10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2020

OR

☐ 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

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 95-1142616 (I.R.S. Employer Identification No.)

350 South Grand Avenue, Suite 5100

Los Angeles, California 90071

(Address of principal executive offices, including zip code)

(213) 687-7700

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	RS	New York Stock Exchange

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  ⌧  No  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes  ⌧  No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 27, 2020, 63,640,761 shares of the registrant’s common stock, $0.001 par value, were outstanding.

RELIANCE STEEL & ALUMINUM CO.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION			1
	Item 1.	Financial Statements
		Unaudited Consolidated Balance Sheets	1
		Unaudited Consolidated Statements of Income	2
		Unaudited Consolidated Statements of Comprehensive Income	3
		Unaudited Consolidated Statements of Equity	4
		Unaudited Consolidated Statements of Cash Flows	5
		Notes to Unaudited Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
	Item 4.	Controls and Procedures	24
PART II — OTHER INFORMATION			25
	Item 1.	Legal Proceedings	25
	Item 1A.	Risk Factors	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
	Item 3.	Defaults Upon Senior Securities	26
	Item 4.	Mine Safety Disclosures	26
	Item 5.	Other Information	27
	Item 6.	Exhibits	28
SIGNATURES			29

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares which are reflected in thousands and par value)

	March 31,		December 31,
	2020		2019*
ASSETS
Current assets:
Cash and cash equivalents	$	172.1	$	174.3
Accounts receivable, less allowance for doubtful accounts of $20.6 at March 31, 2020 and $17.8 at December 31, 2019		1,216.1		1,067.8
Inventories		1,630.0		1,645.7
Prepaid expenses and other current assets		68.2		85.2
Income taxes receivable		—		37.2
Total current assets		3,086.4		3,010.2
Property, plant and equipment:
Land		239.5		239.8
Buildings		1,211.5		1,195.1
Machinery and equipment		2,062.5		2,044.4
Accumulated depreciation		(1,721.8)		(1,684.1)
Property, plant and equipment, net		1,791.7		1,795.2
Operating lease right-of-use assets		201.5		201.5
Goodwill		1,998.8		2,003.8
Intangible assets, net		928.0		1,031.1
Cash surrender value of life insurance policies, net		35.2		42.7
Other assets		43.9		46.6
Total assets	$	8,085.5	$	8,131.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	347.0	$	275.0
Accrued expenses		85.8		67.4
Accrued compensation and retirement costs		127.9		172.1
Accrued insurance costs		46.5		43.4
Current maturities of long-term debt and short-term borrowings		64.8		64.9
Current maturities of operating lease liabilities		52.4		52.5
Income taxes payable		11.2		—
Total current liabilities		735.6		675.3
Long-term debt		1,772.3		1,523.6
Operating lease liabilities		149.7		149.5
Long-term retirement costs		81.2		87.0
Other long-term liabilities		12.6		12.3
Deferred income taxes		434.8		469.3
Commitments and contingencies
Equity:
Preferred stock, $0.001 par value:
Authorized shares — 5,000
None issued or outstanding		—		—
Common stock and additional paid-in capital, $0.001 par value:
Authorized shares — 200,000
Issued and outstanding shares — 63,641 at March 31, 2020 and 66,854 at December 31, 2019		0.1		122.2
Retained earnings		5,028.6		5,189.5
Accumulated other comprehensive loss		(136.5)		(105.1)
Total Reliance stockholders’ equity		4,892.2		5,206.6
Noncontrolling interests		7.1		7.5
Total equity		4,899.3		5,214.1
Total liabilities and equity	$	8,085.5	$	8,131.1

* Amounts were derived from audited financial statements.

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except number of shares which are reflected in thousands and per share amounts)

	Three Months Ended
	March 31,
	2020		2019
Net sales	$	2,572.9	$	2,956.6
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		1,792.2		2,089.7
Warehouse, delivery, selling, general and administrative		522.7		532.1
Depreciation and amortization		57.0		54.0
Impairment of long-lived assets		97.7		—
		2,469.6		2,675.8
Operating income		103.3		280.8
Other expense:
Interest expense		16.9		24.2
Other expense, net		3.3		1.1
Income before income taxes		83.1		255.5
Income tax provision		20.2		63.9
Net income		62.9		191.6
Less: Net income attributable to noncontrolling interests		1.2		1.5
Net income attributable to Reliance	$	61.7	$	190.1
Earnings per share attributable to Reliance stockholders:
Diluted	$	0.92	$	2.80
Basic	$	0.93	$	2.83
Shares used in computing earnings per share:
Diluted		67,248		67,926
Basic		66,337		67,127
Cash dividends per share	$	0.625	$	0.55

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Three Months Ended
	March 31,
	2020		2019
Net income	$	62.9	$	191.6
Other comprehensive (loss) income:
Foreign currency translation (loss) gain		(31.4)		6.8
Total other comprehensive (loss) income		(31.4)		6.8
Comprehensive income		31.5		198.4
Less: Comprehensive income attributable to noncontrolling interests		1.2		1.5
Comprehensive income attributable to Reliance	$	30.3	$	196.9

See accompanying notes to unaudited consolidated financial statements.

3

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except number of shares which are reflected in thousands and per share amounts)

	Reliance Stockholders’ Equity
	Common Stock					Accumulated
	and Additional					Other		Non-
	Paid-In Capital			Retained		Comprehensive		controlling
	Shares	Amount		Earnings		(Loss) Income		Interests		Total
Balance at January 1, 2019	66,882	$	136.4	$	4,637.9	$	(102.7)	$	7.9	$	4,679.5
Net income	—		—		190.1		—		1.5		191.6
Other comprehensive income	—		—		—		6.8		—		6.8
Stock-based compensation, net	333		(1.3)		—		—		—		(1.3)
Stock options exercised	20		0.8		—		—		—		0.8
Cash dividends — $0.55 per share and dividend equivalents	—		—		(38.2)		—		—		(38.2)
Balance at March 31, 2019	67,235	$	135.9	$	4,789.8	$	(95.9)	$	9.4	$	4,839.2
Balance at January 1, 2020	66,854	$	122.2	$	5,189.5	$	(105.1)	$	7.5	$	5,214.1
Net income	—		—		61.7		—		1.2		62.9
Other comprehensive loss	—		—		—		(31.4)		—		(31.4)
Noncontrolling interest purchased	—		(6.9)		—		—		(1.1)		(8.0)
Dividend to noncontrolling interest holder	—		—		—		—		(0.5)		(0.5)
Stock-based compensation, net	111		3.8		—		—		—		3.8
Stock options exercised	6		0.3		—		—		—		0.3
Repurchase of common shares	(3,330)		(119.3)		(180.7)		—		—		(300.0)
Cash dividends — $0.625 per share and dividend equivalents	—		—		(41.9)		—		—		(41.9)
Balance at March 31, 2020	63,641	$	0.1	$	5,028.6	$	(136.5)	$	7.1	$	4,899.3

See accompanying notes to unaudited consolidated financial statements.

4

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Three Months Ended
	March 31,
	2020		2019
Operating activities:
Net income	$	62.9	$	191.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		57.0		54.0
Impairment of long-lived assets		97.7		—
Provision for uncollectible accounts		3.8		1.7
Deferred income tax benefit		(33.5)		(0.1)
Stock-based compensation expense		8.9		8.2
Other		9.7		1.7
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable		(155.8)		(180.7)
Inventories		12.4		(119.0)
Prepaid expenses and other assets		68.3		41.2
Accounts payable and other liabilities		39.4		118.6
Net cash provided by operating activities		170.8		117.2
Investing activities:
Purchases of property, plant and equipment		(55.5)		(53.0)
Other		0.5		4.3
Net cash used in investing activities		(55.0)		(48.7)
Financing activities:
Proceeds from long-term debt borrowings		667.0		374.0
Principal payments on long-term debt		(419.0)		(391.0)
Dividends and dividend equivalents paid		(41.9)		(39.6)
Share repurchases		(300.0)		—
Noncontrolling interest purchased		(8.0)		—
Other		(5.5)		(8.8)
Net cash used in financing activities		(107.4)		(65.4)
Effect of exchange rate changes on cash and cash equivalents		(10.6)		2.3
(Decrease) increase in cash and cash equivalents		(2.2)		5.4
Cash and cash equivalents at beginning of year		174.3		128.2
Cash and cash equivalents at end of period	$	172.1	$	133.6
Supplemental cash flow information:
Interest paid during the period	$	6.0	$	13.6
Income taxes paid during the period, net	$	5.2	$	7.9

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

Note 1. Basis of Presentation

Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, our financial statements reflect all adjustments, which are of a normal recurring nature, necessary for presentation of financial statements for interim periods in accordance with U.S. GAAP. The results of operations for the first quarter of 2020 are not necessarily indicative of the results for the full year ending December 31, 2020. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2019, included in the Reliance Steel & Aluminum Co. (“Reliance,” the “Company,” “we,” “our” or “us”) Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Our consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. During the first quarter of 2020, we purchased the remaining 49% noncontrolling interest of Feralloy Processing Company, which increased our ownership from 51% to 100%. See Note 9—“Equity” for further discussion of our noncontrolling interest transaction. Our investments in unconsolidated subsidiaries are recorded under the equity method of accounting.

Note 2.  Impact of Recently Issued Accounting Guidance

Impact of Recently Issued Accounting Standards—Adopted

Financial Instruments – Credit Losses—In June 2016, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that changes how entities account for credit losses for most financial assets, including the allowance for doubtful accounts for trade receivables, and certain other instruments that are not measured at fair value through net income. The new guidance replaces the current incurred loss model with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset. We adopted the new standard on January 1, 2020. The adoption of this accounting change did not have a material impact on our consolidated financial statements.

Impact of Recently Issued Accounting Standards—Not Yet Adopted

Income Taxes—In December 2019, the FASB issued accounting changes that simplify the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2020, or January 1, 2021 for the Company. Early adoption is permitted. The adoption of this standard will not have a material impact on our consolidated financial statements.

Reference Rate Reform—In March 2020, the FASB issued accounting changes that provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The accounting changes may be applied prospectively through December 31, 2022. The Company expects to adopt this guidance for any contracts that are modified as a result of reference rate reform. We are continuing

6

to evaluate which contracts may be impacted by reference rate reform, but believe our use of these accounting changes will not have a material impact on our consolidated financial statements.

Note 3. Revenues

The following table presents our sales disaggregated by product and service. Certain sales taxes and value-added taxes collected from customers are excluded from our reported net sales.

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Carbon steel	$	1,316.2	$	1,593.6
Aluminum		512.2		565.8
Stainless steel		404.9		406.5
Alloy		151.4		184.3
Toll processing and logistics		112.5		111.7
Other and eliminations		75.7		94.7
Total	$	2,572.9	$	2,956.6

Note 4. Goodwill

The change in the carrying amount of goodwill is as follows:

	(in millions)
Balance at January 1, 2020	$	2,003.8
Purchase price allocation adjustments		0.6
Foreign currency translation loss		(5.6)
Balance at March 31, 2020	$	1,998.8

We had no accumulated impairment losses related to goodwill at March 31, 2020.

The purchase price allocation for our 2019 acquisition of Fry Steel Company is pending the completion of purchase price adjustments, based on tangible and intangible asset valuations, and the completion of pre-acquisition period tax returns.

Note 5. Intangible Assets, net

Intangible assets, net consisted of the following:

		March 31, 2020				December 31, 2019
	Weighted Average	Gross				Gross
	Amortizable	Carrying		Accumulated		Carrying		Accumulated
	Life in Years	Amount		Amortization		Amount		Amortization
		(in millions)
Intangible assets subject to amortization:
Covenants not to compete	5.0	$	0.7	$	(0.4)	$	0.7	$	(0.4)
Customer lists/relationships	15.5		680.2		(445.4)		710.1		(438.1)
Software	10.0		8.1		(8.1)		8.1		(8.1)
Other	7.2		1.0		(0.9)		1.1		(0.9)
			690.0		(454.8)		720.0		(447.5)
Intangible assets not subject to amortization:
Trade names			692.8		—		758.6		—
		$	1,382.8	$	(454.8)	$	1,478.6	$	(447.5)

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Amortization expense for intangible assets was $10.8 million for the first quarters of 2020 and 2019. Foreign currency translation losses related to intangible assets, net, were $3.5 million in the first quarter of 2020 compared to foreign currency translation gains of $1.2 million in the first quarter of 2019.

In the first quarter of 2020, we recognized impairment losses of $64.1 million on our trade name and $24.7 million on our customer lists/relationships intangible assets related to certain of our energy-related businesses. See Note 12—“Impairment and Restructuring Charge” for further discussion of our impairment losses.

The following is a summary of estimated future amortization expense for the remaining nine months of 2020 and each of the succeeding five years:

	(in millions)
2020 (remaining nine months)	$	26.4
2021		34.7
2022		34.0
2023		29.7
2024		26.2

Note 6. Debt

Debt consisted of the following:

	March 31,		December 31,
	2020		2019
	(in millions)
Unsecured revolving credit facility due September 30, 2021	$	631.0	$	368.0
Unsecured term loan due from June 30, 2020 to September 30, 2021		450.0		465.0
Senior unsecured notes due April 15, 2023		500.0		500.0
Senior unsecured notes due November 15, 2036		250.0		250.0
Other notes and revolving credit facilities		13.2		13.3
Total		1,844.2		1,596.3
Less: unamortized discount and debt issuance costs		(7.1)		(7.8)
Less: amounts due within one year and short-term borrowings		(64.8)		(64.9)
Total long-term debt	$	1,772.3	$	1,523.6

Unsecured Credit Facility

On September 30, 2016, we entered into a $2.1 billion unsecured five-year credit agreement (“Credit Agreement”) comprised of a $1.5 billion unsecured revolving credit facility and a $600.0 million unsecured term loan, with an option to increase the revolving credit facility up to an additional $500.0 million at our request, subject to approval of the lenders and certain other customary conditions. The term loan due September 30, 2021 amortizes in quarterly installments, with an annual amortization of 10% until June 2021, with the balance to be paid at maturity. Interest on borrowings under the Credit Agreement at March 31, 2020 was at variable rates based on LIBOR plus 1.00% or the bank prime rate and we pay a commitment fee at an annual rate of 0.125% on the unused portion of the revolving credit facility. The applicable margins over LIBOR and base rate borrowings, along with commitment fees, are subject to adjustment every quarter based on our leverage ratio, as defined in the Credit Agreement. All borrowings under the Credit Agreement may be prepaid without penalty.

Weighted average interest rates on borrowings outstanding on the revolving credit facility were 2.14% and 3.69% as of March 31, 2020 and December 31, 2019, respectively. Weighted average interest rates on borrowings outstanding on the term loan were 1.99% and 2.80% as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, we had $631.0 million of outstanding borrowings, $37.5 million of letters of credit issued and $831.5 million available for borrowing on the revolving credit facility.

8

Senior Unsecured Notes

On November 20, 2006, we entered into an indenture (the “2006 Indenture”) for the issuance of $600.0 million of unsecured debt securities. The total debt issued was comprised of two tranches, (a) $350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid on November 15, 2016 and (b) $250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036.

On April 12, 2013, we entered into an indenture (the “2013 Indenture” and, together with the 2006 Indenture, the “Indentures”) for the issuance of $500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing on April 15, 2023. 

Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. If we experience a change in control accompanied by a downgrade in our credit rating, we will be required to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest.

Other Notes and Revolving Credit Facilities

A revolving credit facility with a credit limit of $7.7 million is in place for an operation in Asia with an outstanding balance of $4.2 million and $4.3 million as of March 31, 2020 and December 31, 2019, respectively.

Various industrial revenue bonds had combined outstanding balances of $9.0 million as of March 31, 2020 and December 31, 2019, and have maturities through 2027.

Covenants

The Credit Agreement and the Indentures include customary representations, warranties, covenants and events of default provisions. The covenants under the Credit Agreement include, among other things, two financial maintenance covenants that require us to comply with a minimum interest coverage ratio and a maximum leverage ratio. We were in compliance with all financial covenants in our Credit Agreement at March 31, 2020.

Note 7.  Leases

Our metals service center leases are comprised of processing and distribution facilities, equipment, trucks and trailers, ground leases and other leased spaces, such as depots, sales offices, storage and data centers. We also lease various office buildings, including our corporate headquarters in Los Angeles, California. Our leases of facilities and other spaces expire at various times through 2031 and our ground leases expire at various times through 2068. Nearly all of our leases are operating leases. Information regarding our insignificant finance leases is not included as it is not meaningful to an understanding of our lease obligations.  

The following is a summary of our lease cost:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Operating lease cost	$	21.1	$	20.8

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Supplemental cash flow and balance sheet information is presented below:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Supplemental cash flow information
Cash payments for operating leases	$	21.2	$	20.2
Right-of-use assets obtained in exchange for operating lease obligations	$	14.5	$	11.7
	March 31,		December 31,
	2020		2019
Other lease information
Weighted average remaining lease term—operating leases		5.5 years		5.6 years
Weighted average discount rate—operating leases		4.2%		4.3%

Maturities of operating lease liabilities as of March 31, 2020 are as follows:

	(in millions)
2020 (remaining nine months)	$	45.1
2021		50.4
2022		39.0
2023		30.0
2024		23.1
Thereafter		41.9
Total operating lease payments		229.5
Less: imputed interest		(27.4)
Total operating lease liabilities	$	202.1

Note 8.  Income Taxes

Our effective income tax rates for the first quarters of 2020 and 2019 were 24.3% and 25.0%, respectively. The differences between our effective income tax rates and the U.S. federal statutory rate of 21% were mainly due to state income taxes partially offset by the effects of company-owned life insurance policies.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer’s share of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts the CARES Act may have on our business.

Note 9. Equity

Dividends

On April 21, 2020, our Board of Directors declared the 2020 second quarter cash dividend of $0.625 per share of common stock, payable on June 12, 2020 to stockholders of record as of May 29, 2020.

During the first quarters of 2020 and 2019, we declared and paid quarterly dividends of $0.625 and $0.55 per share, or $41.0 million and $37.0 million in total, respectively. In addition, we paid $0.9 million and $2.6 million in dividend equivalents with respect to vested restricted stock units (“RSUs”) during the first quarters of 2020 and 2019, respectively.

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Stock-Based Compensation

We make annual grants of long-term incentive awards to officers and key employees in the forms of service-based and performance-based RSUs that have approximately 3-year vesting periods. The performance-based RSU awards are subject to both service and performance goal criteria. We also make annual grants of stock to the non-employee members of the Board of Directors that vest immediately upon grant. The fair value of the RSUs and stock grants is determined based on the closing stock price of our common stock on the grant date.

In the first quarters of 2020 and 2019, we made payments of $5.1 million and $9.5 million, respectively, to tax authorities on our employees’ behalf for shares withheld related to net share settlements. These payments are reflected in the Stock-based compensation, net caption of our consolidated statements of equity.

A summary of the status of our unvested service-based and performance-based RSUs as of March 31, 2020 and changes during the quarter then ended is as follows:

		Weighted
		Average
		Grant Date
		Fair Value
Unvested RSUs	Shares	Per RSU
Unvested at January 1, 2020	859,005	$	86.40
Granted(1)	540,547		82.81
Vested	(721)		84.54
Cancelled or forfeited	(3,964)		85.79
Unvested at March 31, 2020	1,394,867	$	85.01
Shares reserved for future grants (all plans)	494,905

(1) Comprised of 330,144 service-based RSUs and 210,403 performance-based RSUs granted in March 2020 with a fair value of $82.81 per RSU. The service-based RSUs cliff vest on December 1, 2022 and the performance-based RSUs are subject to a three-year performance period ending December 31, 2022.

Share Repurchase Plan

On October 23, 2018, our Board of Directors amended our share repurchase plan, increasing the total authorized number of shares available to be repurchased by 5.0 million and extending the duration of the plan through December 31, 2021. As of March 31, 2020, we had authorization under the plan to repurchase approximately 3.1 million shares, or about 5% of our current outstanding shares. Repurchased and subsequently retired shares are restored to the status of authorized but unissued shares. During the first quarter of 2020, we repurchased approximately 3.3 million shares at an average cost of $90.09, for a total of $300.0 million. There were no share repurchases in the first quarter of 2019.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss included the following:

			Pension and		Accumulated
	Foreign Currency		Postretirement		Other
	Translation		Benefit Adjustments,		Comprehensive
	Loss		Net of Tax		Loss
	(in millions)
Balance as of January 1, 2020	$	(64.4)	$	(40.7)	$	(105.1)
Current-period change		(31.4)		—		(31.4)
Balance as of March 31, 2020	$	(95.8)	$	(40.7)	$	(136.5)

Foreign currency translation adjustments have not been adjusted for income taxes. Pension and postretirement benefit adjustments are net of taxes of $7.9 million as of March 31, 2020 and December 31, 2019. Income tax effects are released

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from accumulated other comprehensive loss as defined benefit plan and supplemental executive retirement plan obligations are settled.

Noncontrolling Interest Transaction

On March 31, 2020, through our wholly owned subsidiary, Feralloy Corporation, we purchased the remaining 49% noncontrolling interest of Feralloy Processing Company (“FPC”), a toll processor in Portage, Indiana. The increase in our ownership from 51% to 100% was accounted for as an equity transaction. The difference between the $8.0 million consideration paid for the noncontrolling interest with a carrying amount of $1.1 million was recognized as a decrease in total Reliance stockholders’ equity.

Note 10.  Commitments and Contingencies

Environmental Contingencies

We are currently involved with an environmental remediation project related to activities at former manufacturing operations of Earle M. Jorgensen Company (“EMJ”), our wholly owned subsidiary, that were sold many years prior to our acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ maintained insurance policies during the time it owned the manufacturing operations that have covered costs incurred to date, and are expected to continue to cover the majority of the related costs. We do not expect that this obligation will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Legal Matters

From time to time, we are named as a defendant in legal actions. Generally, these actions arise in the ordinary course of business. We are not currently 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 impact on our consolidated financial position, results of operations or cash flows. We maintain general liability insurance against risks arising in the ordinary course of business.

Note 11.  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31,
	2020		2019
	(in millions, except number of shares which are reflected in thousands and per share amounts)
Numerator:
Net income attributable to Reliance	$	61.7	$	190.1
Denominator:
Weighted average shares outstanding		66,337		67,127
Dilutive effect of stock-based awards		911		799
Weighted average diluted shares outstanding		67,248		67,926
Earnings per share attributable to Reliance stockholders:
Diluted	$	0.92	$	2.80
Basic	$	0.93	$	2.83

The computations of earnings per share for the first quarters of 2020 and 2019 do not include 701,053 and 682,660 weighted average shares, respectively, in respect of RSUs, because their inclusion would have been anti-dilutive.

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Note 12.  Impairment and Restructuring Charge

We recorded an impairment and restructuring charge of $137.5 million in the first quarter of 2020. The recent significant decline in crude oil prices that is expected to result in reduced drilling activity and decreased demand for the products we sell informed our decision to close three of our energy-related businesses and reduce our long-term outlook for our businesses servicing the energy market.

The impairment and restructuring charge consisted of the following:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Intangible assets, net	$	88.8	$	—
Property, plant and equipment		8.7		—
Operating lease right-of-use assets		0.2		—
Total impairment charge		97.7		—
Restructuring––cost of sales		39.8		—
Total impairment and restructuring charge	$	137.5	$	—

The property, plant and equipment and restructuring – cost of sales charges relate to the planned closure of certain locations where we anticipate losses on the disposition of certain real property, machinery and equipment and inventories. The measurement of the intangible assets at fair value was determined using discounted cash flow techniques. The use of discounted cash flow models requires significant judgement and requires the use of inputs by management that are unobservable, including revenue forecasts, discount rates and long-term growth rates. Unobservable inputs are inputs that reflect the Company’s expectations of the assumptions market participants would use in pricing the eventual recovery of the oil and gas industry based on the best information available in the circumstances.

Note 13. Subsequent Event

COVID-19 Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The Company is monitoring this, and although operations have not been materially affected by the COVID-19 outbreak as of and for the three months ended March 31, 2020, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties. The duration and severity of the outbreak and its long-term impact on our business are uncertain at this time.

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RELIANCE STEEL & ALUMINUM CO.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our forward-looking statements may include, but are not limited to, discussions of our industry, our end markets, our business strategies and our expectations concerning future demand and our results of operations, margins, profitability, impairment and restructuring charges, taxes, liquidity, litigation matters and capital resources. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “preliminary,” “range” and “continue,” the negative of these terms, and similar expressions. All statements contained in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date of such statements.

Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to, actions taken by us, including restructuring or cash-preservation initiatives, as well as developments beyond our control, including, but not limited to, the impact of the novel strain of coronavirus ("COVID-19") outbreak and changes in worldwide and U.S. economic conditions that materially impact our customers and the demand for our products and services. The extent to which the COVID-19 pandemic will continue to negatively impact our operations will depend on future developments which are highly uncertain and cannot be predicted, including the duration of the outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, the actions taken to control the spread of COVID-19 or treat its impact, and changes in worldwide and U.S. economic conditions. Further deteriorations in economic conditions, as a result of COVID-19 or otherwise, could lead to a further or prolonged decline in demand for our products and services and negatively impact our business, and may also impact financial markets and corporate credit markets which could adversely impact our access to financing, or the terms of any financing. We cannot at this time predict the extent of the impact of the COVID-19 pandemic and resulting economic impact, but it could have a material adverse effect on our business, financial position, results of operations and cash flows. Other factors which could cause actual results to differ materially from our forward-looking statements include those disclosed in this report and in other reports we have filed with the United States Securities and Exchange Commission (the “SEC”). Important risks and uncertainties about our business can be found elsewhere in this Quarterly Report on Form 10-Q, including in Item 1A “Risk Factors,” and in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC. As a result, these statements speak only as of the date that they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based. You should review any additional disclosures we make in our press releases and Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC.

Overview

We delivered solid financial results with healthy demand levels through most of the first quarter of 2020 offset by downward pricing pressure mainly attributable to uncertainty regarding COVID-19.

Certain key financial results for the first quarter of 2020 included:

● Net sales of $2.57 billion, down $383.7 million, or 13.0%, from $2.96 billion in the first quarter of 2019;

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● Gross profit of $780.7 million, down $86.2 million, or 9.9%, from gross profit of $866.9 million in the first quarter of 2019. Gross profit included a $39.8 million restructuring charge that decreased our gross profit margin by 160 basis points;  

● Gross profit margin of 30.3% (or 31.9%, excluding the impact of a $39.8 million restructuring charge) compared to 29.3% in the first quarter of 2019;

● Pretax income of $83.1 million, down $172.4 million, or 67.5%, from $255.5 million in the first quarter of 2019. Pretax income included a $137.5 million impairment and restructuring charge that decreased pretax income margin by 540 basis points; and

● Earnings per diluted share of $0.92 for the first quarter of 2020, down $1.88, or 67.1%, from $2.80 in the first quarter of 2019. The impairment and restructuring charge noted above decreased earnings per diluted share by $1.53.

Our same-store tons sold decreased 2.3% and our average selling price per ton sold decreased 11.8% in the first quarter of 2020 compared to the first quarter of 2019. The decline in our average selling price per ton sold was mainly due to carbon steel pricing that has trended lower over the past four quarters. Our investments in value-added processing equipment during the past several years and focus on specialty products supported our strong gross profit margin of 30.3% (or 31.9%, excluding the impact of a $39.8 million restructuring charge) in the first quarter of 2020.

As of March 31, 2020, our net debt-to-total capital ratio was 25.4%, up from 21.4% as of December 31, 2019, but below our historical range of 30% to 40%. As of March 31, 2020, we had ample liquidity with $831.5 million available for borrowing on our revolving credit facility and $172.1 million in cash and cash equivalents.

Due to the spread of COVID-19, many government orders were issued to curb non-essential businesses beginning in the US in mid-March. As a result, certain of our customers closed. However, most of our locations continue to operate to support our customers albeit at reduced levels as essential businesses under the United States Department of Homeland Security Cybersecurity and Infrastructure Security Agency guidance. Our toll processing operations servicing the automotive market experienced significant declines in mid to late March as many auto manufacturers and steel and aluminum mills suddenly closed. We took decisive, immediate action, by reducing the workforce at our largest U.S. tolling operations by about 50%. Demand in the non-residential end market, our largest, remained solid through most of the first quarter. However, we have begun to see some second quarter projects being deferred. Demand for the products we sell to the aerospace market remained relatively steady through the first quarter, with strength noted in our sales to the defense portion of this market. We expect activity for commercial aerospace to decline beginning in the second quarter as the direct result of COVID-19 and are uncertain as to the long-term impact.

We will continue to evaluate the nature and extent of future impacts of COVID-19 on our business. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations, and overall financial performance cannot be reasonably estimated at this time.

In addition, changes in drilling technology and increased global oil production led to significantly lower crude oil prices in the first quarter of 2020. As a result, we made a decision to close three of our energy-related businesses and reduced our long-term outlook for certain of our remaining energy-related businesses, resulting in an impairment and restructuring charge of $137.5 million.

We believe that our broad end market exposure, diverse product offerings, focus on small order sizes, when-needed delivery and significant value-added processing capabilities along with our wide geographic footprint will enable us to persevere during these difficult and uncertain times. We believe that these business model characteristics combined with pricing discipline and our strategy of concentrating on higher margin business differentiate us from our peers and will continue to allow us to achieve industry-leading results.

In addition to ensuring the health, safety and well-being of our employees during this challenging time, with the significant uncertainty that currently exists, we have adjusted our capital allocation priorities to focus on cash preservation,

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including rightsizing our inventory and pausing non-essential capital expenditures. Due to the significant uncertainty that remains regarding the duration of the COVID-19 pandemic, we have reduced our 2020 capital expenditure budget from approximately $250 million to approximately $190 million. Nevertheless, we remain committed to concurrently making investments that support the long-term growth and sustainability of our company as well as continuing to provide returns to our stockholders. We believe our sources of liquidity and access to capital markets will continue to be adequate for the foreseeable future to maintain operations, finance strategic initiatives, pay dividends, and execute opportunistic purchases under our share repurchase program. 

For more information, please see Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.  

Acquisitions

2020 Acquisition

On March 31, 2020, through our wholly owned subsidiary, Feralloy Corporation, we purchased the remaining 49% noncontrolling interest of joint venture partnership Feralloy Processing Company (“FPC”), a toll processor in Portage, Indiana, that increased our ownership from 51% to 100%. We have consolidated the results of FPC since August 1, 2008, when we acquired PNA Group Holding Corporation and its subsidiaries. The difference between the $8.0 million consideration paid for the noncontrolling interest with a carrying amount of $1.1 million was recognized as a decrease in total Reliance stockholders’ equity.

We funded our 2020 acquisition of FPC with borrowings on our revolving credit facility and cash on hand.

2019 Acquisition

On December 31, 2019, we acquired Fry Steel Company (“Fry Steel”). Fry Steel is a general line and long bar distributor located in Santa Fe Springs, California. Fry Steel specializes in the cutting of various bar products including stainless, alloy, aluminum, carbon, brass and bronze. Sales of Fry Steel were $25.5 million in the first quarter of 2020.

We funded our 2019 acquisition of Fry Steel with borrowings on our revolving credit facility and cash on hand.

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Results of Operations

The following table sets forth certain income statement data for the first quarters of 2020 and 2019 (dollars are shown in millions and certain amounts may not calculate due to rounding):

	Three Months Ended March 31,
	2020				2019
			% of				% of
	$		Net Sales		$		Net Sales
Net sales	$	2,572.9	100.0	%	$	2,956.6	100.0	%
Cost of sales (exclusive of depreciation and amortization expenses shown below)(1)		1,792.2	69.7			2,089.7	70.7
Gross profit(2)		780.7	30.3			866.9	29.3
Warehouse, delivery, selling, general and administrative expense ("S,G&A")		522.7	20.3			532.1	18.0
Depreciation expense		46.2	1.8			43.2	1.5
Amortization expense		10.8	0.4			10.8	0.4
Impairment of long-lived assets		97.7	3.8			—	—
Operating income	$	103.3	4.0	%	$	280.8	9.5	%

(1) Cost of sales in the first quarter of 2020 included a $39.8 million inventory provision relating to the planned closure of certain energy-related operations.

(2) 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 expenses associated with the corresponding sales. About half 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, is not significant and is excluded from our cost of sales. Therefore, our cost of sales is substantially comprised of the cost of the material we sell. We use gross profit and gross profit margin as shown above as measures of operating performance. Gross profit and gross profit margin are important operating and financial measures, as their fluctuations 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.

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Net Sales

	Three Months Ended March 31,				Dollar		Percentage
	2020		2019		Change		Change
	(dollars in millions)
Net sales	$	2,572.9	$	2,956.6	$	(383.7)	(13.0)	%
Net sales, same-store	$	2,547.4	$	2,956.6	$	(409.2)	(13.8)	%
	Three Months Ended March 31,				Tons		Percentage
	2020		2019		Change		Change
	(tons in thousands)
Tons sold		1,468.8		1,502.0		(33.2)	(2.2)	%
Tons sold, same-store		1,466.8		1,502.0		(35.2)	(2.3)	%
	Three Months Ended March 31,				Price		Percentage
	2020		2019		Change		Change
Average selling price per ton sold	$	1,742	$	1,958	$	(216)	(11.0)	%
Average selling price per ton sold, same-store	$	1,727	$	1,958	$	(231)	(11.8)	%

Same-store amounts exclude the results of our acquisition completed in 2019.

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Our net sales were lower in the first quarter of 2020 compared to the first quarter of 2019 due to a lower average selling price per ton sold and lower tons sold.

Demand in non-residential construction (including infrastructure), our largest end market served, remained solid for most of the first quarter of 2020 before slowing in late March. Demand in the automotive end market (which we serve primarily through our toll processing operations in the U.S. and Mexico) was strong until mid-March when demand declined as many automotive OEM and steel and aluminum mills suspended operations. The aerospace end market remained steady during the first quarter of 2020, but is expected to be challenged in future quarters. Demand in heavy industry was steady in the first half of the first quarter of 2020, but both agricultural and construction equipment spending declined significantly in the last month of the quarter. Demand for the products we sell to the energy (oil and natural gas) end market continued to decline throughout the quarter from already low levels. We expect the aforementioned end market trends to continue until COVID-19 restrictions are lifted and economic conditions improve. Our tons sold have trended significantly lower, declining about 20% in the first two-and-a-half weeks in April of 2020 compared to the same period of March 2020; a trend that may continue, get worse or get better.

Since we primarily purchase and sell our inventories in the “spot” market, the changes in our average selling prices generally fluctuate in accordance with the changes in the costs of the various metals we purchase. The mix of products sold can also have an impact on our average selling prices.

The first quarter of 2020 same-store average selling price per ton sold decreased 11.8%, mainly due to mill price decreases on many of the carbon steel products we sell. Our same-store average selling price per ton sold has declined sequentially for the past five quarters. As carbon steel sales represent approximately 50% of our sales dollars, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.

Our major commodity selling prices changed year-over-year as follows:

			Same-store
	Average Selling		Average Selling
	Price per Ton Sold		Price per Ton Sold
	(percentage change)
Carbon steel	(16.4)	%	(16.5)	%
Aluminum	(5.8)	%	(5.8)	%
Stainless steel	(1.0)	%	(3.3)	%
Alloy	(0.4)	%	(4.4)	%

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Cost of Sales

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
Cost of sales	$	1,792.2	69.7	%	$	2,089.7	70.7	%	$	(297.5)	(14.2)	%

The decrease in cost of sales in the first quarter of 2020 compared to the first quarter of 2019 is mainly due to a lower average cost per ton sold and lower tons sold. See “Net Sales” above for trends in both demand and costs of our products.

Cost of sales in the first quarter of 2020 included a $39.8 million inventory provision relating to the planned closure of certain energy-related operations. See Note 12 — “Impairment and Restructuring Charge” of our Unaudited Consolidated Financial Statements for further information on our 2020 restructuring charge.

In addition, our last-in, first-out (“LIFO”) method inventory valuation reserve adjustment, which is included in cost of sales and, in effect, reflects cost of sales at current replacement costs, resulted in a credit, or income, of $20.0 million in the first quarter of 2020 compared to a credit, or income, of $12.5 million in the first quarter of 2019. At March 31, 2020, our LIFO reserve balance was $117.6 million.

Gross Profit

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
Gross profit	$	780.7	30.3	%	$	866.9	29.3	%	$	(86.2)	(9.9)	%

Our strong gross profit margin continues to benefit from the increases in the percentage of our orders that include value-added processing in recent years that is supported by our ongoing investments in processing equipment. The $39.8 million inventory provision in the first quarter of 2020 reduced our gross profit margin by 160 basis points. See “Net Sales” and “Cost of Sales” above for further discussion on product pricing trends and our LIFO inventory valuation reserve adjustments, respectively.

Expenses

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
S,G&A expense	$	522.7	20.3	%	$	532.1	18.0	%	$	(9.4)	(1.8)	%
S,G&A expense, same-store	$	516.8	20.3	%	$	532.1	18.0	%	$	(15.3)	(2.9)	%
Depreciation & amortization expense	$	57.0	2.2	%	$	54.0	1.8	%	$	3.0	5.6	%
Impairment of long-lived assets	$	97.7	3.8	%	$	—	—	%	$	97.7	*

* Not meaningful.

Same-store amounts exclude the results of our acquisition completed in 2019.

Our same-store S,G&A expense was lower in the first quarter of 2020 compared to the first quarter of 2019 due to decreases in incentive compensation related to lower profitability levels and due to certain warehouse and delivery expenses that were lower due to our lower tons sold that offset the impact of general inflation, including wage increases.

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Our S,G&A expense as a percentage of sales increased in the first quarter of 2020 compared to the first quarter of 2019, mainly due to our lower sales levels.

In the first quarter of 2020, we recorded a $64.1 million impairment charge on our intangibles with indefinite lives and a $33.6 million impairment charge on our long-lived assets. The impairment charge related to our decision to close three of our energy-related operations and our reduced long-term outlook for the energy market. See Note 12 — “Impairment and Restructuring Charge” of our Unaudited Consolidated Financial Statements for further information on our 2020 impairment charge.

Operating Income

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
Operating income	$	103.3	4.0	%	$	280.8	9.5	%	$	(177.5)	(63.2)	%

Our operating income was lower in the first quarter of 2020 compared to the first quarter of 2019 mainly due to a $137.5 million impairment and restructuring charge. Excluding the non-recurring impairment and restructuring charge, our operating income declined $40.0 million, or 14.2%, and was mainly due to our lower sales levels partially offset by a higher gross profit margin. In addition, excluding the non-recurring impairment and restructuring charge, which reduced our first quarter of 2020 operating margin by 540 basis points, our operating income margin for the first quarter of 2020 was only 10 basis points lower than our first quarter of 2019 operating income margin. See Note 12 — “Impairment and Restructuring Charge” of our Unaudited Consolidated Financial Statements for further information on our 2020 impairment and restructuring charge. See “Net Sales” above for trends in both demand and costs of our products and “Expenses” for trends in our operating expenses.

Other Expense

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
Interest expense	$	16.9	0.7	%	$	24.2	0.8	%	$	(7.3)	(30.2)	%
Other expense, net	$	3.3	0.1	%	$	1.1	—	%	$	2.2	200.0	%

Interest expense was lower in the first quarter of 2020 due to lower interest rates on decreased borrowing levels on our revolving credit facility. See Note 6 — “Debt” of our Unaudited Consolidated Financial Statements for further information on the interest rates on our borrowings.

Income Tax Rate

Our effective income tax rates for the first quarters of 2020 and 2019 were 24.3% and 25.0%, respectively. The differences between our effective income tax rates and the U.S. federal statutory rate of 21% were mainly due to state income taxes partially offset by the effects of company-owned life insurance policies.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer’s share of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts the CARES Act may have on our business.

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Net Income

	Three Months Ended
	March 31,
	2020				2019
			% of				% of		Dollar		Percentage
	$		Net Sales		$		Net Sales		Change		Change
	(dollars in millions)
Net income attributable to Reliance	$	61.7	2.4	%	$	190.1	6.4	%	$	(128.4)	(67.5)	%

The decrease in our net income in the first quarter of 2020 compared to the first quarter of 2019 was mainly due to a $137.5 million impairment and restructuring charge and lower gross profit from our lower sales levels. Our net income margin in the first quarter of 2020, excluding the impact of the impairment and restructuring charge, was 6.4%, consistent with the first quarter of 2019.

Liquidity and Capital Resources

Operating Activities

Net cash provided by operations of $170.8 million in the first quarter of 2020 increased $53.6 million, or 45.7%, from $117.2 million in the first quarter of 2019. Our increased operating cash flow was mainly due to decreased working capital investment (primarily accounts receivable and inventory less accounts payable) in the first quarter of 2020. Our inventory tons on hand at the end of the first quarter of 2020 were relatively flat compared to December 31, 2019, due to effective inventory management. Conversely, in the first quarter of 2019 we increased our inventory tons on hand due to an expectation of a more favorable demand environment that did not materialize. Accordingly, we focused on reducing inventory levels through the remainder of 2019 to rightsize our inventory. To manage our working capital, we focus on our days sales outstanding and on our inventory turnover rate, as receivables and inventory are the two most significant elements of our working capital. At March 31, 2020 and 2019, our days sales outstanding rate was 42.4 days and 42.1 days, respectively. Our inventory turn rate (based on tons) during the first quarter of 2020 was 4.8 times (or 2.5 months on hand), compared to 4.2 times (or 2.9 months on hand) in the first quarter of 2019.

Investing Activities

Net cash used in investing activities of $55.0 million in the first quarter of 2020 was fairly consistent with the $48.7 million used in the first quarter of 2019 and was substantially comprised of our capital expenditures. Capital expenditures were $55.5 million for the first quarter of 2020 compared to $53.0 million in the first quarter of 2019. The majority of our 2020 and 2019 capital expenditures related to growth initiatives.

Financing Activities

Net cash used in financing activities of $107.4 million in the first quarter of 2020 increased from $65.4 million net cash used in the first quarter of 2019 mainly due to share repurchases, partially offset by increased net debt borrowings. In the first quarter of 2020, we repurchased a total of $300.0 million of our common stock compared to no repurchases in the first quarter of 2019. Net debt borrowings in the first quarter of 2020 were $248.0 million compared to $17.0 million of net debt repayments in the first quarter of 2019.

On April 21, 2020, our Board of Directors declared the 2020 second quarter cash dividend of $0.625 per share. We have increased our quarterly dividend 27 times since our IPO in 1994, with the most recent increase of 13.6% from $0.55 per share to $0.625 per share effective in the first quarter of 2020. We have never reduced or suspended our dividend and have paid regular quarterly dividends to our stockholders for 61 consecutive years.

On October 23, 2018, our Board of Directors amended our share repurchase plan, increasing the total authorized number of shares available to be repurchased by 5.0 million and extending the duration of the plan through December 31, 2021. In the first quarter of 2020, we repurchased 3,329,824 shares of our common stock at an average cost of $90.09 per share, for a total of $300.0 million. As of March 31, 2020, we had authorization under the plan to repurchase approximately

21

3.1 million shares, or about 5% of our current outstanding shares. From the inception of the plan in 1994 through March 31, 2020, we have repurchased approximately 32.5 million shares at an average cost of $47.57 per share. We expect to continue to be opportunistic in our approach to repurchasing shares of our common stock.

Liquidity

Our primary sources of liquidity are funds generated from operations and our $1.5 billion revolving credit facility. Our total outstanding debt at March 31, 2020 was $1.84 billion, compared to $1.60 billion at December 31, 2019. As of March 31, 2020, we had $631.0 million of outstanding borrowings, $37.5 million of letters of credit issued and $831.5 million available for borrowing on our revolving credit facility. As of March 31, 2020, we had $172.1 million in cash and cash equivalents and our net debt-to-total capital ratio (net debt-to-total capital is calculated as total debt, net of cash, divided by total Reliance stockholders’ equity plus total debt, net of cash) was 25.4%, up from 21.4% as of December 31, 2019.

On September 30, 2016, we entered into a $2.1 billion unsecured five-year credit agreement (“Credit Agreement”) comprised of a $1.5 billion unsecured revolving credit facility and a $600.0 million unsecured term loan, with an option to increase the revolving credit facility up to an additional $500.0 million at our request, subject to approval of the lenders and certain other customary conditions. We intend to use the revolving credit facility for working capital and general corporate purposes, including, but not limited to, capital expenditures, dividend payments, repayment of debt, share repurchases, internal growth initiatives and acquisitions. The $600.0 million term loan due September 30, 2021 amortizes in quarterly installments, with an annual amortization of 10% until June 2021, with the balance to be paid at maturity. All borrowings under the Credit Agreement may be prepaid without penalty.

A revolving credit facility with a credit limit of $7.7 million is in place for an operation in Asia with an outstanding balance of $4.2 million and $4.3 million as of March 31, 2020 and December 31, 2019, respectively.

Capital Resources

On November 20, 2006, we entered into an indenture (the “2006 Indenture”) for the issuance of $600.0 million of unsecured debt securities. The total debt issued was comprised of two tranches, (a) $350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid on November 15, 2016 and (b) $250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036.

On April 12, 2013, we entered into an indenture (the “2013 Indenture” and, together with the 2006 Indenture, the “Indentures”) for the issuance of $500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing on April 15, 2023. 

Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. If we experience a change in control accompanied by a downgrade in our credit rating, we will be required to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest.

Various industrial revenue bonds had combined outstanding balances of $9.0 million as of March 31, 2020 and December 31, 2019, and have maturities through 2027.

As of March 31, 2020, we had $80.2 million of debt obligations coming due before our $1.5 billion revolving credit facility expires on September 30, 2021.

We believe that we will continue to have sufficient liquidity to fund our future operating needs and to repay our debt obligations as they become due. In addition to funds generated from operations and funds available under our revolving credit facility, we expect to be able to access the capital markets to raise funds, if desired. We have taken steps to mitigate the impact of COVID-19 on our business, including, adjusting our capital allocation priorities to focus on cash preservation, including rightsizing our inventory and pausing non-essential capital expenditures. Due to the significant uncertainty that

22

remains regarding the duration of the COVID-19 pandemic, we have reduced our 2020 capital expenditure budget from approximately $250 million to approximately $190 million. We believe our sources of liquidity will continue to be adequate to maintain operations, make necessary capital expenditures, finance strategic initiatives, and pay dividends. Additionally, based on current market conditions, we believe our investment grade credit rating enhances our ability to effectively raise capital, if needed. We expect to continue our acquisition and other growth and stockholder return activities and anticipate that we will be able to fund such activities as they arise.

The COVID-19 pandemic has had, and we expect will continue to have, an adverse effect on our net sales and pretax income. Future decreases in cash flow from operations would decrease the cash available for the capital uses described above, including capital expenditures, dividend payments, repayment of debt, internal growth initiatives and acquisitions. However, since the ultimate severity and length of the COVID-19 pandemic is unknown, we cannot predict the impact it will have on our customers and suppliers and on the debt and equity capital markets, and we cannot estimate the ultimate impact it will have on our liquidity and capital resources.

Covenants

The Credit Agreement and the Indentures include customary representations, warranties, covenants, acceleration, indemnity and events of default provisions. The covenants under the Credit Agreement include, among other things, two financial maintenance covenants that require us to comply with a minimum interest coverage ratio and a maximum leverage ratio. Our interest coverage ratio for the twelve-month period ended March 31, 2020 was 13.1 times compared to the debt covenant minimum requirement of 3.0 times (interest coverage ratio is calculated as earnings before interest and taxes (“EBIT”), as defined in the Credit Agreement, divided by interest expense). Our leverage ratio as of March 31, 2020, calculated in accordance with the terms of the Credit Agreement, was 27.7% compared to the debt covenant maximum amount of 60% (leverage ratio is calculated as total debt, inclusive of finance lease obligations and outstanding letters of credit, divided by Reliance stockholders’ equity plus total debt).

We were in compliance with all financial covenants in our Credit Agreement at March 31, 2020.

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 March 31, 2020 and December 31, 2019, we were contingently liable under standby letters of credit in the aggregate amount of $28.4 million. The letters of credit relate to insurance policies and construction projects.

Contractual Obligations and Other Commitments

We had no material changes in commitments for capital expenditures or purchase obligations as of March 31, 2020, as compared to those disclosed in our table of contractual obligations included in our Annual Report on Form 10-K for the year ended December 31, 2019.

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. However, our overall operations have not shown any material seasonal trends as a result of our geographic, product and customer diversity. Typically, revenues in the months of July, November and December have been lower than in other months because of a reduced number of working days for shipments of our products, resulting from holidays observed by the Company as well as vacation and extended holiday closures at some of our customers. Reduced shipping

23

days also have a significant impact on our profitability. Particularly in light of COVID-19, we cannot predict whether period-to-period fluctuations will be consistent with historical patterns. 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 $2.00 billion at March 31, 2020, or approximately 25% of total assets and 41% of total equity. Additionally, other intangible assets, net amounted to $928.0 million at March 31, 2020, or approximately 11% of total assets and 19% of total equity. Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests and further evaluation when certain events occur. Other intangible assets with finite useful lives are amortized over their useful lives. We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. In the first quarter of 2020, we recorded impairment losses of $64.1 million on our intangible assets with indefinite lives and $24.7 million on our intangible assets subject to amortization. See Note 12—“Impairment and Restructuring Charge” for further information on our impairment charge.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Unaudited Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. 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 goodwill and other indefinite-lived 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. The impacts of the COVID-19 pandemic increases uncertainty, which has reduced our ability to use past results to estimate future performance. Accordingly, our estimates and judgments may be subject to greater volatility than in the past.

See “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2019 for further information regarding the accounting policies that we believe to be critical accounting policies and that affect our more significant judgments and estimates used in preparing our consolidated financial statements. We do not believe that the new accounting guidance implemented in 2020 changed our critical accounting policies.

New Accounting Guidance

See Note 2—“Impact of Recently Issued Accounting Guidance” of our Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for disclosure on new accounting guidance issued or implemented.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates, changes in general economic conditions, domestic and foreign competition, foreign currency exchange rates and metals pricing, demand and availability. See Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion on quantitative and qualitative disclosures about market risk. Refer to Item 1A “Risk Factors” within this Quarterly Report on Form 10-Q for additional discussion of current and potential risks of the COVID-19 pandemic on our business and financial performance.

Item 4. Controls And Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design

24

and operation of the Company’s disclosure controls and procedures pursuant to and as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered in this report, the Company’s disclosure controls and procedures are effective to ensure information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information contained under the heading “Legal Matters” in Note 10—“Commitments and Contingencies” to our Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1.

Item 1A. Risk Factors

We are supplementing the risk factors described under Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes such risk factors.

The COVID-19 global pandemic may materially and adversely impact our business, financial condition and results of operations.

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020 and has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. These factors have led to reduced demand of our products and services, particularly for our businesses that service the automotive, oil and gas, commercial aerospace and non-residential construction (infrastructure) sectors. Our tons sold have trended significantly lower, declining about 20% in the first two-and-a-half weeks in April of 2020 compared to the same period of March 2020; a trend that may continue, get worse or get better. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted. 

The volatility in the market largely due to COVID-19 could result in a material impairment of goodwill or indefinite-lived intangible assets. Continued negative impacts to the markets we service due COVID-19 or additional stock market volatility could result in a decline in our market capitalization that may result in goodwill and/or indefinite-lived intangible asset impairment charges that could be material.

While most of our facilities continue to operate as essential businesses under the United States Department of Homeland Security Cybersecurity and Infrastructure Security Agency guidance, facility closures or work slowdowns or temporary stoppages could occur at all or some of our facilities due to new government regulations, decreased demand for our products and services or otherwise. In many cases, facilities are not operating under full staffing as a result of COVID-19, which could have a longer-term impact. Any prolonged slowdown or stoppage at our facilities may adversely affect our business, financial condition and results of operations and such impact may be material. We may face unpredictable

25

increases in demand for certain of our products when restrictions on business and travel end. If demand for our products exceeds our capacity, it could adversely affect our financial results and customer relationships.

We continue to work with our stakeholders (including customers, employees, suppliers, business partners and local communities) to responsibly address this global pandemic. We will continue to monitor the situation and assess possible implications to our business and our stakeholders and will take appropriate actions in an effort to mitigate adverse consequences, including through adjusting our capital allocation priorities to focus on cash preservation. We cannot assure you that we will be successful in any such mitigation efforts. Although the duration and ultimate impact of these factors is unknown at this time, the decline in economic conditions due to COVID-19, or another disease causing similar impacts, may adversely affect our business, financial condition and results of operations and such impact may be material. Further deteriorations in economic and public health conditions, as a result of the COVID-19 pandemic or otherwise, could lead to disruptions in our supply chain and metals commodities pricing, a further or prolonged decline in demand for our products, potential closures of additional of our facilities, recognition of additional impairment charges, and otherwise negatively impact our business. We have a substantial amount of indebtedness outstanding, and if we experience continued significant declines in sales as a result of the pandemic, our business may not be able to generate cash flow from operations or access additional borrowings on our revolving credit facility in amounts sufficient to enable us to pay our debts and fund our other liquidity needs. The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets and credit markets, which depending on future developments could impact our capital resources and liquidity in the future.

In addition, to the extent COVID-19 adversely affects the Company's business and financial results, it may also have the effect of heightening many of the other risks described under Part I, Item 1A “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2019.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  

We repurchase shares of our common stock from time to time pursuant to our publicly announced share repurchase program. All of our share repurchases during the first quarter of 2020 were made in the open market. Our share repurchase activity for the first quarter of 2020 was as follows:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares That May Yet Be Purchased Under the Plan(1)
January 1 - January 31, 2020	—	$	—	—	6,433,821
February 1 - February 29, 2020	492,500	$	106.57	492,500	5,941,321
March 1 - March 31, 2020	2,837,324	$	87.23	2,837,324	3,103,997
Total	3,329,824	$	90.09	3,329,824

(1) Share repurchases were made pursuant to a share repurchase program authorized by our Board of Directors on October 20, 2015. On October 23, 2018, our Board of Directors amended our share repurchase plan increasing by 5,000,000 shares the total number of shares authorized to be repurchased and extending the duration of the program through December 31, 2021. Our share repurchase plan does not obligate us to acquire any specific number of shares. Under the share repurchase plan, shares may be repurchased in the open market or privately negotiated transactions.

Item 3.  Defaults Upon Senior Securities  

None.

Item 4.  Mine Safety Disclosures  

Not applicable.

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Item 5.  Other Information  

None.

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Item 6.  Exhibits

Exhibit No.	Description
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, 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 of 1934, as amended.
32**	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	The following unaudited financial information from Reliance Steel & Aluminum Co.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted in iXBRL (Inline eXtensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these consolidated financial statements.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Label Linkbase Document.
101.PRE*	XBRL Taxonomy Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatting as Inline XBRL and contained in Exhibit 101).

*      Filed herewith.

**    Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RELIANCE STEEL & ALUMINUM CO.
	(Registrant)
Dated: May 1, 2020	By:	/s/ Karla R. Lewis
		Karla R. Lewis
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
	By:	/s/ Arthur Ajemyan
		Arthur Ajemyan
		Vice President and Corporate Controller
		(Principal Accounting Officer)

29

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

I, James D. Hoffman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reliance Steel & Aluminum Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2020

/s/ James D. Hoffman

James D. Hoffman

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

I, Karla R. Lewis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reliance Steel & Aluminum Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2020

/s/ Karla R. Lewis

Karla R. Lewis

Senior Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) (the “Act”), each of the undersigned officers of Reliance Steel & Aluminum Co., a Delaware corporation (the “Company”), does hereby certify that:

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Periodic Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James D. Hoffman

James D. Hoffman

President and Chief Executive Officer

/s/ Karla R. Lewis

Karla R. Lewis

Senior Executive Vice President and Chief Financial Officer

Dated: May 1, 2020

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Commitments and Contingencies (Details)	Mar. 31, 2020
Environmental Contingencies
Ownership interest in domestic subsidiaries (as a percent)	100.00%

XML

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share

Computation of basic and diluted earnings per share

	Three Months Ended
	March 31,
	2020		2019
	(in millions, except number of shares which are reflected in thousands and per share amounts)
Numerator:
Net income attributable to Reliance	$	61.7	$	190.1
Denominator:
Weighted average shares outstanding		66,337		67,127
Dilutive effect of stock-based awards		911		799
Weighted average diluted shares outstanding		67,248		67,926
Earnings per share attributable to Reliance stockholders:
Diluted	$	0.92	$	2.80
Basic	$	0.93	$	2.83

XML

Intangible Assets, net (Tables)

3 Months Ended

Mar. 31, 2020

Intangible Assets, net

Summary of intangible assets, net

		March 31, 2020				December 31, 2019
	Weighted Average	Gross				Gross
	Amortizable	Carrying		Accumulated		Carrying		Accumulated
	Life in Years	Amount		Amortization		Amount		Amortization
		(in millions)
Intangible assets subject to amortization:
Covenants not to compete	5.0	$	0.7	$	(0.4)	$	0.7	$	(0.4)
Customer lists/relationships	15.5		680.2		(445.4)		710.1		(438.1)
Software	10.0		8.1		(8.1)		8.1		(8.1)
Other	7.2		1.0		(0.9)		1.1		(0.9)
			690.0		(454.8)		720.0		(447.5)
Intangible assets not subject to amortization:
Trade names			692.8		—		758.6		—
		$	1,382.8	$	(454.8)	$	1,478.6	$	(447.5)

Summary of estimated aggregate amortization expense

	(in millions)
2020 (remaining nine months)	$	26.4
2021		34.7
2022		34.0
2023		29.7
2024		26.2

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Impairment and Restructuring Charge

3 Months Ended

Mar. 31, 2020

Impairment and Restructuring Charge

Impairment and Restructuring Charge

Note 12.  Impairment and Restructuring Charge

We recorded an impairment and restructuring charge of $137.5 million in the first quarter of 2020. The recent significant decline in crude oil prices that is expected to result in reduced drilling activity and decreased demand for the products we sell informed our decision to close three of our energy-related businesses and reduce our long-term outlook for our businesses servicing the energy market.

The impairment and restructuring charge consisted of the following:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Intangible assets, net	$	88.8	$	—
Property, plant and equipment		8.7		—
Operating lease right-of-use assets		0.2		—
Total impairment charge		97.7		—
Restructuring––cost of sales		39.8		—
Total impairment and restructuring charge	$	137.5	$	—

The property, plant and equipment and restructuring – cost of sales charges relate to the planned closure of certain locations where we anticipate losses on the disposition of certain real property, machinery and equipment and inventories. The measurement of the intangible assets at fair value was determined using discounted cash flow techniques. The use of discounted cash flow models requires significant judgement and requires the use of inputs by management that are unobservable, including revenue forecasts, discount rates and long-term growth rates. Unobservable inputs are inputs that reflect the Company’s expectations of the assumptions market participants would use in pricing the eventual recovery of the oil and gas industry based on the best information available in the circumstances.

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

Income Taxes

Note 8.  Income Taxes

Our effective income tax rates for the first quarters of 2020 and 2019 were 24.3% and 25.0%, respectively. The differences between our effective income tax rates and the U.S. federal statutory rate of 21% were mainly due to state income taxes partially offset by the effects of company-owned life insurance policies.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer’s share of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impacts the CARES Act may have on our business.

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Goodwill

3 Months Ended

Mar. 31, 2020

Goodwill.

Goodwill

Note 4. Goodwill

The change in the carrying amount of goodwill is as follows:

	(in millions)
Balance at January 1, 2020	$	2,003.8
Purchase price allocation adjustments		0.6
Foreign currency translation loss		(5.6)
Balance at March 31, 2020	$	1,998.8

We had no accumulated impairment losses related to goodwill at March 31, 2020.

The purchase price allocation for our 2019 acquisition of Fry Steel Company is pending the completion of purchase price adjustments, based on tangible and intangible asset valuations, and the completion of pre-acquisition period tax returns.

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Revenues (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue Disaggregation
Revenue	$ 2,572.9	$ 2,956.6
Carbon steel
Revenue Disaggregation
Revenue	1,316.2	1,593.6
Aluminum
Revenue Disaggregation
Revenue	512.2	565.8
Stainless steel
Revenue Disaggregation
Revenue	404.9	406.5
Alloy
Revenue Disaggregation
Revenue	151.4	184.3
Toll processing and logistics
Revenue Disaggregation
Revenue	112.5	111.7
Other and eliminations
Revenue Disaggregation
Revenue	$ 75.7	$ 94.7

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Debt - Other (Details) $ in Millions				1 Months Ended	3 Months Ended
	Sep. 30, 2016 USD ($)	Apr. 12, 2013 USD ($)	Nov. 20, 2006 USD ($) tranche	Sep. 30, 2016 USD ($)	Mar. 31, 2020 USD ($) item	Dec. 31, 2019 USD ($)	Nov. 15, 2016 USD ($)
Debt
Total					$ 1,844.2	$ 1,596.3
Number of financial covenants | item					2
Credit Agreement
Debt
Maximum borrowing capacity	$ 2,100.0			$ 2,100.0
Debt term	5 years
Unsecured revolving credit facility due September 30, 2021
Debt
Maximum borrowing capacity	$ 1,500.0			1,500.0
Total					$ 631.0	$ 368.0
Additional maximum borrowing capacity under the credit agreement subject to approval of the lenders and certain other conditions	500.0			500.0
Commitment fee on unused portion of revolving credit facility (as a percent)					0.125%
Weighted average fixed interest rate (as a percent)					2.14%	3.69%
Letters of credit outstanding					$ 37.5
Available on the revolving credit facility					$ 831.5
Unsecured revolving credit facility due September 30, 2021 | LIBOR
Debt
Variable interest rate					LIBOR
Interest rate added to base (as a percent)					1.00%
Unsecured revolving credit facility due September 30, 2021 | Bank prime rate
Debt
Variable interest rate					bank prime rate
Unsecured term loan due from June 30, 2020 to September 30, 2021
Debt
Maximum borrowing capacity	$ 600.0			$ 600.0
Total					$ 450.0	$ 465.0
Annual amortization of term loan thereafter until June 2021 (as a percent)				10.00%
Weighted average fixed interest rate (as a percent)					1.99%	2.80%
Senior Unsecured Notes
Debt
Percentage of principal amount at which the notes may be required to be repurchased in event of a change of control and a downgrade of the entity's credit rating					101.00%
Senior unsecured notes issued November 20, 2006
Debt
Issuance of debt			$ 600.0
Number of tranches comprising the debt issuance | tranche			2
Senior unsecured notes due November 15, 2016
Debt
Total							$ 0.0
Interest rate (as a percent)			6.20%
Lump sum payment on maturity							$ 350.0
Issuance of debt			$ 350.0
Senior unsecured notes due April 15, 2023
Debt
Total					$ 500.0	$ 500.0
Interest rate (as a percent)		4.50%
Issuance of debt		$ 500.0
Senior unsecured notes due November 15, 2036
Debt
Total					250.0	250.0
Interest rate (as a percent)			6.85%
Issuance of debt			$ 250.0
Other notes and revolving credit facilities
Debt
Maximum borrowing capacity					7.7
Total					4.2	4.3
IRB
Debt
Total					$ 9.0	$ 9.0

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 172.1	$ 174.3
Accounts receivable, less allowance for doubtful accounts of $20.6 at March 31, 2020 and $17.8 at December 31, 2019	1,216.1	1,067.8
Inventories	1,630.0	1,645.7
Prepaid expenses and other current assets	68.2	85.2
Income taxes receivable		37.2
Total current assets	3,086.4	3,010.2
Property, plant and equipment:
Land	239.5	239.8
Buildings	1,211.5	1,195.1
Machinery and equipment	2,062.5	2,044.4
Accumulated depreciation	(1,721.8)	(1,684.1)
Property, plant and equipment, net	1,791.7	1,795.2
Operating lease right-of-use assets	201.5	201.5
Goodwill	1,998.8	2,003.8
Intangible assets, net	928.0	1,031.1
Cash surrender value of life insurance policies, net	35.2	42.7
Other assets	43.9	46.6
Total assets	8,085.5	8,131.1
Current liabilities:
Accounts payable	347.0	275.0
Accrued expenses	85.8	67.4
Accrued compensation and retirement costs	127.9	172.1
Accrued insurance costs	46.5	43.4
Current maturities of long-term debt and short-term borrowings	64.8	64.9
Current maturities of operating lease liabilities	52.4	52.5
Income taxes payable	11.2
Total current liabilities	735.6	675.3
Long-term debt	1,772.3	1,523.6
Operating lease liabilities	149.7	149.5
Long-term retirement costs	81.2	87.0
Other long-term liabilities	12.6	12.3
Deferred income taxes	434.8	469.3
Commitments and contingencies
Equity:
Preferred stock, $0.001 par value: Authorized shares - 5,000 None issued or outstanding
Common stock and additional paid-in capital, $0.001 par value: Authorized shares - 200,000 Issued and outstanding shares - 63,641 at March 31, 2020 and 66,854 at December 31, 2019	0.1	122.2
Retained earnings	5,028.6	5,189.5
Accumulated other comprehensive loss	(136.5)	(105.1)
Total Reliance stockholders' equity	4,892.2	5,206.6
Noncontrolling interests	7.1	7.5
Total equity	4,899.3	5,214.1
Total liabilities and equity	$ 8,085.5	$ 8,131.1

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Millions	Common Stock	Common Stock and Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Non-controlling Interests	Total
Balance at Dec. 31, 2018		$ 136.4	$ 4,637.9	$ (102.7)	$ 7.9	$ 4,679.5
Balance (in shares) at Dec. 31, 2018	66,882
Increase (Decrease) in Stockholders' Equity
Net income			190.1		1.5	191.6
Other comprehensive income (loss)				6.8		6.8
Stock-based compensation, net		(1.3)				(1.3)
Stock-based compensation, net (in shares)	333
Stock options exercised		0.8				$ 0.8
Stock options exercised (in shares)	20
Repurchase of common shares (in shares)						0
Cash dividends - $0.55 and $0.625 per share and dividend equivalents for the quarter ended March 31, 2019 and March 31, 2020, respectively			(38.2)			$ (38.2)
Balance at Mar. 31, 2019		135.9	4,789.8	(95.9)	9.4	4,839.2
Balance (in shares) at Mar. 31, 2019	67,235
Balance at Dec. 31, 2019		122.2	5,189.5	(105.1)	7.5	$ 5,214.1
Balance (in shares) at Dec. 31, 2019	66,854					66,854
Increase (Decrease) in Stockholders' Equity
Net income			61.7		1.2	$ 62.9
Other comprehensive income (loss)				(31.4)		(31.4)
Noncontrolling interest purchased		(6.9)			(1.1)	(8.0)
Dividend to noncontrolling interest holder					(0.5)	(0.5)
Stock-based compensation, net		3.8				3.8
Stock-based compensation, net (in shares)	111
Stock options exercised		0.3				0.3
Stock options exercised (in shares)	6
Repurchase of common shares		(119.3)	(180.7)			$ (300.0)
Repurchase of common shares (in shares)	(3,330)					3,300
Cash dividends - $0.55 and $0.625 per share and dividend equivalents for the quarter ended March 31, 2019 and March 31, 2020, respectively			(41.9)			$ (41.9)
Balance at Mar. 31, 2020		$ 0.1	$ 5,028.6	$ (136.5)	$ 7.1	$ 4,899.3
Balance (in shares) at Mar. 31, 2020	63,641					63,641

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Equity - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Schedule of accumulated other comprehensive loss
Balance at the beginning of the period	$ (105.1)
Current-period change	(31.4)
Balance at the end of the period	(136.5)
Deferred tax assets in accumulated other comprehensive loss, pension liabilities	7.9	$ 7.9
Foreign Currency Translation Loss
Schedule of accumulated other comprehensive loss
Balance at the beginning of the period	(64.4)
Current-period change	(31.4)
Balance at the end of the period	(95.8)
Pension and Postretirement Benefit Adjustments, Net of Tax
Schedule of accumulated other comprehensive loss
Balance at the beginning of the period	(40.7)
Balance at the end of the period	$ (40.7)

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Equity

3 Months Ended

Mar. 31, 2020

Equity

Equity

Note 9. Equity

Dividends

On April 21, 2020, our Board of Directors declared the 2020 second quarter cash dividend of $0.625 per share of common stock, payable on June 12, 2020 to stockholders of record as of May 29, 2020.

During the first quarters of 2020 and 2019, we declared and paid quarterly dividends of $0.625 and $0.55 per share, or $41.0 million and $37.0 million in total, respectively. In addition, we paid $0.9 million and $2.6 million in dividend equivalents with respect to vested restricted stock units (“RSUs”) during the first quarters of 2020 and 2019, respectively.

Stock-Based Compensation

We make annual grants of long-term incentive awards to officers and key employees in the forms of service-based and performance-based RSUs that have approximately 3-year vesting periods. The performance-based RSU awards are subject to both service and performance goal criteria. We also make annual grants of stock to the non-employee members of the Board of Directors that vest immediately upon grant. The fair value of the RSUs and stock grants is determined based on the closing stock price of our common stock on the grant date.

In the first quarters of 2020 and 2019, we made payments of $5.1 million and $9.5 million, respectively, to tax authorities on our employees’ behalf for shares withheld related to net share settlements. These payments are reflected in the Stock-based compensation, net caption of our consolidated statements of equity.

A summary of the status of our unvested service-based and performance-based RSUs as of March 31, 2020 and changes during the quarter then ended is as follows:

		Weighted
		Average
		Grant Date
		Fair Value
Unvested RSUs	Shares	Per RSU
Unvested at January 1, 2020	859,005	$	86.40
Granted(1)	540,547		82.81
Vested	(721)		84.54
Cancelled or forfeited	(3,964)		85.79
Unvested at March 31, 2020	1,394,867	$	85.01
Shares reserved for future grants (all plans)	494,905

(1) Comprised of 330,144 service-based RSUs and 210,403 performance-based RSUs granted in March 2020 with a fair value of $82.81 per RSU. The service-based RSUs cliff vest on December 1, 2022 and the performance-based RSUs are subject to a three-year performance period ending December 31, 2022.

Share Repurchase Plan

On October 23, 2018, our Board of Directors amended our share repurchase plan, increasing the total authorized number of shares available to be repurchased by 5.0 million and extending the duration of the plan through December 31, 2021. As of March 31, 2020, we had authorization under the plan to repurchase approximately 3.1 million shares, or about 5% of our current outstanding shares. Repurchased and subsequently retired shares are restored to the status of authorized but unissued shares. During the first quarter of 2020, we repurchased approximately 3.3 million shares at an average cost of $90.09, for a total of $300.0 million. There were no share repurchases in the first quarter of 2019.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss included the following:

			Pension and		Accumulated
	Foreign Currency		Postretirement		Other
	Translation		Benefit Adjustments,		Comprehensive
	Loss		Net of Tax		Loss
	(in millions)
Balance as of January 1, 2020	$	(64.4)	$	(40.7)	$	(105.1)
Current-period change		(31.4)		—		(31.4)
Balance as of March 31, 2020	$	(95.8)	$	(40.7)	$	(136.5)

Foreign currency translation adjustments have not been adjusted for income taxes. Pension and postretirement benefit adjustments are net of taxes of $7.9 million as of March 31, 2020 and December 31, 2019. Income tax effects are released

from accumulated other comprehensive loss as defined benefit plan and supplemental executive retirement plan obligations are settled.

Noncontrolling Interest Transaction

On March 31, 2020, through our wholly owned subsidiary, Feralloy Corporation, we purchased the remaining 49% noncontrolling interest of Feralloy Processing Company (“FPC”), a toll processor in Portage, Indiana. The increase in our ownership from 51% to 100% was accounted for as an equity transaction. The difference between the $8.0 million consideration paid for the noncontrolling interest with a carrying amount of $1.1 million was recognized as a decrease in total Reliance stockholders’ equity.

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Intangible Assets, net

3 Months Ended

Mar. 31, 2020

Intangible Assets, net

Intangible Assets, net

Note 5. Intangible Assets, net

Intangible assets, net consisted of the following:

		March 31, 2020				December 31, 2019
	Weighted Average	Gross				Gross
	Amortizable	Carrying		Accumulated		Carrying		Accumulated
	Life in Years	Amount		Amortization		Amount		Amortization
		(in millions)
Intangible assets subject to amortization:
Covenants not to compete	5.0	$	0.7	$	(0.4)	$	0.7	$	(0.4)
Customer lists/relationships	15.5		680.2		(445.4)		710.1		(438.1)
Software	10.0		8.1		(8.1)		8.1		(8.1)
Other	7.2		1.0		(0.9)		1.1		(0.9)
			690.0		(454.8)		720.0		(447.5)
Intangible assets not subject to amortization:
Trade names			692.8		—		758.6		—
		$	1,382.8	$	(454.8)	$	1,478.6	$	(447.5)

Amortization expense for intangible assets was $10.8 million for the first quarters of 2020 and 2019. Foreign currency translation losses related to intangible assets, net, were $3.5 million in the first quarter of 2020 compared to foreign currency translation gains of $1.2 million in the first quarter of 2019.

In the first quarter of 2020, we recognized impairment losses of $64.1 million on our trade name and $24.7 million on our customer lists/relationships intangible assets related to certain of our energy-related businesses. See Note 12—“Impairment and Restructuring Charge” for further discussion of our impairment losses.

The following is a summary of estimated future amortization expense for the remaining nine months of 2020 and each of the succeeding five years:

	(in millions)
2020 (remaining nine months)	$	26.4
2021		34.7
2022		34.0
2023		29.7
2024		26.2

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts	$ 20.6	$ 17.8
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, Authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, Authorized shares	200,000,000	200,000,000
Common stock, Issued shares	63,641,000	66,854,000
Common stock, outstanding shares	63,641,000	66,854,000

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Equity - Share Repurchases, Dividends, Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended	3 Months Ended
	Apr. 21, 2020	Oct. 23, 2018	Mar. 31, 2020	Mar. 31, 2020	Mar. 31, 2019
Share Repurchase Plan
Increase in authorized number of shares to be repurchased		5,000,000.0
Number of shares authorized by the Board of Directors to be repurchased under share repurchase plan			3,100,000	3,100,000
Number of shares authorized by the Board of Directors to be repurchased under share repurchase plan, expressed as a percentage of outstanding shares (as a percent)			5.00%	5.00%
Share repurchases (in shares)				3,300,000	0
Average costs per share				$ 90.09
Value of shares repurchased				$ 300.0
Dividends
Common stock quarterly dividend per share (in dollars per share)	$ 0.625			$ 0.625	$ 0.55
Common stock dividend quarterly declared and paid per share (in dollars per share)				$ 0.625	$ 0.55
Dividends paid				$ 41.0	$ 37.0
Common Stock and Additional Paid in Capital
Share Repurchase Plan
Value of shares repurchased				119.3
Common Stock and Additional Paid-In (in Shares)
Payments made to tax authorities on employees' behalf				5.1	9.5
RSU's
Dividends
Dividend equivalents paid				$ 0.9	$ 2.6
Stock-Based Compensation
Vesting period (in years)				3 years
RSU's | Service-based
Stock-Based Compensation
Vesting period (in years)			3 years
Changes
Granted (in shares)			330,144
Weighted Average Grant Date Fair Value
Granted (in dollars per share)			$ 82.81
RSU's | Performance-based
Stock-Based Compensation
Vesting period (in years)			3 years
Changes
Granted (in shares)			210,403
Weighted Average Grant Date Fair Value
Granted (in dollars per share)			$ 82.81
Unvested RSUs
Changes
Unvested at the beginning of the year (in shares)				859,005
Granted (in shares)				540,547
Vested (in shares)				(721)
Cancelled or forfeited (in shares)				(3,964)
Unvested at the end of the period (in shares)			1,394,867	1,394,867
Shares reserved for future grants (all plans)			494,905	494,905
Weighted Average Grant Date Fair Value
Unvested at the beginning of the year (in dollars per share)				$ 86.40
Granted (in dollars per share)				82.81
Vested (in dollars per share)				84.54
Cancelled or forfeited (in dollars per share)				85.79
Unvested at the end of the period (in dollars per share)			$ 85.01	$ 85.01

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CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares		3 Months Ended
	Apr. 21, 2020	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF EQUITY
Cash dividends per share (in dollars per share)	$ 0.625	$ 0.625	$ 0.55

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Basis of Presentation (Details) - Feralloy Processing Company	Mar. 31, 2020	Mar. 30, 2020
Basis of Presentation
Ownership percentage acquired	49.00%
Ownership percentage in consolidated investments other than equity method investment	100.00%	51.00%

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Debt - Summary (Details) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Debt
Total	$ 1,844.2	$ 1,596.3
Less: unamortized discount and debt issuance costs	(7.1)	(7.8)
Less: amounts due within one year and short-term borrowings	(64.8)	(64.9)
Total long-term debt	1,772.3	1,523.6
Unsecured revolving credit facility due September 30, 2021
Debt
Total	631.0	368.0
Unsecured term loan due from June 30, 2020 to September 30, 2021
Debt
Total	450.0	465.0
Senior unsecured notes due April 15, 2023
Debt
Total	500.0	500.0
Senior unsecured notes due November 15, 2036
Debt
Total	250.0	250.0
Other notes and revolving credit facilities
Debt
Total	$ 13.2	$ 13.3

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Equity - Noncontrolling (Details) - USD ($) $ in Millions	Mar. 31, 2020	Mar. 30, 2020
Feralloy Processing Company
Joint Ventures and Noncontrolling Interests
Carrying value of noncontrolling interest	$ 0.0	$ 1.1
Feralloy Processing Company
Joint Ventures and Noncontrolling Interests
Ownership percentage acquired	49.00%
Ownership percentage in consolidated investments other than equity method investment	100.00%	51.00%
Payments for acquired equity interest	$ 8.0

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Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt

Summary of debt

	March 31,		December 31,
	2020		2019
	(in millions)
Unsecured revolving credit facility due September 30, 2021	$	631.0	$	368.0
Unsecured term loan due from June 30, 2020 to September 30, 2021		450.0		465.0
Senior unsecured notes due April 15, 2023		500.0		500.0
Senior unsecured notes due November 15, 2036		250.0		250.0
Other notes and revolving credit facilities		13.2		13.3
Total		1,844.2		1,596.3
Less: unamortized discount and debt issuance costs		(7.1)		(7.8)
Less: amounts due within one year and short-term borrowings		(64.8)		(64.9)
Total long-term debt	$	1,772.3	$	1,523.6

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Subsequent Event

3 Months Ended

Mar. 31, 2020

Subsequent Event

Subsequent Event

Note 13. Subsequent Event

COVID-19 Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The Company is monitoring this, and although operations have not been materially affected by the COVID-19 outbreak as of and for the three months ended March 31, 2020, we are unable to predict the impact that COVID-19 will have on our future financial position and operating results due to numerous uncertainties. The duration and severity of the outbreak and its long-term impact on our business are uncertain at this time.

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Impairment and Restructuring Charge (Tables)

3 Months Ended

Mar. 31, 2020

Impairment and Restructuring Charge

Schedule of impairment and restructuring charge

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Intangible assets, net	$	88.8	$	—
Property, plant and equipment		8.7		—
Operating lease right-of-use assets		0.2		—
Total impairment charge		97.7		—
Restructuring––cost of sales		39.8		—
Total impairment and restructuring charge	$	137.5	$	—

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Apr. 27, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-13122
Entity Registrant Name	RELIANCE STEEL & ALUMINUM CO
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-1142616
Entity Address, Address Line One	350 South Grand Avenue, Suite 5100
Entity Address, City or Town	Los Angeles
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90071
City Area Code	213
Local Phone Number	687-7700
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	RS
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		63,640,761
Entity Central Index Key	0000861884
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 62.9	$ 191.6
Other comprehensive (loss) income:
Foreign currency translation (loss) gain	(31.4)	6.8
Total other comprehensive (loss) income	(31.4)	6.8
Comprehensive income	31.5	198.4
Less: Comprehensive income attributable to noncontrolling interests	1.2	1.5
Comprehensive income attributable to Reliance	$ 30.3	$ 196.9

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Goodwill (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Change in the carrying amount of goodwill
Balance at the beginning of the period	$ 2,003.8
Purchase price allocation adjustments	0.6
Foreign currency translation loss	(5.6)
Balance at the end of the period	1,998.8
Accumulated impairment losses	$ 0.0

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Basis of Presentation

12 Months Ended

Dec. 31, 2020

Basis of Presentation

Basis of Presentation

Note 1. Basis of Presentation

Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, our financial statements reflect all adjustments, which are of a normal recurring nature, necessary for presentation of financial statements for interim periods in accordance with U.S. GAAP. The results of operations for the first quarter of 2020 are not necessarily indicative of the results for the full year ending December 31, 2020. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2019, included in the Reliance Steel & Aluminum Co. (“Reliance,” the “Company,” “we,” “our” or “us”) Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Our consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. During the first quarter of 2020, we purchased the remaining 49% noncontrolling interest of Feralloy Processing Company, which increased our ownership from 51% to 100%. See Note 9—“Equity” for further discussion of our noncontrolling interest transaction. Our investments in unconsolidated subsidiaries are recorded under the equity method of accounting.

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Leases (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Leases
Operating lease cost	$ 21.1	$ 20.8
Cash payments for operating leases	21.2	20.2
Right-of-use assets obtained in exchange for operating lease obligations	$ 14.5	$ 11.7
Weighted average remaining lease term - operating leases	5 years 6 months		5 years 7 months 6 days
Weighted average discount rate - operating leases	4.20%		4.30%
Maturities of operating lease liabilities
2020 (remaining nine months)	$ 45.1
2021	50.4
2022	39.0
2023	30.0
2024	23.1
Thereafter	41.9
Total operating lease payments	229.5
Less: imputed interest	(27.4)
Total operating lease liabilities	$ 202.1

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Earnings Per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share

Earnings Per Share

Note 11.  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31,
	2020		2019
	(in millions, except number of shares which are reflected in thousands and per share amounts)
Numerator:
Net income attributable to Reliance	$	61.7	$	190.1
Denominator:
Weighted average shares outstanding		66,337		67,127
Dilutive effect of stock-based awards		911		799
Weighted average diluted shares outstanding		67,248		67,926
Earnings per share attributable to Reliance stockholders:
Diluted	$	0.92	$	2.80
Basic	$	0.93	$	2.83

The computations of earnings per share for the first quarters of 2020 and 2019 do not include 701,053 and 682,660 weighted average shares, respectively, in respect of RSUs, because their inclusion would have been anti-dilutive.

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Leases

3 Months Ended

Mar. 31, 2020

Leases

Leases

Note 7.  Leases

Our metals service center leases are comprised of processing and distribution facilities, equipment, trucks and trailers, ground leases and other leased spaces, such as depots, sales offices, storage and data centers. We also lease various office buildings, including our corporate headquarters in Los Angeles, California. Our leases of facilities and other spaces expire at various times through 2031 and our ground leases expire at various times through 2068. Nearly all of our leases are operating leases. Information regarding our insignificant finance leases is not included as it is not meaningful to an understanding of our lease obligations.  

The following is a summary of our lease cost:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Operating lease cost	$	21.1	$	20.8

Supplemental cash flow and balance sheet information is presented below:

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Supplemental cash flow information
Cash payments for operating leases	$	21.2	$	20.2
Right-of-use assets obtained in exchange for operating lease obligations	$	14.5	$	11.7
	March 31,		December 31,
	2020		2019
Other lease information
Weighted average remaining lease term—operating leases		5.5 years		5.6 years
Weighted average discount rate—operating leases		4.2%		4.3%

Maturities of operating lease liabilities as of March 31, 2020 are as follows:

	(in millions)
2020 (remaining nine months)	$	45.1
2021		50.4
2022		39.0
2023		30.0
2024		23.1
Thereafter		41.9
Total operating lease payments		229.5
Less: imputed interest		(27.4)
Total operating lease liabilities	$	202.1

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Revenues

3 Months Ended

Mar. 31, 2020

Revenues

Revenues

Note 3. Revenues

The following table presents our sales disaggregated by product and service. Certain sales taxes and value-added taxes collected from customers are excluded from our reported net sales.

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Carbon steel	$	1,316.2	$	1,593.6
Aluminum		512.2		565.8
Stainless steel		404.9		406.5
Alloy		151.4		184.3
Toll processing and logistics		112.5		111.7
Other and eliminations		75.7		94.7
Total	$	2,572.9	$	2,956.6

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Net income attributable to Reliance	$ 61.7	$ 190.1
Denominator:
Weighted average shares outstanding (in shares)	66,337,000	67,127,000
Dilutive effect of stock-based awards (in shares)	911,000	799,000
Weighted average diluted shares outstanding (in shares)	67,248,000	67,926,000
Earnings per share attributable to Reliance stockholders - diluted (in dollars per share)	$ 0.92	$ 2.80
Earnings per share attributable to Reliance stockholders - basic (in dollars per share)	$ 0.93	$ 2.83
Diluted shares
Weighted average shares, respectively, primarily for RSU's and stock options, not included in the diluted calculation due to their aniti-dilutive effect	701,053	682,660

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Equity (Tables)

3 Months Ended

Mar. 31, 2020

Equity

Summary of the status of the Company's unvested restricted stock units and changes during the year

		Weighted
		Average
		Grant Date
		Fair Value
Unvested RSUs	Shares	Per RSU
Unvested at January 1, 2020	859,005	$	86.40
Granted(1)	540,547		82.81
Vested	(721)		84.54
Cancelled or forfeited	(3,964)		85.79
Unvested at March 31, 2020	1,394,867	$	85.01
Shares reserved for future grants (all plans)	494,905

(1) Comprised of 330,144 service-based RSUs and 210,403 performance-based RSUs granted in March 2020 with a fair value of $82.81 per RSU. The service-based RSUs cliff vest on December 1, 2022 and the performance-based RSUs are subject to a three-year performance period ending December 31, 2022.

Schedule of accumulated other comprehensive loss

			Pension and		Accumulated
	Foreign Currency		Postretirement		Other
	Translation		Benefit Adjustments,		Comprehensive
	Loss		Net of Tax		Loss
	(in millions)
Balance as of January 1, 2020	$	(64.4)	$	(40.7)	$	(105.1)
Current-period change		(31.4)		—		(31.4)
Balance as of March 31, 2020	$	(95.8)	$	(40.7)	$	(136.5)

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Goodwill (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill.

Schedule of changes in the carrying amount of goodwill

	(in millions)
Balance at January 1, 2020	$	2,003.8
Purchase price allocation adjustments		0.6
Foreign currency translation loss		(5.6)
Balance at March 31, 2020	$	1,998.8

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Impairment and Restructuring Charge (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Impairment and Restructuring Charge
Intangible assets, net	$ 88.8
Property, plant and equipment	8.7
Operating lease right-of-use assets	0.2
Total impairment charge	97.7
Total impairment and restructuring charge	137.5
Cost of sales
Impairment and Restructuring Charge
Restructuring	$ 39.8

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases

Schedule of lease cost

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Operating lease cost	$	21.1	$	20.8

Schedule of supplemental cash flow and other lease information

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Supplemental cash flow information
Cash payments for operating leases	$	21.2	$	20.2
Right-of-use assets obtained in exchange for operating lease obligations	$	14.5	$	11.7
	March 31,		December 31,
	2020		2019
Other lease information
Weighted average remaining lease term—operating leases		5.5 years		5.6 years
Weighted average discount rate—operating leases		4.2%		4.3%

Schedule of maturities of operating lease liabilities

	(in millions)
2020 (remaining nine months)	$	45.1
2021		50.4
2022		39.0
2023		30.0
2024		23.1
Thereafter		41.9
Total operating lease payments		229.5
Less: imputed interest		(27.4)
Total operating lease liabilities	$	202.1

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Revenues (Tables)

3 Months Ended

Mar. 31, 2020

Revenues

Schedule of disaggregation of revenue

	Three Months Ended
	March 31,
	2020		2019
	(in millions)
Carbon steel	$	1,316.2	$	1,593.6
Aluminum		512.2		565.8
Stainless steel		404.9		406.5
Alloy		151.4		184.3
Toll processing and logistics		112.5		111.7
Other and eliminations		75.7		94.7
Total	$	2,572.9	$	2,956.6

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Intangible Assets, net (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Intangible assets subject to amortization:
Intangible assets subject to amortization, Gross Carrying Amount	$ 690.0		$ 720.0
Intangible assets subject to amortization, Accumulated Amortization	(454.8)		(447.5)
Intangible assets
Intangible assets, Gross Carrying Amount	1,382.8		1,478.6
Amortization expense for intangible assets	10.8	$ 10.8
Changes in intangible assets due to foreign currency translation gains (losses)	(3.5)	$ 1.2
Summary of estimated aggregate amortization expense for each of the succeeding five years
2020 (remaining nine months)	26.4
2021	34.7
2022	34.0
2023	29.7
2024	26.2
Trade names
Intangible assets not subject to amortization:
Intangible assets not subject to amortization, Gross Carrying Amount	692.8		758.6
Intangible assets
Impairment losses of intangible assets, indefinite-lived	$ 64.1
Covenants not to compete
Intangible assets subject to amortization:
Weighted average amortizable life in years	5 years
Intangible assets subject to amortization, Gross Carrying Amount	$ 0.7		0.7
Intangible assets subject to amortization, Accumulated Amortization	$ (0.4)		(0.4)
Customer lists/relationships
Intangible assets subject to amortization:
Weighted average amortizable life in years	15 years 6 months
Intangible assets subject to amortization, Gross Carrying Amount	$ 680.2		710.1
Intangible assets subject to amortization, Accumulated Amortization	(445.4)		(438.1)
Intangible assets
Impairment losses of intangible assets, finite-lived	$ 24.7
Software
Intangible assets subject to amortization:
Weighted average amortizable life in years	10 years
Intangible assets subject to amortization, Gross Carrying Amount	$ 8.1		8.1
Intangible assets subject to amortization, Accumulated Amortization	$ (8.1)		(8.1)
Other
Intangible assets subject to amortization:
Weighted average amortizable life in years	7 years 2 months 12 days
Intangible assets subject to amortization, Gross Carrying Amount	$ 1.0		1.1
Intangible assets subject to amortization, Accumulated Amortization	$ (0.9)		$ (0.9)

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Taxes
Effective tax rate (as a percent)	24.30%	25.00%
Income tax at U.S. federal statutory tax rate (as a percent)	21.00%	21.00%

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating activities:
Net income	$ 62.9	$ 191.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	57.0	54.0
Impairment of long-lived assets	97.7
Provision for uncollectible accounts	3.8	1.7
Deferred income tax benefit	(33.5)	(0.1)
Stock-based compensation expense	8.9	8.2
Other	9.7	1.7
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable	(155.8)	(180.7)
Inventories	12.4	(119.0)
Prepaid expenses and other assets	68.3	41.2
Accounts payable and other liabilities	39.4	118.6
Net cash provided by operating activities	170.8	117.2
Investing activities:
Purchases of property, plant and equipment	(55.5)	(53.0)
Other	0.5	4.3
Net cash used in investing activities	(55.0)	(48.7)
Financing activities:
Proceeds from long-term debt borrowings	667.0	374.0
Principal payments on long-term debt	(419.0)	(391.0)
Dividends and dividend equivalents paid	(41.9)	(39.6)
Share repurchases	(300.0)
Noncontrolling interest purchased	(8.0)
Other	(5.5)	(8.8)
Net cash used in financing activities	(107.4)	(65.4)
Effect of exchange rate changes on cash and cash equivalents	(10.6)	2.3
(Decrease) increase in cash and cash equivalents	(2.2)	5.4
Cash and cash equivalents at beginning of year	174.3	128.2
Cash and cash equivalents at end of period	172.1	133.6
Supplemental cash flow information:
Interest paid during the period	6.0	13.6
Income taxes paid during the period, net	$ 5.2	$ 7.9

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CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF INCOME
Net sales	$ 2,572.9	$ 2,956.6
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	1,792.2	2,089.7
Warehouse, delivery, selling, general and administrative	522.7	532.1
Depreciation and amortization	57.0	54.0
Impairment of long-lived assets	97.7
Total costs and expenses	2,469.6	2,675.8
Operating income	103.3	280.8
Other expense:
Interest expense	16.9	24.2
Other expense, net	3.3	1.1
Income before income taxes	83.1	255.5
Income tax provision	20.2	63.9
Net income	62.9	191.6
Less: Net income attributable to noncontrolling interests	1.2	1.5
Net income attributable to Reliance	$ 61.7	$ 190.1
Earnings per share attributable to Reliance stockholders:
Diluted (in dollars per share)	$ 0.92	$ 2.80
Basic (in dollars per share)	$ 0.93	$ 2.83
Shares used in computing earnings per share:
Diluted (in shares)	67,248	67,926
Basic (in shares)	66,337	67,127
Cash dividends per share (in dollars per share)	$ 0.625	$ 0.55

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Debt

3 Months Ended

Mar. 31, 2020

Debt

Debt

Note 6. Debt

Debt consisted of the following:

	March 31,		December 31,
	2020		2019
	(in millions)
Unsecured revolving credit facility due September 30, 2021	$	631.0	$	368.0
Unsecured term loan due from June 30, 2020 to September 30, 2021		450.0		465.0
Senior unsecured notes due April 15, 2023		500.0		500.0
Senior unsecured notes due November 15, 2036		250.0		250.0
Other notes and revolving credit facilities		13.2		13.3
Total		1,844.2		1,596.3
Less: unamortized discount and debt issuance costs		(7.1)		(7.8)
Less: amounts due within one year and short-term borrowings		(64.8)		(64.9)
Total long-term debt	$	1,772.3	$	1,523.6

Unsecured Credit Facility

On September 30, 2016, we entered into a $2.1 billion unsecured five-year credit agreement (“Credit Agreement”) comprised of a $1.5 billion unsecured revolving credit facility and a $600.0 million unsecured term loan, with an option to increase the revolving credit facility up to an additional $500.0 million at our request, subject to approval of the lenders and certain other customary conditions. The term loan due September 30, 2021 amortizes in quarterly installments, with an annual amortization of 10% until June 2021, with the balance to be paid at maturity. Interest on borrowings under the Credit Agreement at March 31, 2020 was at variable rates based on LIBOR plus 1.00% or the bank prime rate and we pay a commitment fee at an annual rate of 0.125% on the unused portion of the revolving credit facility. The applicable margins over LIBOR and base rate borrowings, along with commitment fees, are subject to adjustment every quarter based on our leverage ratio, as defined in the Credit Agreement. All borrowings under the Credit Agreement may be prepaid without penalty.

Weighted average interest rates on borrowings outstanding on the revolving credit facility were 2.14% and 3.69% as of March 31, 2020 and December 31, 2019, respectively. Weighted average interest rates on borrowings outstanding on the term loan were 1.99% and 2.80% as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, we had $631.0 million of outstanding borrowings, $37.5 million of letters of credit issued and $831.5 million available for borrowing on the revolving credit facility.

Senior Unsecured Notes

On November 20, 2006, we entered into an indenture (the “2006 Indenture”) for the issuance of $600.0 million of unsecured debt securities. The total debt issued was comprised of two tranches, (a) $350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid on November 15, 2016 and (b) $250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036.

On April 12, 2013, we entered into an indenture (the “2013 Indenture” and, together with the 2006 Indenture, the “Indentures”) for the issuance of $500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing on April 15, 2023. 

Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. If we experience a change in control accompanied by a downgrade in our credit rating, we will be required to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest.

Other Notes and Revolving Credit Facilities

A revolving credit facility with a credit limit of $7.7 million is in place for an operation in Asia with an outstanding balance of $4.2 million and $4.3 million as of March 31, 2020 and December 31, 2019, respectively.

Various industrial revenue bonds had combined outstanding balances of $9.0 million as of March 31, 2020 and December 31, 2019, and have maturities through 2027.

Covenants

The Credit Agreement and the Indentures include customary representations, warranties, covenants and events of default provisions. The covenants under the Credit Agreement include, among other things, two financial maintenance covenants that require us to comply with a minimum interest coverage ratio and a maximum leverage ratio. We were in compliance with all financial covenants in our Credit Agreement at March 31, 2020.

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Impact of Recently Issued Accounting Guidance

3 Months Ended

Mar. 31, 2020

Impact of Recently Issued Accounting Guidance

Impact of Recently Issued Accounting Guidance

Note 2.  Impact of Recently Issued Accounting Guidance

Impact of Recently Issued Accounting Standards—Adopted

Financial Instruments – Credit Losses—In June 2016, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that changes how entities account for credit losses for most financial assets, including the allowance for doubtful accounts for trade receivables, and certain other instruments that are not measured at fair value through net income. The new guidance replaces the current incurred loss model with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset. We adopted the new standard on January 1, 2020. The adoption of this accounting change did not have a material impact on our consolidated financial statements.

Impact of Recently Issued Accounting Standards—Not Yet Adopted

Income Taxes—In December 2019, the FASB issued accounting changes that simplify the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2020, or January 1, 2021 for the Company. Early adoption is permitted. The adoption of this standard will not have a material impact on our consolidated financial statements.

Reference Rate Reform—In March 2020, the FASB issued accounting changes that provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The accounting changes may be applied prospectively through December 31, 2022. The Company expects to adopt this guidance for any contracts that are modified as a result of reference rate reform. We are continuing

to evaluate which contracts may be impacted by reference rate reform, but believe our use of these accounting changes will not have a material impact on our consolidated financial statements.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitment and Contingencies

Commitments and Contingencies

Note 10.  Commitments and Contingencies

Environmental Contingencies

We are currently involved with an environmental remediation project related to activities at former manufacturing operations of Earle M. Jorgensen Company (“EMJ”), our wholly owned subsidiary, that were sold many years prior to our acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ maintained insurance policies during the time it owned the manufacturing operations that have covered costs incurred to date, and are expected to continue to cover the majority of the related costs. We do not expect that this obligation will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Legal Matters

From time to time, we are named as a defendant in legal actions. Generally, these actions arise in the ordinary course of business. We are not currently 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 impact on our consolidated financial position, results of operations or cash flows. We maintain general liability insurance against risks arising in the ordinary course of business.