01—Abstract
Summary
Summary of the 10-K filed February 27, 2014. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported 2013 net sales of $9.22 billiona, up 9.3% from $8.44 billion in 2012, driven mainly by the April 2013 acquisition of Metals USA, which contributed $1.24 billion of net sales.
Tons sold rose 21.4%, but average selling price per ton fell 10.0% to $1,712,b as metal pricing declined. Same-store net sales fell 6.6%, and same-store tons rose only 0.9%. Gross profit margin held at 26.0%, within the company's historical 25% to 27% range.
Operating income declined 16.3% to $551.9 millionc, and net income attributable to Reliance fell 20.3% to $321.6 million, or $4.14 diluted earnings per share. The balance sheet expanded materially. Total assets rose to $7.34 billion from $5.86 billion, and aggregate indebtedness reached $2.11 billion, up from $1.21 billion at year-end 2012.
Net debt-to-capital was 34.3%, down from 39.4% immediately after the Metals USA funding. Operating cash flow was $633.3 milliond, and capital expenditures were $168.0 million. The company was in compliance with all debt covenants, with an interest coverage ratio of about 7.3 times against a 3.0 times minimum.
Shareholder returns were a focus. Cash dividends per share rose to $1.26 in 2013 from $0.80 in 2012, and the board raised the quarterly dividend to $0.35 in February 2014. The company did not repurchase shares in 2013, and it disclosed a pending antitrust lawsuit filed by former employees, which management believes is without merit.
02—Key points
Key Highlights
- Net sales of $9.22 billion in 2013, up 9.3%, with the Metals USA acquisition (April 2013) contributing $1.24 billion
- Gross profit margin of 26.0% versus 26.1% in 2012, within the historical 25% to 27% range
- Average selling price per ton fell 10.0% to $1,712, while tons sold rose 21.4%
- Operating income of $551.9 million, down 16.3%; net income attributable to Reliance of $321.6 million, down 20.3%
- Total debt rose to $2.11 billion from $1.21 billion; net debt-to-capital improved to 34.3% from 39.4% after the Metals USA funding
- Cash dividends per share of $1.26 in 2013, up from $0.80; quarterly dividend raised to $0.35 in February 2014
- Operating cash flow of $633.3 million; capital expenditures of $168.0 million; 2014 capex budget of approximately $220 million
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Reliance kept $0.03.
- Revenue$9.22B100.0%
- Cost of revenue−$6.83B74.0%
- Gross profit$2.40B26.0%
- Operating costs−$1.85B20.0%
- Operating income$551.9M6.0%
- Interest, other & tax−$230.3M2.5%
- Net income$321.6M3.5%
Where FY2013 revenue went
$9.22B- Cost of revenue: $6.83B, 74% of revenue
- SG&A: $1.64B, 18% of revenue
- Net income: $321.6M, 3.5% of revenue
- Other operating costs: $207.3M, 2.2% of revenue
- Interest, other & tax: $230.3M, 2.5% of revenue
Kept 3.5% as net incomeNet income $321.6M · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 27, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $9.22B$8.44B | +9.3% |
| Cost of Revenue | $6.83B$6.24B | +9.5% |
| Gross Profit | $2.40B$2.21B | +8.6% |
| SG&A Expenses | $1.64B$1.40B | +17.3% |
| Operating Expenses | $8.67B$7.78B | +11.4% |
| Operating Income | $551.90M$659.20M | −16.3% |
| Interest Expense | $77.50M$58.40M | +32.7% |
| Net Income | $321.60M$403.50M | −20.3% |
| EPS (Basic) | $4.19$5.36 | −21.8% |
| EPS (Diluted) | $4.14$5.33 | −22.3% |
| Shares Outstanding (Basic) | 76.84M75.22M | +2.2% |
| Shares Outstanding (Diluted) | 77.65M75.69M | +2.6% |
05—Questions
Frequently Asked Questions
How did the Metals USA acquisition affect Reliance's 2013 results?
Metals USA, acquired April 12, 2013 for a total transaction value of approximately $1.25 billion, contributed $1.24 billion of net sales and added 44 service centers. Company-wide tons sold rose 21.4%, while same-store tons rose only 0.9%. Transaction costs of about $11.4 million were included in selling, general and administrative expenses.
Why did net income decline in 2013 despite higher sales?
Average selling prices fell 10.0% in 2013 as mill pricing declined, which reduced gross profit dollars on a same-store basis. The filing attributes the net income decline to lower gross profit dollars, partly offset by acquisition contributions, along with non-recurring acquisition-related expenses, restructuring costs of $2.5 million, and a $14.9 million trade name impairment.
How is Reliance's debt position and liquidity?
Total debt was $2.11 billion at December 31, 2013, including $480.0 million drawn on a $1.5 billion revolving credit facility and a $500.0 million term loan due April 2018. The net debt-to-capital ratio was 34.3%, and the company stated it was in compliance with all debt covenants.
What is the outlook for dividends and capital spending?
The board increased the quarterly dividend to $0.35 per share in February 2014, a 6% increase, and the company has raised its dividend 21 times since its 1994 IPO. The 2014 capital expenditure budget is approximately $220 million, mostly for internal growth, with maintenance capital expenditures estimated at $80 to $85 million.
06—Continue