01—Abstract
Summary
Summary of the 10-K filed March 29, 2001. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported record 2000 results, with net sales rising to $1,726,665 thousanda (a 14.3% increase over 1999) and net income reaching $62,319 thousand, or $2.28 per diluted share.
The company attributed the growth mainly to acquisitions completed in 1999 and 2000, along with a 7.4% increase in tons sold and a 6.5% rise in average selling price per ton. Gross margin held roughly steady at 27.2% of sales, while income from operations was $130,349 thousandb (7.5% of sales). Management stated it does not anticipate the same level of gross margin and net income returns in 2001 given current economic conditions and metal cost volatility.
The balance sheet shows total assets of $997,243 thousand and long-term debt rising to $421,825 thousandc from $318,050 thousand, reflecting borrowings used to fund $41,147 thousand of 2000 acquisitions and $56,284 thousand of stock repurchases. Goodwill totaled $232,048 thousand, or 57.6% of shareholders' equity. Operating cash flow fell to $24,464 thousand from $131,355 thousand in 1999, driven by increases in inventories and receivables.
Demand in semiconductor and aerospace markets was strong during 2000, while carbon steel sales weakened in the second half, and the company expects semiconductor demand to slow in 2001. In early 2001 the company completed two further acquisitions, Aluminum and Stainless, Inc. (about $22 milliond in revenue) and Viking Materials, Inc. with Viking Materials of Illinois (about $90 million combined revenue), both funded with its credit line. The company also planned to refinance its syndicated credit facility, and the Board raised the quarterly dividend 9% to $.06 per share in February 2001.
02—Key points
Key Highlights
- Record 2000 net sales of $1,726,665 thousand, up 14.3% from 1999, driven by acquisitions and a 6.5% increase in average selling price per ton
- Net income of $62,319 thousand, or $2.28 per diluted share, versus $57,610 thousand in 1999
- Gross profit of $469,668 thousand, with gross margin steady at 27.2% of sales compared with 27.4% in 1999
- Long-term debt rose to $421,825 thousand from $318,050 thousand, funding acquisitions and a $56,284 thousand stock repurchase
- Operating cash flow dropped to $24,464 thousand from $131,355 thousand in 1999 due to higher inventory and receivables
- Management does not anticipate the same level of gross margin and net income returns in 2001
- Quarterly dividend increased 9% to $.06 per share in February 2001
03—Questions
Frequently Asked Questions
What drove Reliance's record 2000 sales growth?
The filing attributes the 14.3% increase in net sales mainly to including twelve months of sales from 1999 acquisitions and sales from 2000 acquisitions, along with a 7.4% increase in tons sold and a 6.5% rise in average selling price per ton. Same-store sales, excluding acquisitions, increased 7.9%.
How did the company fund its 2000 acquisitions and stock repurchases?
Acquisitions totaled approximately $41,147 thousand and stock repurchases totaled $56,284 thousand. The filing states these were funded mainly through borrowings on the revolving line of credit, with internally generated funds also a source of liquidity.
What is the outlook for 2001?
Management stated it does not anticipate the same level of gross margin and net income returns in 2001 as in recent years, due to current general economic conditions and volatility of metal costs, net of the impact of any acquisitions made during 2001. It also expects demand in the semiconductor industry to decline from 2000 levels.
What is the company's debt and liquidity position?
Long-term debt was $421,825 thousand at year-end 2000. The syndicated revolving line had a $200,000 thousand limit with $85,000 thousand outstanding, and the company planned to refinance it. It also had $290,000 thousand of senior unsecured notes at an average fixed rate of 6.83%. The company does not use interest rate derivatives.
What are the main risks to the business described in the filing?
The filing cites exposure to cyclical industries including aerospace, semiconductor, and transportation, fluctuations in raw metal prices, intense price competition, and higher leverage after recent acquisitions. It also notes that the carbon steel business weakened in the Southeast and Midwest in the second half of 2000 and that the company cannot guarantee sales levels in economic downturns.
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