Reliance Steel & Aluminum Co. Reports 2012 Fourth Quarter And Full Year Financial Results

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 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).

³ Calculations are based on the latest twelve months net income attributable to Reliance and beginning total Reliance shareholders’ equity.

⁴ Book value per share is calculated as total Reliance shareholders’ equity divided by outstanding common shares.

RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
ASSETS
		December 31,				December 31,
		2012				2011*
Current assets:
Cash and cash equivalents		$	97.6			$	84.6
Accounts receivable, less allowance for doubtful accounts of $20.5 at December 31, 2012 and $22.2 at December 31, 2011			807.7				896.2
Inventories			1,272.3				1,212.8
Prepaid expenses and other current assets			40.9				47.8
Income taxes receivable			28.4				--
Deferred income taxes			30.5				33.3
Total current assets			2,277.4				2,274.7
Property, plant and equipment:
Land			155.6				145.8
Buildings			725.1				656.8
Machinery and equipment			1,124.7				982.9
Accumulated depreciation			(764.7	)			(680.0	)
			1,240.7				1,105.5
Goodwill			1,314.6				1,244.3
Intangible assets, net			936.5				895.9
Cash surrender value of life insurance policies, net			45.2				41.9
Investments in unconsolidated entities			15.5				16.2
Other assets			27.8				27.4
Total assets		$	5,857.7			$	5,605.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	255.6			$	335.2
Accrued expenses			87.4				54.0
Accrued compensation and retirement costs			112.8				111.0
Accrued insurance costs			38.8				42.1
Current maturities of long-term debt and short-term borrowings			83.6				12.2
Income taxes payable			--				21.9
Total current liabilities			578.2				576.4
Long-term debt			1,123.8				1,319.0
Long-term retirement costs			94.9				88.6
Other long-term liabilities			27.1				30.1
Deferred income taxes			466.3				439.8
Commitments and contingencies
Equity:
Preferred stock, no par value:
Authorized shares — 5,000,000
None issued or outstanding			--				--
Common stock, no par value:
Authorized shares — 200,000,000
Issued and outstanding shares – 76,042,546 at December 31, 2012 and 75,007,694 at December 31, 2011, stated capital			722.2				657.1
Retained earnings			2,837.7				2,495.6
Accumulated other comprehensive loss			(1.5	)			(8.8	)
Total Reliance shareholders’ equity			3,558.4				3,143.9
Noncontrolling interests			9.0				8.1
Total equity			3,567.4				3,152.0
Total liabilities and equity		$	5,857.7			$	5,605.9
* Amounts were derived from audited financial statements.

RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
		Three Months								Twelve Months
		Ended December 31,								Ended December 31,
		2012				2011				2012				2011 *
Net sales		$	1,889.0			$	2,033.9			$	8,442.3			$	8,134.7
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)			1,364.6				1,558.9				6,235.4				6,148.7
Warehouse, delivery, selling, general and administrative			346.4				328.3				1,396.2				1,280.1
Depreciation and amortization			42.2				34.4				151.5				133.1
			1,753.2				1,921.6				7,783.1				7,561.9
Operating income			135.8				112.3				659.2				572.8
Other income (expense):
Interest			(14.2	)			(14.7	)			(58.4	)			(59.8	)
Other (expense) income, net			(0.3	)			0.8				8.6				(1.4	)
Income before income taxes			121.3				98.4				609.4				511.6
Income tax provision			40.5				29.3				201.1				162.4
Net income			80.8				69.1				408.3				349.2
Less: Net income attributable to noncontrolling interests			0.4				1.2				4.8				5.4
Net income attributable to Reliance		$	80.4			$	67.9			$	403.5			$	343.8
Earnings per share:
Diluted earnings per common share attributable to Reliance shareholders		$	1.06			$	0.91			$	5.33			$	4.58
Basic earnings per common share attributable to Reliance shareholders		$	1.06			$	0.91			$	5.36			$	4.60
Cash dividends per share		$	0.25			$	0.12			$	0.80			$	0.48
* Amounts were derived from audited financial statements.

RELIANCE STEEL & ALUMINUM CO.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
		Twelve Months Ended
		December 31,
		2012				2011 *
Operating activities:
Net income		$	408.3			$	349.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			151.5				133.1
Deferred income tax provision (benefit)			2.8				(27.2	)
Gain on sales of property, plant and equipment			(2.9	)			(2.6	)
Equity in earnings of unconsolidated entities			(2.2	)			(2.2	)
Dividends received from unconsolidated entities			2.9				3.9
Share-based compensation expense			23.0				21.3
Tax deficit from share-based compensation			0.4				0.3
Net loss from life insurance policies and other investments			4.0				5.5
Changes in operating assets and liabilities (excluding effects of businesses acquired):
Accounts receivable			123.1				(145.9	)
Inventories			(1.3	)			(231.0	)
Prepaid expenses and other assets			(18.9	)			22.8
Accounts payable and other liabilities			(88.8	)			107.6
Net cash provided by operating activities			601.9				234.8
Investing activities:
Purchases of property, plant and equipment			(214.0	)			(156.4	)
Acquisitions of metals service centers, net of cash acquired			(166.9	)			(313.3	)
Proceeds from sales of property, plant and equipment			8.2				9.0
Net investment in marketable securities			(0.7	)			(8.5	)
Net investment in life insurance policies			(11.2	)			(9.0	)
Net proceeds from redemptions of life insurance policies			2.9				3.6
Net cash used in investing activities			(381.7	)			(474.6	)
Financing activities:
Net short-term debt repayments			(63.2	)			(104.7	)
Proceeds from long-term debt borrowings			641.0				995.0
Principal payments on long-term debt			(763.0	)			(606.6	)
Debt issuance costs			—				(7.3	)
Payments to noncontrolling interest holders			(3.1	)			(3.7	)
Dividends paid			(60.2	)			(35.9	)
Tax deficit from share-based compensation			(0.4	)			(0.3	)
Exercise of stock options			42.1				11.1
Noncontrolling interests purchased			(0.8	)			—
Net cash (used in) provided by financing activities			(207.6	)			247.6
Effect of exchange rate changes on cash			0.4				3.9
Increase in cash and cash equivalents			13.0				11.7
Cash and cash equivalents at beginning of year			84.6				72.9
Cash and cash equivalents at end of year		$	97.6			$	84.6
Supplemental cash flow information:
Interest paid during the year		$	58.7			$	57.4
Income taxes paid during the year		$	245.7			$	149.2
Non-cash investing and financing activities:
Debt assumed in connection with acquisitions of metals service centers		$	59.4			$	104.7
* Amounts were derived from audited financial statements.

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