participating in multiemployer plans to provide additional quantitative and qualitative disclosures to provide users with more detailed information regarding an employer’s involvement in multiemployer plans.  The new guidance is effective for the Company’s interim and annual reporting periods beginning in the fourth quarter of 2011, with early adoption permitted. The Company is currently evaluating this guidance, but does not expect the adoption will have a material effect on its consolidated financial statements.

 

In September 2011, the FASB issued updated guidance on the periodic testing of goodwill for impairment. This guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This new guidance is effective for the Company beginning January 1, 2012, with early adoption permitted. The Company is currently evaluating this guidance, but does not expect the adoption will have a material effect on its consolidated financial statements.

 

4



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

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 is currently evaluating how it will report comprehensive income, but either method permitted will constitute a change in the Company’s financial statement presentation.

 

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.

 

3.  Acquisitions

 

2011 Acquisition

 

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. The acquisition was funded with proceeds from our revolving credit facility. Continental is 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 has 12 locations in seven countries including the United States, Canada, United Kingdom, Singapore, Malaysia, U.A.E. and Mexico. Continental and its affiliates had combined net sales of $88.4 million for the two months ended September 30, 2011.

 

The allocation of the total preliminary purchase price of Continental to the fair value of the assets acquired and liabilities assumed is as follows (in millions):

 

Cash

 

$

22.8

 

Accounts receivable

 

55.7

 

Inventories

 

126.7

 

Property, plant and equipment

 

30.5

 

Goodwill

 

126.3

 

Intangible assets subject to amortization

 

95.9

 

Intangible assets not subject to amortization

 

84.3

 

Other current and long-term assets

 

1.8

 

Total assets acquired

 

544.0

 

Current and long-term debt

 

(104.8

)

Deferred taxes

 

(58.5

)

Other current and long-term liabilities

 

(51.4

)

Total liabilities assumed

 

(214.7

)

Net assets acquired

 

$

329.3

 

 

2010 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 nine months ended September 30, 2011 were $29.9 million.

 

5



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

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 nine months ended September 30, 2011 were $77.2 million.

 

Purchase price allocations

 

The acquisitions discussed in this note have been accounted for under the acquisition method of accounting and, accordingly, the respective purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of each acquisition.  The accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date.  The consolidated balance sheets reflect the allocation of each acquisition’s purchase price as of September 30, 2011, as applicable.  The purchase price allocation for the Continental acquisition is preliminary and is pending the completion of certain purchase price adjustments based on audited closing balance sheet amounts, tangible and intangible asset valuations and various pre- and post-acquisition period tax returns.

 

4.  Goodwill

 

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

 

Balance as of December 31, 2010

 

$

1,109.6

 

Acquisition

 

126.3

 

Purchase price allocation adjustments

 

0.2

 

Effect of foreign currency translation

 

(4.5

)

Balance as of September 30, 2011

 

$

1,231.6

 

 

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

 

5.  Intangible Assets, net

 

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

 

 

 

September 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

 

$

7.4

 

$

(6.9

)

$

7.1

 

$

(6.7

)

Loan fees

 

31.2

 

(17.4

)

23.9

 

(14.1

)

Customer lists/relationships

 

470.5

 

(104.9

)

379.3

 

(83.7

)

Software — internal use

 

8.1

 

(4.5

)

8.1

 

(3.8

)

Other

 

4.9

 

(2.0

)

4.9

 

(1.7

)

 

 

522.1

 

(135.7

)

423.3

 

(110.0

)

Intangible assets not subject to amortization:

 

 

 

 

 

 

 

 

 

Trade names

 

523.4

 

 

442.5

 

 

 

 

$

1,045.5

 

$

(135.7

)

$

865.8

 

$

(110.0

)

 

6



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Intangible assets recorded in connection with the Continental acquisition were $180.2 million (see Note 3). A total of $84.3 million was allocated to the trade names acquired, none of which is subject to amortization. Additionally, the Company recorded other identifiable assets related to customer relationships and covenants not to compete of $95.6 million and $0.3 million, respectively, with weighted average lives of 10 years and 5 years, respectively. The Company also recorded $7.3 million of intangible assets in connection with the amendment of its syndicated credit agreement (see Note 7).  The Company recognized amortization expense for intangible assets of $25.9 million and $21.7 million for the nine months ended September 30, 2011 and 2010, respectively. Other changes in intangible assets, net during the nine months ended September 30, 2011 are due to foreign currency translation losses of $7.6 million.

 

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

 

2011

 

$

9.9

 

2012

 

39.5

 

2013

 

39.4

 

2014

 

37.4

 

2015

 

35.8

 

2016

 

34.2

 

 

6.  Income Taxes

 

The Company’s effective income tax rates for the nine months ended September 30, 2011 and 2010 were 32.2% and 33.4%, respectively. The decrease in the effective income tax rate was primarily due to favorable state law changes to apportionment weights, statute expirations and settlements for uncertain tax positions, and the Continental acquisition, which caused a shift in our state apportionment rates that lowered our state income tax rates as well as increased our foreign income levels that are taxed at lower rates.

 

7.  Debt

 

Debt consists of the following:

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(in millions)

 

 

 

 

 

 

 

Unsecured revolving credit facility due July 26, 2016

 

$

790.0

 

$

 

Unsecured revolving credit facility due November 9, 2012

 

 

195.0

 

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

 

75.0

 

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

 

14.8

 

13.1

 

Total

 

1,479.8

 

943.1

 

Less: unamortized discount

 

(1.7

)

(1.8

)

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

 

(14.2

)

(86.2

)

Total long-term debt

 

$

1,463.9

 

$

855.1

 

 

Unsecured Revolving Credit Facility

 

On July 26, 2011, the Company amended and restated the existing syndicated credit agreement to increase the borrowing limit from $1.1 billion to $1.5 billion, and to extend the maturity date of the credit facility for a five-year term to July 26, 2016.  The amended and restated revolving credit facility has 26 banks as lenders. Interest on borrowings from the amended and restated revolving credit facility is at variable rates based on LIBOR plus 1.50% or the bank prime rate plus 0.50% as of September 30, 2011.  The amended and restated revolving credit facility includes a commitment fee on the unused portion, at an annual rate of 0.25% as of September 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.

 

7



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Weighted average rates on borrowings outstanding on the revolving credit facility were 1.74% and 3.54% as of September 30, 2011 and December 31, 2010, respectively. As of September 30, 2011, the Company had $41.3 million of letters of credit outstanding under the revolving credit facility with availability to issue an additional $208.7 million of letters of credit.

 

Revolving Credit Facilities — Foreign Operations

 

Various other separate revolving credit facilities with a combined credit limit of approximately $24.0 million are in place for operations in Asia and Europe with combined outstanding balances of $13.7 million and $11.8 million as of September 30, 2011 and December 31, 2010, respectively.

 

Senior Unsecured Notes — Private Placements

 

The Company has $75.0 million of outstanding senior unsecured notes issued in private placements of debt as of September 30, 2011. At September 30, 2011, the outstanding senior notes bear interest at a fixed rate of 5.35% and have a remaining life of 1.8 years, maturing in July 2013.

 

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 amended and restated 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 September 30, 2011 was approximately 8.8 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 September 30, 2011 calculated in accordance with the terms of the revolving credit facility was 33.0% 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 September 30, 2011 was $999.2 million compared to Reliance shareholders’ equity balance of $3.08 billion as of September 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 86% of our total consolidated EBITDA for the last twelve months and approximately 89% of total consolidated tangible assets as of September 30, 2011.

 

The Company was in compliance with all debt covenants as of September 30, 2011.

 

8



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

8.  Equity

 

Common Stock

 

During the nine months ended September 30, 2011, the Company issued 225,746 shares of common stock in connection with the exercise of stock options for total proceeds of approximately $9.6 million.

 

Share Based Compensation

 

On August 8, 2011, the Company granted 86,000 shares of restricted stock to certain officers of the Company pursuant to the Amended and Restated Stock Option and Restricted Stock Plan (the “Plan”), which was approved by the shareholders in May 2006. The awards include dividend rights and vest 20% on each anniversary date through 2016. The fair value of the restricted stock granted was $37.29 per share, determined based on the fair value of the Company’s common stock on the grant date.

 

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, pursuant to the Plan, 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 September 30, 2011. No shares were repurchased in 2011 or 2010. Repurchased shares are redeemed and treated as authorized but unissued shares.

 

Other Comprehensive (Loss) Income

 

Other comprehensive (loss) income included the following:

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in millions)

 

Net income

 

$

86.3

 

$

49.3

 

$

280.1

 

$

157.1

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain

 

(19.8

)

5.4

 

(13.4

)

4.5

 

Unrealized (loss) gain on investments, net of tax

 

(0.3

)

0.1

 

(0.2

)

 

Total other comprehensive (loss) income

 

(20.1

)

5.5

 

(13.6

)

4.5

 

Comprehensive income

 

66.2

 

54.8

 

266.5

 

161.6

 

Comprehensive income attributable to noncontrolling interests

 

(1.4

)

(0.6

)

(4.2

)

(2.2

)

Comprehensive income attributable to Reliance

 

$

64.8

 

$

54.2

 

$

262.3

 

$

159.4

 

 

9



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Accumulated Other Comprehensive (Loss) Income

 

Accumulated other comprehensive (loss) income included the following:

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(in millions)

 

Foreign currency translation gain

 

$

6.9

 

$

20.3

 

Unrealized loss on investments, net of tax

 

(0.4

)

(0.2

)

Minimum pension liability, net of tax

 

(9.8

)

(9.8

)

Total accumulated other comprehensive (loss) income

 

$

(3.3

)

$

10.3

 

 

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 $0.3 million and $6.6 million, respectively, as of September 30, 2011 and $0.1 million and $6.6 million, respectively, as of 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 the Company’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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in millions, except share and per share amounts)

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income attributable to Reliance

 

$

84.9

 

$

48.7

 

$

275.9

 

$

154.9

 

Denominator:

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share:

 

 

 

 

 

 

 

 

 

Weighted average shares

 

74,826,968

 

74,292,161

 

74,740,921

 

74,126,497

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

Stock options and restricted stock

 

136,159

 

108,198

 

305,768

 

242,579

 

Denominator for diluted earnings per share:

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares and assumed conversions

 

74,963,127

 

74,400,359

 

75,046,689

 

74,369,076

 

Net income per share attributable to Reliance shareholders — diluted

 

$

1.13

 

$

0.65

 

$

3.68

 

$

2.08

 

Net income per share attributable to Reliance shareholders — basic

 

$

1.13

 

$

0.65

 

$

3.69

 

$

2.09

 

 

10



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The computations of earnings per share for the three months ended September 30, 2011 and 2010 do not include 3,859,485 and 3,954,200 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 nine months ended September 30, 2011 and 2010 do not include 3,347,503 and 2,759,308 shares reserved for issuance upon exercise of stock options, respectively, because their inclusion would have been anti-dilutive.

 

11.          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 September 30, 2011

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations &
Reclassifications

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

29.3

 

$

8.5

 

$

53.3

 

$

 

$

91.1

 

Accounts receivable, less allowance for doubtful accounts

 

76.0

 

841.0

 

102.5

 

 

1,019.5

 

Inventories

 

55.6

 

1,079.5

 

141.5

 

 

1,276.6

 

Intercompany receivables

 

0.3

 

31.2

 

5.8

 

(37.3

)

 

Other current assets

 

94.5

 

29.9

 

9.2

 

(91.1

)

42.5

 

Total current assets

 

255.7

 

1,990.1

 

312.3

 

(128.4

)

2,429.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in subsidiaries

 

2,157.1

 

261.0

 

 

(2,418.1

)

 

Property, plant and equipment, net

 

97.3

 

918.3

 

72.0

 

 

1,087.6

 

Goodwill

 

23.8

 

1,110.5

 

97.3

 

 

1,231.6

 

Intangible assets, net

 

13.8

 

754.9

 

141.1

 

 

909.8

 

Intercompany receivables

 

2,351.3

 

36.1

 

 

(2,387.4

)

 

Other assets

 

5.2

 

62.3

 

1.8

 

 

69.3

 

Total assets

 

$

4,904.2

 

$

5,133.2

 

$

624.5

 

$

(4,933.9

)

$

5,728.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities & Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

41.0

 

$

343.8

 

$

65.2

 

$

(37.3

)

$

412.7

 

Accrued compensation and retirement costs

 

17.1

 

75.8

 

7.2

 

 

100.1

 

Other current liabilities

 

49.0

 

45.8

 

8.4

 

 

103.2

 

Income taxes payable

 

 

20.9

 

9.3

 

(25.5

)

4.7

 

Deferred income taxes

 

 

75.2

 

 

(65.6

)

9.6

 

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

 

0.3

 

0.2

 

13.7

 

 

14.2

 

Total current liabilities

 

107.4

 

561.7

 

103.8

 

(128.4

)

644.5

 

Long-term debt

 

1,463.9

 

 

 

 

1,463.9

 

Intercompany borrowings

 

 

2,226.4

 

161.0

 

(2,387.4

)

 

Deferred taxes and other long-term liabilities

 

248.2

 

252.7

 

26.0

 

 

526.9

 

Total Reliance shareholders’ equity

 

3,084.7

 

2,088.0

 

330.1

 

(2,418.1

)

3,084.7

 

Noncontrolling interests

 

 

4.4

 

3.6

 

 

8.0

 

Total equity

 

3,084.7

 

2,092.4

 

333.7

 

(2,418.1

)

3,092.7

 

Total liabilities and equity

 

$

4,904.2

 

$

5,133.2

 

$

624.5

 

$

(4,933.9

)

$

5,728.0

 

 

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 September 30, 2011
(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

178.9

 

$

1,858.3

 

$

157.3

 

$

(55.9

)

$

2,138.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

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

 

144.2

 

1445.9

 

110.5

 

(55.9

)

1,644.7

 

Warehouse, delivery, selling, general and administrative

 

19.7

 

289.1

 

22.6

 

(11.8

)

319.6

 

Depreciation and amortization

 

4.4

 

27.1

 

2.7

 

 

34.2

 

 

 

168.3

 

1,762.1

 

135.8

 

(67.7

)

1,998.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

10.6

 

96.2

 

21.5

 

11.8

 

140.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(14.8

)

(4.6

)

(1.1

)

5.5

 

(15.0

)

Other income (expense), net

 

16.0

 

(3.9

)

(1.3

)

(17.3

)

(6.5

)

Income before equity in earnings of subsidiaries and income taxes

 

11.8

 

87.7

 

19.1

 

 

118.6

 

Equity in earnings of subsidiaries

 

64.1

 

8.0

 

 

(72.1

)

 

Income before income taxes

 

75.9

 

95.7

 

19.1

 

(72.1

)

118.6

 

Income tax (benefit) provision

 

(9.0

)

37.2

 

4.1

 

 

32.3

 

Net income

 

84.9

 

58.5

 

15.0

 

(72.1

)

86.3

 

Less: Net income attributable to noncontrolling interests

 

 

1.2

 

0.2

 

 

1.4

 

Net income attributable to Reliance

 

$

84.9

 

$

57.3

 

$

14.8

 

$

(72.1

)

$

84.9

 

 

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 September 30, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

155.0

 

$

1,449.3

 

$

89.3

 

$

(39.8

)

$

1,653.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

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

 

119.0

 

1,119.4

 

59.0

 

(39.8

)

1,257.6

 

Warehouse, delivery, selling, general and administrative

 

26.6

 

248.2

 

17.8

 

(14.4

)

278.2

 

Depreciation and amortization

 

3.3

 

24.8

 

1.7

 

 

29.8

 

 

 

148.9

 

1,392.4

 

78.5

 

(54.2

)

1,565.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

6.1

 

56.9

 

10.8

 

14.4

 

88.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(15.6

)

(4.4

)

(0.2

)

4.9

 

(15.3

)

Other (expense) income, net

 

(28.9

)

48.2

 

0.5

 

(19.3

)

0.5

 

(Loss) income before equity in earnings of subsidiaries and income taxes

 

(38.4

)

100.7

 

11.1

 

 

73.4

 

Equity in earnings of subsidiaries

 

63.5

 

5.0

 

 

(68.5

)

 

Income before income taxes

 

25.1

 

105.7

 

11.1

 

(68.5

)

73.4

 

Income tax (benefit) provision

 

(23.6

)

45.2

 

2.5

 

 

24.1

 

Net income

 

48.7

 

60.5

 

8.6

 

(68.5

)

49.3

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

0.8

 

(0.2

)

 

0.6

 

Net income attributable to Reliance

 

$

48.7

 

$

59.7

 

$

8.8

 

$

(68.5

)

$

48.7

 

 

15



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

537.4

 

$

5,346.2

 

$

383.0

 

$

(165.8

)

$

6,100.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

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

 

412.5

 

4,085.5

 

257.6

 

(165.8

)

4,589.8

 

Warehouse, delivery, selling, general and administrative

 

59.1

 

886.4

 

63.5

 

(57.2

)

951.8

 

Depreciation and amortization

 

11.3

 

81.2

 

6.2

 

 

98.7

 

 

 

482.9

 

5,053.1

 

327.3

 

(223.0

)

5,640.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

54.5

 

293.1

 

55.7

 

57.2

 

460.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(44.6

)

(23.2

)

(1.5

)

24.2

 

(45.1

)

Other income (expense), net

 

78.3

 

2.2

 

(1.3

)

(81.4

)

(2.2

)

Income before equity in earnings of subsidiaries and income taxes

 

88.2

 

272.1

 

52.9

 

 

413.2

 

Equity in earnings of subsidiaries

 

168.8

 

23.7

 

 

(192.5

)

 

Income before income taxes

 

257.0

 

295.8

 

52.9

 

(192.5

)

413.2

 

Income tax (benefit) provision

 

(18.9

)

140.1

 

11.9

 

 

133.1

 

Net income

 

275.9

 

155.7

 

41.0

 

(192.5

)

280.1

 

Less: Net income attributable to noncontrolling interests

 

 

3.5

 

0.7

 

 

4.2

 

Net income attributable to Reliance

 

$

275.9

 

$

152.2

 

$

40.3

 

$

(192.5

)

$

275.9

 

 

16



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Statement of Income
For the nine months ended September 30, 2010

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

448.0

 

$

4,164.6

 

$

244.4

 

$

(128.5

)

$

4,728.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

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

 

339.5

 

3,159.5

 

166.9

 

(128.5

)

3,537.4

 

Warehouse, delivery, selling, general and administrative

 

75.1

 

745.0

 

51.9

 

(52.4

)

819.6

 

Depreciation and amortization

 

9.6

 

74.7

 

4.6

 

 

88.9

 

 

 

424.2

 

3,979.2

 

223.4

 

(180.9

)

4,445.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

23.8

 

185.4

 

21.0

 

52.4

 

282.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest

 

(46.9

)

(26.2

)

(0.5

)

27.6

 

(46.0

)

Other income (expense), net

 

31.3

 

47.7

 

0.4

 

(80.0

)

(0.6

)

Income before equity in earnings of subsidiaries and income taxes

 

8.2

 

206.9

 

20.9

 

 

236.0

 

Equity in earnings of subsidiaries

 

113.6

 

9.6

 

 

(123.2

)

 

Income before income taxes

 

121.8

 

216.5

 

20.9

 

(123.2

)

236.0

 

Income tax (benefit) provision

 

(33.1

)

107.9

 

4.1

 

 

78.9

 

Net income

 

154.9

 

108.6

 

16.8

 

(123.2

)

157.1

 

Less: Net income attributable to noncontrolling interests

 

 

2.2

 

 

 

2.2

 

Net income attributable to Reliance

 

$

154.9

 

$

106.4

 

$

16.8

 

$

(123.2

)

$

154.9

 

 

17



Table of Contents

 

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Unaudited Consolidating Cash Flow Statement
For the nine months ended September 30, 2011

(in millions)

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

275.9

 

$

155.7

 

$

41.0

 

$

(192.5

)

$

280.1

 

Equity in earnings of subsidiaries

 

(168.8

)

(25.3

)

 

192.5

 

(1.6

)

Other operating activities, net

 

4.6

 

(244.5

)

(21.3

)

 

(261.2

)

Cash provided by (used in) operating activities

 

111.7

 

(114.1

)

19.7

 

 

17.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(9.5

)

(99.9

)

(3.3

)

 

(112.7

)

Acquisition of a metal service center, net of cash acquired

 

(306.5

)

 

 

 

(306.5

)

Net advances to subsidiaries

 

(294.7

)

 

 

294.7

 

 

Other investing activities, net

 

3.9

 

8.7

 

0.1

 

 

12.7

 

Cash used in investing activities

 

(606.8

)

(91.2

)

(3.2

)

294.7

 

(406.5

)

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) of debt

 

534.8

 

(76.1

)

(28.0

)

 

430.7

 

Dividends paid

 

(26.9

)

 

 

 

(26.9

)

Net intercompany borrowings

 

 

284.5

 

10.2

 

(294.7

)

 

Other financing activities, net

 

2.1

 

(2.6

)

 

 

(0.5

)

Cash provided by (used in) financing activities

 

510.0

 

205.8

 

(17.8

)

(294.7

)

403.3

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

4.1

 

 

4.1

 

Increase in cash and cash equivalents

 

14.9

 

0.5

 

2.8

 

 

18.2

 

Cash and cash equivalents at beginning of year