01—Abstract
Summary
Summary of the 10-K filed February 26, 2015. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported record 2014 net sales of $10.45 billiona, up 13.3% from $9.22 billion in 2013, with net income attributable to Reliance of $371.5 million, up from $321.6 million.
Same-store tons sold rose 6.1%, outpacing the 4.2% industry increase reported by the Metals Service Center Institute. Management said gross profit margin declined in 2014 amid competitive pricing from high import levels, but stayed within its historical 25% to 27% range. Operating income rose to $617.4 millionb from $551.9 million, aided by three 2014 acquisitions with a combined transaction value of $248.1 million.
Cash flow from operations fell to $356.0 millionc from $633.3 million, mainly due to higher working capital needs. Total debt was $2.32 billion at year-end, and the net debt-to-total-capital ratio was 35.0%, up from 34.3%. Liquidity included $765.8 million available under the $1.5 billion revolving credit facility, and the company was in compliance with all debt covenants.
The company expects carbon steel prices to keep declining in the first quarter of 2015, which will reduce margins and earnings in that period. It also flagged a downturn in the energy market, which it estimates at about 8%d to 10% of sales. Shareholder returns were a focus.
The Board raised the quarterly dividend 14% to $0.40 per share in February 2015, and cash dividends paid per share rose to $1.40 in 2014. The company repurchased about $50.0 million of stock in October 2014 and extended its repurchase plan to December 31, 2017.
02—Key points
Key Highlights
- Record net sales of $10.45 billion in 2014, up 13.3% from $9.22 billion in 2013
- Net income attributable to Reliance of $371.5 million, compared with $321.6 million in 2013
- Same-store tons sold increased 6.1%, versus a 4.2% industry increase reported by MSCI
- Gross profit margin declined to 25.1% from 26.0%, still within the company's historical 25% to 27% range
- Cash flow from operations was $356.0 million, down from $633.3 million, due to higher working capital investment
- Total debt of $2.32 billion; net debt-to-total-capital ratio of 35.0%; $765.8 million available on the revolving credit facility
- Quarterly dividend increased 14% to $0.40 per share in February 2015; share repurchase plan extended to December 31, 2017
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Reliance kept $0.04.
- Revenue$10.45B100.0%
- Cost of revenue−$7.83B74.9%
- Gross profit$2.62B25.1%
- Operating costs−$2.00B19.2%
- Operating income$617.4M5.9%
- Interest, other & tax−$245.9M2.4%
- Net income$371.5M3.6%
Where FY2014 revenue went
$10.45B- Cost of revenue: $7.83B, 75% of revenue
- SG&A: $1.79B, 17% of revenue
- Net income: $371.5M, 3.6% of revenue
- Other operating costs: $213.8M, 2.0% of revenue
- Interest, other & tax: $245.9M, 2.4% of revenue
Kept 3.6% as net incomeNet income $371.5M · 3.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 26, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $10.45B$9.22B | +13.3% |
| Cost of Revenue | $7.83B$6.83B | +14.7% |
| Gross Profit | $2.62B$2.40B | +9.3% |
| SG&A Expenses | $1.79B$1.64B | +9.2% |
| Operating Expenses | $9.83B$8.67B | +13.4% |
| Operating Income | $617.40M$551.90M | +11.9% |
| Interest Expense | $81.90M$77.50M | +5.7% |
| Net Income | $371.50M$321.60M | +15.5% |
| EPS (Basic) | $4.78$4.19 | +14.1% |
| EPS (Diluted) | $4.73$4.14 | +14.3% |
| Shares Outstanding (Basic) | 77.68M76.84M | +1.1% |
| Shares Outstanding (Diluted) | 78.62M77.65M | +1.2% |
05—Questions
Frequently Asked Questions
How did Reliance's revenue and profit change in 2014?
Net sales rose 13.3% to a record $10.45 billion from $9.22 billion. Net income attributable to Reliance increased to $371.5 million from $321.6 million, and diluted EPS was $4.73 versus $4.14. The company attributed the sales growth to demand improvement and its 2013 acquisition of Metals USA.
What risks did management flag for 2015?
Management said metal prices, especially for carbon steel, continued to decline into the first quarter of 2015 because high import levels were expected to persist, which would reduce margins and earnings during that period. The energy market, about 8% to 10% of sales, was also expected to weaken as oil prices fell.
How strong is the balance sheet and debt position?
At December 31, 2014, total debt was $2.32 billion, up from $2.11 billion, and the net debt-to-total-capital ratio was 35.0%. The company had $675.0 million drawn on its $1.5 billion revolver and was in compliance with all debt covenants. The interest coverage ratio was approximately 7.5 times against a covenant minimum of 3.0 times.
What is the company doing with excess cash?
Reliance paid $108.7 million in dividends in 2014 and raised the quarterly dividend to $0.40 per share in February 2015. It repurchased about $50.0 million of stock in October 2014 and extended its share repurchase plan to December 31, 2017, with about 7.1 million shares still authorized. Capital expenditures were $190.4 million, and the 2015 budget is approximately $200 million.
06—Continue