RELIANCE STEEL & ALUMINUM CO - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - RELIANCE STEEL & ALUMINUM CO. 8-K - RELIANCE STEEL & ALUMINUM CO	a6079854.htm

Exhibit 99.1

Reliance Steel & Aluminum Co. Reports Profitable 2009 Third Quarter and Nine Month Results

LOS ANGELES--(BUSINESS WIRE)--October 22, 2009--Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the third quarter and nine months ended September 30, 2009. For the 2009 third quarter, Reliance reported net income of $41.8 million, or $.57 per diluted share. For the 2008 third quarter, Reliance had net income of $152.5 million, or $2.07 per diluted share. For the 2009 second quarter, Reliance had a net loss of $5.8 million, or $0.08 per diluted share. Sales for the 2009 third quarter were $1.24 billion, down from 2008 third quarter sales of $2.57 billion, and flat with 2009 second quarter sales of $1.24 billion. The 2009 third quarter financial results include in cost of sales a pre-tax LIFO income amount of $67.5 million, compared with a pre-tax LIFO expense amount of $79.0 million for the 2008 third quarter and a pre-tax LIFO income amount of $75.0 million in the 2009 second quarter.

For the nine months ended September 30, 2009, net income amounted to $56.1 million, compared with net income of $416.5 million for the same period in 2008. Earnings per diluted share were $.76 for the nine months ended September 30, 2009, compared with earnings of $5.65 per diluted share for the nine months ended September 30, 2008. Sales for the 2009 year-to-date period were $4.04 billion, down 39% from 2008 nine month sales of $6.58 billion. The 2009 nine month financial results include in cost of sales a pre-tax LIFO income amount of $217.5 million, compared with a pre-tax LIFO expense amount of $136.5 million in the 2008 year-to-date period.

Reliance’s tons sold for the 2009 third quarter were down 26% from the 2008 third quarter and down less than 1% from the 2009 second quarter. Average price per ton sold was down 34% compared to the 2008 third quarter and flat with the 2009 second quarter. For the nine months ended September 30, 2009, tons sold were down 13% and average pricing was down 29% compared to the same period of 2008. For the 2009 third quarter carbon steel sales were 54% of our revenues; aluminum sales were 19%; stainless steel sales were 14%; alloy sales were 7%; other sales were 4% and toll processing sales were 2%.

David H. Hannah, Chairman and CEO of Reliance said, “The 2009 third quarter results improved substantially from the 2009 second quarter mainly due to higher gross profit margins. Because of mill price increases for most of our products during the third quarter and our significant inventory reductions over the past twelve months, our inventory costs on hand are now more in line with current replacement costs allowing us to improve our gross profit margins from the historically low margins experienced in the 2009 second quarter. We further reduced our FIFO inventory levels by $92 million in the quarter. Demand from our customers improved slightly during the quarter from the low levels experienced in July.”

“During the 2009 nine months, we generated record cash flow from operations of $807.2 million. We repaid $192 million of debt during the quarter. On September 28, 2009, we amended our existing $1.1 billion credit facility to adjust certain financial ratios and limit certain uses of cash through June 30, 2010. Pricing was adjusted and we also extended the maturity date on $1.02 billion of the $1.1 billion credit facility an additional year, through November 2012. Concurrent with the amendment and extension of the credit facility, we paid off and terminated our term loan that had an outstanding balance of $444 million, using $194 million of cash on hand and $250 million of borrowings on the credit facility. At September 30, 2009 we had cash on hand of $88 million. Our net debt-to-total capital ratio is 28% as of September 30, 2009,” commented Hannah.

“We are pleased with the significant improvement in our gross profit margins; however, we are uncertain as to business activity in the 2009 fourth quarter. Although we believe that demand is fairly stable at low levels, the fourth quarter is typically seasonally slower for us. Pricing also seems to be more stable than it was earlier in the year; however, we believe there may be some slight downward pressure on pricing for many of our products in the coming months. Because of this, we are not comfortable providing earnings guidance for the 2009 fourth quarter. We will, as the quarter progresses, communicate any meaningful information regarding our operations as it becomes available. Reliance stands on solid financial footings and is well positioned for the eventual recovery in economic conditions,” concluded Hannah.

On October 21, 2009, the Board of Directors declared a regular quarterly cash dividend of $.10 per share of common stock. The dividend is payable on January 6, 2010 to shareholders of record December 4, 2009. The Company has paid regular quarterly dividends for 49 consecutive years.

Reliance will host a conference call that will be broadcast live over the Internet (listen only mode) regarding the third quarter and nine month financial results for the period ended September 30, 2009. All interested parties are invited to listen to the web cast on October 22, 2009 at 11:00 a.m. Eastern Time at: http://www.rsac.com in the Investor Information section or http://www.streetevents.com. Player format: Windows Media and RealPlayer. The web cast will remain on the Reliance web site at: www.rsac.com through November 22, 2009 and a printed transcript will be posted on the Reliance web site after the completion of the conference call.

Reliance Steel & Aluminum Co., headquartered in Los Angeles, California, is the largest metals service center company in North America. Through a network of more than 200 locations in 38 states and Belgium, Canada, China, Mexico, Singapore, South Korea, and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of over 100,000 metal products to more than 125,000 customers in a broad range of industries.

Reliance Steel & Aluminum Co.’s press releases and additional information are available on the Company’s web site at www.rsac.com. The Company was named to the 2008 “Fortune 500” List, the 2008 Forbes “America’s Best Managed Companies” List and the 2009 Fortune List of “The World’s Most Admired Companies.”

This release may contain forward-looking statements. Actual results and events may differ materially as a result of a variety of factors, many of which are outside of Reliance Steel & Aluminum Co.’s control. Risk factors and additional information are included in Reliance Steel & Aluminum Co.’s reports on file with the Securities and Exchange Commission, including Reliance Steel & Aluminum Co.’s Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009.

RELIANCE STEEL & ALUMINUM CO.
SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)


	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2009			2008			2009			2008
Income Statement Data:
Net sales	$	1,243,373		$	2,572,836		$	4,044,886		$	6,576,074
Gross profit¹		356,469			624,048			993,796			1,703,261
Operating income		74,283			269,216			127,674			726,417
Pre-tax income		61,511			245,249			82,644			668,790
Net income attributable to Reliance		41,757			152,498			56,088			416,489
Diluted earnings per share attributable to Reliance shareholders	$	0.57		$	2.07		$	0.76		$	5.65
Weighted average shares outstanding – diluted		73,784,086			73,775,991			73,623,714			73,686,248
Gross margin¹		28.7	%		24.3	%		24.6	%		25.9	%
Operating income margin		6.0	%		10.5	%		3.2	%		11.0	%
Pre-tax income margin		4.9	%		9.5	%		2.0	%		10.2	%
Net income margin - Reliance		3.4	%		5.9	%		1.4	%		6.3	%
Cash dividends per share	$	.10		$	.10		$	.30		$	.30

	September 30,			December 31,
	2009			2008
Balance Sheet and Other Data:
Current assets	$	1,576,183		$	2,302,372
Working capital		1,127,907			1,652,207
Property, plant and equipment, net		987,684			998,706
Total assets		4,464,342			5,195,485
Current liabilities		448,276			650,165
Long-term debt²		1,065,689			1,675,565
Total Reliance shareholders’ equity		2,500,012			2,431,436
Capital expenditures (year-to-date)		55,044			151,890
Cash flow from operations (year-to-date)		807,204			664,684
Net debt-to-total capital³		28.3	%		41.4	%
Return on Reliance shareholders’ equity⁴		5.0	%		22.9	%
Current ratio		3.5			3.5
Book value per share	$	34.02		$	33.17

¹		Gross Profit, calculated as Net Sales less Cost of Sales, and Gross Profit Margin, calculated as Gross Profit divided by Net Sales, are non-GAAP financial measures as they exclude depreciation and amortization expense associated with the corresponding sales. The majority of our orders are basic distribution with no processing services performed. For the remainder of our sales orders, we perform “first-stage” processing which is generally not labor intensive as we are simply cutting the metal to size. Because of this, the amount of related labor and overhead, including depreciation and amortization, are not significant and are excluded from our Cost of Sales. Therefore, our Cost of Sales is primarily comprised of the cost of the material we sell. We use Gross Profit and Gross Profit Margin as shown above as measures of operating performance. Gross Profit and Gross Profit Margin are important operating and financial measures, as fluctuations in our Gross Profit Margin can have a significant impact on our earnings. Gross Profit and Gross Profit Margin, as presented, are not necessarily comparable with similarly titled measures for other companies.
²		Long-term debt includes capital lease obligations of $3,350 and $3,833 as of September 30, 2009 and December 31, 2008, respectively.
³		Net debt-to-total capital is calculated as total debt (net of cash) divided by total Reliance shareholders’ equity plus total debt (net of cash).
⁴		Calculations are based on the latest twelve months net income and beginning total Reliance shareholders’ equity.


RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)

ASSETS
	September 30,			December 31,
	2009			2008
	(Unaudited)
Current assets:
Cash and cash equivalents	$	87,864		$	51,995
Accounts receivable, less allowance for doubtful accounts of $21,254 at September 30, 2009 and $22,018 at December 31, 2008		588,293			851,214
Inventories		792,119			1,284,468
Prepaid expenses and other current assets		27,367			33,782
Income taxes receivable		—			9,980
Deferred income taxes		80,540			70,933
Total current assets		1,576,183			2,302,372
Property, plant and equipment:
Land		131,115			125,096
Buildings		530,967			506,781
Machinery and equipment		829,785			810,054
Accumulated depreciation		(504,183	)		(443,225	)
		987,684			998,706

Goodwill		1,079,127			1,065,527
Intangible assets, net		731,694			741,681
Cash surrender value of life insurance policies, net		56,053			57,410
Investments in unconsolidated entities		20,190			20,605
Other assets		13,411			9,184
Total assets	$	4,464,342		$	5,195,485
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	221,774		$	248,312
Accrued expenses		59,842			59,982
Deferred revenue		48,785			82,949
Accrued compensation and retirement costs		61,459			123,707
Accrued insurance costs		40,006			40,700
Income taxes payable		7,930			—
Current maturities of long-term debt		7,825			93,877
Current maturities of capital lease obligations		655			638
Total current liabilities		448,276			650,165
Long-term debt		1,062,339			1,671,732
Capital lease obligations		3,350			3,833
Long-term retirement costs and other long-term liabilities		109,124			94,361
Deferred income taxes		339,014			340,326
Commitments and contingencies
Reliance shareholders’ equity:
Preferred stock, no par value:
Authorized shares — 5,000,000
None issued or outstanding		—			—
Common stock, no par value:
Authorized shares — 100,000,000
Issued and outstanding shares — 73,489,071 at
September 30, 2009 and 73,312,714 at
December 31, 2008, stated capital		577,107			563,092
Retained earnings		1,934,732			1,900,360
Accumulated other comprehensive loss		(11,827	)		(32,016	)
Total Reliance shareholders’ equity		2,500,012			2,431,436
Noncontrolling interests		2,227			3,632
Total equity		2,502,239			2,435,068
Total liabilities and equity	$	4,464,342		$	5,195,485


RELIANCE STEEL & ALUMINUM CO. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2009			2008			2009			2008

Net sales	$	1,243,373		$	2,572,836		$	4,044,886		$	6,576,074

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		886,904			1,948,788			3,051,090			4,872,813
Warehouse, delivery, selling, general and administrative		251,761			327,822			776,270			907,024
Depreciation and amortization		30,425			27,010			89,852			69,820
		1,169,090			2,303,620			3,917,212			5,849,657

Operating income		74,283			269,216			127,674			726,417

Other income (expense):
Interest		(15,916	)		(23,899	)		(51,930	)		(56,673	)
Other income (expense), net		3,144			(68	)		6,900			(954	)
Income before income taxes		61,511			245,249			82,644			668,790
Income tax provision		19,434			92,127			25,735			251,605
Net income		42,077			153,122			56,909			417,185
Less: Net income attributable to noncontrolling interests		320			624			821			696
Net income attributable to Reliance	$	41,757		$	152,498		$	56,088		$	416,489

Earnings per share:
Diluted earnings per common share attributable to Reliance shareholders	$	0.57		$	2.07		$	0.76		$	5.65
Weighted average shares outstanding - diluted		73,784,086			73,775,991			73,623,714			73,686,248

Basic earnings per common share attributable to Reliance shareholders	$	0.57		$	2.08		$	0.76		$	5.70
Weighted average shares outstanding - basic		73,478,197			73,238,881			73,391,043			73,038,140

Cash dividends per share	$	.10		$	.10		$	.30		$	.30


RELIANCE STEEL & ALUMINUM CO. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

	Nine Months Ended September 30,
	2009			2008
Operating activities:
Net income	$	56,909		$	417,185
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense		89,852			69,820
Deferred income tax benefit		(14,120	)		(4,057	)
Loss on sales of property, plant and equipment		62			2,212
Equity in earnings of unconsolidated entities		(705	)		(396	)
Dividends received from unconsolidated entities		1,120			—
Stock based compensation expense		11,456			10,621
Excess tax benefits from stock based compensation		(303	)		(9,381	)
Net (gain) loss from life insurance policies		(5,219	)		1,733
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable		266,537			(230,160	)
Inventories		497,000			(294,160	)
Prepaid expenses and other assets		18,464			15,388
Accounts payable and other liabilities		(113,849	)		136,582
Net cash provided by operating activities		807,204			115,387

Investing activities:
Purchases of property, plant and equipment		(55,044	)		(119,546	)
Acquisitions of metals service centers and net asset purchases of metal service centers, net of cash acquired		—			(329,402	)
Tax distributions related to prior acquisitions		—			(1,155	)
Proceeds from sales of property, plant and equipment		1,173			18,917
Net proceeds from redemptions of life insurance policies		6,576			2,532
Net investment in life insurance policies		—			(96	)
Net cash used in investing activities		(47,295	)		(428,750	)

Financing activities:
Proceeds from borrowings		354,755			1,633,897
Principal payments on long-term debt and short-term borrowings		(1,051,279	)		(1,239,310	)
Debt issuance costs		(6,841	)		(3,313	)
Dividends paid		(22,019	)		(21,899	)
Payments to noncontrolling interest holders		(1,323	)		—
Excess tax benefits from stock based compensation		303			9,381
Exercise of stock options		4,059			17,081
Issuance of common stock		258			284
Noncontrolling interests purchases		(2,661	)		—
Common stock repurchases		—			(114,774	)
Net cash (used in) provided by financing activities		(724,748	)		281,347
Effect of exchange rate changes on cash		708			(1,325	)
Increase (decrease) in cash and cash equivalents		35,869			(33,341	)
Cash and cash equivalents at beginning of period		51,995			77,023
Cash and cash equivalents at end of period	$	87,864		$	43,682

Supplemental cash flow information:
Interest paid during the period	$	46,832		$	38,339
Income taxes paid during the period	$	28,260		$	184,443

CONTACT:
Reliance Steel & Aluminum Co.
Kim P. Feazle
Investor Relations
(713) 610-9937
(213) 576-2428
kfeazle@rsac.com
investor@rsac.com

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