Form 10-K

10-K 1 d10k.htm FORM 10-K Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

¨	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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

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

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price on the New York Stock Exchange on June 30, 2010 was approximately $2,570,000,000. As of January 31, 2011, 74,660,137 shares of the registrant’s common stock, no par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2011 (the “Proxy Statement”) are incorporated by reference into Part III of this report.

INDEX

Page

PART I

Item 1.

Products and Processing Services

Marketing

Industry and Market Cycles

Competition

Quality Control

Systems

Government Regulation

Environmental

Employees

Available Information

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

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

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.

Certain Relationships and Related Transactions and Director Independence

Item 14.

Principal Accounting Fees and Services

PART IV

Item 15.

Exhibits, Financial Statement Schedules

SIGNATURES

SAFE HARBOR STATEMENT UNDER THE PRIVATE

SECURITIES LITIGATION REFORM ACT OF 1995

Unless otherwise indicated or required by the context, as used in this Annual Report on Form 10-K, the terms “Company,” “Reliance,” “we,” “our,” and “us” refer to Reliance Steel & Aluminum Co. and all of its subsidiaries that are consolidated in conformity with U.S. generally accepted accounting principles. This Annual Report on Form 10-K and the documents incorporated by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements include discussions of our business strategies and our expectations concerning future operations, margins, profitability, liquidity and capital resources. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “potential” and similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. These risks and other factors include those described under “Risk Factors” and elsewhere in this Annual Report on Form 10-K and the documents incorporated by reference. These factors, among others, could cause our actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this Annual Report and the documents incorporated by reference, you should understand that the forward-looking statements are not guarantees of performance or results.

All future written and oral forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Annual Report as a result of new information, future events or developments, except as required by the federal securities laws.

Forward-looking statements involve known and unknown risks and uncertainties. Various factors, such as the factors listed below and further discussed in detail in “Risk Factors” may cause our actual results, performance, or achievements to be materially different from those expressed or implied by any forward-looking statements. Among the factors that could cause our results to differ are the following:

•

Our future operating results depend on a number of factors beyond our control, such as the prices for and the availability of metals, which could cause our results to fluctuate significantly over time. During periods of low customer demand it could be more difficult for us to pass through price increases to our customers, which could reduce our gross profit and net income. A significant or rapid increase or decrease in costs from current levels could also have a severe negative impact on our gross profit. In late 2010 and early 2011, our suppliers announced significant price increases for carbon steel products. Most of the price increases have been raw material cost driven rather than demand driven. With no corresponding improvement in demand these price increases may not be sustainable and there could be significant decreases in carbon steel product prices from current levels, which could have an adverse impact on our gross profit margins and profitability.

•

We service industries that are highly cyclical, and downturns in our customers’ industries could reduce our revenue and profitability.

•

The success of our business is affected by general economic conditions and, accordingly, our business was adversely impacted by the recent economic recession. In the 2008 fourth quarter the effects of the depressed economy impacted our industry in a very significant and rapid manner from both demand and pricing perspectives. Although pricing and demand stabilized somewhat during the latter part of 2009 and continued to improve slowly but steadily in 2010, current demand for our products continues to be at low levels. We do not know if, or when, demand levels will return to pre-recession levels.

•

We operate in a very competitive industry and increased competition could reduce our gross profit margins and net income. The inventory destocking that occurred in our industry beginning in late 2008 and continuing through 2009 as a result of price reductions from our suppliers and significant decreases in demand from our customers significantly increased competitive pressures and negatively impacted our gross profit margins.

•

Global economic factors may cause increased imports of metal products to the U.S., which may cause the cost of the metals we purchase to decline and could also cause our selling prices and gross profits to decline.

•

If the producers increase production levels without offsetting increases in end demand, metal costs could decline, which may cause our selling prices and gross profits to decline.

•

As a decentralized business, we depend on both senior management and our operating employees; if we are unable to attract and retain well-qualified individuals, our results of operations may decline.

•

Foreign currency exchange rates could change, which could affect the price we pay for certain metals and the results of our foreign operations, which have grown as a percentage of our total operations to approximately 5% of net sales in 2010 (based on where sales originated).

•

The interest rates on our $1.1 billion revolving credit facility are variable. Although our outstanding borrowings on our $1.1 billion revolving credit facility were only $195.0 million at December 31, 2010, the impact of interest rate changes on our financial results could increase if we increase our borrowings on our $1.1 billion revolving credit facility to finance future acquisitions or increases in working capital.

•

The recent financial crisis has reduced credit availability for certain of our customers. The amount of customer receivable related allowances and write-offs in 2009 increased significantly compared to prior years. Although our credit losses declined in 2010 from the highs we experienced in 2009, these losses continue to be above our historical average levels. If our customers are unable to obtain the credit necessary to fund their operations and their purchases from us, particularly in an environment of increasing prices for our products, our financial results could be negatively affected.

•

We may not be able to consummate future acquisitions, and those acquisitions that we do complete may be difficult to integrate into our business, or may fail to successfully adopt our operating strategies.

•

Our acquisitions might fail to perform as we anticipate or there could be significant negative events in our industry or the general economy that fundamentally alter our business model and outlook. This could result in an impairment charge to write off some or all of the goodwill and/or other intangible assets for acquired entities. Acquisitions may also result in our becoming responsible for unforeseen liabilities that may adversely affect our financial condition and liquidity. If our acquisitions do not perform as anticipated, our operating results also may be adversely affected.

•

Various environmental and other governmental regulations may require us to expend significant capital and incur substantial costs or may impact the customers we serve, which may have a negative impact on our financial results.

•

We may discover internal control deficiencies in our decentralized operations or in an acquisition that must be reported in our SEC filings, which may result in a negative impact on the market price of our common stock or the ratings of our debt.

•

If existing shareholders with substantial holdings of our common stock sell their shares, the market price of our common stock could decline.

•

Principal shareholders who own a significant number of our shares may have interests that conflict with yours.

•

We have implemented a staggered or classified Board that may impact your rights as a shareholder. A shareholder proposal to eliminate the classified Board was passed by a majority of the votes cast at our 2010 Annual Meeting of Shareholders and a proposed amendment to the Company’s Bylaws to implement this proposal will be presented to the shareholders at our 2011 Annual Meeting of Shareholders.

•

We may pursue growth opportunities that require us to increase our leverage ratios. This may cause our stock price to decline or impact our public debt ratings.

•

The volatility of our stock price has increased significantly. This volatility may continue in the future and may increase from current levels.

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements and review carefully the section captioned “Risk Factors” in Item 1A. of this Annual Report on Form 10-K for a more complete discussion of the risks of an investment in the Company’s securities.

This Annual Report on Form 10-K includes registered trademarks, trade names and service marks of the Company and its subsidiaries.

iii

PART I

Item 1.

Business.

We are the largest metals service center company in North America (U.S. and Canada). Our network of metals service centers operates more than 200 locations in 38 states, Belgium, Canada, China, Malaysia, Mexico, Singapore, South Korea and the United Kingdom. Through this network, we provide metals processing services and distribute a full line of more than 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products, to more than 125,000 customers in a broad range of industries. Many of our metals service centers process and distribute only specialty metals. We deliver a variety of products from facilities located across the United States and Canada, and have a growing international presence to support the globalization of our customers, giving us product, customer and geographic diversification.

Our primary business strategy is to enhance our operating results through strategic acquisitions, expansion of our existing operations and improved operating performance at our locations. We believe our focused growth strategy of diversifying our products, customers and geographic locations makes us less vulnerable to regional or industry specific economic volatility and somewhat lessened the negative impact of the recent economic recession. We also believe that such diversification has been instrumental in our ability to produce industry-leading operating results among publicly traded metals service center companies in North America. We continued to generate industry-leading operating results with our 2010 net sales of $6.31 billion and net income of $194.4 million.

Industry Overview

Metals service centers acquire products from primary metals producers and then process carbon steel, aluminum, stainless steel and other metals to meet customer specifications, using techniques such as blanking, leveling (or cutting-to-length), sawing, shape cutting, shearing and slitting. These processing services save our customers time, labor, and expense and reduce their overall manufacturing costs. Specialized equipment used to process the metals requires high-volume production to be cost effective. Many manufacturers are not able or willing to invest in the necessary technology, equipment, and inventory to process the metals for their own manufacturing operations. Accordingly, industry dynamics have created a niche in the market. Metals service centers purchase, process, and deliver metals to end-users in a more efficient and cost-effective manner than the end-user could achieve by dealing directly with the primary producer or with an intermediate metals processor. Service centers comprise the largest single customer group for North American mills, buying and reselling more than 43% of all the carbon, alloy, stainless and specialty steels, aluminum, copper, brass and bronze, and superalloys produced in the U.S. and Canada in 2008 according to the April 2009 issue of Purchasing magazine. This is the most recent publication that we are aware of providing such information. Purchasing magazine and the Purchasing.com website were closed in April 2010.

The metals service center industry is highly fragmented and intensely competitive within localized areas or regions. Many of our competitors operate single stand-alone service centers. According to Purchasing, the number of intermediate steel processors and metal center facilities in North America has decreased from approximately 7,000 locations in 1980 to approximately 3,300 locations operated by more than 1,200 companies in 2008. This consolidation trend continues to create opportunities for us to expand by making acquisitions.

In June 2010, Tom Stundza, former editor of Purchasing magazine, reported that the North American (U.S. and Canada) metals distribution industry was estimated to have generated net sales of $107.5 billion in 2009 (the latest year for which such information is available), a 35.2% decline from the $166.0 billion generated in 2008. Revenues for the five largest North American metals service center companies ranged from $1.99 billion to $5.32 billion for total revenues of $16.1 billion, which represented approximately 14.9% of the estimated $107.5 billion industry total in 2009. Our 2009 sales of $5.32 billion represented approximately 4.9% of the estimated $107.5 billion industry total. We continue to be the largest North American metals service center company on a revenue basis.

Metals service centers are generally less susceptible to market cycles than producers of the metals, because service centers are usually able to pass on all or a portion of increases in metal costs to their customers, unless they are selling to their customers on a contractual basis. We believe that service center companies, like Reliance, with the most rapid inventory turnover and minimal contract sales are generally the least vulnerable to changing metals prices.

Customers purchase from service centers to obtain value-added metals processing, readily available inventory, reliable and timely delivery, flexible minimum order size, and quality control. Many customers deal exclusively with service centers because the quantities of metal products that they purchase are smaller than the minimum orders specified by mills or because those customers require intermittent deliveries over long or irregular periods. Metals service centers respond to a niche market created because of the focus of the capital goods and related industries on just-in-time inventory management and materials management

outsourcing, and because metal producers have reduced in-house direct sales efforts to small sporadic purchasers to enhance their production efficiency.

History of Reliance

Reliance Steel & Aluminum Co. was organized as a California corporation on February 3, 1939, and commenced business in Los Angeles, California fabricating steel reinforcing bar. Within ten years, we had become a full-line distributor of steel and aluminum, operating a single metals service center in Los Angeles. In the early 1950’s, we automated our materials handling operations and began to provide processing services to meet our customers’ requirements. In the 1960’s, we began to acquire other companies to establish additional service centers, expanding into other geographic areas.

In the mid-1970’s, we began to establish specialty metals centers stocked with inventories of selected metals such as aluminum, stainless steel, brass, and copper, and equipped with automated materials handling and precision cutting equipment. We have continued to expand our network, with a focus on servicing our customers as opposed to merely distributing metal. In the mid-1990’s we began to expand nationally and focused on acquiring well-run, profitable service center companies. We have continued that strategy and have become the largest North American (U.S. and Canada) metals service center company based on revenues, with over 200 locations and net 2010 sales of $6.31 billion. We have not diversified outside of our core business and we strive to consistently perform as one of the best in our industry. We currently operate metals service centers under the following trade names:


Trade Name	No. of Locations		Primary Products Processed & Distributed
*Reliance Divisions*
Affiliated Metals		1	Plate and flat-rolled aluminum and stainless steel
Bralco Metals		6	Aluminum, brass, copper and stainless steel
Central Plains Steel Co.		1	Carbon steel
Lusk Metals		1	Precision cut aluminum plate and aluminum sheet and extrusions
MetalCenter		1	Flat-rolled aluminum and stainless steel
Olympic Metals		1	Aluminum, brass, copper and stainless steel
Reliance Metalcenter		7	Variety of carbon steel and non-ferrous metal products
Reliance Steel Company		2	Carbon steel flat-rolled and plate
Tube Service Co.		6	Specialty tubing
*Allegheny Steel Distributors, Inc.*		1	Carbon steel
*Aluminum and Stainless, Inc.*		2	Aluminum and stainless steel sheet, plate and bar
*American Metals Corporation*
American Metals		3	Carbon steel bar, flat-rolled, plate, structural and tubing
American Steel		2	Carbon steel bar, flat-rolled, plate, structural and tubing
Lampros Steel, Inc.		2	Carbon structural and tubing
LSI Plate (50% owned)		1	Carbon plate
*AMI Metals, Inc.*
AMI Metals		6	Heat-treated aluminum sheet and plate
AMI Metals Europe S.P.R.L.		1	Heat-treated aluminum sheet and plate
*CCC Steel, Inc.*
CCC Steel		1	Carbon steel bar, plate, structural and tubing
IMS Steel		1	Carbon steel bar, plate, structural and tubing
*Chapel Steel Corp.*		5	Carbon steel plate
*Chatham Steel Corporation*		5	Carbon and stainless steel
*Clayton Metals, Inc.*		3	Aluminum and stainless steel flat-rolled products and custom extrusions
*Crest Steel Corporation*		2	Carbon steel flat-rolled, plate, bar and structural


Trade Name	No. of Locations		Primary Products Processed & Distributed
*Delta Steel, Inc.*
Delta Steel		4	Carbon steel bar, flat-rolled, plate, structural and tubing
Smith Pipe & Steel Company		1	Carbon steel bar, flat-rolled, plate, structural and tubing
*Diamond Manufacturing Company*
Diamond Manufacturing		3	Perforated flat-rolled aluminum, stainless steel and carbon steel
Perforated Metals Plus		1	Perforated flat-rolled aluminum, stainless steel and carbon steel
Dependable Punch		1	Metal fabrication
*Durrett Sheppard Steel Co., Inc.*		1	Carbon steel bar, flat-rolled, plate, structural and tubing
*Earle M. Jorgensen Company*
Earle M. Jorgensen		30	Specialty bar and tubing
Encore Metals USA		3	Stainless and alloy bar, plate and tube
Steel Bar		1	Carbon steel bars and tubing
*Feralloy Corporation*
Feralloy		5	Flat-rolled carbon steel service centers
Feralloy Processing Company (51%-owned)		1	Toll processing (leveling and blanking) of carbon steel
Indiana Pickling & Processing (56%-owned)		1	Toll processing (pickling) of carbon steel
Acero Prime (40%-owned)		3	Toll processing (slitting and leveling) of carbon steel
Oregon Feralloy Partners (40%-owned)		1	Toll processing (leveling and blanking) of carbon steel
*Infra-Metals Co.*		6	Carbon steel bar, plate, structural and tubing
*Liebovich Bros., Inc.*
Liebovich Steel & Aluminum Company		3	Full-line service centers
Custom Fab Company		1	Metal fabrication
Good Metals Company		1	Tool and alloy steels
Hagerty Steel & Aluminum Company		1	Plate and flat-rolled carbon steel
*Metals Supply Company, Ltd.*		1	Carbon steel bar, flat-rolled, plate, structural and tubing
*Metalweb Limited*		4	Aluminum sheet, plate and bar
*Pacific Metal Company*		6	Aluminum and coated carbon steel
*PDM Steel Service Centers, Inc.*		8	Carbon steel bar, flat-rolled, plate, structural and tubing
*Phoenix Corporation*
Phoenix Metals Company		11	Flat-rolled aluminum, stainless steel and coated carbon steel
*Precision Flamecutting and Steel, Inc.*		1	Carbon, alloy, and HSLA steel plate
*Precision Strip, Inc.*
Precision Strip		10	Toll processing (slitting, leveling, blanking) of aluminum, stainless steel and carbon steel
Precision Strip de Mexico		1	Toll processing (slitting, leveling, blanking) of aluminum, stainless steel and carbon steel
*Reliance Asia Holding Pte. Ltd.*
Earle M. Jorgensen (Malaysia)		1	Carbon, stainless and alloy bar and tube
Everest Metals (Suzhou) Co., Ltd		1	Aluminum plate and bar
Reliance Metalcenter Asia Pacific Pte. Ltd.		1	Aluminum plate, sheet and coil
*Reliance Metals Canada Ltd.*
Earle M. Jorgensen (Canada)		5	Specialty bar and tubing
Encore Metals		4	Stainless and alloy bar, plate and tube
Team Tube		5	Alloy and carbon steel tubing


Trade Name	No. of Locations		Primary Products Processed & Distributed
*Service Steel Aerospace Corp.*
Service Steel Aerospace		2	Stainless and alloy specialty steels
Dynamic Metals International		1	Maraging and specialty steels
United Alloys Aircraft Metals		1	Titanium products
*Siskin Steel & Supply Company, Inc.*
Siskin Steel		5	Full-line service centers
Athens Steel		1	Carbon steel structural, flat-rolled and ornamental iron
East Tennessee Steel Supply		1	Carbon steel plate, bar and structural
Industrial Metals and Surplus/Georgia Steel		1	Carbon steel structural, flat-rolled and ornamental iron
*Sugar Steel Corporation*		2	Carbon steel bar, plate, structural and tubing
*Toma Metals, Inc.*		1	Stainless steel sheet and coil
*Valex Corp. (97%-owned)*
Valex		1	Electropolished stainless steel tubing and fittings
Valex China Co., Ltd. (88%-owned)		1	Electropolished stainless steel tubing and fittings
Valex Korea Co., Ltd. (92%-owned)		1	Electropolished stainless steel tubing and fittings
*Viking Materials, Inc.*		2	Flat-rolled carbon steel
*Yarde Metals, Inc.*		7	Stainless steel and aluminum plate, rod and bar

We serve our customers primarily by providing quick delivery, metals processing and inventory management services. We purchase a variety of metals from primary producers and sell these products in small quantities based on our customers’ needs. We performed metals processing services, or first-stage processing, on approximately 38% of our sales orders in 2010 before distributing the product to manufacturers and other end-users. For approximately 50% of our 2010 orders we delivered the metal to our customer within 24 hours from receipt of an order. These services save time, labor, and expense for our customers and reduce their overall manufacturing costs. During 2010, we handled approximately 4,840,000 transactions in total or 19,220 transactions per business day, with an average price of approximately $1,300 per transaction. Our net sales during 2010 were $6.31 billion. We believe that our focus on small orders with quick turnaround differentiates us from many of the other large metals service center companies and allows us to better service our customers, resulting in higher profits than those generated by the other large metals service center companies.

Historically, we have expanded both through acquisitions and internal growth. Since our initial public offering in September 1994, we have successfully purchased more than 45 businesses. From 1984 to September 1994, we acquired 20 businesses. Our internal growth activities during the last few years have been at historically high levels for us and have included the opening of new facilities, adding to our processing capabilities and relocating existing operations to larger, more efficient facilities. We will continue to evaluate acquisition opportunities and we expect to continue to grow our business through acquisitions and internal growth initiatives, particularly those that will diversify our products, customer base and geographic locations.

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 owns a 50% interest in an unconsolidated partnership, LSI Plate that is a distributor of carbon steel plate with locations in California and Oregon. The revenue of LSI from December 1, 2010 through December 31, 2010 was approximately $1.9 million. Effective February 2011, the business conducted by the LSI Plate Oregon location was moved to LSI in order to achieve certain operational efficiencies.

On October 1, 2010, we acquired all of the outstanding capital stock of Diamond Consolidated Industries, Inc. and affiliated companies (“Diamond”), which now operate as 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. Net sales of Diamond from October 1, 2010 through December 31, 2010 were approximately

$20.5 million. An operating division of Diamond was opened near Dallas, Texas in early 2011 to expand Diamond’s geographic reach.

Internal Growth Activities

As the economy stabilized in 2010, we maintained our focus on organic growth by opening new facilities, building or expanding existing facilities and adding processing equipment with total capital expenditures of $111.4 million. During 2010 we also consolidated and closed a few small operations that did not impact our ability to service our customers. We continued to expand our geographic presence as follows:

•

Chatham Steel Corporation leased a new facility in South Point, Ohio and is scheduled to open for business in the first quarter of 2011.

•

Diamond commenced operations in Cedar Hill, Texas at a newly built facility in February 2011.

•

Earle M. Jorgensen Company (“EMJ”) completed construction of a new facility in Orlando, Florida that commenced operations in February 2011.

•

EMJ Malaysia completed construction of its new facility in Nusajaya, Malaysia and commenced operations in the third quarter of 2010.

•

Sugar Steel Corporation leased a new facility in Evansville, Indiana that commenced operations in February 2011.

•

Yarde Metals, Inc. opened a new transfer facility in Livonia, Michigan in October 2010 to expand its presence in that market and to provide faster delivery of products to its customers in the area.

Operations in existing markets were also expanded as follows:

•

EMJ completed construction of its new facility in Memphis, Tennessee, which is scheduled to commence operations during the first quarter of 2011.

•

Liebovich Bros., Inc. completed construction of its new Rockford, Illinois coil processing facility in the fourth quarter of 2010 to expand into new product markets it was not previously able to support.

•

Precision Flamecutting and Steel, Inc. completed the purchase of land in Houston, Texas in January 2011, and plans to begin construction of a new, larger and more efficient facility to better service its customers in the area.

•

Yarde Metals, Inc. moved to its new larger and more efficient Limerick, Pennsylvania facility in October 2010. Construction was also started in 2010 on an expansion of Yarde Metals’ existing Hartford, Connecticut facility, with completion of the project expected during the third quarter of 2011.

Our 2011 capital expenditure budget is approximately $200 million with much of this related to internal growth activities comprised of expansions of existing facilities and purchases of equipment as well as establishing a presence in new geographic markets. We also plan to move out of various leased facilities and into newly built and/or purchased ones. We will continue to evaluate and execute additional growth projects as appropriate, given the economic conditions and outlook at the time.

Our executive officers maintain a control environment that is focused on integrity and ethical behavior, establish general policies and operating guidelines and monitor adherence to proper financial controls, while our division managers and subsidiary officers have autonomy with respect to day-to-day operations. This balanced, yet entrepreneurial, management style has enabled us to improve the productivity and profitability both of acquired businesses and of our own expanded operations. Key management personnel are eligible for incentive compensation based, in part, on the profitability of their particular division or subsidiary and, in part, on the Company’s overall profitability.

We seek to increase our profitability by expanding our existing operations and acquiring businesses that diversify or enhance our customer base, product range, processing services and geographic coverage. We have developed and maintained an excellent reputation in the industry for our integrity and the quality and timeliness of our service to customers.

Customers

Our customers purchase from us and other metals service centers to obtain value-added metals processing, readily available inventory, reliable and timely delivery, flexible minimum order size and quality control. Many of our customers deal exclusively with service centers because the quantities of metal products that they purchase are smaller than the minimum orders specified by mills, because those customers require intermittent deliveries over long or irregular periods, or because those customers require specialized processing services. We believe that metals service centers have also enjoyed an increasing share of total metal shipments due to the focus of the capital goods and other manufacturing industries on just-in-time inventory management and materials management outsourcing, and because metal producers have reduced in-house direct sales efforts to small sporadic

purchasers in order to enhance their production efficiency. The consolidation of carbon steel mills that occurred during the 2001 to 2003 period has further reduced the number of potential sources of metal available to customers purchasing small quantities of metal.

We have more than 125,000 customers in various industries. Our customers are manufacturers and end-users in the general manufacturing, non-residential construction, transportation (rail, truck trailer and shipbuilding), aerospace, energy, electronics and semiconductor fabrication and related industries. In 2003, many of our suppliers also became our customers as a result of our purchase of Precision Strip, which typically sells processing services, but not metal, to larger customers, such as mills and original equipment manufacturers (“OEM’s”), and in larger annual volumes than we have experienced historically. Precision Strip also has indirectly increased our participation in the auto and appliance end markets with the auto exposure primarily relating to the processing and delivery of metal for the transplants, or “New Domestic” companies.

Our metals service centers wrote and delivered over 4,840,000 orders during 2010 at an average price of approximately $1,300 per order. Most of our metals service center customers are located within a 200-mile radius of the metals service center serving them. The proximity of our service centers to our customers helps us provide just-in-time delivery to our customers as well as increases the likelihood of repeat business. In 2010, approximately 97% of our orders were from repeat customers. With our fleet of approximately 1,550 trucks (some of which are leased), we are able to service many smaller customers. Moreover, our computerized order entry systems and flexible production scheduling enable us to meet customer requirements for short lead times and just-in-time delivery. We believe that our long-term relationships with many of our customers significantly contribute to the success of our business. Providing prompt and efficient services and quality products at reasonable prices are important factors in maintaining these relationships.

Our acquisitions in recent years have increased our international exposure both from a customer and physical location perspective. In addition, we have built and opened international locations in recent years to service specific industries, typically to support key customers that are operating in those international markets. Net sales of our international locations (based on where the shipments originated) accounted for approximately 5% of our 2010 net sales, or $289.2 million. However, our net sales to international customers (based on the shipping destination) were approximately 7% of our 2010 net sales or $441.1 million, with approximately 58% of these sales, or $254.8 million, to Canadian customers. See Note 1 of the Notes to the Consolidated Financial Statements for further information on U.S. and foreign revenues and assets.

Customer demand may change from time to time based on, among other things, general economic conditions and industry capacity. Many of the industries in which our customers compete are cyclical in nature. Because we sell to a wide variety of customers in many industries, we believe that the effect of such changes on us is significantly reduced. In addition, many of our customers are small job shops and fabricators who also have a diverse customer base and have the versatility to service different end markets when an existing market slows. However, our diversity could not overcome the negative impact of the recent economic downturn and financial crisis as the recession significantly affected all industries and geographic regions. Beginning with the 2008 fourth quarter and throughout the first half of 2009 we saw a rapid and precipitous decline in demand and prices for almost all of our products. Our largest end market is non-residential construction, representing about one-third of our sales. Because of the length of many of these projects, our demand fell off at a slower pace than many of our competitors. We continued to see declines in this market through the first half of 2010. This market has remained at low demand levels since then. Pricing for most products we sell has increased significantly from the bottoms they reached in the summer of 2009. The price increases have been primarily raw material cost driven rather than demand driven. With metal pricing at elevated levels and credit availability still being limited, our customers continue to buy metal from us in smaller quantities, but more frequently. We believe that our ability to service customer orders in small quantities and with next day service provides a substantial advantage to metal buyers in the current environment.

During 2010, we saw a slow but steady improvement in our customer collections and by the end of the year our days sales outstanding (“DSO”) in customer receivables decreased to 41.6 days as of December 31, 2010, down from 42.6 days as of December 31, 2009. The diversity of our customer base somewhat reduces the impact of any single customer, as no customer in 2010 represented more than 1% of our sales. We only had six customers with 2010 annual sales of greater than $25 million.

California was our largest market for many years, but we have expanded our geographic coverage in recent years and the Midwest region of the United States has become our largest market. Although our sales dollars in each of the regions we serve have generally increased, the percent of total sales in each region has changed as we have expanded our network. California represented 12% of our 2010 sales, which is a significant decrease from 45% of our 1997 sales; however, the dollar amount of our sales in California has increased about 75% during that time. The Midwest region, which we entered in 1999, is our largest region now with 28% of our 2010 sales.

The geographic breakout of our sales based on the location of our metals service center facilities in each of the three years ended December 31 was as follows:


	2010			2009			2008
Midwest		28	%		25	%		26	%
Southeast		18	%		18	%		19	%
West/Southwest		15	%		18	%		16	%
California		12	%		13	%		14	%
Northeast		8	%		8	%		6	%
Mid-Atlantic		6	%		6	%		5	%
Pacific Northwest		5	%		5	%		6	%
Mountain		3	%		3	%		4	%
International		5	%		4	%		4	%

Total		100	%		100	%		100	%

Suppliers

We purchase our inventory primarily from the major domestic metals mills, although we do purchase certain products from foreign mills. We have multiple suppliers for all of our product lines. Our major suppliers of domestic carbon steel products include ArcelorMittal, California Steel Industries, Inc., Evraz NA, Gerdau Ameristeel Corporation (including Chaparral Steel Company), Nucor Corporation, Steel Dynamics, Inc., SSAB and United States Steel Corporation. AK Steel, Allegheny Technologies Incorporated, North American Stainless and ThyssenKrupp AG supply stainless steel products. We are a recognized distributor for various major aluminum companies, including Alcan Aluminum Limited, Alcoa Inc., Aleris International, Inc., Kaiser Aluminum Corp., Novelis Inc. and Sapa Group.

From 2001 through 2003, many domestic steel mills entered bankruptcy proceedings, which resulted in significant consolidation. Due to improved demand, mainly for flat-rolled products for the auto and appliance industries, U.S. carbon steel mills are now operating above 70% of capacity, up from less than 50% in 2009. Limited imports to the U.S. and increased raw material costs have generally supported higher prices for carbon steel since 2004. Although there has been significant volatility in carbon steel pricing since 2004, the low end of the pricing has been at historically high levels.

In 2010, mill pricing for carbon steel products was up by roughly a third during the first half of the year. By the end of the year, however, pricing had fallen back to levels just above January 2010 prices. Average pricing for the benchmark carbon hot-rolled steel product in 2010 rose approximately 30% from the 2009 average (according to American Metal Market). Although only about 5% of our 2010 sales dollars were in carbon steel hot-rolled coil, pricing for this product is commonly used by Reliance and others in the industry as an indicator of overall carbon steel pricing. Due mainly to a rise in scrap and other input costs at the mills, as opposed to higher end-use demand, prices for carbon steel hot-rolled coil have risen from $570 in November 2010 to around $900 a ton in February 2011 (according to American Metal Market).

Costs for most stainless products rose during the first half of 2010 mainly due to rising nickel surcharges, then decreased from July through September before increasing again in the last three months of the year. Aluminum products saw costs rise as a result of an increasing ingot price through May 2010, followed by a small decrease in June and July. From August through the end of 2010 aluminum product pricing continued to rise once again on increases in the cost of ingot. Costs for products that experienced the least volatility were primarily heat treated aluminum and alloy steel products because of their specialty nature.

Mill pricing for most products that we purchase has continued to increase in early 2011, and is at relatively high levels. A weakening in demand, increasing production by domestic mills without offsetting demand increases, a decline in raw material costs or increased imports to the U.S. could weaken pricing for any or all of our products.

Because of our total volume of purchases and our long-term relationships with our suppliers, we believe that we are generally able to purchase inventory at the best prices offered by the suppliers, given the order size. We believe that we are not dependent on any one of our suppliers for metals. From 2004 to 2008, when the supply of certain metals was tight, we believe that these relationships provided an advantage to us in our ability to source product and have it available for our customers. Our size and strong relationships with our suppliers are now more important, we believe, because mill consolidation has somewhat reduced the number of suppliers.

Backlog

Because of the just-in-time delivery and the short lead-time nature of our business, we do not believe information on our backlog of orders is material to an understanding of our metals service center business.

Products and Processing Services

We provide a wide variety of processing services to meet our customers’ specifications and deliver products to fabricators, manufacturers and other end users. We maintain a wide variety of products in inventory. We often deliver orders that do not require extensive or specialized processing to the customer within 24 hours of receiving the order. Our product mix has changed mainly as a result of our acquisitions. Flat-rolled carbon steel products, which generally have the most volatile and competitive pricing, accounted for only 11% of our 2010 sales. Our sales dollars by product type as a percentage of total sales in each of the three years ended December 31 were as follows:


	2010			2009			2008
		12	%		12	%		13	%	carbon steel plate
		10	%		13	%		10	%	carbon steel structurals
		10	%		11	%		12	%	carbon steel tubing
		9	%		9	%		10	%	carbon steel bar
		5	%		5	%		5	%	hot-rolled steel sheet and coil
		4	%		4	%		3	%	galvanized steel sheet and coil
		2	%		2	%		2	%	cold rolled steel sheet and coil

Carbon Steel		52	%		56	%		55	%

		7	%		6	%		6	%	aluminum bar and tube
		5	%		6	%		4	%	heat-treated aluminum plate
		4	%		4	%		4	%	common alloy aluminum sheet and coil
		1	%		1	%		1	%	common alloy aluminum plate
		1	%		1	%		1	%	heat-treated aluminum sheet and coil

Aluminum		18	%		18	%		16	%

		8	%		6	%		7	%	stainless steel bar and tube
		6	%		5	%		5	%	stainless steel sheet and coil
		2	%		2	%		2	%	stainless steel plate

Stainless Steel		16	%		13	%		14	%

		6	%		5	%		6	%	alloy bar and rod
		1	%		1	%		1	%	alloy tube
		1	%		1	%		1	%	alloy plate, sheet and coil

Alloy		8	%		7	%		8	%

		2	%		2	%		2	%	toll processing of aluminum, carbon steel and stainless steel
		4	%		4	%		5	%	miscellaneous, including brass, copper and titanium

Total		100	%		100	%		100	%

We are not dependent on any particular customer group or industry because we process and distribute a variety of metals. Because of this diversity of product type and material, we believe that we are less exposed to fluctuations or other weaknesses in the financial or economic stability of particular customers or industries. We are also less dependent on particular suppliers.

For sheet and coil products, we purchase coiled metal from primary producers in the form of a continuous sheet, typically 36 to 60 inches wide, between .015 and .25 inches thick, and rolled into 3- to 20-ton coils. The size and weight of these coils require specialized equipment to move and process the coils into smaller sizes and various products. Many of the other products that we carry also require specialized equipment. Few of our customers have the capability to process the metal into the desired sizes.

After receiving an order, we enter it into our computerized order entry system, select appropriate inventory and schedule the processing to meet the specified delivery date. In 2010, we delivered approximately 50% of our orders within 24 hours of the customer placing the order with us. We attempt to maximize the yield from the various metals that we process by combining customer orders to use each product that we purchase to the fullest extent practicable.

Few metals service centers offer the full scope of processing services and metals that we provide. In 2010, we performed processing services for approximately 38% of our sales orders. Our primary processing services are described below:

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Bar turning involves machining a metal bar into a smaller diameter.

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Bending is the forming of metals into various angles.

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Blanking is the cutting of metals into close-tolerance square or rectangular shapes.

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Cambering is the forming of slight curves into metals.

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Deburring is the process used to smooth the sharp, jagged edges of a cut piece of metal.

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Electropolishing is the process used on stainless steel tubing and fittings to simultaneously smooth, brighten, clean and passivate the interior surfaces of these components. Electropolishing is an electrochemical removal process that selectively removes a thin layer of metal, including surface flaws and imbedded impurities. Electropolishing is a required surface treatment for all ultra high-purity components used in the gas distribution systems of semiconductor manufacturers worldwide and many sterile water distribution systems of pharmaceutical and biotechnology companies.

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Fabricating includes performing second and/or third-stage processing per customer specifications, typically to provide a part, casing or kit, which is used in the customer’s end product.

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Forming involves bending and forming plate or sheet products into customer-specified shapes and sizes with press brakes.

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Grinding or blanchard grinding involves grinding the top and/or bottom of carbon or alloy steel plate or bars into close tolerance.

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Leveling (cutting-to-length) involves cutting metal along the width of a coil into specified lengths of sheets, blanks or plates.

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Machining refers to performing multiple processes to a piece of metal to produce a customer-specified component part.

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Oscillate slitting involves slitting the metal into specified widths and then oscillating the slit coil when it is wound. The oscillated coil winds the strip metal similar to the way fishing line is wound on a reel rather than standard ribbon winding. An oscillate coil can typically hold five to six times more metal than a standard coil, which allows customers to achieve longer production run times by reducing the number of equipment shut-downs to change coils.

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Perforating is the process of punching holes in sheet or tube products with perforating presses that are designed specifically to quickly and accurately produce the largest number of holes per hit, which makes them an efficient and an economical solution for producing perforated material.

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Pickling involves treating metal surfaces with chemicals to remove impurities, such as stains, inorganic contaminants, and rust or scale from ferrous metals.

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Pipe threading refers to the cutting of threads around the circumference of the pipe.

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Polishing changes the texture of the surface of the metal to specific finishes in accordance with customer specifications.

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Precision plate sawing involves sawing plate (primarily aluminum plate products) into square or rectangular shapes to tolerances as close as 0.003 of an inch.

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Punching is the cutting of holes into carbon steel beams or plates by pressing or welding per customer specifications.

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Routing produces various sizes and shapes of aluminum plate according to customer-supplied drawings through the use of CNC controlled machinery.

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Sawing involves cutting metal into customer-specified lengths, shapes or sizes.

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Shape cutting, or burning, can produce various shapes according to customer-supplied drawings through the use of CNC controlled machinery. This procedure can include the use of oxy-fuel, plasma, high-definition plasma, laser burning or water jet cutting for carbon, aluminum and stainless steel sheet and plate.

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Shearing is the cutting of metal into small, precise square or rectangular pieces.

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Skin milling grinds the top and/or bottom of a large aluminum plate into close tolerance.

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Slitting involves cutting metal to specified widths along the length of the coil.

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Tee splitting involves splitting metal beams. Tee straightening is the process of straightening split beams.

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Trepanning involves removing the desired diameter from sheet metal, plates, or structural sections by cutting out a solid disk.

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Twin milling grinds one or all six sides of a small square or rectangular piece of aluminum plate into close tolerance.

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Welding is the joining of one or more pieces of metal.

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Wheelabrating, shotblasting and bead-blasting involve pressure blasting metal grid onto carbon steel products to remove rust and scale from the surface.

We generally process specific metals to non-standard sizes only at the request of customers pursuant to purchase orders. We do not maintain a significant inventory of finished products, but we carry a wide range of metals to meet the short lead time and just-in-time delivery requirements of our customers. Our metals service centers maintain inventory and equipment selected to meet the needs of that facility’s customers.

Marketing

As of December 31, 2010, we had approximately 1,500 sales personnel located in 42 states, Belgium, Canada, China, France, Malaysia, Mexico, Singapore, South Korea and the United Kingdom that provide marketing services throughout each of those areas, as well as nearby locations. The sales personnel are organized by division or subsidiary among our profit centers and are divided into two groups. Our outside sales personnel are considered those personnel who travel throughout a specified geographic territory to maintain relationships with our existing customers and develop new customers. Those sales personnel who remain at the facilities to write and price orders are our inside sales personnel. The inside sales personnel generally receive incentive compensation, in addition to their base salary, based on the gross profit and/or pretax profit of their particular profit center. The outside sales personnel generally receive incentive compensation based on the gross profit from their particular geographic territories.

Industry and Market Cycles

We distribute metal products to our customers in a variety of industries, including non-residential construction, manufacturing, transportation, aerospace, energy and semiconductor fabrication. Many of the industries in which our customers compete are cyclical in nature and are subject to changes in demand based on general economic conditions. We sell to a wide variety of customers in diverse industries and geographic regions to reduce the effect of changes in these cyclical industries on our results. However, our diversity could not overcome the negative impact of the recent global economic downturn that significantly affected all industries.

Beginning with the 2008 fourth quarter, when our industry first felt the impact of the global economic recession, and continuing through the first half of 2009, there was a rapid and precipitous decline in demand and prices for almost all of our products and end markets. We saw pricing for the benchmark carbon steel hot-rolled coil product that reached $1,080 a ton in May 2008 from 2007 average pricing of about $540 a ton, decline to $390 a ton in May 2009 (according to American Metal Market). This was an unprecedented level of pricing volatility for the industry, and that, combined with the dramatic reduction in demand beginning in the 2008 fourth quarter and continuing throughout the first half of 2009, left most service centers with large amounts of inventory on hand at a higher cost than replacement cost. In reaction to this, service centers, including Reliance, entered an inventory destocking mode to try to clear out their higher cost material. However, poor customer demand required that selling prices be lowered, which resulted in significant deterioration in gross profit margins, causing many service center companies to operate at a loss during 2009. According to the Metals Service Center Institute (“MSCI”), tons sold during 2009 were down approximately 37% for the metals service center industry in North America compared to 2008. Our 2009 tons sold on a same-store basis were down approximately 32% from 2008.

Beginning with the second half of 2009 and throughout 2010, we saw a gradual but steady improvement in demand for most products and end markets we sell to with the exception of non-residential construction, which we believe represents about one-third of our business. The non-residential construction market remains our weakest market and is the only market we serve that was worse in 2010 than in 2009; however, we believe it has reached a bottom. Business activity in most all of our other markets is better than in 2009, especially in our energy, oil and gas and semi-conductor related businesses, which improved the most in 2010. We have also seen meaningful improvements in the automotive (through our toll processing operations), agriculture and aerospace industries. All other major end markets that we serve, including manufacturing and transportation (heavy truck, truck trailer, and rail car industries) also showed positive improvements from 2009, with further improvements noticed in quoting and sales activity in late 2010 and early 2011.

According to the MSCI, tons sold during 2010 were up approximately 21% for the metals service center industry in North America compared to 2009. Most of the improvement in industry volumes shipped came from carbon steel flat-rolled products, which experienced approximately a 25% increase in volume from 2009 and were driven primarily by improvement in the automotive and appliance sectors. According to the MSCI, carbon steel flat-rolled products represented approximately 63% of total industry shipments during 2010. For Reliance, carbon steel flat-rolled products represent approximately 20% of our total tons sold and only 11% of total sales due to their relatively lower selling prices in comparison to other products we sell. Our exposure to the automotive market and carbon steel flat-rolled products is primarily through our toll processing operations, which experienced a 39% increase in tons processed in 2010 from 2009 levels. In the case of toll processed (i.e., customer-owned) material, which is a typical service offered by a number of our metals service centers, our revenues generated are limited to our processing fees and do not include the cost of metal. Our tons sold (excluding the toll processing tons) were up approximately 6% from 2009; however, our combined tons sold and tons toll processed were up by approximately 22% from 2009.

On the pricing side, significant price increases were announced by the domestic carbon mills late in 2010 due mainly to a rise in scrap and other input costs at the mills, as opposed to higher end-use demand. The prices for carbon steel hot-rolled coil have risen from $570 in November 2010 to around $900 a ton in February 2011 (according to American Metal Market).

At this time, we expect slow and steady growth in demand throughout 2011, and expect current mill pricing to hold through the 2011 first quarter. A weakening in demand, increasing production by domestic mills without offsetting demand increases, declines in raw material costs or increased imports to the U.S. could weaken pricing.

Fluctuations in the cost of our materials affect the prices we charge to our customers. Managing through both price and demand volatility is a normal part of our business and we have successfully managed through such cycles for many years. We have historically been able to pass increases in metal costs on to our customers, as costs typically increase due to strong demand. However, in the current environment of increasing prices that are not demand driven, there could be pressure on our selling prices and gross profit margins due to the weak demand levels. We cannot predict whether the margin between our metal costs and selling prices will improve, decline or remain at the levels experienced during 2010, especially if costs of domestic metals decline rapidly and significantly.

Competition

The metals distribution industry is highly fragmented and competitive. We have numerous competitors in each of our product lines and geographic locations, and competition is most frequently local or regional. Our competitors are smaller than we are, but we still face strong competition from national, regional and local independent metals distributors and the producers themselves, some of which have greater resources than we do. As reported in the April 2009 issue of Purchasing magazine, it is estimated that there were approximately 3,300 intermediate steel processors and metals service center facilities in North America in 2008 (Purchasing magazine and the Purchasing.com website were closed in April 2010). In June 2010, Tom Stundza, former editor of Purchasing magazine, reported that the North American (U.S. and Canada) metals distribution industry was estimated to have generated net sales of $107.5 billion in 2009 (the latest year for which such information is available), a 35.2% decline from the $166.0 billion generated in 2008. Revenues for the five largest North American metals service center companies ranged from $1.99 billion to $5.32 billion for total revenues of $16.1 billion, which represented approximately 14.9% of the estimated $107.5 billion industry total in 2009. Our 2009 sales of $5.32 billion represented approximately 4.9% of the estimated $107.5 billion industry total. We continue to be the largest North American metals service center company on a revenue basis.

We compete with other companies on price, service, quality and availability of products. We maintain centralized relationships with our major suppliers and a decentralized operational structure. We believe that this division of responsibility has increased our ability to obtain competitive prices of metals and to provide more responsive service to our customers. In addition, we believe that the size of our inventory, the different metals and products we have available, and the wide variety of processing services we provide distinguish us from our competition. We believe that we have increased our market share during recent years due to our strong financial condition, our high quality of products and services, our acquisitions and opportunities created by the activities of certain of our competitors, as well as our focus on small order sizes with quick turnaround.

Quality Control

Procuring high quality metal from suppliers on a consistent basis is critical to our business. We have instituted strict quality control measures to assure that the quality of purchased raw materials will enable us to meet our customers’ specifications and to reduce the costs of production interruptions. In certain instances, we perform physical and chemical analyses on selected raw materials, typically through a third party testing lab, to verify that their mechanical and dimensional properties, cleanliness and surface characteristics meet our requirements and our customers’ specifications. We also conduct certain analyses of surface

characteristics on selected processed metal before delivery to the customer. We believe that maintaining high standards for accepting metals ultimately results in reduced return rates from our customers.

In 2010, a total of 106 of our 200-plus facilities maintained ISO 9001:2008 certifications. The ISO 9001:2008 quality standard includes a matrix to record and review customer satisfaction and organizes the quality standard requirements to about eight elements. The certification takes approximately one year to obtain. Each facility seeking ISO certification is required to establish a quality system that is documented in a quality control manual that affects all aspects of the facility’s operations, including sales, product inspections, product storage, delivery and documentation. A certifying agent performs a physical audit of each facility every six months to determine that the facility is in fact following the procedures set forth in the quality control manual. A recertification is required for each facility every three years.

Initially in 1996, when we first began the certification process, we expected that more customers would require such certification, but we have learned that for the types of products and services that most of our facilities provide, very few of our customers require such certification and most of our customers have responded that they would purchase products from Reliance or its subsidiaries regardless of such certification. However, we believe that going through the certification process allows our facilities to improve their efficiency and the quality of products and services provided to our customers.

Our Precision Strip, Inc. subsidiary maintains ISO/TS 16949:2002 certifications at its 11 facilities. ISO/TS 16949:2002 is an ISO Technical Specification, which aligns existing American (QS-9000), German (VDA6.1), French (EAQF) and Italian (AVSQ) automotive quality systems standards within the global automotive industry. Quality System Requirements QS-9000 (“QS-9000”) is the common quality standard for automotive suppliers and is based upon the 1994 edition of ISO 9001, with additional requirements specific to the automotive industry. Our Bralco Metals division and our AMI Metals, Inc., Metalweb Limited, Service Steel Aerospace Corp., and Yarde Metals, Inc. subsidiaries maintain AS 9100 certification. AS 9100 is a standardized quality management system specific to the aerospace industry. The standards emphasize areas that impact process and service, safety, quality and reliability for aerospace products. Many aerospace organizations require their suppliers to have AS 9100 certification. Our Valex Korea subsidiary maintains ISO 14001:2004 certification at its operating facility in South Korea. ISO 14001:2004 gives the generic requirements for an environmental management system. The intention of ISO 14001:2004 is to provide a framework for a strategic approach to the organization’s environmental policy, plans and actions.

Systems

Our Reliance divisions and certain of our subsidiaries use the Stelplan^™ and eStelplan^™ manufacturing and distribution information systems. Stelplan^™ and eStelplan^™ are registered trademarks of Invera, Inc. Stelplan^™ and eStelplan^™ are integrated business application systems with functions ranging from order to cash and procure to pay cycles. These systems were developed specifically for the metals service center and processor industry and provide information in real time, such as inventory availability, location and cost. With this information, our marketing and sales personnel can respond to our customers’ needs more efficiently and more effectively.

Approximately 50 of our 200-plus locations use a suite of software products purchased and developed by our subsidiary Earle M. Jorgensen Company (“EMJ”). In 2009, the Reliance Corporate and EMJ IT departments merged and the combined team modified certain aspects of the software to allow it to support multiple entities. This system was implemented at certain Reliance subsidiaries in 2009 and 2010. Other subsidiaries use other vendor or in-house developed systems to support their operations. The basic functionality of the various systems is similar to Stelplan^™ but in many instances has been customized for each of their operations with features to accommodate the products that they carry, automated equipment interfaces, or other specialized needs. These systems are included in our internal control testing.

A common financial reporting system, as well as certain other accounting and tax packages are used company-wide. We have also initiated efforts to allow us to identify the appropriate system solutions to provide a common ERP platform across our operating companies and to develop more efficient means of consolidating data. This is a multi-phased, multi-year project that will be pursued and implemented in a manner to limit both operational and financial risk.

Government Regulation

Our metals service centers are subject to many foreign, federal, state and local requirements to protect the environment, including hazardous waste disposal and underground storage tank regulations. The only hazardous substances that we generally use in our operations are lubricants, cleaning solvents and petroleum for fueling our trucks. We pay state-certified private companies to haul and dispose of our hazardous waste.

Our operations are also subject to laws and regulations relating to workplace safety and worker health, principally the Occupational Health and Safety Act and related regulations, which, among other requirements, establish noise, dust and safety standards. We maintain comprehensive health and safety policies and encourage our employees to follow established safety practices. We encourage social well being by instituting these high quality labor, health and safety standards. We do not anticipate that future compliance with such laws and regulations will have a material adverse effect on our results of operations or financial condition.

Certain of our operations sell metal to foreign customers, subjecting us to various export compliance regulations. We have implemented a company-wide export compliance program to monitor adherence to our export compliance policy and to provide appropriate training to our operating personnel. Although the actual dollar amounts of our sales that are subject to these regulations are not material, penalties assessed to any violations may be material. Although we have implemented policies and procedures to comply with export compliance regulations, we cannot guarantee that we will not incur any violations and resulting penalties from such activity.

Environmental

Some of the properties we own or lease are located in industrial areas with histories of heavy industrial use. We may incur some environmental liabilities because of the location of these properties. In addition, we are currently involved with certain environmental remediation projects related to activities at former manufacturing operations of EMJ, our wholly-owned subsidiary, that were sold many years prior to Reliance’s acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ had insurance policies in place at the time they owned the manufacturing operations that are expected to cover the majority of the related costs. The Company does not expect that these obligations will have a material adverse impact on its financial position, results of operations or cash flows.

All scrap metal produced by our operations is sold to independent scrap metal companies and we believe is recycled. We continue to evaluate and implement energy conservation and other initiatives to reduce pollution. If more stringent environmental regulations are enacted this could have an adverse impact on our financial results.

Employees

As of December 31, 2010, we had approximately 9,610 employees. Approximately 13% of the employees are covered by collective bargaining agreements, which expire at various times over the next four years. We have entered into collective bargaining agreements with 36 union locals at 41 of our locations. These collective bargaining agreements have not had a material impact either favorably or unfavorably on our revenues or profitability at our various locations. We have always maintained excellent relations with our employees. Over the years we have experienced minor work stoppages by our employees at certain of our locations, but due to the small number of employees and the short time periods involved, these stoppages have not had a material impact on our operations. We have never experienced a significant work stoppage.

As a result of the global economic recession that significantly impacted our business activity beginning in the 2008 fourth quarter, we made significant reductions in our workforce in order for us to maintain profitability as personnel costs represent the most significant variable operating expense that we have and are also the most impacted by changes in our order volumes. Throughout the 2008 fourth quarter and 2009 we reduced our workforce by approximately 2,500 employees, or 22%. As the economy stabilized and our business conditions improved in 2010, we increased our workforce at certain of our locations, with an increase of approximately 420 employees, or 5%, from December 31, 2009 on a same store basis. Many of our employees participate in various bonus programs based upon the financial results of a particular operation or the Company as a whole. Because of our higher profitability levels in 2010, our compensation expense was higher as our employees generally received higher commission incentives and bonuses than in 2009.

Available Information

We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a Website that contains reports, proxy information statements and other information regarding issuers, including our Company, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

We also make available free of charge on or through our Internet Website (http://www.rsac.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reference to our Website is not intended to incorporate anything on the Website into this report.

Item 1A. Risk Factors

Set forth below are the risks that we believe are material to our investors. Our business, results of operations and financial condition may be materially adversely affected due to any of the following risks. The risks described below are not the only ones we face. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the beginning of this Report.

Risks Related to Our Business and Industry

Our indebtedness could impair our financial condition and reduce the funds available to us for other purposes and our failure to comply with the covenants contained in our debt instruments could result in an event of default that could adversely affect our operating results.

We have substantial debt service obligations. As of December 31, 2010, we had aggregate outstanding indebtedness of approximately $941.3 million. This indebtedness could adversely affect us in the following ways:

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additional financing may not be available to us in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes and, if available, may be considerably more costly than our current debt costs;

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a significant portion of our cash flow from operations must be dedicated to the payment of interest and principal on our debt, which reduces the funds available to us for our operations or other purposes;

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some of the interest on debt is, and will continue to be, accrued at variable rates, which may result in higher interest expense in the event of increases in interest rates, which may occur in future periods;

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because we may be more leveraged than some of our competitors, our debt may place us at a competitive disadvantage;

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our leverage may increase our vulnerability to economic downturns and limit our ability to withstand adverse events in our business by limiting our financial alternatives; and

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our ability to capitalize on significant business opportunities, including potential acquisitions, and to plan for, or respond to, competition and changes in our business may be limited.

Our existing debt agreements contain financial and restrictive covenants that limit our ability to incur additional debt, and to engage in other activities that we may believe are in our long-term best interests, including the disposition or acquisition of assets or other companies or the payment of dividends to our shareholders. Our failure to comply with these covenants may result in an event of default, which, if not cured or waived, could accelerate the maturity of our indebtedness or prevent us from accessing additional funds under our credit facility. If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. See discussion regarding our financial covenants in the “Liquidity and Capital Resources” section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We may not be able to generate sufficient cash flow to meet our existing debt service obligations.

Our annual debt service obligations until November 2012, when our revolving credit facility is scheduled to mature, will be primarily limited to interest and principal payments on multiple series of privately placed senior notes and our outstanding debt securities, with an aggregate principal amount of $735.0 million, and on borrowings under our $1.1 billion credit facility of $195.0 million as of December 31, 2010. Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. For example, we may not generate sufficient cash flow from our operations or new acquisitions to repay amounts drawn under our revolving credit facility when it

matures in 2012, our private notes when they mature on various dates between 2011 and 2013 or our debt securities when they mature in 2016 and 2036. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, we expect to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We may not be able to consummate any such transaction at all or on a timely basis or on terms, and for proceeds, that are acceptable to us. These transactions may not be permitted under the terms of our various debt instruments then in effect, however; our inability to generate sufficient cash flow to satisfy our debt obligations or to timely refinance our obligations on acceptable terms could adversely affect our ability to serve our customers and could cause us to reduce or discontinue our planned operations.

The costs that we pay for metals fluctuate due to a number of factors beyond our control, and such fluctuations could adversely affect our operating results, particularly if we cannot pass on higher metal prices to our customers.

We purchase large quantities of aluminum, carbon, alloy and stainless steel and other metals, which we sell to a variety of end-users. The costs to us for these metals and the prices that we charge customers for our products may change depending on many factors outside of our control, including general economic conditions (both domestic and international), competition, production levels, raw material costs, customer demand levels, import duties and other trade restrictions, currency fluctuations and surcharges imposed by our suppliers. We attempt to pass cost increases on to our customers with higher selling prices but we may not always be able to do so.

We maintain substantial inventories of metal to accommodate the short lead times and delivery requirements of our customers. Our customers typically purchase products from us pursuant to purchase orders and typically do not enter into long-term purchase agreements or arrangements with us. Accordingly, we purchase metal in quantities we believe to be appropriate to satisfy the anticipated needs of our customers based on information derived from customers, market conditions, historic usage and industry research. Commitments for metal purchases are generally at prevailing market prices in effect at the time orders are placed or at the time of shipment. During periods of rising prices for metal, we may be negatively impacted by delays between the time of increases in the cost of metals to us and increases in the prices that we charge for our products if we are unable to pass these increased costs on to our customers immediately. In addition, when metal prices decline, this could result in lower selling prices for our products and, as we use existing inventory that we purchased at higher metal prices, lower margins. Consequently, during periods in which we sell this existing inventory, the effects of changing metal prices could adversely affect our operating results.

Our business could be adversely affected by economic downturns.

Demand for our products is affected by a number of general economic factors. A decline in economic activity in the U.S. and other markets in which we operate could materially affect our financial condition and results of operations. The U.S. economy technically entered an economic recession in December 2007 and the economic recession spread to many global markets in 2008. Beginning in the 2008 fourth quarter and throughout 2009, the metals industry, including service centers and Reliance, felt the effects of the recession. Both demand for our products and pricing levels declined rapidly and significantly. In addition to reducing our direct business activity, many of our customers were not able to pay us amounts when they became due, further affecting our financial condition and results of operations. Although demand and pricing levels stabilized somewhat during the second half of 2009 and continued to improve at a slow but steady rate during 2010 and so far in 2011, overall demand for our products continues to be at low levels. We have little visibility as to the duration of the economic downturn, particularly its continued impact on the non-residential construction market, which may cause our financial condition to worsen from current levels and may continue to threaten the financial viability of our customers and their ability to pay us.

The prices of metals are subject to fluctuations in the supply and demand for metals worldwide and changes in the worldwide balance of supply and demand could negatively impact our revenues, gross profit and net income.

Metal prices are volatile due to, among other things, fluctuations in foreign and domestic production capacity, raw material availability, metals consumption and foreign currency rates. For example, in the past few years, China has significantly increased both its consumption and production of metals and metal products. Initially, China’s large and growing demand for metals significantly affected the metals industry by diverting supply to China and contributing to the global increases in metal prices. With China’s increased production of metals, it has become a significant buyer of natural resources and a net exporter of certain metals. While these developments can affect global pricing, China has not yet had a significant impact on U.S. pricing or the pricing for our products. Future changes in China’s general economic conditions or in its production or export of metals could cause fluctuations in metal prices globally, which could adversely affect our revenues, gross profit and net income. Due to the recent global recession, U.S. mills have significantly reduced their production capacities by idling production lines in an effort to more closely match supply with current demand. Domestic carbon steel mills were operating at less than 50% of capacity in early 2009, which we believe supported pricing levels well above pricing levels that would have developed if capacity had not

been reduced. During the second half of 2009 and throughout 2010 mill capacity rates have hovered around 70%, led mainly by increased demand for flat-rolled products by the auto and appliance industries. Pricing for most products has experienced significant increases in late 2010 and early 2011 mostly driven by increasing raw material costs as opposed to demand. However, if mills continue to increase production without a corresponding increase in demand, prices may decline. Global mills may react more irrationally than domestic mills.

Additionally, significant currency fluctuations in the United States or abroad could negatively impact our cost of metals and the pricing of our products. A decline in the dollar relative to foreign currencies may result in increased prices for metals and metal products in the United States and reduce the amount of metal imported into the U.S. as imported metals become relatively more expensive. If the value of the dollar improves relative to foreign currencies, this may result in increased metal being imported into the U.S., which in turn may pressure existing domestic prices for metal. In addition, when prices for metal products in the U.S. are lower than in foreign markets, metals may be sold in the foreign markets rather than in the U.S., reducing the availability of metal products in the U.S., which may allow the domestic mills to increase their prices.

We operate in an industry that is subject to cyclical fluctuations and any downturn in general economic conditions or in our customers’ specific industries could negatively impact our revenues, gross profit and net income.

The metals service center industry is cyclical and impacted by both market demand and metals supply. Periods of economic slowdown or recession in the United States or other countries, or the public perception that these may occur, could decrease the demand for our products and adversely affect our pricing. For example, the recent economic recession significantly impacted our revenue levels due to both demand and pricing level deterioration beginning in the 2008 fourth quarter and through the first half of 2009. This deterioration also impacted our gross profit and net income levels as we had to lower our selling prices to our customers faster than we received lower cost metal into our inventory. Since the second half of 2009, our inventory costs have been generally in line with our replacement costs, allowing us to improve our gross profit margins to more normal historical levels since the second half of 2009 and throughout 2010. As previously discussed in Item 1. Business, Industry and Market Cycles, significant price increases have been announced by our suppliers for carbon steel products in late 2010 and early 2011 that are raw material cost as opposed to demand driven. If either demand or pricing were to decline from the current elevated levels that we have observed so far in early 2011, this could reduce our revenues, gross profit and net income.

We sell many products to industries that are cyclical, such as the non-residential construction, semiconductor, energy and transportation industries, including aerospace. Although many of our direct sales are to sub-contractors or job shops that may serve many customers and industries, the demand for our products is directly related to, and quickly impacted by, demand for the finished goods manufactured by customers in these industries, which may change as a result of changes in the general U.S. or worldwide economy, domestic exchange rates, energy prices or other factors beyond our control. If we are unable to accurately project the product needs of our customers over varying lead times or if there is a limited availability of products through allocation by the mills or otherwise, we may not have sufficient inventory to be able to provide products desired by our customers on a timely basis. In addition, if we are not able to diversify our customer base and/or increase sales of products to customers in other industries when one or more of the cyclical industries that we serve are experiencing a decline, our revenues, gross profit and net income may be adversely affected.

We compete with a large number of companies in the metals service center industry, and, if we are unable to compete effectively, our revenues, gross profit and net income may decline.

We compete with a large number of other general-line distributors and specialty distributors in the metals service center industry. Competition is based principally on price, inventory availability, timely delivery, customer service, quality and processing capabilities. Competition in the various markets in which we participate comes from companies of various sizes, some of which have more established brand names in the local markets that we serve. These competitors may be better able to withstand adverse changes in conditions within our customers’ industries and may have greater operating and financial flexibility than we have. To compete for customer sales, we may lower prices or offer increased services at a higher cost, which could reduce our revenues, gross profit and net income. The significantly lower demand levels during 2009 and rapidly declining prices escalated competitive pressures, with service centers selling at substantially reduced prices, and sometimes at a loss, in an effort to reduce their high cost inventory and generate cash. These competitive pressures could intensify again if demand and particularly pricing decline significantly from the elevated levels reached in early 2011. Any increased competitive pressure could cause our revenues, gross profit and net income to decline further.

If we were to lose any of our primary suppliers or otherwise be unable to obtain sufficient amounts of necessary metals on a timely basis, we may not be able to meet our customers’ needs and may suffer reduced sales.

We have few long-term contracts to purchase metals. Therefore, our primary suppliers of carbon steel, alloy steel, stainless steel, aluminum or other metals could curtail or discontinue their delivery of these metals to us in the quantities we need with little or no notice. Our ability to meet our customers’ needs and provide value-added inventory management services depends on our ability to maintain an uninterrupted supply of high quality metal products from our suppliers. If our suppliers experience production problems, lack of capacity or transportation disruptions, the lead times for receiving our supply of metal products could be extended and the cost of our inventory may increase. If, in the future, we are unable to obtain sufficient amounts of the necessary metals at competitive prices and on a timely basis from our customary suppliers, we may not be able to obtain these metals from acceptable alternative sources at competitive prices to meet our delivery schedules. Even if we do find acceptable alternative suppliers, the process of locating and securing these alternatives may be disruptive to our business, which could have an adverse impact on our ability to meet our customers’ needs and reduce our sales, gross profit and net income. In addition, if a significant domestic supply source is discontinued and we cannot find acceptable domestic alternatives, we may need to find a foreign source of supply. Using foreign sources of supply could result in longer lead times, increased price volatility, less favorable payment terms, increased exposure to foreign currency movements and certain tariffs and duties and require greater levels of working capital. Alternative sources of supply may not maintain the quality standards that are in place with our current suppliers that could impact our ability to provide the same quality of products to our customers that we have provided in the past, which could cause our customers to move their business to our competitors or to file claims against us, which may be more difficult to pass through to foreign suppliers. There has been significant consolidation at the metal producer level both globally and within the U.S. This consolidation has reduced the number of suppliers available to us, which could result in increased metals costs to us that we may not be able to pass on to our customers and may limit our ability to obtain the necessary metals to service our customers. The number of available suppliers may be further reduced if the current economic downturn continues. Lower metal prices and lower demand levels caused certain mills to reduce their production capacity and, in many cases, to operate at a loss, which could cause one or more mills to discontinue operations if the losses continue over an extended period of time or if the mill cannot obtain the necessary financing to fund its operating costs.

We rely upon our suppliers as to the specifications of the metals we purchase from them.

We rely on mill certifications that attest to the physical and chemical specifications of the metal received from our suppliers for resale and generally, consistent with industry practice, do not undertake independent testing of such metals. We rely on our customers to notify us of any metal that does not conform to the specifications certified by the supplying mill. Although our primary sources of products have been domestic mills, we have and will continue to purchase product from foreign suppliers when we believe it is appropriate. In the event that metal purchased from domestic suppliers is deemed to not meet quality specifications as set forth in the mill certifications or customer specifications, we generally have recourse against these suppliers for both the cost of the products purchased and possible claims from our customers. However, such recourse will not compensate us for the damage to our reputation that may arise from sub-standard products and possible losses of customers. Moreover, there is a greater level of risk that similar recourse will not be available to us in the event of claims by our customers related to products from foreign suppliers that do not meet the specifications set forth in the mill certifications. In such circumstances, we may be at greater risk of loss for claims for which we do not carry, or do not carry sufficient, insurance.

If we do not successfully implement our acquisition growth strategy, our ability to grow our business could be impaired.

We may not be able to identify suitable acquisition candidates or successfully complete any acquisitions or integrate any other businesses into our operations. If we cannot identify suitable acquisition candidates or are otherwise unable to complete acquisitions, we are unlikely to sustain our historical growth rates, and, if we cannot successfully integrate these businesses, we may incur increased or redundant expenses. Moreover, any additional indebtedness we incur to pay for these acquisitions could adversely affect our liquidity and financial condition.

Because of the recent economic downturn and uncertainty regarding the timing and extent of the eventual recovery, it may be difficult to reach agreement with potential sellers on the appropriate valuation of target companies, which may delay or cancel potential acquisitions.

Acquisitions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of that transaction.

Historically, we have expanded both through acquisitions and internal growth. Since our initial public offering in September 1994, we have successfully purchased more than 45 businesses. From 1984 to September 1994, we acquired 20 businesses. We continue to evaluate acquisition opportunities and, although we placed acquisitions on hold in 2009 because of the poor economic climate, we continued our acquisition activity in 2010 and expect to continue to grow our business through acquisitions in the future. Risks we may encounter in acquisitions include:

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the acquired company may not further our business strategy, or we may pay more than it is worth;

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the acquired company may not perform as anticipated, which could result in an impairment charge or otherwise impact our results of operations;

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we may not realize the anticipated increase in our revenues if a larger than predicted number of customers decline to continue purchasing products from us;

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we may have to delay or not proceed with a substantial acquisition if we cannot obtain the necessary funding to complete the acquisition in a timely manner;

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we may significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition or assume existing debt of an acquired company, which, among other things, may result in a downgrade of our credit ratings;

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we may have multiple and overlapping product lines that may be offered, priced and supported differently, which could cause our gross profit margins to decline;

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we may have increased inventory exposure for a short time period if the acquired company had significant amounts of material on order;

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our relationship with current and new employees, customers and suppliers could be impaired;

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our due diligence process may fail to identify risks that could negatively impact our financial condition;

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we may lose anticipated tax benefits or have additional legal or tax exposures if we have prematurely or improperly combined entities;

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we may face contingencies related to product liability, intellectual property, financial disclosures, tax positions and accounting practices or internal controls;

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the acquisition may result in litigation from terminated employees or third parties;

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our management’s attention may be diverted by transition or integration issues; and

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we may be unable to obtain timely approvals from governmental authorities under competition and antitrust laws.

These factors could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or a number of acquisitions.

As a decentralized business, we depend on both senior management and our key operating employees; if we are unable to attract and retain these individuals, our ability to operate and grow our business may be adversely affected.

Because of our decentralized operating style, we depend on the efforts of our senior management, including our chairman and chief executive officer, David H. Hannah, our president and chief operating officer, Gregg J. Mollins, and our executive vice president and chief financial officer, Karla Lewis, as well as our key operating employees. We may not be able to retain these individuals or attract and retain additional qualified personnel when needed. We do not have employment agreements with any of our corporate officers or most of our key employees, so they may have less of an incentive to stay with us when presented with alternative employment opportunities. The compensation of our officers and key employees is heavily dependent on our profitability and in times of reduced profitability this may cause our employees to seek employment opportunities that provide a more stable compensation structure. In addition, our senior management and key operating employees hold stock options that have vested and may also hold common stock in our employee stock ownership plan. These individuals may, therefore, be more likely to leave us if the shares of our common stock significantly appreciate in value. The loss of any key officer or employee will require remaining officers and employees to direct immediate and substantial attention to seeking a replacement. Our inability to retain members of our senior management or key operating employees or to find adequate replacements for any departing key officer or employee on a timely basis could adversely affect our ability to operate and grow our business.

We are subject to various environmental, employee safety and health and customs and export laws and regulations, which could subject us to significant liabilities and compliance expenditures.

We are subject to various foreign, federal, state and local environmental laws and regulations concerning air emissions, wastewater discharges, underground storage tanks and solid and hazardous waste disposal at or from our facilities. Our operations are also subject to various employee safety and health laws and regulations, including those concerning occupational injury and illness, employee exposure to hazardous materials and employee complaints. We are also subject to customs and exporting laws and regulations for international shipment of our products. Environmental, employee safety and health and customs and export laws and regulations are comprehensive, complex and frequently changing. Some of these laws and regulations are subject to varying and conflicting interpretations. We may be subject from time to time to administrative and/or judicial proceedings or investigations brought by private parties or governmental agencies with respect to environmental matters, employee safety and health issues or customs and exporting issues. Proceedings and investigations with respect to environmental matters, any employee safety and health issues or customs and exporting issues could result in substantial costs to us, divert our management’s attention and result in significant liabilities, fines or the suspension or interruption of our service center activities. Some of our current properties are located in industrial areas with histories of heavy industrial use. The location of these properties may require us to incur environmental expenditures and to establish accruals for environmental liabilities that arise from causes other than our operations. In addition, we are currently investigating and remediating contamination in connection with certain properties we have acquired. Our international presence has grown, so the risk of incurring liabilities or fines resulting from non-compliance with customs or export laws has increased. Future events, such as changes in existing laws and regulations or their enforcement, new laws and regulations or the discovery of conditions not currently known to us, could result in material environmental or export compliance or remedial liabilities and costs, constrain our operations or make such operations more costly.

Proposed legislation aimed at regulating and taxing carbon emissions may impact both the prices we pay for materials and the volume of business from our customers involved in fossil fuel exploration.

We purchase large quantities of metal from mills whose production costs may increase because of proposed increases in taxation on carbon emissions as a byproduct of the milling process. Such regulation, if passed, may result in significantly higher prices charged to us by the mills for most every type of metal that we sell. The price that we pay for utilities such as electricity to run our warehouse equipment and fuel to run our delivery trucks and forklifts may rise as well due to increased taxation on the companies who produce and supply these commodities. We may not be able to fully pass on these costs to our customers without a resulting decline in order volumes, which may adversely impact our profits.

Carbon-related regulation may also negatively impact domestic exploration efforts. Should such a reduction in domestic exploration occur, we would expect to see a resulting slowdown in sales to our energy end market in general, thus negatively impacting our revenues, gross profit and net income.

Our operating results have fluctuated, and are expected to continue fluctuating, depending on the season.

Some of our customers are in seasonal businesses, including customers in the construction and related industries. Revenues in the months of July, November and December traditionally have been lower than in other months because of increased vacation days and holiday closures for various customers. Consequently, you should not rely on our results of operations during any particular quarter as an indication of our results for a full year or any other quarter.

Ongoing tax audits may result in additional taxes.

Reliance and our subsidiaries are undergoing various tax audits. These tax audits could result in additional taxes, plus interest and penalties being assessed against Reliance or any of our subsidiaries and the amounts assessed could be material.

Damage to our computer infrastructure and software systems could harm our business.

The unavailability of any of our primary information management systems for any significant period of time could have an adverse effect on our operations. In particular, our ability to deliver products to our customers when needed, collect our receivables and manage inventory levels successfully largely depend on the efficient operation of our computer hardware and software systems. Through information management systems, we provide inventory availability to our sales and operating personnel, improve customer service through better order and product reference data and monitor operating results. Difficulties associated with upgrades, installations of major software or hardware, and integration with new systems could lead to business interruptions that could harm our reputation, increase our operating costs and decrease our profitability. In addition, these systems are vulnerable to, among other things, damage or interruption from power loss, computer system and network failures, loss of telecommunications services, operator negligence, physical and electronic loss of data, or security breaches and computer viruses.

We have contracted with third-party service providers that provide us with backup systems in the event that our major information management systems are damaged. The backup facilities and other protective measures we take could prove to be inadequate.

The value of your investment may be subject to sudden decreases due to the potential volatility of the price of our common stock.

The market price of our common stock may be highly volatile and subject to wide fluctuations in response to various factors, including variations in our quarterly results of operations and our leverage position, as well as general economic conditions. During the last three years our stock price was extremely volatile reaching an all-time high of $78 per share in July 2008, declining to $13 per share in November 2008, and then recovering during 2009 and 2010 and currently trading in the $50 range in early 2011. Other factors may include matters discussed in other risk factors and the following factors:

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changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors or changes in estimates that we provide in our quarterly earnings release and conference call;

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developments affecting our Company, our customers or our suppliers;

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changes in the legal or regulatory environment affecting our business;

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press releases, earnings releases or publicity relating to us or our competitors or relating to trends in the metals service center industry;

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inability to meet securities analysts’ and investors’ quarterly or annual estimates or targets of our performance;

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a decline in our credit rating by the rating agencies;

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damage to our corporate reputation;

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the operating and stock performance of other companies that investors may deem comparable;

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sales of our common stock by large shareholders or insiders;

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general domestic or international economic, market and political conditions.

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance. In addition, stock markets from time to time experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. In the past, some shareholders have brought securities class action lawsuits against companies following periods of volatility in the market price of their securities. We may in the future be the target of similar litigation. Securities litigation, regardless of whether our defense is ultimately successful, could result in substantial costs and divert management’s attention and resources.

The volatility of the market could result in a material impairment of goodwill.

We review the recoverability of goodwill annually or whenever significant events or changes occur that might impair the recovery of recorded costs, making certain assumptions regarding future operating performance. We test for impairment of goodwill by calculating the fair value of a reporting unit using the discounted cash flow method. Under this method, the fair value of each reporting unit is estimated based on expected future economic benefits discounted to a present value at a rate of return commensurate with the risk associated with the investment. Projected cash flows are discounted to present value using an estimated weighted average cost of capital, which considers both returns to equity and debt investors. Significant changes in any one of the assumptions made as part of our analysis, which could occur as a result of actual events, or further declines in the market conditions for our products or our common stock could significantly impact our impairment analysis. An impairment charge, if incurred, could be material.

Principal shareholders who own a significant number of shares may have interests that conflict with yours.

Periodically, we have one or more shareholders that control 5% or more of the outstanding shares of our common stock. Individually or together, they may have the ability to significantly influence matters requiring shareholder approval. In deciding how to vote on such matters, these shareholders may be influenced by interests that conflict with yours.

We have implemented anti-takeover provisions that may adversely impact your rights as a holder of Reliance common stock.

Certain provisions in our articles of incorporation and our bylaws could delay, defer or prevent a third party from acquiring Reliance, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock and the rights of our shareholders. We are authorized to issue 5,000,000 shares of preferred stock, no par value, with the rights, preferences, privileges and restrictions of such stock to be determined by our board of directors, without a vote of the holders of common stock. Our board of directors could grant rights to holders of preferred stock to reduce the attractiveness of Reliance as a potential takeover target or make the removal of management more difficult. In addition, our restated articles of incorporation and amended and restated bylaws (1) impose advance notice requirements for shareholder proposals and nominations of directors to be considered at shareholder meetings and (2) establish a staggered or classified board of directors. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors other than the candidates nominated by our board of directors. A shareholder proposal to eliminate the classified Board was passed by a majority of the votes cast at our 2010 Annual Meeting of Shareholders and a proposed amendment to the Company’s Bylaws to implement this proposal will be presented to the shareholders at our 2011 Annual Meeting of Shareholders. In addition, our credit facility and the provisions of our senior private notes and debt securities contain limitations on our ability to enter into change of control transactions.

Risks Related to our Debt Securities

Because our senior debt securities and the related guarantees are not secured and are effectively subordinated to the rights of secured creditors, the debt securities and the related guarantees will be subject to the prior claims of any secured creditors, and if a default occurs, we may not have sufficient funds to fulfill our obligations under the debt securities or the related guarantees.

The notes and the guarantees are unsecured obligations, ranking equally with other senior unsecured indebtedness. The indenture governing the notes, as well as our credit facility and private placement notes, permit us and the subsidiary guarantors to incur additional secured or unsecured debt under specified circumstances. If we or the subsidiary guarantors incur additional secured debt, our assets and the assets of the subsidiary guarantors securing such debt will be subject to prior claims by our secured creditors. In the event of bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up of either Reliance or any of the subsidiary guarantors, assets that secure debt will be available to pay obligations on the notes and guarantees only after all debt secured by those assets has been repaid in full. Holders of the notes will participate in any remaining assets ratably with all of the respective unsecured and unsubordinated creditors of Reliance and the subsidiary guarantors, including trade creditors. If Reliance or any of the subsidiary guarantors incurs any additional unsecured obligations that rank equally with the notes, including trade payables, the holders of those obligations will be entitled to share ratably with the holders of the notes in any proceeds distributed as a result of bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up. If we do not have sufficient assets to pay all creditors of these entities, a portion of the notes outstanding would remain unpaid.

The guarantees may be unenforceable due to fraudulent conveyance statutes and, accordingly, the holders of our debt securities may not have a claim against the subsidiary guarantors.

The obligations of each subsidiary guarantor under its guarantee will be limited as necessary to prevent that guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law. However, a court in some jurisdictions could, under fraudulent conveyance laws, further subordinate or void the guarantee of any subsidiary guarantor if it found that such guarantee was incurred with actual intent to hinder, delay or defraud creditors, or such subsidiary guarantor did not receive fair consideration or reasonably equivalent value for the guarantee and that the subsidiary guarantor was any of the following: insolvent or rendered insolvent because of the guarantee, engaged in a business or transaction for which its remaining assets constituted unreasonably small capital, or intended to incur, or believed that it would incur, debts beyond its ability to pay such debts at maturity.

If a court were to void the guarantee of a subsidiary guarantor as the result of a fraudulent conveyance, or hold it unenforceable for any other reason, holders of the notes would cease to have a claim against that subsidiary guarantor on its guarantee and would be creditors solely of Reliance and any other subsidiary guarantor whose guarantee is not voided or held to be unenforceable.

The guarantees will be released under certain circumstances.

The debt securities will be guaranteed by any subsidiary guarantor for so long as such subsidiary guarantor is a borrower or a guarantor of obligations under our credit agreement and our private notes. In the event that, for any reason, the obligations of any subsidiary guarantor terminate as a borrower or guarantor under our credit agreement and our private notes, that subsidiary guarantor will be deemed released from all of its obligations under the indenture and its guarantee of the notes will terminate. A subsidiary guarantor’s guarantee will also terminate and such subsidiary guarantor will be deemed released from all of its obligations under the indenture with respect to the notes of a series upon legal defeasance of such series or satisfaction and discharge of the indenture as it relates to such series. A subsidiary guarantor’s guarantee will also terminate and such subsidiary guarantor will be deemed released from all of its obligations under the indenture with respect to each series of notes in connection with any sale or other disposition by Reliance of all of the capital stock of that subsidiary guarantor (including by way of merger or consolidation) or other transaction such that after giving effect to such transaction such subsidiary guarantor is no longer a domestic subsidiary of Reliance. If the obligations of any subsidiary guarantor as a guarantor terminate or are released, the risks applicable to our subsidiaries that are not guarantors will also be applicable to such subsidiary guarantor.

We depend on the receipt of dividends or other intercompany transfers from our subsidiaries to meet our obligations under the notes. Claims of creditors of our subsidiaries may have priority over your claims with respect to the assets and earnings of our subsidiaries.

We conduct a substantial portion of our operations through our subsidiaries. We will therefore be dependent upon dividends or other intercompany transfers of funds from our subsidiaries in order to meet our obligations under the notes and to meet our other obligations. Generally, creditors of our subsidiaries will have claims to the assets and earnings of our subsidiaries that are superior to the claims of our creditors, except to the extent the claims of our creditors are guaranteed by our subsidiaries. All of our wholly-owned domestic subsidiaries, which constitute the substantial majority of our subsidiaries, guarantee the notes. As of December 31, 2010, Reliance and the subsidiary guarantors accounted for approximately $4.32 billion, or 93%, of our total consolidated assets. Reliance and the subsidiary guarantors accounted for approximately $5.97 billion, or 95%, of our total consolidated revenues for the year ended December 31, 2010. If Reliance expands its international presence at a greater pace than it expands its U.S. presence, a smaller percentage of its consolidated assets may be subject to the guarantee obligations.

In the event of the bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up of Reliance, the holders of our notes may not receive any amounts with respect to the notes until after the payment in full of the claims of creditors of our subsidiaries that are not subsidiary guarantors.

We are permitted to incur more debt, which may intensify the risks associated with our current leverage, including the risk that we will be unable to service our debt.

Subject to certain limitations, our existing credit facility and private notes permit us to incur additional debt. The indenture governing the notes does not limit the amount of additional debt that we may incur. If we incur additional debt, the risks associated with our leverage, including the risk that we will be unable to service our debt, will increase.

The provisions in the indenture that governs the notes relating to change of control transactions will not necessarily protect the holders of our notes in the event of a highly leveraged transaction.

The provisions contained in the indenture will not necessarily afford the holders of our notes protection in the event of a highly leveraged transaction that may adversely affect them, including a reorganization, restructuring, merger or other similar transaction involving Reliance. These transactions may not involve a change in voting power or beneficial ownership or, even if they do, may not involve a change of the magnitude required under the definition of change of control repurchase event in the indenture to trigger these provisions, notably, that the transactions are accompanied or followed within 60 days by a downgrade in the rating of the notes. Except in the event of a change of control, the indenture does not contain provisions that permit the holders of the notes to require us to repurchase the notes in the event of a takeover, recapitalization or similar transaction.

Reliance may not be able to repurchase all of the notes upon a change of control repurchase event.

We will be required to offer to repurchase certain outstanding senior notes upon the occurrence of a change of control repurchase event as defined in the indenture dated November 20, 2006 (see Exhibit 4.01 included in this Annual Report on Form 10-K). We may not have sufficient funds to repurchase the notes in cash at such time or have the ability to arrange necessary financing on acceptable terms. In addition, our ability to repurchase the notes for cash may be limited by law or the terms of

other agreements relating to our indebtedness outstanding at the time. Under the terms of our credit facility, we are prohibited from repurchasing the notes if we are in default under such credit facility.

Ratings of our notes may change and affect the market price and marketability of the notes.

The notes are rated by Moody’s Investors Service Inc. and Standard & Poor’s. Such ratings are limited in scope, and do not address all material risks relating to an investment in the notes, but rather reflect only the view of each rating agency at the time the rating is issued and subsequently updated or affirmed. An explanation of the significance of such rating may be obtained from such rating agency. There is no assurance that our current credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. It is also possible that such ratings may be lowered in connection with future events, such as future acquisitions. Holders of our notes have no recourse against us or any other parties in the event of a change in or suspension or withdrawal of such ratings. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the market price or marketability of the notes. In addition, any decline in the ratings of the notes may make it more difficult for us to raise capital on acceptable terms.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2010, we maintained more than 200 metals service center processing and distribution facilities in 38 states, and in Belgium, Canada, China, Malaysia, Mexico, Singapore, South Korea and the United Kingdom, a sales office in France, and our corporate headquarters. All of our service center facilities are in good or excellent condition and are adequate for our existing operations. These facilities generally operate at about 50-60% of capacity based upon a 24-hour seven-day week, with each location averaging about two shifts operating at full capacity for a five-day work week.

We lease 142 of our processing and distribution facilities for a total of approximately 9.2 million square feet. Total square footage on all company-owned properties is approximately 14.8 million. In addition, we lease our corporate headquarters in Los Angeles, California and several of our subsidiaries lease other sales offices or non-operating locations. The leases expire at various times through 2031 and the aggregate monthly rent amount is approximately $3.1 million.

Item 3. Legal Proceedings.

From time to time, we are named as a defendant in legal actions. Generally, these actions arise out of our normal course of business. We are not a party to any pending legal proceedings other than routine litigation incidental to the business. We expect that these matters will be resolved without having a material adverse effect on our results of operations or financial condition. We maintain liability insurance against risks arising out of our normal course of business.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “RS” and was first traded on September 16, 1994. The following table sets forth the high and low reported closing sale prices of the common stock on the NYSE Composite Tape for the stated calendar quarters.


	2010				2009
	High		Low		High		Low
First Quarter	$	50.46	$	39.46	$	29.07	$	18.72
Second Quarter	$	54.96	$	36.15	$	43.10	$	28.05
Third Quarter	$	41.82	$	35.35	$	43.80	$	33.71
Fourth Quarter	$	51.73	$	40.89	$	45.42	$	36.42

As of February 16, 2011, there were 272 record holders of our common stock. We have paid quarterly cash dividends on our common stock for 51 years. In February 2008, the regular quarterly dividend was increased 25% from $0.08 to $0.10 per share of common stock. In February 2011 the Board again increased the regular quarterly dividend amount 20% from $0.10 to $0.12 per share of common stock. Our Board of Directors has increased the quarterly dividend rate on a periodic basis. The Board may reconsider or revise this policy from time to time based on conditions then existing, including our earnings, cash flows, financial condition and capital requirements, or other factors the Board may deem relevant. We expect to continue to declare and pay dividends in the future, if earnings are available to pay dividends, but we also intend to continue to retain a portion of earnings for reinvestment in our operations and expansion of our businesses. We cannot assure you that either cash or stock dividends will be paid in the future or that, if paid, the dividends will be at the same amount or frequency as paid in the past.

We did not repurchase any of our common stock in 2010. In January 2008, we repurchased 2,443,500 shares of our common stock at an average cost per share of $46.97. Since initiating the Stock Repurchase Plan in 1994 we have purchased approximately 15,200,000 shares at an average cost of $18.41 per share. As of December 31, 2010 we had authorization to purchase an additional 7,883,033 shares under our existing Repurchase Plan.

The private placement debt agreements for our senior notes and our syndicated credit facility contain covenants, which, among other things, require us to maintain a minimum net worth, which may restrict our ability to pay dividends. Since our initial public offering in September 1994 through 2010, we have paid between 5% and 25% of earnings to our shareholders as dividends. The wide range is due mainly to volatility of our earnings over this period more than volatility of our dividend rate. In 2010, our dividend payments represented 15% of earnings.

The following table contains certain information with respect to our cash dividends declared during the past two fiscal years:


Date of Declaration	Record Date	Payment Date	Dividends
10/20/10	12/3/10	12/22/10	$0.10 per share
7/21/10	8/20/10	9/13/10	$0.10 per share
4/21/10	6/2/10	6/23/10	$0.10 per share
2/17/10	3/5/10	3/26/10	$0.10 per share
10/21/09	12/4/09	1/6/10	$0.10 per share
7/22/09	8/21/09	9/14/09	$0.10 per share
4/21/09	6/1/09	6/22/09	$0.10 per share
2/18/09	3/6/09	3/27/09	$0.10 per share

Although we have not offered any securities for sale in the last three years, we have issued restricted stock on exercise of stock options granted pursuant to the Directors’ Stock Option Plan, as amended, which was approved by shareholders. Proceeds from the exercise of these options were used for working capital. Shares of our common stock were issued only to non-management directors in the following transactions exempt from registration under Sections 4(2) and 4(6) of the Securities Act:


Number of Shares	Exercise Price	Date of Exercise
3,750	$17.16	7/28/09

Restricted shares of common stock were also issued as bonuses under the Key-Man Incentive Plan, which we have maintained since 1965. The recipients of the restricted shares are fully vested in the shares on the date of the grant; however, they are restricted from trading the shares for a period of two years from the date of the grant. There were no proceeds received from the restricted shares granted under the Key-Man Incentive Plan. Shares of our common stock were issued only to a limited

number of key employees in the following transactions exempt from registration under Sections 4(2) and 4(6) of the Securities Act:


Number of Shares	Market Value	Date of Grant
10,360	$24.86	2/23/09
5,052	$56.04	3/3/08

We also have securities authorized for issuance under our Amended and Restated Stock Option and Restricted Stock Plan and the EMJ incentive stock option plan. For a description of securities authorized for issuance under these equity compensation plans, which have been registered under the Securities Act of 1933, and the Directors’ Stock Option Plan, see Note 10 to the consolidated financial statements. Additional information regarding securities authorized for issuance under these equity compensation plans and the Directors’ Stock Option Plan is included under the caption “EXECUTIVE COMPENSATION – Equity Compensation Table” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2011.

Stock Performance Graph

The following graph compares the performance of our Common Stock with that of the S&P 500, the Russell 2000 and the peer group that we selected for the five-year period from December 31, 2005 through December 31, 2010. The comparison of total return assumes that a fixed investment of $100 was invested on December 31, 2005 in all common stock and assumes the reinvestment of dividends. Since there is no nationally-recognized industry index consisting of metals service center companies to be used as a peer group index, Reliance constructed its own peer group. As of December 31, 2010, the peer group consisted of Olympic Steel Inc. and Gibraltar Industries, Inc., each of which has securities listed for trading on NASDAQ; A.M. Castle & Co. and Worthington Industries, Inc., each of which has securities listed for trading on the New York Stock Exchange; and Russel Metals Inc., which has securities listed for trading on the Toronto Stock Exchange (collectively, “Peer Group”). The returns of each member of the peer group are weighted according to that member’s stock market capitalization as of the period measured. The stock price performance shown on the graph below is not necessarily indicative of future price performance.

LOGO


	2005		2006		2007		2008		2009		2010
Reliance Steel & Aluminum Co.		100.00		129.63		179.53		66.77		146.49		174.77
S&P 500		100.00		115.80		122.16		76.96		97.33		111.99
Russell 2000		100.00		118.37		116.51		77.15		98.11		124.46
Peer Group		100.00		106.76		110.71		70.54		89.06		113.67

Item 6. Selected Financial Data.

We have derived the following selected summary consolidated financial and operating data for each of the five years ended December 31, 2010 from our audited consolidated financial statements. You should read the information below with our Consolidated Financial Statements, including the notes related thereto, and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

SELECTED CONSOLIDATED FINANCIAL DATA


	Year Ended December 31,
	2010			2009			2008			2007			2006
	(In thousands, except per share data)
Income Statement Data:
Net sales	$	6,312,795		$	5,318,132		$	8,718,844		$	7,255,679		$	5,742,608
Cost of sales (exclusive of depreciation and amortization expenses included in operating expenses)		4,727,887			3,918,611			6,556,748			5,418,161			4,231,386

Gross profit ⁽¹⁾		1,584,908			1,399,521			2,162,096			1,837,518			1,511,222
Operating expenses ⁽²⁾		1,224,187			1,149,129			1,309,125			1,114,012			883,860

Operating income		360,721			250,392			852,971			723,506			627,362
Other income (expense):
Interest expense		(61,175	)		(67,523	)		(82,575	)		(78,710	)		(61,692	)
Other (expense) income, net		(3,118	)		12,624			(3,840	)		9,931			5,768

Income before income taxes		296,428			195,493			766,556			654,727			571,438
Provision for income taxes		98,579			46,317			282,921			246,438			216,625

Net income		197,849			149,176			483,635			408,289			354,813
Less: Net income attributable to noncontrolling interests		3,496			1,018			858			334			306

Net income attributable to Reliance	$	194,353		$	148,158		$	482,777		$	407,955		$	354,507


Earnings per Share:
Net income per share attributable to Reliance shareholders — diluted ⁽³⁾	$	2.61		$	2.01		$	6.56		$	5.36		$	4.82
Net income per share attributable to Reliance shareholders — basic ⁽³⁾	$	2.62		$	2.02		$	6.60		$	5.39		$	4.85
Weighted average common shares outstanding — diluted ⁽³⁾		74,472			73,702			73,598			76,065			73,600
Weighted average common shares outstanding — basic ⁽³⁾		74,230			73,446			73,102			75,623			73,134

Other Data:
Cash flow provided by operations	$	214,087		$	942,996		$	664,684		$	638,964		$	190,964
Capital expenditures		111,356			69,901			151,890			124,127			108,742
Cash dividends per share ⁽³⁾		0.40			0.40			0.40			0.32			0.22

Balance Sheet Data (December 31):
Working capital	$	1,192,302		$	973,335		$	1,652,207		$	1,121,539		$	1,124,650
Total assets		4,668,893			4,306,777			5,195,485			3,983,477			3,614,173
Long-term debt ⁽⁴⁾		857,789			852,557			1,675,565			1,013,260			1,088,051
Reliance shareholders’ equity		2,823,732			2,606,432			2,431,436			2,106,249			1,746,398

⁽¹⁾

Gross profit, calculated as Net sales less Cost of sales, is a non-GAAP financial measure as it excludes 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. The Company uses Gross profit as shown above as a measure of operating performance. Gross profit is an important operating and financial measure, as fluctuations in Gross profit can have a significant impact on our earnings. Gross profit, as presented, is not necessarily comparable with similarly titled measures for other companies.

⁽²⁾	Operating expenses include warehouse, delivery, selling, general and administrative expenses, depreciation expense and amortization expense.

⁽³⁾	All share information has been retrospectively adjusted to reflect the two-for-one stock split effected in the form of a 100% stock dividend that was effective July 19, 2006.

⁽⁴⁾	Includes the long-term portion of capital lease obligations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Business conditions in 2010 were much better than in 2009, although well below what we consider to be healthy levels. We consider the last two months of 2008 and all of 2009 to be the most difficult operating environment that our company and our industry has ever experienced due to rapid and significant demand and pricing declines resulting from the global economic recession. Beginning in mid-2009 both demand and pricing for our products had generally stabilized and we began to see improvements in demand in certain of our end markets that continued through 2010 — most notably in semiconductor and electronics; energy, oil and gas; aerospace; agriculture and heavy equipment; and toll processing for the automotive and appliance industries. There was one end market where demand was weaker for us in 2010 than in 2009, and that was non-residential construction, which happens to be our largest end market. Projects continued to wind down through 2009 and the first half of 2010 and then bottomed for us in mid-2010. Activity has remained consistent at these low levels for non-residential construction since that time. Although there was positive improvement in many of our end markets in 2010, our total tons sold were up only 6% in 2010 from 2009 due to our end market and product mix. This is after we experienced a 32% decrease in our same-store tons sold in 2009 as compared to 2008.

Pricing rebounded much more than demand during 2010. Beginning near the end of 2009, mill prices, especially for carbon steel products, which represented 52% of our 2010 sales dollars, increased mainly because of increased costs for raw materials globally. The mills passed their cost increases through to us, and we, in turn passed these increases on to our customers. Prices continued to increase through most of the 2010 first half, but then declined mid-year when forecasts of a potential double-dip recession became prominent. This pressure on pricing lowered our gross profit margins until the double-dip fear subsided and raw material costs again increased. The mills announced multiple carbon steel price increases late in the 2010 fourth quarter, as their raw material costs continued to increase. This allowed us to increase our selling price to our customers and somewhat improve our December gross profit margins. However, our 2010 gross profit margin was 25.1%, compared to 26.3% in 2009.

The use of LIFO inventory valuation results in a better matching of costs and revenues. However, we believe that our reported gross profit margins, that are on a LIFO basis, somewhat distort the true improvement in both demand and pricing in 2010 compared to 2009. In 2010, our LIFO adjustment resulted in expense of $35 million, compared to income of $305 million in 2009 — a swing of $340 million.

We are pleased with our performance in 2010 but look forward to further improvement in demand for all of our end markets. We will continue to focus on maximizing the profitability of our existing businesses and continued profitable growth through both acquisitions and internal initiatives. In 2010 we again entered the acquisition market, completing two acquisitions in the 2010 fourth quarter with a combined transaction value of about $123 million, and we also spent $111 million on capital expenditures. A significant portion of our capital expenditures related to growth initiatives, including the expansion and relocation of existing facilities, enhancing and adding processing capabilities, penetrating new geographic markets and expanding product offerings at existing locations. Our 2010 acquisitions and internal growth initiatives further enhanced our product, geographic and customer diversity. We believe this diversification makes our financial results less cyclical than others in our industry.

Our balance sheet provides significant capacity for us to execute our growth strategies. Our net debt-to-total capital ratio was only 23.5% at December 31, 2010 and we had only $195 million of borrowings outstanding on our $1.1 billion credit facility. From now through November 2012, we have $86.7 million of scheduled debt maturities. We expect to fund these obligations, as well as our working capital, growth and other activities with our cash flow from operations and availability on our credit facility.

We expect to further grow the Company in 2011 both through accretive acquisitions and internal growth opportunities to enhance our product, geographic and customer diversity. We believe the improved business climate and credit markets should result in acquisition opportunities that are attractive to us in the future. We will evaluate these opportunities and pursue those that meet our disciplined acquisition criteria. Our 2011 capital expenditure budget is about $200 million, a good portion of which will be invested in new or expanded facilities and state-of-the art equipment that will allow us to continue to provide superior customer service and the highest quality of processed metals to our existing customers as well as to expand our market share.

We expect a continued slow and steady improvement in demand across our end markets throughout 2011. Prices are currently at high levels for most products that we sell. We expect these prices to hold through the 2011 first quarter but anticipate there may be

downward pressure on pricing for most products later in the 2011 second quarter, unless overall demand improves significantly. However, we expect our average selling price for 2011 to be at or above our 2010 average selling price. In an environment of improving demand and moderate price fluctuations, up or down, we anticipate that we will be able to maintain our gross profit margins in a range of 25% to 27%, consistent with our historical results over the past ten years. We will continue to focus on cost controls and inventory turnover. All of these factors indicate improved financial results in 2011 as compared to 2010; however, until there is significant improvement in demand, especially in the non-residential construction market, we expect our results to be below what we believe our true earnings power is, given the current size and breadth of our Company.

Effect of Demand and Pricing Changes on our Operating Results

Customer demand can have a significant impact on our results of operations. When volume increases our revenue dollars increase, which then contributes to increased gross profit dollars. Variable costs may also increase with volume including increases in our warehouse, delivery, selling, general and administrative expenses. Conversely, when volume declines, we typically produce fewer revenue dollars, which can reduce our gross profit dollars. We can reduce certain variable expenses when volumes decline, but we cannot easily reduce our fixed costs.

Pricing for our products can have a more significant impact on our results of operations than customer demand levels. As pricing increases, so do our revenue dollars. Our pricing usually increases when the cost of our materials increases. If prices increase and we maintain the same gross profit percentage, we generate higher levels of gross profit and pre-tax income dollars for the same operational efforts. Conversely, if pricing declines, we will typically generate lower levels of gross profit and pre-tax income dollars. Because changes in pricing do not require us to adjust our expense structure other than for profit-based compensation, the impact on our results of operations from changes in pricing is typically much greater than the effect of volume changes.

In addition, when volume or pricing increases, our working capital requirements typically increase, which may require us to increase our outstanding debt. This usually increases our interest expense. When our customer demand falls, we typically generate stronger levels of cash flow from operations as our working capital needs decrease.

2010 Acquisitions

We funded our 2010 acquisitions with borrowings of approximately $100.3 million on our $1.1 billion revolving credit facility. We also assumed and subsequently repaid $22.6 million of debt from our 2010 acquisitions.

Internal Growth Activities

•

Chatham Steel Corporation leased a new facility in South Point, Ohio and is scheduled to open for business in the first quarter of 2011.

•

Diamond commenced operations in Cedar Hill, Texas at a newly built facility in February 2011.

•

Earle M. Jorgensen Company (“EMJ”) completed construction of a new facility in Orlando, Florida that commenced operations in February 2011.

•

EMJ Malaysia completed construction of its new facility in Nusajaya, Malaysia and commenced operations in the third quarter of 2010.

•

Sugar Steel Corporation leased a new facility in Evansville, Indiana that commenced operations in February 2011.

•

Yarde Metals, Inc. opened a new transfer facility in Livonia, Michigan in October 2010 to expand its presence in that market and to provide faster delivery of products to its customers in the area.

Operations in existing markets were also expanded as follows:

•

EMJ completed construction of its new facility in Memphis, Tennessee, which is scheduled to commence operations during the first quarter of 2011.

•

Results of Operations

The following table sets forth certain income statement data for each of the three years ended December 31 (dollars are shown in thousands and certain amounts may not calculate due to rounding):


	2010					2009					2008
	$		% of Net Sales			$		% of Net Sales			$		% of Net Sales
Net sales	$	6,312,795		100.0	%	$	5,318,132		100.0	%	$	8,718,844		100.0	%
Cost of sales (exclusive of depreciation and amortization expense shown below)		4,727,887		74.9			3,918,611		73.7			6,556,748		75.2
Gross profit ⁽¹⁾		1,584,908		25.1			1,399,521		26.3			2,162,096		24.8
S,G&A expenses		1,103,584		17.5			1,030,245		19.4			1,211,201		13.9
Depreciation expense		91,043		1.4			89,068		1.7			78,853		0.9
Amortization expense		29,560		0.5			29,816		0.6			19,071		0.2

Operating income	$	360,721		5.7	%	$	250,392		4.7	%	$	852,971		9.8	%

⁽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. The Company uses 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.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Net Sales. Our 2010 annual consolidated sales of $6.31 billion were up 18.7% from 2009, with a 5.9% increase in tons sold and an 11.7% increase in our average selling price per ton sold. (Tons sold and average selling price per ton sold amounts exclude our toll processing sales.) Same-store sales, which exclude the sales of our 2010 acquisitions, were $6.29 billion in 2010, up 18.3% from 2009, with a 5.6% increase in our tons sold and an 11.6% increase in our average selling price per ton sold.

In general, demand has been gradually improving since we reached a low in June 2009 as the general economy is slowly recovering and our customers are buying metal to meet their production needs. Business activity in most all of our markets is better than in 2009, with the exception of non-residential construction, which we believe represents about one-third of our revenues. Our strongest markets during the year were in energy, oil & gas; semiconductor & electronics; aerospace; and toll processing, which is primarily related to the auto and appliance industries. Our toll processing volumes in 2010 were up 39% from 2009 levels.

Most of the products we sell had higher average selling prices in 2010 compared to 2009 levels as a result of increased mill prices over this period. Our major commodity selling prices increased in 2010 from 2009 levels as follows: carbon steel up 6.6%; aluminum up 2.3%; stainless steel up 18.8%; and alloy up 0.6%. Contributing to the increase in our overall average selling price of 11.7% was also the shift in our product mix, with our carbon steel sales as a percent of total sales dollars declining to 52% of total sales dollars in 2010 from 56% in 2009 and stainless steel sales increasing to 16% from 13%. As stainless steel products generally have higher prices than carbon steel products, this shift in our product mix increased our average price per ton sold.

Furthermore, late in 2010, significant price increases were announced by the domestic carbon steel mills due mainly to a rise in scrap and other input costs at the mills, as opposed to higher end-use demand. The prices for carbon steel hot-rolled coil have risen from $570 in November 2010 to around $900 a ton in February 2011 (according to American Metal Market). Many of these increases were announced in December 2010, which allowed us to pass through at least a portion of the increase to our customers and contributed to the increase in our 2010 fourth quarter average selling price.

Cost of Sales. Our total cost of sales increased 20.7% in 2010 to $4.73 billion compared to $3.92 billion in 2009. The increase in cost of sales in 2010 compared to 2009 is due to increases in tons sold as well as increased costs for most products we sell (see “Net Sales” above for trends in the costs of our products) from 2009. Our cost per ton sold increased 13.9%, relatively consistent with the increase in our average selling price per ton sold of 11.7%.

Also, our LIFO reserve adjustment, which is included in our cost of sales and, in effect, reflects cost of sales at current replacement costs, resulted in a charge, or expense of $34.8 million in 2010 compared to a credit, or income of $305.0 million in 2009. The LIFO charge, or expense, that we recorded in 2010 was the result of increases in our inventory costs at year-end 2010 as compared to year-end 2009 levels. The 2009 LIFO credit, or income, resulted from significant declines in both cost and quantities of inventory on hand at the end of 2009 as compared to the beginning of that year. Our LIFO reserve as of December 31, 2010 and 2009 was $117.6 million and $82.8 million, respectively.

Gross Profit. Total gross profit increased 13.2% to $1.58 billion for 2010, compared to $1.40 billion in 2009. Our gross profit as a percentage of sales in 2010 was 25.1% compared to 26.3% in 2009.

Our 2009 gross profit margin was positively impacted due to our large LIFO adjustment in that period resulting from falling metal prices. In mid-2009 our inventory costs were better aligned with current replacement costs and demand and pricing had generally stabilized. This allowed us to improve our FIFO gross profit margins in the 2009 second half that, along with our LIFO adjustment, resulted in a gross profit margin of 26.3%.

Our gross profit margin during the 2010 first half was relatively consistent with our 2009 rate. Although we were operating in a more stable environment during 2010, our gross profit margin narrowed in the second half of the year, which resulted in a 2010 gross profit margin of 25.1%. The mills announced price reductions early in the 2010 third quarter and that, along with the higher-cost inventory that we were receiving, pressured our selling prices, resulting in lower gross profit margins than we experienced earlier in 2010. Late in the 2010 fourth quarter mills announced significant increases for certain carbon products, which positively impacted our gross profit margins in December and early 2011. See “Cost of Sales” above for discussion of our LIFO reserve adjustments.

Expenses. Warehouse, delivery, selling, general and administrative expenses (“S,G&A expenses”) for 2010 increased $73.3 million, or 7.1%, from 2009 and were 17.5% as a percentage of sales, down from 19.4% in 2009. Our 2010 expenses as a percent of sales decreased because of our higher sales compared to 2009.

Increases in variable compensation expenses along with moderate increases in certain warehouse and delivery expenses, resulting from improved demand for our products as well as the S,G&A expenses from our 2010 acquisitions account for most of the change in S,G&A expenses during 2010 compared to 2009. Our cost structure is highly variable, with personnel-related expenses making up about 60% of our S,G&A expenses. In 2009, we reduced our headcount by over 1,700 employees or 16% from 2008 year-end levels. Total compensation related expenses in 2009 were lower because of these personnel reductions as well as reduced bonus, commission, and incentive compensation due to lower gross profit and pre-tax income levels. Since employees throughout our workforce have a significant portion of compensation tied to profitability, the improvement in gross profit margins and pre-tax profits in 2010 as compared to 2009 led to higher bonus, commission, and incentive compensation levels during 2010 as compared to 2009.

Depreciation and amortization expense for 2010 of $120.6 million increased 1.4% from 2009. The increase was mainly due to additional depreciation expense from our 2010 acquisitions and depreciation of our 2010 capital expenditures.

Operating Income. Operating income was $360.7 million in 2010, resulting in an operating profit margin of 5.7%, compared to 2009 operating income of $250.4 million and an operating profit margin of 4.7%. The higher sales and gross profit amounts in 2010 have significantly increased our operating income.

Other Income and Expense. Interest expense in 2010 was $61.2 million, a decrease of $6.3 million from $67.5 million in 2009. Although we significantly increased our borrowings for the $1.1 billion purchase of PNA in August 2008, we were able to quickly reduce our debt level because of our record cash flows during 2009 and continued positive cash flow in 2010. Other (expense) income, net was expense of $3.1 million in 2010 compared to income of $12.6 million in 2009, a net decrease in income of $15.7 million. Lower investment income on company-owned life insurance policies as well as lower related policy redemption gains resulted in a $12.4 million decrease in income from life-insurance policies in 2010 compared to 2009.

Income Tax Rate. Our 2010 effective income tax rate was 33.3% compared to 23.7% for 2009. The fluctuations in our effective tax rate are mainly due to our varying income levels and due to the favorable resolution of certain tax matters in 2009. All other permanent items that impacted our effective tax rates as compared to the U.S. federal statutory rate of 35% were not materially different in amounts during both years and relate mainly to company-owned life insurance policies and domestic production activities deductions.

Net Income. Net income attributable to Reliance in 2010 was $194.4 million compared to $148.2 million in 2009. The increase was primarily the result of a more stable demand and pricing environment for our products, which has allowed us to generate increased gross profit dollars with relatively smaller increases in our operating expenses.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Net Sales. Our 2009 annual consolidated sales of $5.32 billion were down 39.0% from 2008, with a 15.4% decrease in tons sold and a 27.5% decrease in our average selling price per ton sold. Our sales for 2009 and 2008 included $1.01 billion and $887.6 million, respectively, from the PNA companies that we acquired on August 1, 2008.

Our average selling prices during 2009 declined mainly because of the significant mill price reductions for most products that we sell compared to 2008. Prices for most carbon steel products were rising significantly during the first half of 2008 and reached record levels in July 2008. Subsequently, prices fell rapidly beginning in the 2008 fourth quarter and continued to decline through the first half of 2009. In the 2009 second half there were modest increases in mill prices for certain products. Our diverse product mix somewhat tempered the effect of the carbon and stainless steel price declines, as aluminum products made up about 18.0% of our 2009 sales, and our average selling price for aluminum products was down only 11.5% in 2009 compared to 2008.

Same-store sales, which exclude the sales of our 2008 acquisitions, were $4.30 billion in 2009, down 45.1% from 2008, with a 31.9% decrease in our tons sold and an 18.8% decrease in our average selling price per ton sold. The decline in our same-store tons sold was due to the lower demand in all markets that we sell to, mainly because of the global economic recession that significantly impacted our business activity beginning in the 2008 fourth quarter. According to the Metals Service Center Institute, tons sold in 2009 were down approximately 37% for the metals service center industry in North America compared to 2008.

The decline in the same-store average selling price per ton sold of 18.8% was lower than the 27.5% for the entire company mainly due to a change in our product mix towards a higher proportion of carbon steel products resulting from the acquisition of PNA. Since carbon steel products typically have lower selling prices than other products that we sell and were most impacted during 2009, they contributed to the relatively higher reduction in our consolidated average selling price per ton sold.

Cost of Sales. Our total cost of sales decreased 40.2% in 2009 to $3.92 billion compared to $6.56 billion in 2008. The decrease in cost of sales in 2009 compared to 2008 is due to decreases in tons sold resulting from the global economic recession along with decreases in mill prices, which impact our costs, that began in the 2008 fourth quarter and continued to decline through the first half of 2009. Our cost per ton sold decreased 29.7%, relatively consistent with the decrease in our average selling price per ton sold of 27.5%.

Also, our LIFO reserve adjustment resulted in a credit, or income of $305.0 million in 2009 compared to a charge, or expense of $109.2 million in 2008. The LIFO credit or income that we recorded in 2009 was the result of significant decreases in our inventory costs at year-end 2009 as compared to year-end 2008 levels, especially for carbon steel products. Our LIFO reserve as of December 31, 2009 and 2008 was $82.8 million and $387.8 million, respectively.

Gross Profit. Total gross profit decreased 35.3% to $1.40 billion for 2009, compared to $2.16 billion in 2008. Our gross profit as a percentage of sales in 2009 was 26.3% compared to 24.8% in 2008.

During the first half of 2009, we were selling higher cost inventory into a declining price market that significantly reduced our gross profit margins. Beginning in the 2009 third quarter, mill prices began to increase and we began purchasing more metal from mills as our inventory levels better matched our shipment levels. This better aligned our inventory costs with current replacement costs resulting in improved gross profit margins. Our LIFO reserve adjustment was income, or a credit, to cost of sales in 2009, compared to expense, or a charge, in 2008, which also impacted our gross profit margins. See “Cost of Sales” above for discussion of our LIFO reserve adjustments.

Expenses. S,G&A expenses for 2009 decreased $181.0 million, or 14.9%, from 2008 and were 19.4% as a percentage of sales, up from 13.9% in 2008. On a same-store basis, our 2009 expenses decreased $247.8 million, or 22.2% from 2008 primarily due to lower compensation expense levels. Our 2009 expenses as a percent of sales increased substantially because of our lower sales compared to 2008.

In 2009, we reduced our workforce by approximately 1,700 employees, or 16%, with most reductions occurring in the first half of the year. From September 30, 2008 through December 31, 2009 we reduced our workforce by approximately 2,500 employees, or 22%. In addition to the headcount reductions, we had many employees working reduced hours resulting in additional savings. Furthermore, throughout our workforce, employees have a significant portion of compensation tied to profitability. Because of the lower profitability levels in 2009, our compensation expense declined. Additionally, our 2009 expenses include $18.8 million related to potentially uncollectible accounts receivable, an increase of $12.7 million from 2008. In 2009, we wrote-off $19.6 million of customer receivables as uncollectible, an increase of $11.6 million compared to 2008. Our allowance for uncollectible accounts at December 31, 2009 was $21.3 million.

Depreciation and amortization expense for 2009 of $118.9 million increased 21.4% from 2008. The increase was mainly due to our 2008 acquisition of PNA and due to depreciation of our 2009 capital expenditures.

Operating Income. Operating income was $250.4 million in 2009, resulting in an operating profit margin of 4.7%, compared to 2008 operating income of $853.0 million and an operating profit margin of 9.8%. The lower sales amounts in 2009 have significantly reduced our operating income.

Other Income and Expense. Interest expense was $67.5 million, a decrease of $15.1 million from $82.6 million in 2008. Although we significantly increased our borrowings for the $1.1 billion purchase of PNA in August 2008, we were able to quickly reduce our debt level because of our strong cash flows resulting from aggressively reducing our working capital levels. Other (expense) income, net was income of $12.6 million in 2009 compared to expense of $3.8 million in 2008, a net increase in income of $16.5 million. Higher interest and dividend income on company-owned life insurance policies as well as related policy redemption gains resulted in $8.8 million higher income from life-insurance policies in 2009 compared to 2008. Also, 2008 results were impacted with foreign currency transaction losses of approximately $6.0 million.

Income Tax Rate. Our 2009 effective income tax rate was 23.7% compared to 36.9% for 2008. The decrease in our effective rate was mainly due to the same type of permanent items having a much greater impact on our effective rate in 2009 as a result of lower income levels and due to the favorable resolution of certain tax matters in 2009.

Net Income. Net income attributable to Reliance in 2009 was $148.2 million compared to $482.8 million in 2008. The decrease was primarily due to the lower sales, gross profit and operating income dollars generated as a result of the global economic recession.

Liquidity and Capital Resources

Operating Activities

Net cash provided by operating activities was $214.1 million in 2010 compared to $943.0 million in 2009. During 2009 we were focused on reducing our working capital as a result of declining demand and pricing for our products, generating a significant amount of cash flow from operations. Due to improving business conditions in 2010, our working capital, primarily accounts receivable and inventories, has increased somewhat mainly due to increased demand levels and higher mill prices from 2009 year-end levels. Our focus on profitability allowed us to remain cash flow positive while we were increasing working capital.

As demand and prices for our products were gradually improving during 2010, we were aligning our working capital needs with current business levels. As a result, our receivables and FIFO inventories increased by $146.7 million and $156.6 million, respectively, from 2009 year-end levels, offset by an increase in our accounts payable balance of approximately $75.9 million.

To manage our working capital, we focus on our days sales outstanding (“DSO”) to monitor accounts receivable and on our inventory turnover rate to monitor our inventory levels, as receivables and inventory are the two most significant elements of our working capital. As of December 31, 2010, our DSO rate was approximately 41.6 days compared to 42.6 days at December 31, 2009. Although our DSO rate has improved from last year, our accounts receivable balance has increased significantly from December 31, 2009 due to higher sales levels in 2010.

Our inventory turn rate during 2010 improved significantly to about 4.8 times (or 2.5 months on hand), compared to our 2009 rate of 3.7 times (or 3.2 months on hand). Our December 31, 2010 FIFO inventory levels increased from December 31, 2009 levels because of our higher shipment levels and higher metal costs, offset by improvement in our inventory turn rate.

Investing Activities

Capital expenditures were $111.4 million in 2010 compared to $69.9 million during 2009, with the majority invested in growth initiatives to expand or relocate existing facilities, purchase properties that we previously leased on terms favorable to us and to add or upgrade equipment in addition to meeting ongoing maintenance requirements. Our 2011 capital expenditures are budgeted at approximately $200 million, which also includes several growth and maintenance activities. Cash used for our 2010 acquisitions was approximately $100.3 million, net of cash acquired and debt assumed.

We borrowed $42.4 million against the surrender value of our company-owned life insurance policies to partially finance our 2010 capital expenditures and acquisitions.

Financing Activities

Our cash flows from operations funded our net reductions of outstanding debt by approximately $18.4 million and dividends to our shareholders of $29.7 million in 2010. On February 16, 2011, our Board of Directors declared the 2011 first quarter cash dividend of $0.12 per share, a 20% increase from $0.10 per share. We have paid regular quarterly dividends to our shareholders for 51 consecutive years.

In May 2005, our Board of Directors amended and restated our stock repurchase program authorizing the repurchase of up to an additional 12,000,000 shares of our common stock, of which 7,883,033 shares remain available for repurchase as of December 31, 2010. Repurchased shares are treated as authorized but unissued shares. We did not repurchase any shares of our common stock in 2010 or 2009. We repurchased approximately 2,443,500 of our common stock in 2008, at an average cost of $46.97 per share. Since initiating our Stock Repurchase Plan in 1994, we have repurchased approximately 15,200,000 shares at an average cost of $18.41 per share. We believe such purchases, given appropriate circumstances, enhance shareholder value and reflect our confidence in the long-term growth potential of our company.

Liquidity

Our primary sources of liquidity are generally our internally generated funds from operations and our $1.1 billion revolving credit facility. Cash flow provided by operations was $214.1 million in 2010 compared to a record $943.0 million in 2009.

Our outstanding debt at December 31, 2010 was $941.3 million, up slightly from $935.8 million at December 31, 2009. We increased our borrowings by approximately $122.9 million to complete our 2010 acquisitions, but were able to keep our outstanding borrowings relatively unchanged from 2009 as a result of our positive operating cash flows in 2010.

On September 28, 2009, we amended our $1.1 billion revolving credit facility to adjust certain financial covenants and placed restrictions on certain uses of cash including cash used for acquisitions, dividends, investments and stock repurchases. Our interest coverage ratio requirement was reduced to a minimum 2.0 times from 3.0 times and our leverage ratio requirement was reduced to a maximum of 50% from a maximum of 60% until June 30, 2010, at which time these ratios adjusted back to the pre-amendment levels. With the amendment, our pricing was adjusted to market rates. Additionally, with the amendment of our credit facility, we extended the maturity date by one year from November 2011 to November 2012 for $1.02 billion of commitments. As of December 31, 2010, we had $195.0 million in outstanding borrowings on our $1.1 billion revolving credit facility.

Our net debt-to-total capital ratio was 23.5% as of December 31, 2010, down from our 2009 year-end rate of 25.6% (net debt-to-total capital is calculated as total debt, net of cash, divided by Reliance shareholders’ equity plus total debt, net of cash).

On November 20, 2006 we entered into an indenture (the “Indenture”), for the issuance of $600 million of unsecured debt securities, which are guaranteed by all of our direct and indirect, wholly-owned domestic subsidiaries and any entities that become such subsidiaries during the term of the Indenture (collectively, the “Subsidiary Guarantors”). None of our foreign subsidiaries or our non-wholly-owned domestic subsidiaries is a guarantor. 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 and rank equally with all of our other existing and future unsecured and unsubordinated debt obligations. 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.

At December 31, 2010, we also had $135.0 million of outstanding senior unsecured notes issued in private placements of debt. The outstanding private placement notes bear interest at an average fixed rate of 5.1% and have an average remaining life of 1.6 years, maturing from 2011 to 2013. In October 2010, $78.0 million of private placement notes matured and were paid off.

We also had a separate revolving credit facility for operations in Canada with a credit limit of CAD$5 million with no outstanding borrowings as of December 31, 2010. We subsequently terminated this credit facility in January 2011. Various other separate revolving credit facilities are in place for our operations in Asia and for our operations in the United Kingdom with total combined outstanding balances of $11.8 million and $8.1 million as of December 31, 2010 and December 31, 2009, respectively.

Our $1.1 billion syndicated revolving credit facility and senior notes collectively require that we maintain a minimum net worth and interest coverage ratio, and a maximum leverage ratio and include change of control provisions, among other things. The interest coverage ratio for the twelve-month period ended December 31, 2010 was approximately 5.8 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 leverage ratio as of December 31, 2010 calculated in accordance with the terms of the credit agreement was 25.9% compared to the debt 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 December 31, 2010 was $999.2 million compared to the Reliance shareholders’ equity balance of $2.82 billion.

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 92% of our total 2010 consolidated EBITDA and approximately 92% of total consolidated tangible assets as of December 31, 2010. We were in compliance with all other debt covenants at December 31, 2010.

We have $86.7 million of debt obligations coming due before our credit facility expires in November 2012. We are comfortable that we will have adequate cash flow and capacity on our revolving credit facility to fund our debt obligations as well as our working capital, capital expenditures, growth and other needs. We expect to continue our acquisition and other

growth activities in the future and anticipate that we will be able to fund such activities with borrowings under our revolving credit facility.

Off-Balance-Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of December 31, 2010 and 2009, we were contingently liable under standby letters of credit in the aggregate amount of $42.6 million and $50.5 million, respectively. The letters of credit related to insurance policies, construction projects, and outstanding bonds.

Contractual Obligations and Other Commitments

The following table summarizes our contractual cash obligations as of December 31, 2010. Certain of these contractual obligations are reflected on our balance sheet, while others are disclosed as future obligations under U.S. generally accepted accounting principles.


			Payments Due by Period (in thousands)
Contractual Obligations
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations	$	943,100	$	86,232	$	256,568	$	300	$	600,000
Estimated Interest on Long-Term Debt⁽¹⁾		603,962		53,208		91,777		77,652		381,325
Capital Lease Obligations		3,641		870		1,674		1,071		26
Operating Lease Obligations		283,058		57,492		84,679		50,645		90,242
Purchase Obligations — Other ⁽²⁾		397,730		84,975		118,117		129,548		65,090
Other Long-Term Liabilities Reflected on the Balance Sheet under GAAP ⁽³⁾		70,707		9,752		11,430		11,310		38,215

Total	$	2,302,198	$	292,529	$	564,245	$	270,526	$	1,174,898

⁽¹⁾	Interest is estimated using applicable rates as of December 31, 2010 for our outstanding fixed and variable rate debt based on their respective scheduled maturities.

⁽²⁾	The majority of our inventory purchases are completed within 30 to 120 days and therefore are not included in this table except for certain purchases where we have significant lead times or corresponding long-term sales commitments, typically for aerospace-related materials.

⁽³⁾	Includes the estimated benefit payments or contribution amounts for the Company’s defined benefit plans for the next ten years.

Contractual obligations for purchases of goods or services are defined as agreements that are enforceable and legally binding on our Company and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time periods. In addition, some of our purchase orders represent authorizations to purchase rather than binding agreements. We do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months. Therefore, agreements for the purchase of goods and services are not included in the table above except for certain purchases where we have significant lead times or corresponding long-term sales commitments, typically for aerospace-related materials.

The expected timing of payments of the obligations above is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, pricing in effect at that time for inventory purchase commitments, or due to changes to agreed-upon amounts for some obligations.

Inflation

Our operations have not been, and we do not expect them to be, materially affected by general inflation. Historically, we have been successful in adjusting prices to our customers to reflect changes in metal prices.

Seasonality

Some of our customers are in seasonal businesses, especially customers in the construction industry and related businesses. As a result of our geographic, product and customer diversity, however, our operations have not shown any material seasonal trends. Revenues in the months of July, November and December traditionally have been lower than in other months because of a reduced number of working days for shipments of our products, resulting from vacation and holiday closures at some of our customers. We cannot assure you that period-to-period fluctuations will not occur in the future. Furthermore, the impact of the recent economic recession was so significant on our business during 2009 that our period-to-period fluctuations experienced throughout that year were not representative of typical seasonal trends experienced in the past. Results of any one or more quarters are therefore not necessarily indicative of annual results.

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $1.11 billion as of December 31, 2010, or approximately 24% of total assets or 39% of Reliance shareholders’ equity. Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. Other intangible assets with finite useful lives continue to be amortized over their useful lives. We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

We review the recoverability of goodwill annually or whenever significant events or changes occur, which might impair the recovery of recorded costs, making certain assumptions regarding future operating performance. We test for impairment of goodwill by calculating the fair value of a reporting unit using the discounted cash flow method. Under this method, the fair value of each reporting unit is estimated based on expected future economic benefits discounted to a present value at a rate of return commensurate with the risk associated with the investment. Projected cash flows are discounted to present value using an estimated weighted average cost of capital, which considers both returns to equity and debt investors. We perform the required annual goodwill impairment evaluation as of November 1 of each year. No impairment of goodwill was determined to exist for the years ended December 31, 2010, 2009 or 2008.

Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and the current changing market conditions may impact our assumptions as to commodity prices, demand and future growth rates or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. Additionally, considerable declines in the market conditions for our products from current levels as well as in the price of our common stock could also significantly impact our impairment analysis. An impairment charge, if incurred, could be material.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical accounting estimates include those related to accounts receivable, inventories, income taxes, goodwill and intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates, as discussed with our Audit Committee, affect our more significant judgments and estimates used in preparing our consolidated financial statements. (See Note 1 of the Notes to Consolidated Financial Statements for our Summary of Significant Accounting Policies.) There have been no material changes made to the critical accounting estimates during the periods presented in the Consolidated Financial Statements. We also have other policies

that we consider key accounting policies, such as for revenue recognition, however these policies do not require us to make subjective estimates or judgments.

Accounts Receivable

We maintain an allowance for doubtful accounts to reflect our estimate of the uncollectability of accounts receivable based on an evaluation of specific potential customer risks. Assessments are based on legal issues (such as bankruptcy status), our past collection history, and current financial and credit agency reports along with current economic pressures impacting that customer or industry. Accounts that we determine to be uncollectible are reserved for or written off in the period in which the determination is made. Additional reserves are maintained based on our historical and probable future bad debt experience. If the financial condition of our customers were to deteriorate beyond our estimates, resulting in an impairment of their ability to make payments, we might be required to increase our allowance for doubtful accounts.

Inventories

A significant portion of our inventory is valued using the last-in, first-out (“LIFO”) method. Under this method, older costs are included in inventory, which may be higher or lower than current costs. This method of valuation is subject to year-to-year fluctuations in our cost of material sold, which is influenced by the inflation or deflation existing within the metals industry as well as fluctuations in our product mix and on-hand inventory levels. At December 31, 2010, cost on the first-in, first-out (“FIFO”) method exceeded our LIFO value of inventories by $117.6 million. The calculation of LIFO does not require us to make subjective estimates or judgments, except at interim reporting periods. Furthermore, considering that our current inventory values as reflected in our financial statements on a LIFO basis are significantly below FIFO costs, valuation of our inventories at the lower of cost or market is also not subject to significant estimates or judgments.

However, we do maintain allowances for estimated obsolescence or unmarketable inventory to reflect the difference between the cost of inventory and the estimated market value based on an evaluation of slow moving products and current replacement costs. If actual market conditions are less favorable than those anticipated by management, additional allowances may be required.

Income Taxes

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change.

For information regarding our deferred tax assets and liabilities, provision for income taxes as well as information regarding differences between our effective tax rate and statutory rates, see Note 9 of the Notes to Consolidated Financial Statements. Our tax rate may be affected by future acquisitions, changes in the geographic composition of our income from operations, changes in our estimates of credits or deductions, changes in our assessment of tax exposure items, and the resolution of issues arising from tax audits with various tax authorities.

Goodwill and Intangible Assets

In assessing the recoverability of our goodwill and other intangibles we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. We perform an annual review in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill is impaired. Our impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. We estimate the reporting unit’s fair value based on a discounted future cash flow approach that requires us to estimate income from operations based on historical results and discount rates based on a weighted average cost of capital of comparable companies. If these estimates or their related assumptions for commodity prices and demand change in the future, we may be required to record impairment charges for these assets not previously recorded.

We reconcile the aggregate fair value of our reporting units to our market capitalization. The reconciliation includes such factors as historical and industry multiples, industry performance statistics, and recent comparable transaction pricing among other information.

Long-Lived Assets

We review the recoverability of our long-lived assets and must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded.

Impact of Recently Issued Accounting Standards

Please refer to Note 1 of the Notes to Consolidated Financial Statements for discussion of the impact of recently issued accounting standards.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In the ordinary course of business, we are exposed to various market risk factors, including changes in general economic conditions, domestic and foreign competition, foreign currency exchange rates, and metals pricing and availability.

Commodity price risk

Metal prices are volatile due to, among other things, fluctuations in foreign and domestic production capacity, raw material availability, metals consumption and foreign currency rates. Decreases in metal prices could adversely affect our revenues, gross profit and net income. Because we primarily purchase and sell in the “spot” market we are able to react quickly to changes in metals pricing. This strategy also limits our exposure to commodity prices to our inventories on hand. In an environment of increasing material costs our pricing usually increases as we try to maintain the same gross profit percentage and typically generate higher levels of gross profit and pre-tax income dollars for the same operational efforts. Conversely, if pricing declines, we will typically generate lower levels of gross profit and pre-tax income dollars. In periods where demand deteriorates rapidly and metal prices are declining significantly in a compressed period of time, such as during the last three months of 2008 and first half of 2009, a portion of our inventory on hand may be at higher costs than our selling prices, causing a significant adverse effect on our gross profit and pre-tax income margins. However, when prices stabilize and our inventories on hand reflect more current prices, our gross profit margins tend to return to more normalized levels.

Foreign exchange rate risk

Because we have foreign operations, we are exposed to foreign currency exchange gains and losses. Since the functional currency of our foreign operations is predominantly in their local currency, the currency effects of translating the financial statements of those foreign subsidiaries, which operate in local currency environments, are included in the “Accumulated Other Comprehensive Income (Loss)” component of consolidated equity and do not impact earnings. However, foreign currency transaction gains and losses do impact earnings and resulted in approximately $0.2 million of gains in 2010 and 2009, and a net loss of approximately $6.0 million for the year ended December 31, 2008. During 2008 our primary exposure to foreign currency rates related to our Canadian operations that had certain outstanding intercompany borrowings denominated in the U.S. dollar that were not hedged. This exposure was significantly reduced at the end of 2008 as the related balances were paid off.

Interest rate risk

We are exposed to market risk related to our fixed-rate and variable-rate long-term debt. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Changes in interest rates may affect the market value of our fixed-rate debt. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes and we do not currently anticipate repayment of our fixed-rate long-term debt prior to scheduled maturities.

Market risk related to our variable-rate debt is estimated as the potential decrease in pre-tax earnings resulting from an increase in interest rates. As of December 31, 2010, our total variable interest rate debt outstanding amounted to approximately $208.0 million, which was primarily comprised of the borrowings on our revolving credit facility of $195.0 million. A hypothetical 1% increase in interest rates on $208.0 million of debt would result in approximately $2.1 million of additional interest expense on an annual basis.

Item 8. Financial Statements and Supplementary Data.

RELIANCE STEEL & ALUMINUM CO.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


	Page
Report of Independent Registered Public Accounting Firm		40
Consolidated Balance Sheets at December 31, 2010 and 2009		41
Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008		42
Consolidated Statements of Equity for the Years Ended December 31, 2010, 2009 and 2008		43
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008		44
Notes to Consolidated Financial Statements		45
Quarterly Results of Operations (Unaudited)		79

FINANCIAL STATEMENT SCHEDULE:
Schedule II — Valuation and Qualifying Accounts		80

All other schedules are omitted because either they are not applicable, not required or the information required is included in the Consolidated Financial Statements, including the notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Reliance Steel & Aluminum Co.:

We have audited the accompanying consolidated balance sheets of Reliance Steel & Aluminum Co. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, equity, and cash flows for each of the years in the three-year period ended December 31, 2010. In connection with our audits of the consolidated financial statements, we also have audited the information in the related financial statement schedule. These consolidated financial statements and the financial statement schedule are the responsibility of Reliance Steel & Aluminum Co.’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Reliance Steel & Aluminum Co. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Reliance Steel & Aluminum Co.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2011 expressed an unqualified opinion on the effectiveness of Reliance Steel & Aluminum Co.’s internal control over financial reporting.

/s/ KPMG LLP

Los Angeles, California

February 25, 2011

RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	December 31, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	72,915		$	43,002
Accounts receivable, less allowance for doubtful accounts of $17,221 at December 31, 2010 and $21,269 at December 31, 2009		697,033			533,871
Inventories		860,215			719,915
Prepaid expenses and other current assets		42,442			37,855
Income taxes receivable		28,292			54,020
Deferred income taxes		—			2,241

Total current assets		1,700,897			1,390,904
Property, plant and equipment:
Land		137,140			131,009
Buildings		594,329			543,590
Machinery and equipment		898,077			829,154
Accumulated depreciation		(604,241	)		(522,494	)

		1,025,305			981,259
Goodwill		1,109,600			1,081,324
Intangible assets, net		755,768			726,255
Cash surrender value of life insurance policies, net		42,011			92,860
Investments in unconsolidated entities		18,274			20,880
Other assets		17,038			13,295

Total assets	$	4,668,893		$	4,306,777

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	244,988		$	169,113
Accrued expenses		45,774			55,927
Accrued compensation and retirement costs		85,065			67,012
Accrued insurance costs		36,972			39,134
Current maturities of long-term debt and short-term borrowings		86,232			86,383
Deferred income taxes		9,564			—

Total current liabilities		508,595			417,569
Long-term debt		855,085			849,375
Long-term retirement costs		74,749			69,277
Other long-term liabilities		27,787			26,537
Deferred income taxes		372,563			335,897
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 — 100,000,000 Issued and outstanding shares — 74,639,223 at December 31, 2010 and 73,750,771 at December 31, 2009, stated capital		624,732			587,612
Retained earnings		2,188,725			2,020,343
Accumulated other comprehensive income (loss)		10,275			(1,523	)

Total Reliance shareholders’ equity		2,823,732			2,606,432
Noncontrolling interests		6,382			1,690

Total equity		2,830,114			2,608,122

Total liabilities and equity	$	4,668,893		$	4,306,777

See accompanying notes to consolidated financial statements.

RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts)


	Year Ended December 31,
	2010			2009			2008
Net sales	$	6,312,795		$	5,318,132		$	8,718,844
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		4,727,887			3,918,611			6,556,748
Warehouse, delivery, selling, general and administrative		1,103,584			1,030,245			1,211,201
Depreciation and amortization		120,603			118,884			97,924

		5,952,074			5,067,740			7,865,873
Operating income		360,721			250,392			852,971
Other income (expense):
Interest		(61,175	)		(67,523	)		(82,575	)
Other (expense) income, net		(3,118	)		12,624			(3,840	)

Income before income taxes		296,428			195,493			766,556
Income tax provision		98,579			46,317			282,921

Net income		197,849			149,176			483,635
Less: Net income attributable to noncontrolling interests		3,496			1,018			858

Net income attributable to Reliance	$	194,353		$	148,158		$	482,777

Earnings per share:
Diluted earnings per common share attributable to Reliance shareholders	$	2.61		$	2.01		$	6.56

Weighted average shares outstanding — diluted		74,472,380			73,701,979			73,597,717

Basic earnings per common share attributable to Reliance shareholders	$	2.62		$	2.02		$	6.60

Weighted average shares outstanding — basic		74,230,452			73,445,583			73,102,215

Cash dividends per share	$	0.40		$	0.40		$	0.40

See accompanying notes to consolidated financial statements.

RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share and per share amounts)


	Reliance Shareholders
	Common Stock						Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total
	Shares			Amount			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interests			Total
Balance at January 1, 2008		74,906,824		$	646,406		$	1,439,598		$	20,245		$	1,699		$	2,107,948
Net income		—			—			482,777			—			858			483,635
Other comprehensive loss:
Foreign currency translation loss		—			—			—			(42,624	)		—			(42,624	)
Unrealized loss on investments, net of tax		—			—			—			(1,163	)		—			(1,163	)
Minimum pension liability, net of tax		—			—			—			(8,474	)		—			(8,474	)

Comprehensive income																	431,374
Noncontrolling interests acquired		—			—			—			—			2,300			2,300
Payment to noncontrolling interest holder		—			—			—			—			(1,225	)		(1,225	)
Share based compensation		—			13,189			—			—			—			13,189
Stock options exercised		844,338			17,987			—			—			—			17,987
Share based compensation tax benefits		—			—			9,693			—			—			9,693
Stock repurchased		(2,443,500	)		(114,774	)		—			—			—			(114,774	)
Adjustment to initially apply EITF 06-10		—			—			(2,479	)		—			—			(2,479	)
Stock issued under incentive bonus plan		5,052			284			—			—			—			284
Cash dividends — $0.40 per share		—			—			(29,229	)		—			—			(29,229	)

Balance at December 31, 2008		73,312,714			563,092			1,900,360			(32,016	)		3,632			2,435,068
Net income		—			—			148,158			—			1,018			149,176
Other comprehensive income:
Foreign currency translation gain		—			—			—			25,870			—			25,870
Unrealized gain on investments, net of tax		—			—			—			524			—			524
Minimum pension liability, net of tax		—			—			—			4,099			—			4,099

Comprehensive income																	179,669
Noncontrolling interests purchased		—			(1,758	)		—			—			(903	)		(2,661	)
Payments to noncontrolling interest holder		—			—			—			—			(2,057	)		(2,057	)
Share based compensation		—			15,530			—			—			—			15,530
Stock options exercised		427,697			10,490			—			—			—			10,490
Share based compensation tax benefits		—			—			1,208			—			—			1,208
Stock issued under incentive bonus plan		10,360			258			—			—			—			258
Cash dividends — $0.40 per share		—			—			(29,383	)		—			—			(29,383	)

Balance at December 31, 2009		73,750,771			587,612			2,020,343			(1,523	)		1,690			2,608,122
Net income		—			—			194,353			—			3,496			197,849
Other comprehensive income:
Foreign currency translation gain		—			—			—			9,657			—			9,657
Unrealized gain on investments, net of tax		—			—			—			220			—			220
Minimum pension liability, net of tax		—			—			—			1,921			—			1,921

Comprehensive income																	209,647
Issuance of equity interest in subsidiary to noncontrolling interest		—			(1,462	)		—			—			1,604			142
Consolidation of a joint venture entity		—			—			—			—			1,370			1,370
Payments to noncontrolling interest holders		—			—			—			—			(1,778	)		(1,778	)
Share based compensation		61,000			17,334			—			—			—			17,334
Stock options exercised		827,452			21,248			—			—			—			21,248
Share based compensation tax benefits		—			—			3,721			—			—			3,721
Cash dividends — $0.40 per share		—			—			(29,692	)		—			—			(29,692	)

Balance at December 31, 2010		74,639,223		$	624,732		$	2,188,725		$	10,275		$	6,382		$	2,830,114

See accompanying notes to consolidated financial statements.

RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Year Ended December 31,
	2010			2009			2008
Operating activities:
Net income	$	197,849		$	149,176		$	483,635
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		120,603			118,884			97,924
Deferred income tax expense		42,724			58,016			22,720
Loss on sales of property, plant and equipment		1,148			138			2,658
Equity in earnings of unconsolidated entities		(724	)		(1,395	)		(565	)
Dividends received from unconsolidated entities		320			1,120			—
Share based compensation expense		17,334			15,530			13,189
Excess tax benefit from share based compensation		(4,039	)		(1,533	)		(9,693	)
Net loss (gain) from life insurance policies		4,217			(10,482	)		4,373
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable		(146,743	)		322,163			166,025
Inventories		(121,857	)		569,943			191,472
Prepaid expenses and other assets		23,867			(56,439	)		(9,121	)
Accounts payable and other liabilities		79,388			(222,125	)		(297,933	)

Net cash provided by operating activities		214,087			942,996			664,684

Investing activities:
Purchases of property, plant and equipment		(111,356	)		(69,901	)		(151,890	)
Acquisitions of metals service centers, net of cash acquired and debt assumed		(100,325	)		—			(330,249	)
Proceeds from sales of property, plant and equipment		3,160			1,284			19,116
Tax distributions made related to prior acquisitions		—			—			(1,155	)
Net borrowings from (investment in) life insurance policies		42,406			(31,544	)		4,890
Net proceeds from redemption of life insurance policies		4,332			6,576			1,634

Net cash used in investing activities		(161,783	)		(93,585	)		(457,654	)

Financing activities:
Net short-term debt borrowings (repayments)		3,157			133			(5,962	)
Proceeds from long-term debt borrowings		539,000			352,000			1,684,000
Principal payments on long-term debt		(560,580	)		(1,183,301	)		(1,788,949	)
Debt issuance costs		—			(6,841	)		(3,313	)
Payments to noncontrolling interest holders		(1,778	)		(2,057	)		(1,225	)
Capital contributions from noncontrolling interests		142			—			—
Dividends paid		(29,692	)		(29,383	)		(29,229	)
Excess tax benefit from share based compensation		4,039			1,533			9,693
Exercise of stock options		21,248			10,490			17,987
Issuance of common stock		—			258			284
Noncontrolling interests purchased		—			(2,661	)		—
Common stock repurchases		—			—			(114,774	)

Net cash used in financing activities		(24,464	)		(859,829	)		(231,488	)
Effect of exchange rate changes on cash		2,073			1,425			(570	)

Increase (decrease) in cash and cash equivalents		29,913			(8,993	)		(25,028	)
Cash and cash equivalents at beginning of year		43,002			51,995			77,023

Cash and cash equivalents at end of year	$	72,915		$	43,002		$	51,995

Supplemental cash flow information:
Interest paid during the year	$	62,176		$	76,050		$	74,654
Income taxes paid during the year	$	68,908		$	49,099		$	267,224

Non-cash investing and financing activities:
Debt assumed in connection with acquisitions of metals service centers	$	22,597		$	—		$	780,043

See accompanying notes to consolidated financial statements.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2010

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Reliance Steel & Aluminum Co. and its subsidiaries (collectively referred to as “Reliance”, “the Company”, “we”, “our” or “us”). 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.

Business

In 2010, the Company operated a metals service center network of more than 200 locations in 38 states, Belgium, Canada, China, Malaysia, Mexico, Singapore, South Korea and the United Kingdom that provided value-added metals processing services and distributed a full line of more than 100,000 metal products. Since its inception in 1939, the Company has not diversified outside its core business as a metals service center operator.

Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, such as accounts receivable collectability, valuation of inventories, goodwill, long-lived assets, income tax and other contingencies, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable and Concentrations of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due to the geographically diverse customer base and various industries into which the Company’s products are sold. Trade receivables are typically non-interest bearing and are initially recorded at cost. Sales to the Company’s recurring customers are generally made on open account terms while sales to occasional customers may be made on a C.O.D. basis when collectability is not assured. Past due status of customer accounts is determined based on how recently payments have been received in relation to payment terms granted. Credit is generally extended based upon an evaluation of each customer’s financial condition, with terms consistent in the industry and no collateral required. Losses from credit sales are provided for in the financial statements and consistently have been within the allowance provided. The allowance is an estimate of the uncollectability of accounts receivable based on an evaluation of specific customer risks along with additional reserves based on historical and probable bad debt experience. Amounts are written off against the allowance in the period the Company determines that the receivable is uncollectible. As a result of the above factors, the Company does not consider itself to have any significant concentrations of credit risk.

Inventories

A significant portion of our inventory is valued using the last-in, first-out (“LIFO”) method, which is not in excess of market. Under this method, older costs are included in inventory, which may be higher or lower than current costs. This method of valuation is subject to year-to-year fluctuations in cost of material sold, which is influenced by the inflation or deflation existing within the metals industry as well as fluctuations in our product mix and on-hand inventory levels.

Fair Values of Financial Instruments

Fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities, and the current portion of long-term debt approximate carrying values due to the short period of time to maturity. Fair values of long-term debt, which have been determined based on borrowing rates currently available to the Company, or to other companies with comparable credit ratings, for loans with similar terms or maturity, approximate the carrying amounts in the consolidated financial statements with the exception of our $600 million senior unsecured notes issued in November 2006. In

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

April 2007, these notes were exchanged for publicly traded notes registered with the Securities and Exchange Commission (“SEC”). The fair values of these senior unsecured notes based on quoted market prices as of December 31, 2010 and 2009 were approximately $612.1 million and $581.6 million, respectively, compared to their carrying values of approximately $598.2 million and $598.1 million, as of the end of each period, respectively.

Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash and cash equivalents with high-credit, quality financial institutions. The Company, by policy, limits the amount of credit exposure to any one financial institution. At times, cash balances held at financial institutions were in excess of federally-insured limits.

Goodwill

Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is tested for impairment at least annually.

For purposes of performing annual goodwill impairment tests, the Company identified reporting units in accordance with the guidance provided within the Segment Reporting topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). The Company tests for impairment of goodwill by calculating the fair value of a reporting unit using the discounted cash flow method. Under this method, the fair value of each reporting unit is estimated based on expected future economic benefits discounted to a present value at a rate of return commensurate with the risk associated with the investment. Projected cash flows are discounted to present value using an estimated weighted average cost of capital, which considers returns to both equity and debt investors. The Company performs the required annual goodwill impairment evaluation on November 1 of each year. No impairment of goodwill was determined to exist for the years ended December 31, 2010, 2009, or 2008.

Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and the current changing market conditions may impact the Company’s assumptions as to commodity prices, demand and future growth rates or other factors that may result in changes in estimates of future cash flows. Although the Company believes the assumptions used in testing for impairment are reasonable, significant changes in any one of the Company’s assumptions could produce a significantly different result. Additionally, significant declines in the market conditions for the Company’s products as well as in the price of its common stock could also significantly impact the impairment analysis. An impairment charge, if incurred, could be material.

Long-Lived Assets

Property, plant and equipment is recorded at cost (or at fair value for assets acquired in connection with business combinations) and the provision for depreciation of these assets is generally computed on the straight-line method at rates designed to distribute the cost of assets over the useful lives, estimated as follows:


Buildings			31¹/2 years
Machinery and equipment			3 -20 years

Other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. No impairment of intangible assets with indefinite lives was determined to exist for the years ended December 31, 2010, 2009, or 2008.

Other intangible assets with finite useful lives continue to be amortized over their useful lives. The Company reviews the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about future operating performance, and may differ from actual cash flows. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. Long-lived asset related impairment losses recognized during the years ended December 31, 2010, 2009 and 2008 were not significant.

Revenue Recognition

The Company recognizes revenue from product or processing sales upon concluding that all of the fundamental criteria for product revenue recognition have been met, such as a fixed and determinable sales price; reasonable assurance of collectability; and passage of title and risks of ownership to the buyer. Such criteria are usually met upon delivery to the customer for orders with FOB destination terms or upon shipment for orders with FOB shipping point terms, or at the time toll processing services are performed. Considering the close proximity of our customers to our metals service center locations, shipment and delivery of our orders generally occur on the same day. Billings for orders where the revenue recognition criteria are not met, which primarily include certain bill and hold transactions (in which our customers request to be billed for the material but request delivery at a later date), are recorded as deferred revenue.

Shipping and handling charges are included as revenue in Net sales. Costs incurred in connection with shipping and handling the Company’s products, which are related to third-party carriers are not material and are typically included in Cost of sales. Costs incurred in connection with shipping and handling the Company’s products that are performed by Company personnel are typically included in operating expenses. For the years ended December 31, 2010, 2009 and 2008, shipping and handling costs included in Warehouse, delivery, selling, general and administrative expenses were approximately $190.1 million, $179.8 million, and $217.8 million, respectively.

Segment Information

Our operating segments have been aggregated into one reportable segment, metals service centers, based on the similar economic characteristics criteria as our operating segments have a similar long-term business model, operate at similar gross profit margins, have similar expense structures, and have similar working capital needs. All of our recent acquisitions were metals service centers and did not result in new reportable segments. Although a variety of products or services are sold at each of our various locations, in total, sales were comprised of the following in each of the three years ended December 31:


	2010			2009			2008
Carbon steel		52	%		56	%		55	%
Aluminum		18			18			16
Stainless steel		16			13			14
Alloy steel		8			7			8
Toll processing		2			2			2
Other		4			4			5

Total		100	%		100	%		100	%

The following table summarizes consolidated financial information of the Company’s operations by geographic location based on where sales originated from:


	United States		Foreign Countries		Total
	(in thousands)
Year Ended December 31, 2010
Net sales	$	6,023,609	$	289,186	$	6,312,795
Long-lived assets		2,807,774		160,222		2,967,996
Year Ended December 31, 2009
Net sales		5,122,214		195,918		5,318,132
Long-lived assets		2,762,560		153,313		2,915,873
Year Ended December 31, 2008
Net sales		8,341,394		377,450		8,718,844
Long-lived assets		2,743,284		149,829		2,893,113

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Share-Based Compensation

All of the Company’s share-based compensation plans are considered equity plans under U.S. GAAP. The Company calculates the fair value of stock option awards on the date of grant based on the closing market price of the Company’s common stock, using a Black-Scholes option-pricing model. The fair value of restricted stock grants is determined based on the fair value of the Company’s common stock on the date of the grant. The fair value of stock option and restricted stock awards is expensed on a straight-line basis over their respective vesting periods, net of estimated forfeitures. The share-based compensation expense recorded was $17.3 million, $15.5 million, and $13.2 million for the years ended December 31, 2010, 2009 and 2008, respectively, and is included in the Warehouse, delivery, selling, general and administrative expense caption of the Company’s consolidated statements of income.

Environmental Remediation Costs

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remediation feasibility study. Such accruals are adjusted as further information develops or circumstances change. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. The Company’s management is not aware of any environmental remediation obligations that would materially affect the operations, financial position or cash flows of the Company. See Note 14 for further discussion on the Company’s environmental remediation matters.

Income Taxes

The Company files a consolidated U.S. federal income tax return with its wholly-owned subsidiaries. The deferred tax assets and/or liabilities are determined by multiplying the differences between the financial reporting and tax reporting bases for assets and liabilities by the enacted tax rates expected to be in effect when such differences are recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date of the change. The provision for income taxes reflects the taxes to be paid for the period and the change during the period in the deferred tax assets and liabilities. The Company evaluates on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.

The Company regularly makes a comprehensive review of its uncertain tax positions. Tax benefits are recognized when it is more-likely-than-not that a tax position will be sustained upon examination by the authorities. The benefit from a position that has surpassed the more-likely-than-not threshold is the largest amount of benefit that is more than 50% likely to be realized upon settlement. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense.

Foreign Currencies

The currency effects of translating the financial statements of those foreign subsidiaries of the Company, which operate in local currency environments, are included in the “Accumulated Other Comprehensive Income (Loss)” component of Reliance shareholders’ equity. Gains and losses resulting from foreign currency transactions are included in the results of operations in the Other (expense) income, net caption and amounted to a net gain of approximately $0.2 million for the years ended December 31, 2010 and 2009 and a net loss of approximately $6.0 million for the year ended December 31, 2008.

Impact of Recently Issued Accounting Standards — Previously Adopted

Fair Value Measurements and Disclosures — In January 2010, the FASB issued new accounting guidance providing clarification on existing requirements and requiring additional disclosures on transfers in and out of Levels 1 and 2 fair value measurement classifications. The clarification of existing requirements and new disclosures were effective for interim and annual reporting periods beginning after December 15, 2009. On January 1, 2010, the Company adopted the new accounting guidance. The adoption of all these changes did not have a material effect on the Company’s consolidated financial statements.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Consolidation of Variable Interest Entities — In June 2009, the FASB issued literature intended to replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. The revised approach is intended to be more effective for identifying which reporting entity has a controlling financial interest in a variable interest entity. The literature also requires additional disclosures about a reporting entity’s involvement in variable interest entities, which enhances the information provided to users of financial statements. On January 1, 2010, the Company adopted the new accounting guidance. As a result of the adoption, the Company consolidated the assets, liabilities, and results of operations of a joint venture entity, which was previously recorded under the equity method of accounting. The joint venture is not material to the Company’s consolidated financial statements.

Postretirement Benefit Plan Disclosures — On December 31, 2009, the Company adopted changes to employers’ disclosures about postretirement benefit plan assets issued by the FASB, which requires enhanced disclosures about plan assets in an employer’s defined benefit pension or other postretirement plans. These enhanced disclosures are intended to provide users of financial statements with a greater understanding of how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and significant concentrations of risk within plan assets. The adoption of these changes did not have a material impact on the Company’s financial position, results of operations or cash flows. See Note 11 for related disclosures.

Business Combinations — On January 1, 2009, the Company adopted changes issued by the FASB for accounting for business combinations. In accordance with the new guidance, upon initially obtaining control, the acquiring entity in a business combination must recognize 100% of the fair values of the acquired assets, including goodwill, and assumed liabilities, with only limited exceptions even if the acquirer has not acquired 100% of its target. As a consequence, the step acquisition model has been eliminated. Also, contingent consideration arrangements are fair valued at the acquisition date and included on that basis in the purchase price consideration. In addition, all transaction costs are expensed as incurred. This new guidance is effective on a prospective basis, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies such that adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to the effective date of the new guidance would be recorded as adjustments to income tax expense or benefit rather than goodwill. In accordance with the provisions of the new guidance, the Company made adjustments to certain tax contingencies in 2009 due to lapses in the statute-of-limitation periods and settlements in the combined amount of approximately $9.9 million that were associated with past acquisitions. See Note 9, Income Taxes, for additional details. The Company has applied the new guidance to business combinations subsequent to adoption of the new requirements. See Note 2 for discussion of the Company’s recent acquisitions.

Consolidation Accounting — On January 1, 2009, the Company adopted changes issued by the FASB to consolidation accounting and reporting. These changes establish new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. In accordance with the new guidance, the Company classified noncontrolling interests as equity on its consolidated balance sheets as of December 31, 2010 and 2009 and presented net income attributable to noncontrolling interests separately on the consolidated statements of income for each of the three years ended December 31, 2010.

Other — On September 30, 2009, the Company adopted changes issued by the FASB to the authoritative hierarchy of U.S. Generally Accepted Accounting Principles. These changes establish the FASB Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Company’s financial statements.

On June 30, 2009, the Company adopted changes issued by the FASB for subsequent events. These changes set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occur after the balance sheet date. 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 December 2010, the FASB issued updated accounting guidance related to the calculation of the carrying amount of a reporting unit when performing the first step of a goodwill impairment test. More specifically, this update will 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 new accounting guidance is effective for impairment tests performed during fiscal years that begin after December 15, 2010 for public companies, or January 1, 2011 for the Company. Early application is not permitted. The Company does not expect the adoption of this new guidance to have a material impact on the Company’s consolidated financial statements.

Note 2. Acquisitions

2010 Acquisitions

On October 1, 2010, the Company 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. Net sales of Diamond from October 1, 2010 through December 31, 2010 were approximately $20.5 million. An operating division of Diamond was opened near Dallas, Texas in early 2011 to expand Diamond’s geographic reach.

We funded our 2010 acquisitions with borrowings of approximately $100.3 million on our $1.1 billion revolving credit facility. The allocation of the total purchase price of LSI and Diamond to the fair values of the assets acquired and liabilities assumed is as follows:


	(in thousands)
Cash	$	3,576
Accounts receivable		14,932
Inventories		17,387
Property, plant and equipment		19,953
Goodwill		26,174
Intangible assets subject to amortization		31,700
Intangible assets not subject to amortization		22,700
Other current and long-term assets		3,887

Total assets acquired		140,309

Current and long-term debt		(22,597	)
Other current and long-term liabilities		(13,811	)

Total liabilities assumed		(36,408	)

Net assets acquired	$	103,901

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

2008 Acquisitions

Acquisition of HLN Metal Centre Pte. Ltd.

In August 2008, the Company formed Reliance Metalcenter Asia Pacific Pte. Ltd. (“RMAP”), a Singapore corporation. On September 17, 2008, RMAP acquired the assets, including the inventory, machinery, and equipment, of the Singapore operation of HLN Metal Centre Pte. Ltd. RMAP focuses primarily on supplying metal to the electronics, semiconductor, and solar energy markets. The all cash purchase price was funded with borrowings on the Company’s revolving credit facility. Net sales of RMAP during the period from September 17, 2008 through December 31, 2008 were approximately $1.0 million.

Acquisition of PNA Group Holding Corporation

On August 1, 2008, the Company acquired all of the outstanding capital stock of PNA Group Holding Corporation (“PNA”), a Delaware corporation, in accordance with the Stock Purchase Agreement dated June 16, 2008. The Company paid cash consideration of approximately $321.0 million, net of purchase price adjustments, repaid or refinanced debt of PNA or its subsidiaries in the amount of approximately $725.2 million, paid related tender offer and consent solicitation premium payments of approximately $54.8 million and incurred direct acquisition costs of approximately $3.0 million for a total transaction value of approximately $1.10 billion. The Company funded the acquisition with proceeds from a $500 million senior unsecured term loan and borrowings under its existing $1.1 billion syndicated unsecured revolving credit facility.

PNA’s subsidiaries include the operating entities Delta Steel, Inc., Feralloy Corporation, Infra-Metals Co., Metals Supply Company, Ltd., Precision Flamecutting and Steel, Inc. and Sugar Steel Corporation. We currently operate PNA as six distinct businesses that process and distribute primarily carbon steel plate, bar, structural and flat-rolled products with 20 steel service centers throughout the United States, as well as four joint ventures with six additional service centers in the United States and Mexico. Net sales of PNA for the five months ended December 31, 2008 were $887.6 million.

The allocation of the total purchase price of PNA to the fair values of the assets acquired and liabilities assumed is as follows:


	(in thousands)
Cash	$	9,845
Accounts receivable		336,369
Inventories		584,307
Property, plant and equipment		113,627
Goodwill		237,855
Intangible assets subject to amortization		167,200
Intangible assets not subject to amortization		126,000
Other current and long-term assets		59,062

Total assets acquired		1,634,265

Current and long-term debt		(780,043	)
Deferred income taxes		(129,870	)
Other current and long-term liabilities		(400,372	)

Total liabilities assumed		(1,310,285	)

Net assets acquired	$	323,980

Acquisition of Dynamic Metals International LLC

Effective April 1, 2008, the Company, through its subsidiary Service Steel Aerospace Corp., acquired the business of Dynamic Metals International LLC (“Dynamic”) based in Bristol, Connecticut. Dynamic was founded in 1999 and is a specialty metal distributor. Dynamic has been merged into and currently operates as a division of Service Steel Aerospace Corp. headquartered in Tacoma, Washington. The all cash purchase price was funded with borrowings on the Company’s revolving credit facility. Dynamic’s net sales for the nine months ended December 31, 2008 were approximately $8.7 million.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Summary purchase price allocation information for all acquisitions

All of the acquisitions discussed in this note have been accounted for under the purchase method of accounting and, accordingly, each purchase price has been allocated to the assets acquired and liabilities assumed based on the 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 allocations of each acquisition’s purchase price as of December 31, 2010 or 2009, as applicable. The purchase price allocations for 2010 acquisitions are preliminary and are pending the completion of various pre- and post-acquisition period tax returns.

As part of the purchase price allocations of the 2010 and 2008 acquisitions, $22.7 million and $126.0 million, respectively, were allocated to the trade names acquired, none of which is subject to amortization. The Company determined that the trade names acquired in connection with these acquisitions had indefinite lives since their economic lives are expected to approximate the life of each company acquired. Additionally, the Company recorded other identifiable intangible assets related to customer relationships for 2010 and 2008 acquisitions of $31.5 million and $171.2 million, respectively, with weighted average lives of 12.3 and 12.4 years, respectively. The goodwill amounts from the 2010 and 2008 acquisitions are expected to be deducted for tax purposes in future years with the exception of the PNA goodwill. Total tax deductible goodwill amounted to approximately $405.2 million as of December 31, 2010.

Pro forma financial information

The following unaudited pro forma summary financial results present the consolidated results of operations as if our 2008 acquisition of PNA had occurred at the beginning of 2008, after the effect of certain adjustments, including increased depreciation expense resulting from recording fixed assets at fair value, interest expense on the acquisition debt and amortization of certain identifiable intangible assets. The pro forma summary financial results reflect PNA’s historical method for inventory valuation. All PNA companies which were on the first-in, first-out (“FIFO”) method through the acquisition date adopted the last-in, first-out (“LIFO”) method of inventory valuation upon acquisition.

The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had these acquisitions been made as of January 1, 2008 or of any potential results which may occur in the future.


	Year Ended December 31, 2008
	(in thousands, except per share amounts)
Pro forma (unaudited):
Net sales	$	10,068,081
Net income attributable to Reliance	$	561,155
Diluted earnings per common share attributable to Reliance shareholders	$	7.62
Basic earnings per common share attributable to Reliance shareholders	$	7.68

Note 3. Joint Ventures and Noncontrolling Interests

The equity method of accounting is used where the Company’s investment in voting stock gives it the ability to exercise significant influence over the investee, generally 20% to 50%. The financial results of investees are generally consolidated when ownership interest is greater than 50%.

In connection with the PNA and LSI acquisitions, the Company acquired interests in three joint venture arrangements with noncontrolling interests as follows: Acero Prime S. de R.L. de C.V. (40%-owned), Oregon Feralloy Partners LLC (40%-owned) and LSI Plate (50% owned). These investments are accounted for using the equity method. The corresponding investments in these entities are reflected in the Investments in unconsolidated entities caption of the balance sheet. Equity in earnings of these entities and related distribution of earnings have not been material to our results of operations or cash flows.

Indiana Pickling & Processing Company (56%-owned) and Feralloy Processing Company (51%-owned) are other joint venture arrangements the Company acquired in connection with the PNA acquisition. Other operations that are majority-owned

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

by the Company are Valex Corp., which is 97%-owned, and its operations in the People’s Republic of China and in South Korea, in which Valex Corp. has 88% and 92% ownership, respectively. The results of these majority-owned operations are consolidated in the Company’s financial results. The portion of the earnings related to the noncontrolling shareholder interests has been reflected in the Net income attributable to noncontrolling interests caption in the accompanying statements of income.

Note 4. Inventories

Inventories of the Company have primarily been stated on the last-in, first-out (“LIFO”) method, which is not in excess of market. The Company uses the LIFO method of inventory valuation because it results in a better matching of costs and revenues. As of December 31, 2010 and 2009, cost on the first-in, first-out (“FIFO”) method exceeded the LIFO value of inventories by $117.6 million and $82.8 million, respectively. Inventories of $124.2 million and $87.0 million as of December 31, 2010 and 2009, respectively, were stated on the FIFO method, which is not in excess of market.

Cost increases in 2010 for the majority of our products were the primary cause of the $34.8 million increase in the LIFO valuation reserve, which increased cost of sales. In 2010, we generally increased inventory levels due to increased shipment levels. As such, there was insignificant liquidation of LIFO inventory quantities in 2010. In 2009, significant cost decreases for the majority of our products were the primary cause of the $305.0 million change in the LIFO valuation reserve, which lowered cost of sales. This amount, however, was net of the impact of inventory quantity reductions, which resulted in a liquidation of LIFO inventory quantities carried at higher costs prevailing in prior years as compared with the cost of 2009 purchases, the effect of which increased cost of sales by approximately $26.3 million in 2009.

Note 5. Goodwill

The changes in the carrying amount of goodwill are as follows:


	(in thousands)
Balance as of January 1, 2008	$	886,152
Acquisitions		232,699
Purchase price allocation adjustments		(45,327	)
Effect of foreign currency translation		(7,997	)

Balance as of December 31, 2008		1,065,527
Purchase price allocation adjustments		10,038
Effect of foreign currency translation		5,759

Balance as of December 31, 2009		1,081,324
Acquisitions		26,174
Consolidation of a joint venture entity		151
Effect of foreign currency translation		1,951

Balance as of December 31, 2010	$	1,109,600

The Company had no accumulated impairment losses related to goodwill as of December 31, 2010.

Note 6. Intangible Assets, net

Intangible assets, net, consisted of the following:


	December 31, 2010					December 31, 2009
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(in thousands)
Intangible assets subject to amortization:
Covenants not to compete	$	7,053	$	(6,731	)	$	6,853	$	(6,558	)
Loan fees		23,868		(14,055	)		23,868		(10,592	)
Customer list/relationships		379,356		(83,666	)		345,035		(58,749	)
Software — internal use		8,100		(3,848	)		8,100		(3,038	)
Other		4,949		(1,723	)		4,949		(1,297	)

		423,326		(110,023	)		388,805		(80,234	)
Intangible assets not subject to amortization:
Trade names		442,465		—			417,684		—

	$	865,791	$	(110,023	)	$	806,489	$	(80,234	)

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Intangible assets recorded in connection with 2010 acquisitions were approximately $54.4 million (see Note 2). Foreign currency translation gain related to intangible assets in 2010 was approximately $2.5 million.

Amortization expense for intangible assets amounted to approximately $29.6 million, $29.8 million and $19.1 million for the years ended December 31, 2010, 2009 and 2008, respectively. Included in amortization expense for the year ended December 31, 2009 is the write-off of deferred financing costs with a net book value of $1.6 million related to our $500 million term loan, which was paid off in September 2009.

The following is a summary of estimated aggregate amortization expense for each of the next five years (in thousands):


2011	$	31,326
2012		30,784
2013		28,104
2014		26,104
2015		24,534

Note 7. Cash Surrender Value of Life Insurance Policies, net

The cash surrender value of all life insurance policies held by the Company, net of loans and related accrued interest, was $42.0 million and $92.9 million as of December 31, 2010 and 2009, respectively.

The Company’s wholly-owned subsidiary, EMJ, is the owner and beneficiary of life insurance policies on all former nonunion employees of a predecessor company, including certain current employees of EMJ. These policies, by providing payments to EMJ upon the death of covered individuals, were designed to provide cash to EMJ in order to repurchase shares held by employees in EMJ’s former Stock Bonus Plan and shares held individually by employees upon the termination of their employment. The Company is also the owner and beneficiary of key man life insurance policies on certain current and former executives of the Company, its subsidiaries and predecessor companies.

Cash surrender value of the life insurance policies increases by a portion of the amount of premiums paid and by investment income earned under the policies and decreases by the amount of cost of insurance charges, investment losses and interest on policy loans, as applicable.

Income earned on all of our life insurance policies is recorded in the Other (expense) income, net caption in the accompanying statements of income (see Note 13).

Annually, we will either borrow against the cash surrender value of policies to pay a portion of the premiums and accrued interest on loans against those policies or pay the accrued interest and premiums using available cash on hand. In 2010, the Company borrowed $78.4 million against the cash surrender value of certain policies, of which $36.0 million was used to pay premiums and accrued interest owed. Interest rates on borrowings under some of the EMJ life insurance policies are fixed at 11.76% and the portion of the policy cash surrender value that the borrowings relate to earns interest and dividend income at 11.26%. The unborrowed portion of the policy cash surrender value earns income at rates commensurate with certain risk-free U.S. Treasury bond yields but not less than 4.0%. All other life insurance policies earn investment income or incur losses based on the performance of the underlying investments held by the policies.

As of December 31, 2010 and 2009, loans and accrued interest outstanding on EMJ’s life insurance policies were approximately $351.8 million and $274.4 million, respectively. There were no borrowings available as of December 31, 2010. Interest expense on borrowings against cash surrender values is included in the Other (expense) income, net caption in the accompanying statements of income (see Note 13).

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Note 8. Debt

Long-term debt consists of the following:


	December 31, 2010			December 31, 2009
	(in thousands)
Unsecured revolving credit facility due November 9, 2012	$	195,000		$	115,000
Senior unsecured notes repaid on October 15, 2010		—			78,000
Senior unsecured notes due from July 1, 2011 to July 2, 2013		135,000			135,000
Senior unsecured notes due November 15, 2016		350,000			350,000
Senior unsecured notes due November 15, 2036		250,000			250,000
Other notes and revolving credit facilities		13,100			9,684

Total		943,100			937,684
Less unamortized discount		(1,783	)		(1,926	)
Less amounts due within one year		(86,232	)		(86,383	)

Total long-term debt	$	855,085		$	849,375

Unsecured Revolving Credit Facility

The Company’s $1.1 billion unsecured revolving credit facility has 16 banks as lenders. On September 28, 2009, the Company amended its syndicated credit agreement to adjust certain financial ratio requirements (primarily related to minimum interest coverage ratio and maximum leverage ratio) until June 30, 2010 at which time these ratios adjusted back to the pre-amendment levels. With the amendment, the pricing on the revolving credit facility was adjusted to market rates in effect at that time and restrictions were placed on certain uses of cash until June 30, 2010 for acquisitions, dividends, investments, and stock repurchases. On June 30, 2010, these financial ratio requirements were adjusted back to pre-amendment levels and the restrictions placed on cash were removed. Also, with the amendment, the Company extended the maturity date of $1.02 billion in commitments for extending lenders through November 9, 2012, while the maturity date of $80.0 million in commitments for non-extending lenders remains at November 9, 2011. Interest on borrowings from extending lenders is at variable rates based on LIBOR plus 3.50% or the bank prime rate plus 2.50% as of December 31, 2010. Interest on borrowings from non-extending lenders is at variable rates based on LIBOR plus 0.45% or the bank prime rate as of December 31, 2010. The revolving credit facility includes a commitment fee on the unused portion, at an annual rate of 0.40% and 0.10% for extending and non-extending lenders, respectively, as of December 31, 2010. The applicable margin over LIBOR rate and base rate borrowings along with commitment fees are subject to adjustment every quarter prospectively based on the Company’s leverage ratio.

Weighted average rates on borrowings outstanding on the revolving credit facility were 3.54% and 3.51% as of December 31, 2010 and 2009, respectively.

As of December 31, 2010, the Company had $42.6 million of letters of credit outstanding under the revolving credit facility with availability to issue an additional $82.4 million of letters of credit.

Revolving Credit Facilities — Foreign Operations

The Company also had a separate revolving credit facility for operations in Canada with a credit limit of CAD$5.0 million. In January 2011, the Canadian unsecured credit facility was closed. There were no borrowings outstanding on this revolving credit facility as of December 31, 2010 or December 31, 2009.

Various other separate revolving credit facilities with a combined credit limit of approximately $22.5 million are in place for operations in Asia and Europe with combined outstanding balances of $11.8 million and $8.1 million as of December 31, 2010 and 2009, respectively.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Senior Unsecured Notes — Private Placements

The Company also had $135.0 million and $213.0 million of outstanding senior unsecured notes issued in private placements of debt as of December 31, 2010 and 2009, respectively. On October 15, 2010, we repaid $78.0 million of the notes that matured on that date. At December 31, 2010, the outstanding senior notes bear interest at a weighted average fixed rate of 5.1% and have a weighted average remaining life of 1.6 years, maturing from July 2011 to 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 $1.1 billion 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. On June 30, 2010, the minimum interest coverage ratio and maximum leverage ratio requirements adjusted from amended levels of 2.0 times and 50%, respectively, back to the pre-amendment levels of 3.0 times and 60%, respectively. The Company’s interest coverage ratio for the twelve-month period ended December 31, 2010 was approximately 5.8 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 December 31, 2010 calculated in accordance with the terms of the revolving credit facility was 25.9% 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 December 31, 2010 was $999.2 million compared to Reliance shareholders’ equity balance of $2.82 billion as of December 31, 2010.

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 92% of our total consolidated EBITDA for the last 12 months and approximately 92% of total consolidated tangible assets as of December 31, 2010.

The Company was in compliance with all debt covenants as of December 31, 2010.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Debt Maturities

The following is a summary of aggregate maturities of long-term debt for each of the next five years and thereafter:


	(in thousands)
2011	$	86,232
2012		181,268
2013		75,300
2014		300
2015		—
Thereafter		600,000

	$	943,100

Note 9. Income Taxes

Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. The Company is no longer subject to U.S. federal, state and local tax examinations for years before 2005.

Significant components of the provision for income taxes attributable to operations are as follows:


	Year Ended December 31,
	2010		2009			2008
	(in thousands)
Current:
Federal	$	40,293	$	(13,520	)	$	218,242
State		12,202		2,946			35,211
Foreign		3,360		(1,125	)		6,748

		55,855		(11,699	)		260,201
Deferred:
Federal		34,001		60,018			23,330
State		7,920		(3,054	)		(117	)
Foreign		803		1,052			(493	)

		42,724		58,016			22,720

	$	98,579	$	46,317		$	282,921

The reconciliation of income tax at the U.S. federal statutory tax rates to income tax expense is as follows:


	Year Ended December 31,
	2010			2009			2008
Income tax at U.S. federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income tax, net of federal tax effect		3.9			(0.6	)		3.0
Net effect of life insurance policies		(2.6	)		(6.3	)		(0.9	)
Net effect of changes in unrecognized tax benefits		(0.1	)		(5.8	)		1.6
Domestic production activity deduction		(1.2	)		—			(0.8	)
Other, net		(1.7	)		1.4			(1.0	)

Effective tax rate		33.3	%		23.7	%		36.9	%

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,
	2010			2009
	(in thousands)
Deferred tax assets:
Accrued expenses not currently deductible for tax	$	35,761		$	50,435
Inventory costs capitalized for tax purposes		12,979			8,839
Allowance for doubtful accounts		7,495			8,071
Tax credits		1,139			18,872
Net operating loss carryforwards		3,225			8,111
Other		14,543			16,569

Total gross deferred tax assets		75,142			110,897
Less: Valuation allowance on deferred tax assets		—			(2,514	)

Total deferred tax assets		75,142			108,383
Deferred tax liabilities:
Tax over book depreciation		(134,794	)		(126,977	)
Goodwill and other intangible assets		(284,675	)		(276,109	)
LIFO inventories		(36,918	)		(38,437	)
Other		(882	)		(516	)

Total deferred tax liabilities		(457,269	)		(442,039	)

Net deferred tax liabilities	$	(382,127	)	$	(333,656	)

During 2010, the Company wrote off certain state NOL’s, including the related valuation allowance of $2.5 million, due to it no longer having nexus in the jurisdiction the NOL’s related to. These state NOL’s primarily related to the parent company of the PNA operating subsidiaries, the operations of which were primarily wound down during 2009. The valuation allowance against these NOL’s was established in 2009.

As of December 31, 2010, the Company had other available state NOL’s of $5.0 million to offset future income taxes, expiring in years 2011 through 2030. The Company believes that it is more likely than not that it will be able to realize these NOL’s within their respective carryforward periods.

Taxes on Foreign Income

As of December 31, 2010, unremitted earnings of subsidiaries outside of the United States were approximately $108.5 million on which no United States taxes had been provided. The Company’s current intention is to reinvest these earnings outside the United States. It is not practicable to estimate the amount of additional taxes that might be payable upon repatriation of foreign earnings.

Unrecognized Tax Benefits

The Company is under audit by various state jurisdictions but does not anticipate any material adjustments from these examinations. Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:


	Year Ended December 31,
	2010			2009			2008
	(in thousands)
Unrecognized tax benefits at January 1	$	15,487		$	23,417		$	3,795
Increases in tax positions for prior years		346			2,820			15
Decreases in tax positions for prior years		(877	)		(3,611	)		(63	)
Increases in tax positions for current year		2,958			2,882			20,073
Settlements		(341	)		(1,291	)		—
Lapses in statutes-of-limitation periods		(2,174	)		(8,730	)		(403	)

Unrecognized tax benefits as of December 31	$	15,399		$	15,487		$	23,417

As of December 31, 2010, $15.4 million of unrecognized tax benefits would impact the effective tax rate if recognized. Accrued interest and penalties, net of applicable tax effect, related to uncertain tax positions were approximately $1.1 million and $1.2 million as of December 31, 2010 and 2009, respectively.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Note 10. Stock Option Plans

In May 2004, the Board of Directors of the Company (the “Board”) adopted, and the shareholders approved, an Incentive and Non-Qualified Stock Option Plan (the “2004 Plan”). This 2004 Plan reserved 6,000,000 shares of the Company’s Common Stock for issuance upon exercise of stock options granted under the 2004 Plan. On May 17, 2006, the 2004 Plan was amended and restated as the Amended and Restated Stock Option and Restricted Stock Plan to allow the Board to extend the term of subsequently granted stock options to up to 10 years, to increase the number of shares available for future grants of options or restricted stock from 6,000,000 shares to 10,000,000 shares, and to provide for the grant of restricted shares of the Company’s common stock, in addition to or in lieu of stock options. As of December 31, 2010, there are 7,941,492 common shares available for issuance under the 2004 Plan and there are 3,631,742 non-qualified stock options and 61,000 shares of restricted stock granted and outstanding. The 2004 Plan, as amended, provides for granting of stock options that may be either “incentive stock options” within the meaning of Section 422A of the Code or “non-qualified stock options,” which do not satisfy the provisions of Section 422A of the Code. Options are required to be granted at an option price per share not less than the fair market value of common stock on the date of grant, except that the exercise price of incentive stock options granted to any employee who owns (or, under pertinent Code provisions, is deemed to own) more than 10% of the outstanding common stock of the Company, must equal at least 110% of fair market value on the date of grant. Stock options cannot be granted longer than ten years from the date of the plan. All options outstanding as of December 31, 2010 have seven-year terms and vest at the rate of 25% per year, commencing one year from the date of grant. All shares of restricted stock awarded under the 2004 Plan and outstanding as of December 31, 2010 have dividend rights and vest at the rate of 20% per year, commencing one year from the date of grant.

On February 23, 2011, the Company granted 1,037,250 options under the 2004 Plan to key employees with an exercise price equal to the fair market value as of the date of the grant. The options have seven-year terms and vest at the rate of 25% per year, commencing one year from the date of grant.

In May 1998, the shareholders approved the adoption of a Directors Stock Option Plan for non-employee directors (the “Directors Plan”), which provides for automatic grants of options to non-employee directors. In February 1999, the Directors Plan was amended to allow the Board authority to grant additional options to acquire the Company’s common stock to non-employee directors. In May 2004 the Directors Plan was amended so that any unexpired stock options granted under the Directors Plan to a non-employee director that retires from the Board of Directors at or after the age of 75 become immediately vested and exercisable, and the director, if he or she so desires, must exercise those options within ninety (90) days after such retirement or the options shall expire automatically. In May 2005, after approval of the Company’s shareholders, the Directors Plan was further amended and restated providing that options to acquire 6,000 shares of Common Stock would be automatically granted to each non-employee director each year and would become 100% exercisable after one year. Once exercisable, the options would remain exercisable until that date that is ten years after the date of grant. In addition, the amendment increased the number of shares available for future grants of options from the 374,000 shares reserved as of May 2005 to 500,000 shares. Options under the Directors Plan are non-qualified stock options, with an exercise price at least equal to fair market value at the date of grant. All options outstanding as of December 31, 2010 have ten-year terms. None of these stock options becomes exercisable until one year after the date of grant, unless specifically approved by the Board. As of December 31, 2010, there were 371,000 common shares available for issuance with 192,000 options granted and outstanding under the Directors Plan.

In connection with the EMJ acquisition in April 2006, the Company assumed the EMJ incentive stock option plan (“EMJ Plan”). As of December 31, 2010, there were 56,310 options outstanding under the EMJ Plan, all of which became fully vested as of March 31, 2009.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Stock option activity under all the plans is as follows:


Stock Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2008		3,152,255		$	30.27
Granted		1,174,000		$	57.14
Exercised		(844,338	)	$	21.31
Expired or forfeited		(63,145	)	$	37.87

Outstanding as of December 31, 2008		3,418,772		$	41.57
Granted		977,300		$	33.86
Exercised		(427,697	)	$	24.53
Expired or forfeited		(159,146	)	$	48.35

Outstanding as of December 31, 2009		3,809,229		$	41.22
Granted		1,039,400		$	42.89
Exercised		(827,452	)	$	25.68
Expired or forfeited		(141,125	)	$	47.10

Outstanding as of December 31, 2010		3,880,052		$	44.76		4.9	$	31,167

Exercisable as of December 31, 2010		1,474,102		$	46.94		4.2	$	9,873

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted average assumptions:


	Year Ended December 31,
	2010			2009			2008
Weighted average assumptions used:
Exercise price	$	42.89		$	33.86		$	57.14
Risk free interest rate		2.35	%		1.87	%		2.90	%
Expected life in years		4.8			4.8			4.8
Expected volatility		.60			.59			.38
Expected dividend yield		0.93	%		1.18	%		0.70	%
Grant date fair value	$	20.62		$	15.58		$	19.78

The total intrinsic values of all options exercised during the years ended December 31, 2010, 2009 and 2008 were $16.6 million, $6.9 million and $31.4 million, respectively.

A summary of the status of the Company’s non-vested stock options as of December 31, 2010 and changes during the year then ended is as follows:


Non-vested Options	Shares			Weighted Average Grant Date Fair Value
Non-vested as of December 31, 2009		2,217,850		$	17.33
Granted		1,039,400		$	20.62
Forfeited		(91,750	)	$	17.87
Vested		(759,550	)	$	17.55

Non-vested as of December 31, 2010		2,405,950		$	18.66

On July 26, 2010, the Company granted 61,000 shares of restricted stock to certain officers of the Company. The awards vest 20% on August 1, 2011 and 20% on each August 1 thereafter through 2015. The fair value of the restricted stock granted was $41.24 per share, determined based on the fair value of the Company’s common stock on the grant date. All shares remain unvested and outstanding as of December 31, 2010.

As of December 31, 2010, there was approximately $31.5 million of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the stock option plans. That cost is expected to be recognized over approximately a 3-year period or a weighted average period of 2.6 years.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Proceeds from option exercises under all stock option plans for the years ended December 31, 2010, 2009 and 2008 were $21.2 million, $10.5 million and $18.0 million, respectively. The tax benefit realized from option exercises during the years ended December 31, 2010, 2009 and 2008 were $6.3 million, $2.7 million and $11.2 million, respectively.

The following tabulation summarizes certain information concerning outstanding and exercisable options as of December 31, 2010:


			Options Outstanding				Options Exercisable
Range of Exercise Price	Outstanding at December 31, 2010		Weighted Average Remaining Contractual Life In Years		Weighted Average Exercise Price		Exercisable at December 31, 2010		Weighted Average Exercise Price of Options Exercisable
$15 - $19		24,000		4.4	$	18.31		24,000	$	18.31
$24 - $28		56,752		4.5	$	25.06		56,752	$	25.06
$33 - $38		893,475		5.5	$	33.87		232,425	$	34.37
$42 - $45		1,833,325		4.9	$	43.73		588,675	$	44.78
$56 - $57		1,006,500		4.2	$	56.80		506,250	$	56.80
$61 - $67		66,000		6.9	$	64.03		66,000	$	64.03

$15 - $67		3,880,052		4.9	$	44.76		1,474,102	$	46.94

Note 11. Employee Benefits

Employee Stock Ownership Plan

The Company has an employee stock ownership plan (the “ESOP”) and trust that have been approved by the Internal Revenue Service as a qualified plan. The ESOP is a noncontributory plan that covers certain salaried and hourly employees of the Company. The amount of the annual contribution is at the discretion of the Board, except that the minimum amount must be sufficient to enable the ESOP trust to meet its current obligations.

Defined Contribution Plans

Effective in 1998, the Reliance Steel & Aluminum Co. Master 401(k) Plan (the “Master Plan”) was established, which combined several of the various 401(k) and profit-sharing plans of the Company and its subsidiaries into one plan. Salaried and certain hourly employees of the Company and its participating subsidiaries are covered under the Master Plan. The Master Plan allows each subsidiary’s Board to determine independently the annual matching percentage and maximum compensation limits or annual profit-sharing contribution. Eligibility occurs after three months of service, and the Company contribution vests at 25% per year, commencing one year after the employee enters the Master Plan. Other 401(k) and profit-sharing plans exist as certain subsidiaries have not combined their plans into the Master Plan as of December 31, 2010.

Supplemental Executive Retirement Plans

Effective January 1996, the Company adopted a Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified pension plan that provides postretirement pension benefits to certain key officers of the Company. The SERP is administered by the Compensation and Stock Option Committee of the Board. Benefits are based upon the employees’ earnings. Effective January 1, 2009, the SERP was amended to freeze the plan to new participants as well as change the benefit formula. The amendment resulted in a net reduction to the benefit obligation under this plan of approximately $2.9 million. Life insurance policies were purchased for most individuals covered by the SERP and are funded by the Company. Separate SERP’s exist for certain wholly-owned subsidiaries of the Company, each of which provides postretirement pension benefits to certain current and former key employees. All of the subsidiary plans have been frozen to include only existing participants. The SERP’s do not maintain their own plan assets, therefore plan assets and related disclosures have been omitted. However, the Company does maintain on its balance sheet assets to fund the SERP’s with values of $13.7 million as of December 31, 2010 and 2009.

Deferred Compensation Plan

In December 2008, a new deferred compensation plan was put in place for certain officers and key employees of the Company, not including, however, those key officers included in the SERP. Account balances from various deferred compensation plans of subsidiaries were transferred and consolidated into this new deferred compensation plan. The balances in

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

the Reliance deferred compensation plan as of December 31, 2010 and 2009 were approximately $8.7 million and $7.9 million, respectively.

Defined Benefit Plans

The Company, through certain of its subsidiaries, maintains qualified defined benefit pension plans for certain of its employees. These plans generally provide benefits of stated amounts for each year of service or provide benefits based on the participant’s hourly wage rate and years of service. The plans permit the sponsor, at any time, to amend or terminate the plans subject to union approval, if applicable.

The Company uses a December 31 measurement date for its plans. The following is a summary of the status of the funding of the various SERP’s and Defined Benefit Plans:


	SERP’s						Defined Benefit Plans
	2010			2009			2010			2009
	(in thousands)						(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	30,480		$	30,754		$	52,126		$	48,443
Assumed in acquisition		—			—			9,095			—
Service cost		798			777			683			752
Interest cost		1,787			1,674			3,166			2,902
Actuarial (gain) losses		(2,772	)		1,112			2,441			1,881
Change in assumptions		—			—			(295	)		—
Benefits paid		(879	)		(902	)		(2,912	)		(1,969	)
Plan amendments		—			(2,905	)		79			117
Curtailments or settlements		—			(30	)		—			—

Benefit obligation as of end of year	$	29,414		$	30,480		$	64,383		$	52,126

Change in plan assets
Fair value of plan assets		N/A			N/A		$	41,605		$	32,498
Acquired in acquisition		N/A			N/A			5,724			—
Actual return on plan assets		N/A			N/A			5,899			6,788
Employer contributions		N/A			N/A			3,456			4,328
Benefits paid		N/A			N/A			(3,028	)		(2,009	)

Fair value of plan assets as of end of year		N/A			N/A		$	53,656		$	41,605

Funded status

Unfunded status of the plans	$	(29,414	)	$	(30,480	)	$	(10,727	)	$	(10,521	)


Items not yet recognized as component of net periodic pension expense
Unrecognized net actuarial losses	$	5,172		$	8,910		$	9,871		$	9,438
Unamortized prior service (credit) cost		(2,042	)		(2,488	)		447			447

	$	3,130		$	6,422		$	10,318		$	9,885

As of December 31, 2010 and 2009, the following amounts were recognized in the balance sheet:


	SERP’s						Defined Benefit Plans
	2010			2009			2010			2009
	(in thousands)						(in thousands)
Amounts recognized in the statement of financial position
Accrued benefit liability — current	$	(1,308	)	$	(1,116	)	$	—		$	—
Accrued benefit liability — long-term		(28,106	)		(29,364	)		(10,727	)		(10,521	)
Accumulated other comprehensive loss		3,130			6,422			10,318			9,885

Net amount recognized	$	(26,284	)	$	(24,058	)	$	(409	)	$	(636	)

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

The accumulated benefit obligation for all SERP’s was $28.5 million and $23.6 million as of December 31, 2010 and 2009, respectively. The accumulated benefit obligation for all defined benefit pension plans was $64.4 million and $52.1 million as of December 31, 2010 and 2009, respectively.


	Year Ended December 31,
	2010		2009
	(in thousands)
Information for defined benefit plans with an accumulated benefit obligation and projected benefit obligation in excess of plan assets
Accumulated benefit obligation	$	62,180	$	49,318
Projected benefit obligation		62,180		49,318
Fair value of plan assets		51,327		38,522

Following are the details of net periodic benefit cost related to the SERP and Defined Benefit Plans:


	SERP’s								Defined Benefit Plans
	Year Ended December 31,								Year Ended December 31,
	2010			2009			2008		2010			2009			2008
	(in thousands)								(in thousands)
Service cost	$	798		$	777		$	1,003	$	683		$	752		$	696
Interest cost		1,787			1,674			1,688		3,166			2,902			2,179
Expected return on plan assets		—			—			—		(3,523	)		(2,718	)		(2,566	)
Curtailment/settlement expense		—			30			1,909		234			174			—
Prior service (credit) cost		(447	)		(447	)		196		79			67			63
Amortization of net loss		966			1,023			1,119		380			824			6

	$	3,104		$	3,057		$	5,915	$	1,019		$	2,001		$	378

Assumptions used to determine net periodic benefit cost are detailed below:


	SERP’s									Defined Benefit Plans
	Year Ended December 31,									Year Ended December 31,
	2010			2009			2008			2010			2009			2008
Weighted average assumptions to determine net cost
Discount rate		5.99	%		6.01	%		6.01	%		5.92	%		6.06	%		6.28	%
Expected long-term rate of return on plan assets		N/A			N/A			N/A			8.10	%		8.04	%		8.02	%
Rate of compensation increase		6.00	%		6.00	%		5.94	%		N/A			N/A			N/A

Assumptions used to determine the benefit obligation as of December 31 are detailed below:


	SERP’s						Defined Benefit Plans
	2010			2009			2010			2009
Weighted average assumptions to determine benefit obligations
Discount rate		5.39	%		5.99	%		5.43	%		5.95	%
Expected long-term rate of return on plan assets		N/A			N/A			8.10	%		8.04	%
Rate of compensation increase		6.00	%		6.00	%		N/A			N/A

Employer contributions to the SERP’s and Defined Benefit Plans during 2011 are expected to be $1.3 million and $3.0 million, respectively.

Plan Assets and Investment Policy

The weighted-average asset allocations of the Company’s Defined Benefit Plans by asset category are as follows:


	December 31,
	2010			2009
Plan Assets
Equity securities		68	%		62	%
Debt securities		29	%		35	%
Other		3	%		3	%

Total		100	%		100	%

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term. The investment goal is a return on assets that is at least equal to the assumed actuarial rate of return over the long term within reasonable and prudent levels of risk. Investment policies reflect the unique circumstances of the respective plans and include requirements designed to mitigate risk including quality and diversification standards. Asset allocation targets are reviewed periodically with investment advisors to determine the appropriate investment strategies for acceptable risk levels. The Company’s target allocation ranges are as follows: equity securities 50% to 80%, debt securities 20% to 60% and other assets of 0% to 10%. The Company establishes its estimated long-term return on plan assets considering various factors including the targeted asset allocation percentages, historic returns and expected future returns.

The fair value measurements of the Company’s Defined Benefit Plan assets fall within the following levels of the fair value hierarchy as of December 31, 2010 and 2009:


	Level 1		Level 2		Level 3		Total
	(in thousands)
December 31, 2010:
Common stock ⁽¹⁾	$	23,555	$	—	$	—	$	23,555
U.S. government and agency		—		6,133		—		6,133
State government		—		340		—		340
Corporate debt securities ⁽²⁾		—		6,549		—		6,549
Mutual funds ⁽³⁾		8,375		7,092		—		15,467
Interest and non-interest bearing cash		1,612		—		—		1,612

	$	33,542	$	20,114	$	—	$	53,656

December 31, 2009:
Common stock ⁽¹⁾	$	18,993	$	—	$	—	$	18,993
U.S. government and agency		—		6,145		—		6,145
State government		—		132		—		132
Corporate debt securities ⁽²⁾		—		6,385		—		6,385
Mutual funds ⁽³⁾		8,827		—		—		8,827
Interest and non-interest bearing cash		1,123		—		—		1,123

	$	28,943	$	12,662	$	—	$	41,605

⁽¹⁾	Comprised of primarily large domestic and international securities. Valued at the closing price reported on the active market on which the individual securities are traded.

⁽²⁾	Valued using a combination of inputs including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.

⁽³⁾

Level 1 assets are comprised of exchange traded funds, money market funds, and stock and bond funds. These assets are valued at closing price for exchange traded funds and Net Asset Value (NAV) for open-end and closed-end mutual funds. Level 2 assets are comprised of pooled separate accounts and are valued at the net asset value per unit based on either the observable net asset value of the underlying investment or the net asset value of the underlying pool of securities.

Postretirement Medical Plan

In addition to the Company’s Defined Benefit Pension Plans, the Company’s wholly-owned subsidiary EMJ sponsors a retiree health care plan that provides postretirement medical and dental benefits to eligible retirees and their dependents until they reach the age of 65 (the “Postretirement Plan”). Monthly retiree contributions are required, and they are based upon length of service. The Company recognizes the cost of future benefits for active eligible participants and retirees using actuarial assumptions. Gains and losses realized from the remeasurement of the plan’s benefit obligation are amortized to income over the expected service period of the participants. The Company uses a measurement date of December 31 for its Postretirement Plan.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Components of the net periodic pension expense associated with the Postretirement Plan are as follows:


	Year Ended December 31,
	2010		2009		2008
	(in thousands)
Service cost	$	886	$	826	$	752
Interest cost		970		773		752
Amortization of net loss		253		123		172

	$	2,109	$	1,722	$	1,676

The following tables provide a reconciliation of the changes in the benefit obligation and the unfunded status of the Postretirement Plan as follows:


	Year Ended December 31,
	2010			2009
	(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	14,385		$	14,016
Service cost		886			826
Interest cost		970			773
Benefit payments		(303	)		(335	)
Change in assumptions		—			345
Actuarial loss (gain)		1,562			(1,240	)

Benefit obligation at end of year	$	17,500		$	14,385

Unfunded status	$	(17,500	)	$	(14,385	)

Amounts recognized in the statement of financial position
Accrued benefit liability (current)	$	(833	)	$	(541	)
Accrued benefit liability (long-term)		(16,667	)		(13,844	)
Accumulated other comprehensive loss		4,284			2,975

Net amount recognized	$	(13,216	)	$	(11,410	)

Item not yet recognized as component of net periodic pension expense
Unrecognized net actuarial losses	$	4,284		$	2,975

Assumptions used to determine net periodic benefit are detailed below:


	Year Ended December 31,
	2010			2009			2008
Weighted average assumptions to determine net cost
Discount rate		6.00	%		6.00	%		6.25	%
Health care cost trend rate		10.00	%		10.00	%		10.00	%
Rate to which the cost trend rate is assumed to decline		6.00	%		6.00	%		6.00	%
Year that the rate reaches the ultimate trend rate		2014			2013			2012

Assumptions used to determine the benefit obligation are detailed below:


	December 31,
	2010			2009
Weighted average assumptions to determine benefit obligations
Discount rate		5.25	%		6.00	%
Health care cost trend rate		10.00	%		10.00	%
Rate to which the cost trend rate is assumed to decline		4.50	%		6.00	%
Year that the rate reaches the ultimate trend rate		2030			2013

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

A one-percentage-point change in assumed health care cost trend rates would have the following effects:


	Year Ended December 31, 2010					Year Ended December 31, 2009
	1% Increase		1% Decrease			1% Increase		1% Decrease
	(in thousands)					(in thousands)
Effect on total service and interest cost components	$	251	$	(214	)	$	236	$	(199	)
Effect on postretirement benefit obligation		2,077		(1,800	)		1,738		(1,499	)

Summary Disclosures for All Defined Benefit Plans

The following is a summary of benefit payments under the Company’s various defined benefit plans, which reflect expected future employee service, as appropriate, expected to be paid in the periods indicated:


	SERP’s		Defined Benefit Plans		Postretirement Medical Plan
	(in thousands)
2011	$	1,311	$	2,631	$	833
2012		1,208		2,787		890
2013		1,355		2,926		805
2014		2,039		3,033		975
2015		2,023		3,223		1,050
2016 – 2020		12,125		19,728		7,565

The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2011 are as follows:


	SERP’s			Defined Benefit Plans		Postretirement Medical Plan
	(in thousands)
Actuarial loss	$	248		$	322	$	175
Prior service (credit) cost		(447	)		86		—

Total	$	(199	)	$	408	$	175

Supplemental Bonus Plan

In 2005, EMJ reached a settlement with the U.S. Department of Labor regarding a change in its methodology for annual valuations of its stock while it was a private company, for the purpose of making contributions in stock to its retirement plan. In connection with the acquisition of EMJ in April 2006, Reliance assumed the obligation resulting from EMJ’s settlement with the U.S. Department of Labor to contribute 258,006 shares of Reliance common stock to EMJ’s Supplemental Bonus Plan, a phantom stock bonus plan supplementing the EMJ Retirement Savings Plan. As of December 31, 2010, the remaining obligation to the EMJ Supplemental Bonus Plan consisted of the cash equivalent of 137,298 shares of Reliance common stock totaling approximately $7.2 million. The adjustments to reflect this obligation at fair value based on the closing price of the Company common stock at the end of each reporting period are included in Warehouse, delivery, selling, general and administrative expense. The expense (income) from mark to market adjustments to this obligation in each of the three year periods ended December 31, 2010 amounted to approximately $1.1 million, $3.5 million and ($5.1) million, respectively. This obligation will be satisfied by future cash payments to participants upon their termination of employment.

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Contributions to Company Sponsored Retirement Plans

The Company’s expense for Company-sponsored retirement plans was as follows:


	Year Ended December 31,
	2010		2009		2008
	(in thousands)
Master Plan	$	14,838	$	13,347	$	16,356
Other Defined Contribution Plans		2,374		1,359		7,299
Employee Stock Ownership Plan		1,200		1,200		1,100
Deferred Compensation Plan		987		1,413		583
Supplemental Executive Retirement Plans		3,104		3,057		5,915
Defined Benefit Plans		1,019		2,001		378
Postretirement Medical Plan		2,109		1,722		1,676

	$	25,631	$	24,099	$	33,307

Note 12. Equity

Common Stock

The Company is authorized to issue 100,000,000 shares of common stock, no par value per share. The Company paid regular quarterly cash dividends on its common stock in 2010. The Company’s Board of Directors increased the quarterly dividend to $0.12 per share of common stock in February 2011 from $0.10 per share. The holders of Reliance common stock are entitled to one vote per share on each matter submitted to a vote of shareholders; however, under California law, for the election of members of the Board of Directors shareholders are entitled to cumulative voting rights.

Share Repurchase Program

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, no par value per share. No shares of the Company’s preferred stock are issued and outstanding. The Company’s restated articles of incorporation provide that shares of preferred stock may be issued from time to time in one or more series by the Board. The Board can fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of each series of preferred stock. The rights of preferred shareholders may supersede the rights of common shareholders.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) included the following:


	Year Ended December 31,
	2010			2009			2008
	(in thousands)
Net income	$	197,849		$	149,176		$	483,635
Other comprehensive income (loss):
Foreign currency translation gain (loss)		9,657			25,870			(42,624	)
Unrealized gain (loss) on investments, net of tax		220			524			(1,163	)
Minimum pension liability, net of tax		1,921			4,099			(8,474	)

Total other comprehensive income (loss)		11,798			30,493			(52,261	)

Comprehensive income		209,647			179,669			431,374
Comprehensive income attributable to noncontrolling interests		(3,496	)		(1,018	)		(858	)

Comprehensive income attributable to Reliance	$	206,151		$	178,651		$	430,516

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) included the following:


	December 31,
	2010			2009
	(in thousands)
Foreign currency translation gain	$	20,305		$	10,648
Unrealized loss on investments, net of tax		(228	)		(448	)
Minimum pension liability, net of tax		(9,802	)		(11,723	)

Total accumulated other comprehensive income (loss)	$	10,275		$	(1,523	)

Foreign currency translation adjustments generally are not adjusted for income taxes as they relate to indefinite investments in foreign subsidiaries. The adjustments to unrealized loss on investments and minimum pension liability are net of taxes of $0.1 million and $6.6 million, respectively, as of December 31, 2010 and $0.3 million and $7.3 million, respectively, as of December 31, 2009.

Note 13. Other (Expense) Income, net

Significant components of Other (expense) income, net are as follows:


	Year Ended December 31,
	2010			2009			2008
	(in thousands)
Investment income from life insurance policies	$	27,404		$	34,666		$	27,314
Interest expense on life insurance policy loans		(32,338	)		(31,685	)		(29,175	)
Life insurance policy cost of insurance		(6,597	)		(4,720	)		(4,940	)
Income from life insurance policy redemptions		2,597			5,201			1,422
Foreign currency exchange gains (losses)		242			244			(5,957	)
Rental income		2,724			3,138			3,737
Interest income		1,160			1,417			2,063
Equity in earnings of unconsolidated entities		724			1,395			565
All other, net		966			2,968			1,131

	$	(3,118	)	$	12,624		$	(3,840	)

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

Note 14. Commitments and Contingencies

Lease Commitments

The Company leases land, buildings and equipment under non-cancelable operating leases expiring in various years through 2031. Rent expense for leases that contain scheduled rent increases are recorded on a straight-line basis. Several of the leases have renewal options providing for additional lease periods. Future minimum payments, by year and in the aggregate, under the non-cancelable leases with initial or remaining terms of one year or more, consisted of the following as of December 31, 2010:


	Operating Leases		Capital Leases
	(in thousands)
2011	$	57,492	$	870
2012		47,455		845
2013		37,224		829
2014		27,854		759
2015		22,791		312
Thereafter		90,242		26

	$	283,058	$	3,641

Less interest				(134	)

Capital lease obligations				3,507
Less current portion				(803	)

Long-term capital lease obligations			$	2,704

Total rental expense amounted to $72.4 million, $75.8 million and $68.3 million, for 2010, 2009 and 2008, respectively.

Included in the amounts above for operating leases are lease payments to various related parties, who are not executive officers of the Company, in the amounts of $4.1 million, $3.7 million and $3.7 million for 2010, 2009 and 2008, respectively. These related party leases are for buildings leased to certain of the companies we have acquired and expire in various years through 2021.

Purchase Commitments

As of December 31, 2010, the Company had commitments to purchase minimum quantities of certain aerospace materials, which we entered into to secure material for corresponding long-term sales commitments we have entered into with our customers. The total amount of the commitments based on current pricing is estimated at approximately $364.0 million, with amounts in each of the next six years being as follows: $58.5 million, $47.5 million, $64.5 million, $64.5 million, $64.5 million, and $64.5 million, respectively.

Collective Bargaining Agreements

As of December 31, 2010, approximately 13% of the Company’s total employees are covered by collective bargaining agreements, which expire at various times over the next four years. Approximately 5% of the Company’s employees are covered by 20 different collective bargaining agreements that expire during 2011.

Environmental Contingencies

The Company is subject to extensive and changing federal, state, local and foreign laws and regulations designed to protect the environment, including those relating to the use, handling, storage, discharge and disposal of hazardous substances and the remediation of environmental contamination. The Company’s operations use minimal amounts of such substances.

The Company believes it is in material compliance with environmental laws and regulations; however, the Company is from time to time involved in administrative and judicial proceedings and inquiries relating to environmental matters. Some of the Company’s owned or leased properties are located in industrial areas with histories of heavy industrial use. The Company may

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

incur some environmental liabilities because of the location of these properties. In addition, the Company is currently involved with certain environmental remediation projects related to activities at former manufacturing operations of EMJ, a wholly-owned subsidiary of the Company, that were sold many years prior to Reliance’s acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ had insurance policies in place at the time it 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.

Legal Matters

The Company is subject to legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the potential loss, if any, cannot be reasonably estimated. However, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. The Company maintains various liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and normal business operations.

Note 15. Earnings Per Share

The Company calculates basic and diluted earnings per share as required by the Earnings Per Share topic of the FASB Codification. 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:


	Year Ended December 31,
	2010		2009		2008
	(in thousands, except per share amounts)
Numerator:
Net income attributable to Reliance	$	194,353	$	148,158	$	482,777

Denominator:
Denominator for basic earnings per share — Weighted average shares		74,230		73,446		73,102

Effect of dilutive securities:
Stock options		242		256		496

Denominator for dilutive earnings per share:
Adjusted weighted average shares and assumed conversions		74,472		73,702		73,598

Net income per share attributable to Reliance shareholders — diluted	$	2.61	$	2.01	$	6.56

Net income per share attributable to Reliance shareholders — basic	$	2.62	$	2.02	$	6.60

The computations of earnings per share for the years ended December 31, 2010, 2009 and 2008 do not include approximately 2,600,699, 3,109,197 and 2,311,000 shares reserved for issuance upon exercise of stock options, respectively, because their inclusion would have been anti-dilutive.

Note 16. 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 combined and 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 loan. The supplemental consolidating financial

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 31, 2010

information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful.

Condensed Consolidating Balance Sheet

As of December 31, 2010

(in thousands)


	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations & Reclassifications			Consolidated
Assets
Cash and cash equivalents	$	14,372	$	7,998	$	50,545	$	—		$	72,915
Accounts receivable, less allowance for doubtful accounts		58,099		586,230		52,704		—			697,033
Inventories		33,609		770,371		56,235		—			860,215
Intercompany receivables		343		12,358		34		(12,735	)		—
Other current assets		99,800		27,330		5,047		(61,443	)		70,734

Total current assets		206,223		1,404,287		164,565		(74,178	)		1,700,897

Investments in subsidiaries		1,783,213		202,824		—		(1,986,037	)		—
Property, plant and equipment, net		97,496		870,301		57,508		—			1,025,305
Goodwill		23,780		1,028,950		56,870		—			1,109,600
Intangible assets, net		9,815		681,074		64,879		—			755,768
Intercompany receivables		1,956,537		—		—		(1,956,537	)		—
Other assets		4,896		71,385		1,042		—			77,323

Total assets	$	4,081,960	$	4,258,821	$	344,864	$	(4,016,752	)	$	4,668,893

Liabilities & Equity
Accounts payable	$	24,510	$	204,614	$	28,599	$	(12,735	)	$	244,988
Accrued compensation and retirement costs		14,849		64,783		5,433		—			85,065
Other current liabilities		37,583		40,184		4,979		—			82,746
Deferred income taxes		—		71,007		—		(61,443	)		9,564
Current maturities of long-term debt		74,432		—		11,800		—			86,232

Total current liabilities		151,374		380,588		50,811		(74,178	)		508,595

Long-term debt		854,932		153		—		—			855,085
Intercompany borrowings		—		1,926,900		29,637		(1,956,537	)		—
Deferred taxes and other long-term liabilities		251,922		218,210		4,967		—			475,099
Total Reliance shareholders’ equity		2,823,732		1,729,455		256,582		(1,986,037	)		2,823,732
Noncontrolling interests		—		3,515		2,867		—			6,382

Total equity		2,823,732		1,732,970		259,449		(1,986,037	)		2,830,114

Total liabilities and equity	$	4,081,960	$	4,258,821	$	344,864	$	(4,016,752	)	$	4,668,893

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Balance Sheet

As of December 31, 2009

(in thousands)


	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations & Reclassifications			Consolidated
Assets
Cash and cash equivalents	$	8,968	$	6,890	$	27,144	$	—		$	43,002
Accounts receivable, less allowance for doubtful accounts		48,344		451,234		34,293		—			533,871
Inventories		27,791		646,343		45,781		—			719,915
Intercompany receivables		300		15,845		1,940		(18,085	)		—
Other current assets		58,521		30,544		5,051		—			94,116

Total current assets		143,924		1,150,856		114,209		(18,085	)		1,390,904

Investments in subsidiaries		1,642,191		155,039		612		(1,797,842	)		—
Property, plant and equipment, net		92,706		840,606		47,947		—			981,259
Goodwill		23,780		1,002,775		54,769		—			1,081,324
Intangible assets, net		13,276		650,784		62,195		—			726,255
Intercompany receivables		1,857,443		—		—		(1,857,443	)		—
Other assets		4,282		121,883		870		—			127,035

Total assets	$	3,777,602	$	3,921,943	$	280,602	$	(3,673,370	)	$	4,306,777

Liabilities & Equity
Accounts payable	$	16,853	$	156,994	$	13,351	$	(18,085	)	$	169,113
Accrued compensation and retirement costs		11,557		51,588		3,867		—			67,012
Other current liabilities		49,109		41,829		4,123		—			95,061
Current maturities of long-term debt		78,250		—		8,133		—			86,383

Total current liabilities		155,769		250,411		29,474		(18,085	)		417,569

Long-term debt		849,220		155		—		—			849,375
Intercompany borrowings		—		1,832,229		25,214		(1,857,443	)		—
Deferred taxes and other long-term liabilities		166,181		263,050		2,480		—			431,711
Total Reliance shareholders’ equity		2,606,432		1,575,184		222,658		(1,797,842	)		2,606,432
Noncontrolling interests		—		914		776		—			1,690

Total equity		2,606,432		1,576,098		223,434		(1,797,842	)		2,608,122

Total liabilities and equity	$	3,777,602	$	3,921,943	$	280,602	$	(3,673,370	)	$	4,306,777

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Statement of Income

For the year ended December 31, 2010

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	593,711		$	5,550,588		$	338,140		$	(169,644	)	$	6,312,795

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		442,273			4,225,957			229,384			(169,727	)		4,727,887
Warehouse, delivery, selling, general and administrative		116,420			978,742			71,484			(63,062	)		1,103,584
Depreciation and amortization		13,022			101,324			6,257			—			120,603

		571,715			5,306,023			307,125			(232,789	)		5,952,074

Operating income		21,996			244,565			31,015			63,145			360,721

Other income (expense):
Interest		(62,357	)		(33,767	)		(812	)		35,761			(61,175	)
Other income (expense), net		50,923			44,819			46			(98,906	)		(3,118	)

Income before equity in earnings of subsidiaries and income taxes		10,562			255,617			30,249			—			296,428
Equity in earnings of subsidiaries		144,267			10,732			—			(154,999	)		—

Income before income taxes		154,829			266,349			30,249			(154,999	)		296,428
Income tax (benefit) provision		(39,524	)		130,620			7,483			—			98,579

Net income		194,353			135,729			22,766			(154,999	)		197,849
Less: Net income attributable to noncontrolling interests		—			3,010			486			—			3,496

Net income attributable to Reliance	$	194,353		$	132,719		$	22,280		$	(154,999	)	$	194,353

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Statement of Income

For the year ended December 31, 2009

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	499,966		$	4,736,573		$	213,311		$	(131,718	)	$	5,318,132

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		343,411			3,544,292			162,708			(131,800	)		3,918,611
Warehouse, delivery, selling, general and administrative		86,786			950,118			53,537			(60,196	)		1,030,245
Depreciation and amortization		12,974			101,347			4,563			—			118,884

		443,171			4,595,757			220,808			(191,996	)		5,067,740

Operating income (loss)		56,795			140,816			(7,497	)		60,278			250,392

Other income (expense):
Interest		(68,499	)		(39,273	)		(544	)		40,793			(67,523	)
Other income, net		101,642			7,555			4,498			(101,071	)		12,624

Income (loss) before equity in earnings (losses) of subsidiaries and income taxes		89,938			109,098			(3,543	)		—			195,493
Equity in earnings (losses) of subsidiaries		36,352			(4,143	)		—			(32,209	)		—

Income (loss) before income taxes		126,290			104,955			(3,543	)		(32,209	)		195,493
Income tax (benefit) provision		(21,868	)		68,513			(328	)		—			46,317

Net income (loss)		148,158			36,442			(3,215	)		(32,209	)		149,176
Less: Net income (loss) attributable to noncontrolling interests		—			1,054			(36	)		—			1,018

Net income (loss) attributable to Reliance	$	148,158		$	35,388		$	(3,179	)	$	(32,209	)	$	148,158

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Statement of Income

For the year ended December 31, 2008

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	868,472		$	7,537,750		$	402,405		$	(89,783	)	$	8,718,844

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		645,619			5,712,679			288,316			(89,866	)		6,556,748
Warehouse, delivery, selling, general and administrative		(30,304	)		1,231,815			74,656			(64,966	)		1,211,201
Depreciation and amortization		10,235			83,326			4,363			—			97,924

		625,550			7,027,820			367,335			(154,832	)		7,865,873

Operating income		242,922			509,930			35,070			65,049			852,971

Other income (expense):
Interest		(86,526	)		(27,243	)		(1,665	)		32,859			(82,575	)
Other income (expense), net		97,718			2,051			(5,701	)		(97,908	)		(3,840	)

Income before equity in earnings of subsidiaries and income taxes		254,114			484,738			27,704			—			766,556
Equity in earnings of subsidiaries		215,759			6,744			—			(222,503	)		—

Income before income taxes		469,873			491,482			27,704			(222,503	)		766,556
Income tax (benefit) provision		(12,904	)		288,421			7,404			—			282,921

Net income		482,777			203,061			20,300			(222,503	)		483,635
Less: Net income attributable to noncontrolling interests		—			842			16			—			858

Net income attributable to Reliance	$	482,777		$	202,219		$	20,284		$	(222,503	)	$	482,777

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Cash Flow Statement

For the year ended December 31, 2010

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating activities:
Net income	$	194,353		$	135,729		$	22,766		$	(154,999	)	$	197,849
Equity in earnings of subsidiaries		(144,267	)		(11,456	)		—			154,999			(724	)
Adjustments to reconcile net income to cash provided by (used in) operating activities		173,112			(148,730	)		(7,420	)		—			16,962

Cash provided by (used in) operating activities		223,198			(24,457	)		15,346			—			214,087

Investing activities:
Purchases of property, plant and equipment		(10,694	)		(93,762	)		(6,900	)		—			(111,356	)
Acquisitions of metals service centers, net of cash acquired and debt assumed		(100,325	)		—			—			—			(100,325	)
Net advances to subsidiaries		(99,094	)		—			—			99,094			—
Other investing activities, net		(5,025	)		49,763			110			5,050			49,898

Cash used in investing activities		(215,138	)		(43,999	)		(6,790	)		104,144			(161,783	)

Financing activities:
Net borrowings (repayments) of debt		1,749			(23,329	)		3,157			—			(18,423	)
Dividends paid		(29,692	)		—			—			—			(29,692	)
Intercompany borrowings		—			94,671			4,423			(99,094	)		—
Other financing activities, net		25,287			(1,778	)		5,192			(5,050	)		23,651

Cash (used in) provided by financing activities		(2,656	)		69,564			12,772			(104,144	)		(24,464	)
Effect of exchange rate changes on cash and cash equivalents		—			—			2,073			—			2,073

Increase in cash and cash equivalents		5,404			1,108			23,401			—			29,913
Cash and cash equivalents at beginning of period		8,968			6,890			27,144			—			43,002

Cash and cash equivalents at end of period	$	14,372		$	7,998		$	50,545		$	—		$	72,915

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Cash Flow Statement

For the year ended December 31, 2009

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating activities:
Net income (loss)	$	148,158		$	36,442		$	(3,215	)	$	(32,209	)	$	149,176
Equity in (earnings) losses of subsidiaries		(36,352	)		2,748			—			32,209			(1,395	)
Adjustments to reconcile net income (loss) to cash provided by operating activities		(9,391	)		772,732			31,874			—			795,215

Cash provided by operating activities		102,415			811,922			28,659			—			942,996

Investing activities:
Purchases of property, plant and equipment		(10,283	)		(46,156	)		(13,462	)		—			(69,901	)
Net repayments from subsidiaries		748,898			—			—			(748,898	)		—
Other investing activities, net		82			(24,010	)		244			—			(23,684	)

Cash provided by (used in) investing activities		738,697			(70,166	)		(13,218	)		(748,898	)		(93,585	)

Financing activities:
Net (repayments) borrowings of debt		(829,464	)		(1,880	)		176			—			(831,168	)
Dividends paid		(29,383	)		—			—			—			(29,383	)
Intercompany (repayments) borrowings		—			(750,130	)		1,232			748,898			—
Other financing activities, net		5,440			(2,057	)		(2,661	)		—			722

Cash used in financing activities		(853,407	)		(754,067	)		(1,253	)		748,898			(859,829	)
Effect of exchange rate changes on cash and cash equivalents		—			—			1,425			—			1,425

(Decrease) increase in cash and cash equivalents		(12,295	)		(12,311	)		15,613			—			(8,993	)
Cash and cash equivalents at beginning of period		21,263			19,201			11,531			—			51,995

Cash and cash equivalents at end of period	$	8,968		$	6,890		$	27,144		$	—		$	43,002

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2010

Condensed Consolidating Cash Flow Statement

For the year ended December 31, 2008

(in thousands)


	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating activities:
Net income	$	482,777		$	203,061		$	20,300		$	(222,503	)	$	483,635
Equity in earnings of subsidiaries		(215,759	)		(7,309	)		—			222,503			(565	)
Adjustments to reconcile net income to cash provided by operating activities		73,943			100,485			7,186			—			181,614

Cash provided by operating activities		340,961			296,237			27,486			—			664,684

Investing activities:
Purchases of property, plant and equipment		(14,911	)		(129,703	)		(7,276	)		—			(151,890	)
Acquisitions of metals service centers, net of cash acquired and debt assumed		(316,999	)		(13,250	)		—			—			(330,249	)
Net repayments from subsidiaries		205,413			—			—			(205,413	)		—
Other investing activities, net		1,082			16,127			7,276			—			24,485

Cash used in investing activities		(125,415	)		(126,826	)		—			(205,413	)		(457,654	)

Financing activities:
Net (repayments) borrowings of debt		(109,075	)		(2,386	)		550			—			(110,911	)
Dividends paid		(29,229	)		—			—			—			(29,229	)
Intercompany repayments		—			(171,351	)		(34,062	)		205,413			—
Common stock repurchases		(114,774	)		—			—			—			(114,774	)
Other financing activities, net		23,426			—			—			—			23,426

Cash used in financing activities		(229,652	)		(173,737	)		(33,512	)		205,413			(231,488	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(570	)		—			(570	)

Decrease in cash and cash equivalents		(14,106	)		(4,326	)		(6,596	)		—			(25,028	)
Cash and cash equivalents at beginning of period		35,369			23,527			18,127			—			77,023

Cash and cash equivalents at end of period	$	21,263		$	19,201		$	11,531		$	—		$	51,995

RELIANCE STEEL & ALUMINUM CO.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended December 31, 2010 and 2009:


	March 31,		June 30,			September 30,		December 31,
	(in thousands, except per share amounts)
2010:
Net sales	$	1,454,075	$	1,620,585		$	1,653,798	$	1,584,337
Cost of sales	$	1,075,962	$	1,203,810		$	1,257,629	$	1,190,486
Gross profit ⁽¹⁾	$	378,113	$	416,775		$	396,169	$	393,851
Net income	$	44,987	$	62,805		$	49,285	$	40,772
Net income attributable to Reliance	$	44,650	$	61,599		$	48,650	$	39,454
Diluted earnings per common share attributable to Reliance shareholders	$	0.60	$	0.83		$	0.65	$	0.53
Basic earnings per common share attributable to Reliance shareholders	$	0.60	$	0.83		$	0.65	$	0.53
2009:
Net sales	$	1,558,535	$	1,242,978		$	1,243,373	$	1,273,246
Cost of sales	$	1,204,093	$	960,093		$	886,904	$	867,521
Gross profit ⁽¹⁾	$	354,442	$	282,885		$	356,469	$	405,725
Net income (loss)	$	20,388	$	(5,556	)	$	42,077	$	92,267
Net income (loss) attributable to Reliance	$	20,118	$	(5,787	)	$	41,757	$	92,070
Diluted earnings (loss) per common share attributable to Reliance shareholders	$	0.27	$	(0.08	)	$	0.57	$	1.25
Basic earnings (loss) per common share attributable to Reliance shareholders	$	0.27	$	(0.08	)	$	0.57	$	1.25

⁽¹⁾

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year shown elsewhere in the Annual Report on Form 10-K.

RELIANCE STEEL & ALUMINUM CO.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(In thousands)


Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Deductions			Amounts Charged to Other Accounts			Balance at End of Period
Year Ended December 31, 2008 Allowance for doubtful accounts	$	16,153	$	6,065	$	8,075	⁽²⁾	$	7,875	⁽¹⁾	$	22,018
Year Ended December 31, 2009 Allowance for doubtful accounts	$	22,018	$	18,775	$	19,647	⁽²⁾	$	123		$	21,269
Year Ended December 31, 2010 Allowance for doubtful accounts	$	21,269	$	11,911	$	13,817	⁽²⁾	$	(2,142	)⁽³⁾	$	17,221

⁽¹⁾	Additions from acquisitions charged to goodwill.

⁽²⁾	Uncollectible accounts written off, net of recoveries.

⁽³⁾	Amount includes $0.3 million of additions from acquisitions charged to goodwill offset by the reclassification of $2.4 million allowance balance along with related trade receivable balance of $2.4 million to a note receivable.

See accompanying report of independent registered public accounting firm.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There have been no changes in or disagreements with the Company’s accountants on any accounting or financial disclosure issues.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of the Company’s management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2010 at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

An evaluation was also performed under the supervision and with the participation of our management, including our CEO and CFO, of any change in our internal controls over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. That evaluation did not identify any change in our internal controls over financial reporting that occurred during our latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.

The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

Item 9B. Other Information.

None.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Reliance Steel & Aluminum Co.:

We have audited Reliance Steel & Aluminum Co.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Reliance Steel & Aluminum Co.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Reliance Steel & Aluminum Co. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Reliance Steel & Aluminum Co. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, equity, and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 25, 2011 expressed an unqualified opinion on those consolidated financial statements and the financial statement schedule.

/s/ KPMG LLP

Los Angeles, California

February 25, 2011

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The narrative and tabular information included under the caption “Management” and under the caption “Compliance with Section 16(a)” of the Proxy Statement for the annual meeting of shareholders to be held on May 18, 2011 are incorporated herein by reference.

Item 11. Executive Compensation.

The narrative and tabular information, including footnotes thereto, included under the caption “Executive Compensation” of the Proxy Statement are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The narrative and tabular information, including footnotes thereto, included under the caption “Securities Ownership of Certain Beneficial Owners and Management” of the Proxy Statement are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence.

The narrative information included under the caption “Certain Transactions” of the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The narrative and tabular information included under the caption “Independent Registered Public Accounting Firm” of the Proxy Statement is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

The following documents are filed as part of this report:

(1)

Financial Statements (included in Item 8).

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2010 and 2009

Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008

Consolidated Statements of Equity for the Years Ended December 31, 2010, 2009 and 2008

Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008

Notes to the Consolidated Financial Statements

Quarterly Results of Operations (Unaudited) for the Years Ended December 31, 2010 and 2009

(2)

Financial Statement Schedules

Schedule II — Valuation and Qualifying Accounts

All other schedules have been omitted since the required information is not significant or is included in the Consolidated Financial Statements or notes thereto or is not applicable.

(3)

Exhibits


Exhibit Number		Description

2.01		Agreement and Plan of Merger dated as of January 17, 2006, among Reliance Steel & Aluminum Co., RSAC Acquisition Corp. and Earle M. Jorgensen Company.⁽¹⁾

3.01		Registrant’s Restated Articles of Incorporation.⁽²⁾

3.02		Registrant’s Amended and Restated Bylaws.⁽³⁾

3.03		Amendment to Registrant’s Restated Articles of Incorporation dated May 20, 1998.⁽⁴⁾

4.01		Indenture dated November 20, 2006 by and among Reliance, the Subsidiary Guarantors named therein and Wells Fargo Bank, a National Association and Forms of the Notes and the Exchange Notes under the Indenture.⁽⁵⁾

4.02		Earle M. Jorgensen Company 2004 Stock Incentive Plan.⁽⁶⁾

4.03		Amended and Restated Credit Agreement dated November 9, 2006 by and among Registrant and RSAC Management Corp., collectively as Borrowers, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁷⁾

4.04		First Amendment to Amended and Restated Credit Agreement dated as of July 31, 2008 by and among Registrant and RSAC Management Corp., collectively as Borrowers, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁸⁾

4.05		Second Amendment to Amended and Restated Credit Agreement dated as of September 25, 2009 by and among Registrant, as Borrower, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁹⁾

4.06		Fourth Supplemental Indenture, dated August 1, 2008 by and among The Bank of New York Mellon, as Trustee, and PNA Group, Inc. and the subsidiaries of PNA Group, Inc. that are guarantors with respect thereto.⁽⁸⁾

10.01		Registrant’s Form of Indemnification Agreement for officers and directors.⁽²⁾

10.02		Registrant’s Supplemental Executive Retirement Plan dated January 1, 1996.⁽⁴⁾

10.03		Registrant’s Amended and Restated Directors Stock Option Plan.⁽¹⁰⁾

10.04		Registrant’s Amended and Restated Stock Option and Restricted Stock Plan and the Forms of agreements related thereto.⁽¹¹⁾

10.05		Omnibus Amendment to Note Purchase Agreements.⁽¹²⁾

10.06		Form of Note Purchase Agreement dated as of July 1, 2003 by and between the Registrant and each of the Purchasers listed on the Schedule thereto.⁽¹³⁾

10.07		Omnibus Amendment No. 2 to Note Purchase Agreements.⁽¹⁴⁾

10.08		Corporate Officers Bonus Plan effective January 1, 2008.⁽¹⁵⁾

10.09		Registrant’s Deferred Compensation Plan effective December 1, 2008.⁽¹⁶⁾

10.10		Registrant’s Supplemental Executive Retirement Plan (Amended and Restated effective as of January 1, 2009).⁽¹⁶⁾

14.01		Registrant’s Code of Conduct.⁽¹⁷⁾


Exhibit Number		Description

21		Subsidiaries of Registrant.

23.1		Consent of Independent Registered Public Accounting Firm KPMG LLP.

24		Power of Attorney.⁽¹⁸⁾

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document.⁽¹⁹⁾

101.SCH		XBRL Taxonomy Extension Schema Document⁽¹⁹⁾

101.CAL		XBRL Taxonomy Calculation Linkbase Document.⁽¹⁹⁾

101.DEF		XBRL Taxonomy Extension Definition Linkbase.⁽¹⁹⁾

101.LAB		XBRL Taxonomy Label Linkbase Document.⁽¹⁹⁾

101.PRE		XBRL Taxonomy Presentation Linkbase Document.⁽¹⁹⁾

⁽¹⁾	Incorporated by reference from Exhibit 2.1 to Registrant’s Current Report on Form 8-K, originally filed on January 19, 2006.

⁽²⁾	Incorporated by reference from Exhibits 3.01 and 10.03, respectively, to Registrant’s Registration Statement on Form S-1, as amended, originally filed on May 25, 1994 as Commission File No. 33-79318.

⁽³⁾	Incorporated by reference from Exhibit 3.01 to Registrant’s Current Report on Form 8-K dated October 14, 2009.

⁽⁴⁾	Incorporated by reference from Exhibit 10.06 to Registrant’s Annual Report on Form 10-K, for the year ended December 31, 1996.

⁽⁵⁾	Incorporated by reference from Exhibits 10.1 and 10.2 to Registrant’s Current Report on Form 8-K dated November 20, 2006.

⁽⁶⁾	Incorporated by reference from Exhibits 4.1 through 4.7 to Registrant’s Registration Statement on Form S-8, filed on April 11, 2006 as Commission File No. 333-133204.

⁽⁷⁾	Incorporated by reference from Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated November 9, 2006.

⁽⁸⁾	Incorporated by reference from Exhibits 4.2 and 4.3, respectively, to Registrant’s Current Report on Form 8-K, filed on August 7, 2008.

⁽⁹⁾	Incorporated by reference from Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated September 28, 2009.

⁽¹⁰⁾	Incorporated by reference from Appendix A to Registrant’s Proxy Statement for Annual Meeting of Shareholders held May 18, 2005.

⁽¹¹⁾	Incorporated by reference from Exhibits 4.1, 4.2 and 4.3 to Registrant’s Registration Statement on Form S-8 filed on August 4, 2006 as Commission File No. 333-136290.

⁽¹²⁾	Incorporated by reference from Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated June 13, 2005.

⁽¹³⁾	Incorporated by reference from Exhibit 2.2 to Registrant’s Current Report on Form 8-K dated July 1, 2003.

⁽¹⁴⁾	Incorporated by reference from Exhibit 4.3 to Registrant’s Current Report on Form 8-K dated April 3, 2006.

⁽¹⁵⁾	Incorporated by reference from Appendix A to Registrant’s Proxy Statement for Annual Meeting of Shareholders held May 21, 2008

⁽¹⁶⁾	Incorporated by reference from Exhibits 10.14 and 10.15, respectively, to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.

⁽¹⁷⁾	Incorporated by reference from Exhibit 14.01 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005.

⁽¹⁸⁾	Set forth on page 86 of this report.

⁽¹⁹⁾

Furnished with this report. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on this 25^th day of February 2011.


RELIANCE STEEL & ALUMINUM CO.

By:		/s/ David H. Hannah
		David H. Hannah
		Chairman and Chief Executive Officer

POWER OF ATTORNEY

The officers and directors of Reliance Steel & Aluminum Co. whose signatures appear below hereby constitute and appoint David H. Hannah and Gregg J. Mollins, or either of them, to act severally as attorneys-in-fact and agents, with power of substitution and resubstitution, for each of them in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons in the capacities and on the dates indicated.


Signatures	Title	Date

/s/ DAVID H. HANNAH David H. Hannah	Chief Executive Officer (Principal Executive Officer); Chairman of the Board; Director	February 25, 2011

/s/ GREGG J. MOLLINS Gregg J. Mollins	President and Chief Operating Officer; Director	February 25, 2011

/s/ KARLA R. LEWIS Karla R. Lewis	Executive Vice President and Chief Financial Officer (Principal Financial Officer; Principal Accounting Officer)	February 25, 2011

/s/ JOHN G. FIGUEROA John G. Figueroa	Director	February 25, 2011

/s/ THOMAS W. GIMBEL Thomas W. Gimbel	Director	February 25, 2011

/s/ DOUGLAS M. HAYES Douglas M. Hayes	Director	February 25, 2011

/s/ MARK V. KAMINSKI Mark V. Kaminski	Director	February 25, 2011

/s/ FRANKLIN R. JOHNSON Franklin R. Johnson	Director	February 25, 2011

/s/ ANDREW G. SHARKEY III Andrew G. Sharkey III	Director	February 25, 2011

/s/ LESLIE A. WAITE Leslie A. Waite	Director	February 25, 2011

EXHIBIT INDEX


Exhibit Number	Description	Sequentially Numbered Page

2.01	Agreement and Plan of Merger dated as of January 17, 2006, among Reliance Steel & Aluminum Co., RSAC Acquisition Corp. and Earle M. Jorgensen Company.⁽¹⁾

3.01	Registrant’s Restated Articles of Incorporation.⁽²⁾

3.02	Registrant’s Amended and Restated Bylaws.⁽³⁾

3.03	Amendment to Registrant’s Restated Articles of Incorporation dated May 20, 1998.⁽⁴⁾

4.01	Indenture dated November 20, 2006 by and among Reliance, the Subsidiary Guarantors named therein and Wells Fargo Bank, a National Association and Forms of the Notes and the Exchange Notes under the Indenture.⁽⁵⁾

4.02	Earle M. Jorgensen Company 2004 Stock Incentive Plan.⁽⁶⁾

4.03	Amended and Restated Credit Agreement dated November 9, 2006 by and among Registrant and RSAC Management Corp., collectively as Borrowers, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁷⁾

4.04	First Amendment to Amended and Restated Credit Agreement dated as of July 31, 2008 by and among Registrant and RSAC Management Corp., collectively as Borrowers, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁸⁾

4.05	Second Amendment to Amended and Restated Credit Agreement dated as of September 25, 2009 by and among Registrant, as Borrower, and Bank of America, N.A., as Administrative Agent, and the banks identified as lenders therein.⁽⁹⁾

4.06	Fourth Supplemental Indenture, dated August 1, 2008 by and among The Bank of New York Mellon, as Trustee, and PNA Group, Inc. and the subsidiaries of PNA Group, Inc. that are guarantors with respect thereto.⁽⁸⁾

10.01	Registrant’s Form of Indemnification Agreement for officers and directors.⁽²⁾

10.02	Registrant’s Supplemental Executive Retirement Plan dated January 1, 1996.⁽⁴⁾

10.03	Registrant’s Amended and Restated Directors Stock Option Plan.⁽¹⁰⁾

10.04	Registrant’s Amended and Restated Stock Option and Restricted Stock Plan and the Forms of agreements related thereto.⁽¹¹⁾

10.05	Omnibus Amendment to Note Purchase Agreements.⁽¹²⁾

10.06	Form of Note Purchase Agreement dated as of July 1, 2003 by and between the Registrant and each of the Purchasers listed on the Schedule thereto.⁽¹³⁾

10.07	Omnibus Amendment No. 2 to Note Purchase Agreements.⁽¹⁴⁾

10.08	Corporate Officers Bonus Plan effective January 1, 2008.⁽¹⁵⁾

10.09	Registrant’s Deferred Compensation Plan effective December 1, 2008.⁽¹⁶⁾

10.10	Registrant’s Supplemental Executive Retirement Plan (Amended and Restated effective as of January 1, 2009).⁽¹⁶⁾

14.01	Registrant’s Code of Conduct.⁽¹⁷⁾

21	Subsidiaries of Registrant.

23.1	Consent of Independent Registered Public Accounting Firm KPMG LLP.

24	Power of Attorney.⁽¹⁸⁾

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document.⁽¹⁹⁾

101.SCH	XBRL Taxonomy Extension Schema Document⁽¹⁹⁾

101.CAL	XBRL Taxonomy Calculation Linkbase Document.⁽¹⁹⁾

101.DEF	XBRL Taxonomy Extension Definition Linkbase.⁽¹⁹⁾

101.LAB	XBRL Taxonomy Label Linkbase Document.⁽¹⁹⁾

101.PRE	XBRL Taxonomy Presentation Linkbase Document.⁽¹⁹⁾

⁽¹⁾	Incorporated by reference from Exhibit 2.1 to Registrant’s Current Report on Form 8-K, originally filed on January 19, 2006.

⁽²⁾	Incorporated by reference from Exhibits 3.01 and 10.03, respectively, to Registrant’s Registration Statement on Form S-1, as amended, originally filed on May 25, 1994 as Commission File No. 33-79318.

⁽³⁾	Incorporated by reference from Exhibit 3.01 to Registrant’s Current Report on Form 8-K dated October 14, 2009.

⁽⁴⁾	Incorporated by reference from Exhibit 10.06 to Registrant’s Annual Report on Form 10-K, for the year ended December 31, 1996.

⁽⁵⁾	Incorporated by reference from Exhibits 10.1 and 10.2 to Registrant’s Current Report on Form 8-K dated November 20, 2006.

⁽⁶⁾	Incorporated by reference from Exhibits 4.1 through 4.7 to Registrant’s Registration Statement on Form S-8, filed on April 11, 2006 as Commission File No. 333-133204.

⁽⁷⁾	Incorporated by reference from Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated November 9, 2006.

⁽⁸⁾	Incorporated by reference from Exhibits 4.2 and 4.3, respectively, to Registrant’s Current Report on Form 8-K, filed on August 7, 2008.

⁽⁹⁾	Incorporated by reference from Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated September 28, 2009.

⁽¹⁰⁾	Incorporated by reference from Appendix A to Registrant’s Proxy Statement for Annual Meeting of Shareholders held May 18, 2005.

⁽¹¹⁾	Incorporated by reference from Exhibits 4.1, 4.2 and 4.3 to Registrant’s Registration Statement on Form S-8 filed on August 4, 2006 as Commission File No. 333-136290.

⁽¹²⁾	Incorporated by reference from Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated June 13, 2005.

⁽¹³⁾	Incorporated by reference from Exhibit 2.2 to Registrant’s Current Report on Form 8-K dated July 1, 2003.

⁽¹⁴⁾	Incorporated by reference from Exhibit 4.3 to Registrant’s Current Report on Form 8-K dated April 3, 2006.

⁽¹⁵⁾	Incorporated by reference from Appendix A to Registrant’s Proxy Statement for Annual Meeting of Shareholders held May 21, 2008

⁽¹⁶⁾	Incorporated by reference from Exhibits 10.14 and 10.15, respectively, to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.

⁽¹⁷⁾	Incorporated by reference from Exhibit 14.01 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005.

⁽¹⁸⁾	Set forth on page 86 of this report.

⁽¹⁹⁾