EX-99.1 2 a4747044ex991.txt PRESS RELEASE EXHIBIT 99.1 Reliance Steel & Aluminum Co. Reports 2004 Third Quarter and Year-to-Date Financial Results; Best-Ever Quarterly Sales and Record Year-to-Date Results LOS ANGELES--(BUSINESS WIRE)--Oct. 21, 2004--Reliance Steel & Aluminum Co. (NYSE:RS) today reported its financial results for the three and nine-months ended September 30, 2004. For the 2004 third quarter, net income was $44.1 million, or $1.35 earnings per diluted share. This compares with net income of $12.4 million, or $.39 earnings per diluted share, for the three-months ended September 30, 2003. Sales for the 2004 third quarter were a quarterly record $783.7 million, an increase of 60% compared with 2003 third quarter sales of $490.6 million. The 2004 third quarter financial results include a pre-tax LIFO expense amount of $32.5 million, or $.60 per diluted share. For the nine-months ended September 30, 2004, net income amounted to a record $126.8 million compared with net income of $24.3 million for the same period in 2003. Earnings per diluted share were $3.88 for the nine-months ended September 30, 2004, compared with earnings of $.77 per diluted share for the nine-months ended September 30, 2003. Sales for the 2004 year-to-date period were a record $2.2 billion, an increase of 57%, compared with 2003 nine-month sales of $1.4 billion. The 2004 year-to-date financial results include a pre-tax LIFO expense amount of $92.5 million, or $1.72 per diluted share. David H. Hannah, Chief Executive Officer of Reliance, said, "The third quarter's operating results exceeded our range of earnings per diluted share that we previously stated during our second quarter conference call on July 15, 2004. This was the result of stronger than expected revenues from both increased pricing and healthier demand than we had forecast. Overall, the summer slowdown was not as pronounced as in prior years, and the expected softening of carbon steel prices did not occur in the third quarter. Our gross profit margins did contract somewhat during the third quarter compared to the second quarter, as we expected, since our average inventory costs increased more than our average selling prices. "We have a very broad product base that gives us added flexibility in the marketplace during volatile pricing environments. Even though we expect pricing to ease slightly in the fourth quarter for carbon steel products that represent about 60% of our revenues, at the same time we also anticipate flat to increased metals pricing for the remaining 40% of our revenues. Customer demand and metals pricing continue to provide a favorable operating environment. All of our businesses are performing well, and we believe there is plenty of room for improvement in demand in many sectors of the industrial economy," said Hannah. "We anticipate steady to improving demand for our products during the fourth quarter, with seasonal slowness due to the Holidays. We also expect our gross profit margins to contract very slightly through the fourth quarter. At this time, our best estimate for earnings per diluted share for the 2004 fourth quarter is a range of $.95 to $1.05," Hannah concluded. On July 14, 2004, the Company's Board of Directors declared a 17% increase in the regular quarterly cash dividend to $.07 per share of common stock. The 2004 third quarter cash dividend was paid on August 27, 2004 to shareholders of record August 6, 2004. 2004 marks the 44th consecutive year that Reliance has paid quarterly dividends to its shareholders. Reliance will host a conference call that will be broadcast live over the Internet (listen-only mode) regarding the third quarter and year-to-date financial results for the period ended September 30, 2004. All interested parties are invited to listen to the web cast on October 21, 2004 at 11:00 a.m. Eastern Time at: http://www.rsac.com/investorinformation or http://www.streetevents.com. Player format: Windows Media. The web cast will remain on the Reliance web site at www.rsac.com through November 21, 2004 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 one of the largest metals service center companies in the United States. Through a network of 105 processing and distribution centers in 30 states and Belgium, France and South Korea, the Company provides value-added metals processing services and distributes a full line of over 90,000 metal products. These products include galvanized, hot-rolled and cold-finished steel; stainless steel; aluminum; brass; copper; titanium; and alloy steel sold to more than 95,000 customers in various 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 as one of "America's Most Admired Companies" listed in the diversified wholesalers category in the March 8, 2004 issue of Fortune. This release may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which Reliance Steel & Aluminum Co. has no control. These risk factors and additional information are included in the Company's reports on file with the Securities and Exchange Commission. 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, ----------------------- ----------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Income Statement Data: Net sales $783,670 $490,587 $2,200,215 $1,397,739 Gross profit 214,922 138,962 630,819 377,737 Operating income(1) 83,636 28,513 239,810 57,839 EBITDA(2) 91,005 39,449 264,021 85,331 EBIT(2) 79,971 28,326 230,875 59,172 Pre-tax income 72,891 20,364 209,059 40,093 Net income 44,140 12,353 126,776 24,324 EPS - diluted $1.35 $.39 $3.88 $.77 Weighted average shares outstanding -- diluted 32,802,503 31,857,794 32,641,089 31,785,626 Gross margin 27.4% 28.3% 28.7% 27.0% Operating margin(1) 10.7% 5.8% 10.9% 4.1% EBITDA margin(2) 11.6% 8.0% 12.0% 6.1% EBIT margin(2) 10.2% 5.8% 10.5% 4.2% Pre-tax margin 9.3% 4.2% 9.5% 2.9% Net margin 5.6% 2.5% 5.8% 1.7% Cash dividends per share $.07 $.06 $.19 $.18 September 30, December 31, 2004 2003 -------------- --------------- Balance Sheet Data: Current assets $771,116 $544,586 Working capital 478,849 341,762 Net fixed assets 461,828 466,871 Total assets 1,604,600 1,369,424 Current liabilities 292,267 202,824 Long-term debt 478,850 469,250 Shareholders' equity 777,882 647,619 Capital expenditures 27,695 20,909 Net debt-to-total capital(3) 39.1% 43.1% Return on equity(4) 21.1% 5.6% Current ratio 2.6 2.7 Book value per share $23.88 $20.10 Cash flow from operations per share(4) $1.17 $3.34 (1) Operating income is calculated as net sales less gross profit, warehouse, delivery, selling, general and administrative expenses and depreciation expense. (2) See Consolidated Statements of Income for reconciliation of EBIT and EBITDA. EBIT is defined as the sum of income before interest expense and income taxes. EBITDA is defined as the sum of income before interest expense, income taxes, depreciation expense and amortization of intangibles. We believe that EBIT and EBITDA are commonly used as a measure of performance for companies in our industry and are frequently used by analysts, investors, lenders and other interested parties to evaluate a company's financial performance and its ability to incur and service debt. EBIT and EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States. The items excluded from EBIT and EBITDA are significant components in understanding and assessing financial performance. EBIT or EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in the consolidated financial statements as an indicator of operating performance or as a measure of liquidity. (3) Net debt-to-total capital is calculated as total debt (net of cash) divided by shareholders' equity plus total debt (net of cash). (4) Calculations are based on the latest twelve months. RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) ASSETS Sept. 30, Dec. 31, 2004 2003 ----------- ----------- (Unaudited) Current assets: Cash and cash equivalents $2,225 $2,166 Accounts receivable, less allowance for doubtful accounts of $9,525 at September 30, 2004 and $4,716 at December 31, 2003, respectively 358,574 221,793 Inventories 376,709 288,080 Prepaid expenses and other current assets 15,661 14,593 Deferred income taxes 17,947 17,954 ----------- ----------- Total current assets 771,116 544,586 Property, plant and equipment, at cost: Land 57,148 57,077 Buildings 260,383 256,708 Machinery and equipment 365,508 349,933 Accumulated depreciation (221,211) (196,847) ----------- ----------- 461,828 466,871 Goodwill 341,780 325,305 Other assets 29,876 32,662 ----------- ----------- Total assets $1,604,600 $1,369,424 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $161,407 $98,438 Accrued expenses 63,567 53,265 Wages and related accruals 37,868 22,696 Deferred income taxes 6,025 6,025 Current maturities of long-term debt 23,400 22,400 ----------- ----------- Total current liabilities 292,267 202,824 Long-term debt 478,850 469,250 Deferred income taxes 40,349 40,349 Minority interest 15,252 9,382 Commitments -- -- 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 32,575,292 at September 30, 2004 and 32,225,872 at December 31, 2003, respectively, stated capital 311,581 303,587 Retained earnings 467,108 344,962 Accumulated comprehensive loss (807) (930) ----------- ----------- Total shareholders' equity 777,882 647,619 ----------- ----------- Total liabilities and shareholders' equity $1,604,600 $1,369,424 =========== =========== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF INCOME (In thousands except share and per share amounts) Three Months Nine Months Ended September 30, Ended September 30, ----------------------- ----------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ----------- Net sales $783,670 $490,587 $2,200,215 $1,397,739 Other income, net 483 585 2,376 2,289 ----------- ----------- ----------- ----------- 784,153 491,172 2,202,591 1,400,028 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 568,748 351,625 1,569,396 1,020,002 Warehouse, delivery, selling, general and administrative 121,047 100,198 360,276 295,228 Depreciation and amortization 11,034 11,123 33,146 26,159 Interest expense 7,080 7,962 21,816 19,079 ----------- ----------- ----------- ----------- 707,909 470,908 1,984,634 1,360,468 Income before minority interest and income taxes 76,244 20,264 217,957 39,560 Minority interest (3,353) 100 (8,898) 533 ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 72,891 20,364 209,059 40,093 Provision for income taxes 28,751 8,011 82,283 15,769 ----------- ----------- ----------- ----------- Net income $44,140 $12,353 $126,776 $24,324 =========== =========== =========== =========== Earnings per share: Income from continuing operations -- diluted $1.35 $.39 $3.88 $.77 =========== =========== =========== =========== Weighted average shares outstanding -- diluted 32,802,503 31,857,794 32,641,089 31,785,626 =========== =========== =========== =========== Income from continuing operations -- basic $1.36 $.39 $3.91 $.77 =========== =========== =========== =========== Weighted average shares outstanding -- basic 32,545,999 31,815,214 32,428,946 31,779,325 =========== =========== =========== =========== Cash dividends per share $.07 $.06 $.19 $.18 =========== =========== =========== =========== Reconciliation of EBIT and EBITDA Income from continuing operations before income taxes $72,891 $20,364 $209,059 $40,093 Interest expense 7,080 7,962 21,816 19,079 ----------- ----------- ----------- ----------- EBIT $79,971 $28,326 $230,875 $59,172 =========== =========== =========== =========== Depreciation expense 10,239 10,251 30,733 24,670 Amortization expense 795 872 2,413 1,489 ----------- ----------- ----------- ----------- EBITDA $91,005 $39,449 $264,021 $85,331 =========== =========== =========== =========== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine Months Ended September 30, ---------------------------- 2004 2003 ------------- -------------- Operating activities: Net income $126,776 $24,324 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 33,146 26,159 Deferred taxes -- (165) Gain on sales of machinery and equipment (585) (764) Minority interest 8,898 (533) Changes in operating assets and liabilities: Accounts receivable (136,781) (23,316) Inventories (88,629) 15,561 Prepaid expenses and other assets (1,630) (2,542) Accounts payable and accrued expenses 89,975 60,754 ------------- -------------- Net cash provided by operating activities 31,170 99,478 Investing activities: Purchases of property, plant and equipment, net (27,695) (13,433) Proceeds from sales of property and equipment 2,590 2,896 Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired and debt assumed -- (245,850) Purchase of minority interest in foreign subsidiary (473) -- Tax reimbursements made related to prior acquisition (16,475) -- ------------- -------------- Net cash used in investing activities (42,053) (256,387) Financing activities: Proceeds from borrowings 193,000 262,195 Principal payments on long-term debt and short-term borrowings (182,400) (100,545) Payments to minority shareholders (1,709) (378) Dividends paid (6,162) (5,719) Exercise of stock options 7,758 2,457 Issuance of common stock 236 218 ------------- -------------- Net cash provided by financing activities 10,723 158,228 Effect of exchange rate changes on cash 219 559 ------------- -------------- Increase in cash and cash equivalents 59 1,878 Cash and cash equivalents at beginning of period 2,166 9,305 ------------- -------------- Cash and cash equivalents at end of period $2,225 $11,183 ============= ============== Supplemental cash flow information: Interest paid during the period $19,001 $12,511 Income taxes paid during the period $69,120 $4,014 CONTACT: Reliance Steel & Aluminum Co. Investor Relations Kim P. Feazle (713) 610-9937 (213) 576-2428 kfeazle@rsac.com investor@rsac.com