01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported net sales of $6.31 billiona for 2010, up from $5.32 billion in 2009, and net income attributable to Reliance of $194.4 million, compared with $148.2 million in 2009.
Diluted EPS was $2.61b versus $2.01. Gross profit margin was 25.1% in 2010 versus 26.3% in 2009, while operating income rose to $360.7 million from $250.4 million. The company describes itself as the largest metals service center company in North America, with more than 200 locations and over 100,000 metal products sold to more than 125,000 customers.
The filing shows a recovering but still-soft demand environment. Management says non-residential construction, about one-third of sales, remained at low levels, while carbon steel prices rose sharply late in 2010 and early 2011 mainly on raw material costs rather than end demand. The company warns that prices could fall if mills add capacity without matching demand.
LIFO accounting produced a $34.8 millionc expense in 2010 versus a $305.0 million credit in 2009. Balance sheet and cash flow data show Reliance shareholders' equity of $2.82 billion, total debt of $941.3 million, and a net debt-to-total capital ratio of 23.5%.
Operating cash flow fell to $214.1 milliond from $943.0 million, largely due to working capital growth. Management expects a 2011 capital expenditure budget of about $200 million and declared a quarterly dividend increase to $0.12 per share from $0.10.
02—Key points
Key Highlights
- Net sales of $6.31 billion in 2010, versus $5.32 billion in 2009; net income attributable to Reliance of $194.4 million versus $148.2 million.
- Diluted EPS of $2.61 in 2010 compared with $2.01 in 2009.
- Gross profit margin of 25.1% in 2010, down from 26.3% in 2009, with a $34.8 million LIFO expense in 2010 versus a $305.0 million LIFO credit in 2009.
- Operating cash flow of $214.1 million in 2010, down from $943.0 million in 2009, as receivables and inventories grew with higher business levels.
- Total debt of $941.3 million at December 31, 2010; $195.0 million drawn on the $1.1 billion revolving credit facility; net debt-to-total capital ratio of 23.5%.
- 2010 acquisitions of Diamond Consolidated Industries and Lampros Steel with a combined transaction value of about $123 million, plus $111.4 million in capital expenditures.
- Quarterly dividend increased to $0.12 per share in February 2011 from $0.10, and the 2011 capital expenditure budget is about $200 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Reliance kept $0.03.
- Revenue$6.31B100.0%
- Cost of revenue−$4.73B74.9%
- Gross profit$1.58B25.1%
- Operating costs−$1.22B19.4%
- Operating income$360.7M5.7%
- Interest, other & tax−$166.3M2.6%
- Net income$194.4M3.1%
Where FY2010 revenue went
$6.31B- Cost of revenue: $4.73B, 75% of revenue
- SG&A: $1.10B, 17% of revenue
- Net income: $194.4M, 3.1% of revenue
- Other operating costs: $120.6M, 1.9% of revenue
- Interest, other & tax: $166.3M, 2.6% of revenue
Kept 3.1% as net incomeNet income $194.4M · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $6.31B$5.32B | +18.7% |
| Cost of Revenue | $4.73B$3.92B | +20.7% |
| Gross Profit | $1.58B$1.40B | +13.2% |
| SG&A Expenses | $1.10B$1.03B | +7.1% |
| Operating Expenses | $5.95B$5.07B | +17.5% |
| Operating Income | $360.70M$250.40M | +44.0% |
| Interest Expense | $61.20M$67.50M | −9.3% |
| Net Income | $194.35M$149.20M | +30.3% |
| EPS (Basic) | $2.62$2.02 | +29.7% |
| EPS (Diluted) | $2.61$2.01 | +29.9% |
| Shares Outstanding (Basic) | 74.23M73.45M | +1.1% |
| Shares Outstanding (Diluted) | 74.47M73.70M | +1.0% |
05—Questions
Frequently Asked Questions
How did Reliance perform financially in 2010?
Net sales rose to $6.31 billion from $5.32 billion, and net income attributable to Reliance was $194.4 million, up from $148.2 million. Operating income increased to $360.7 million from $250.4 million, although gross profit margin declined to 25.1% from 26.3%.
What is driving pricing and margin risk?
Carbon steel mill prices rose late in 2010 and early 2011 mainly because of higher raw material and scrap costs rather than end-market demand. The filing warns that prices could decline if mills increase production without matching demand growth or if imports rise, which could compress gross margins.
How strong is the balance sheet and debt position?
Total debt was $941.3 million at December 31, 2010, with a net debt-to-total capital ratio of 23.5%, down from 25.6% a year earlier. The company had $195.0 million outstanding on its $1.1 billion revolving credit facility, which matures in November 2012, and reported an interest coverage ratio of about 5.8 times against a 3.0 times covenant minimum.
What is management's outlook for 2011?
Management expects slow and steady demand growth through 2011 and anticipates gross profit margins in a range of 25% to 27%. It expects average selling prices for 2011 to be at or above 2010 levels, while noting that results would remain below its view of true earnings power until non-residential construction demand improves significantly.
Why did operating cash flow decline sharply?
Operating cash flow fell to $214.1 million in 2010 from $943.0 million in 2009. The filing attributes the decline to rising working capital as business conditions improved, with receivables increasing by $146.7 million and FIFO inventories by $156.6 million from 2009 year-end levels.
06—Continue