What drove the increase in 2004 profitability?

The filing attributes the increase mainly to higher selling prices. The average selling price per ton rose 47.6% as mill supply was limited and carbon steel costs increased sharply, while tons sold increased 4.3%. Warehouse, delivery, selling, general and administrative expenses rose to 16.4% of sales from 21.0% in 2003.

How much debt does the company carry, and how has leverage changed?

Long-term debt was $380.9 million at December 31, 2004, down from $469.3 million a year earlier. Total debt, including current maturities, was $427.3 million. The net debt-to-capital ratio fell to 33.6% from 43.1%, and the debt-to-EBITDA ratio, as defined by the syndicated credit facility, fell to 1.3 from 3.6.

What are the main risks the filing highlights for future results?

The filing cites a decline in customer demand or pricing, which could reduce gross margins, and a significant increase in domestic metals availability, which could hurt results. It also notes that changing interest rates on variable-rate debt, reliance on metal prices and availability, foreign currency fluctuations, and the possibility that acquisitions underperform could affect results.

What is the outlook for 2005 and capital spending plans?

Management said 2005 should be a strong year compared with all years except 2004, but it gave no assurance. It expects aerospace demand to continue increasing, and it expects modest increases, if any, in demand for other products. The 2005 capital expenditure budget is $57 million.

What are the company's dividend and shareholder return policies?

The quarterly dividend was raised to $.09 per share in February 2005, from $.07. Cash dividends paid in 2004 totaled $.26 per share, and the company has paid quarterly dividends for 45 years. Its senior notes and credit facility limit dividends based on earnings. No shares were repurchased in 2004 or 2003.

RS 10-K FY2004 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 15, 2005. Cited figures are marked; the original filing is the authoritative source.

Reliance Steel & Aluminum Co. (now Reliance, Inc.) reported record 2004 results as a metals service center.

Net sales rose 56.3% to $2.94 billion^a from $1.88 billion, and net income reached $169.7 million, or $5.19 per diluted share, compared with $34.0 million in 2003. The filing attributes the gains mainly to a sharp rise in selling prices: the average selling price per ton increased 47.6%, while tons sold rose 4.3%. Gross profit was $832.2 million, or 28.3% of sales, and operating profit was $306.9 million, a 10.4% margin.

Results were helped by a 2004 LIFO expense of $110.8 million^b, which reduced gross profit. The balance sheet strengthened over the year. Long-term debt fell to $380.9 million from $469.3 million, and the net debt-to-capital ratio improved to 33.6% from 43.1%.

The debt-to-EBITDA ratio, as defined by the syndicated credit facility, dropped to 1.3 from 3.6. Operations generated $121.8 million^c of cash. Management said the security interest granted to lenders in 2003 is expected to be released in the first quarter of 2005.

The quarterly dividend was raised to $.09 per share in February 2005, from $.07. Management stated that 2005 should be strong compared with all years except 2004, but it gave no assurance of this.

The company warned that a decline in demand or pricing, or a significant increase in domestic metals availability, could hurt results. It did not complete any acquisitions in 2004, and its 2005 capital expenditure budget is $57 million^d.

02—Key points

Key Highlights

Record net sales of $2.94 billion in 2004, up 56.3% from $1.88 billion, driven mainly by a 47.6% rise in the average selling price per ton.
Net income of $169.7 million, or $5.19 per diluted share, versus $34.0 million, or $1.07 per diluted share, in 2003.
Gross profit of $832.2 million (28.3% of sales) and operating profit of $306.9 million (10.4% of sales), including $110.8 million of LIFO expense.
Net debt-to-capital ratio improved to 33.6% from 43.1%, and debt-to-EBITDA fell to 1.3 from 3.6.
Cash from operations of $121.8 million was used for capital expenditures of $36.0 million and net debt repayments of $64.4 million.
Quarterly dividend increased to $.09 per share in February 2005, from $.07 per share.
The security interest granted to lenders in 2003 is expected to be released in the first quarter of 2005.

03—Questions

Frequently Asked Questions

What drove the increase in 2004 profitability?
The filing attributes the increase mainly to higher selling prices. The average selling price per ton rose 47.6% as mill supply was limited and carbon steel costs increased sharply, while tons sold increased 4.3%. Warehouse, delivery, selling, general and administrative expenses rose to 16.4% of sales from 21.0% in 2003.
How much debt does the company carry, and how has leverage changed?
Long-term debt was $380.9 million at December 31, 2004, down from $469.3 million a year earlier. Total debt, including current maturities, was $427.3 million. The net debt-to-capital ratio fell to 33.6% from 43.1%, and the debt-to-EBITDA ratio, as defined by the syndicated credit facility, fell to 1.3 from 3.6.
What are the main risks the filing highlights for future results?
The filing cites a decline in customer demand or pricing, which could reduce gross margins, and a significant increase in domestic metals availability, which could hurt results. It also notes that changing interest rates on variable-rate debt, reliance on metal prices and availability, foreign currency fluctuations, and the possibility that acquisitions underperform could affect results.
What is the outlook for 2005 and capital spending plans?
Management said 2005 should be a strong year compared with all years except 2004, but it gave no assurance. It expects aerospace demand to continue increasing, and it expects modest increases, if any, in demand for other products. The 2005 capital expenditure budget is $57 million.
What are the company's dividend and shareholder return policies?
The quarterly dividend was raised to $.09 per share in February 2005, from $.07. Cash dividends paid in 2004 totaled $.26 per share, and the company has paid quarterly dividends for 45 years. Its senior notes and credit facility limit dividends based on earnings. No shares were repurchased in 2004 or 2003.

04—Continue

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