01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported a challenging 2020 driven by COVID-19, with net sales of $8.81 billiona, down 19.7% from $10.97 billion in 2019, as tons sold declined 10.8% and average selling price per ton fell 9.6%.
Despite lower volumes, the company achieved a record annual gross profit margin of 31.5%, up from 30.3% in 2019. Net income attributable to Reliance was $369.1 millionb, or $5.66 per diluted share, compared with $701.5 million in 2019. Results were weighed down by $157.8 million of impairment and restructuring charges, mainly a $137.5 million charge in the first quarter tied to energy-related businesses, and operating income fell to $565.8 million from $1.01 billion.
Cash flow from operations remained strong at $1.17 billionc, down 9.9% from a record $1.30 billion in 2019. The company strengthened its liquidity by issuing $900.0 million of senior unsecured notes in August 2020 and amending its $1.5 billion credit agreement; it had no outstanding borrowings under the credit agreement at year-end and $683.5 million of cash. Total debt was $1.66 billion, and the net debt-to-total capital ratio fell to 15.8% from 21.4%.
The company returned $164.1 milliond in dividends and repurchased $337.3 million of shares in 2020, and in February 2021 raised its quarterly dividend 10.0% to $0.6875 per share. Looking ahead, the 2021 capital expenditure budget is $245 million, with actual 2021 spending expected to be higher due to projects carried forward from 2020. Management stated that the COVID-19 pandemic's ultimate duration and severity remain uncertain, and that it cannot estimate the full impact on its business.
02—Key points
Key Highlights
- Net sales of $8.81 billion in 2020, down 19.7% from $10.97 billion in 2019, on a 10.8% decline in tons sold and a 9.6% decline in average selling price per ton.
- Record annual gross profit margin of 31.5% in 2020, versus 30.3% in 2019.
- Net income attributable to Reliance of $369.1 million, or $5.66 per diluted share, versus $701.5 million in 2019.
- Impairment and restructuring charges of $157.8 million in 2020, mainly a $137.5 million charge tied to energy-related businesses.
- Cash provided by operations of $1.17 billion, down 9.9% from $1.30 billion in 2019.
- Issued $900.0 million of senior unsecured notes in 2020; no borrowings outstanding under the $1.5 billion credit agreement at year-end, and $683.5 million of cash on hand.
- Quarterly dividend raised 10.0% to $0.6875 per share in February 2021, the 28th increase since the 1994 IPO; 2020 share repurchases totaled $337.3 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $8.81B$10.97B | −19.7% |
| SG&A Expenses | $1.87B$2.10B | −10.6% |
| Operating Expenses | $8.25B$9.96B | −17.2% |
| Operating Income | $565.80M$1.01B | −44.2% |
| Interest Expense | $62.90M$85.00M | −26.0% |
| Net Income | $372.40M$706.10M | −47.3% |
| EPS (Basic) | $5.74$10.49 | −45.3% |
| EPS (Diluted) | $5.66$10.34 | −45.3% |
| Shares Outstanding (Basic) | 64.33M66.89M | −3.8% |
| Shares Outstanding (Diluted) | 65.26M67.86M | −3.8% |
05—Questions
Frequently Asked Questions
How did COVID-19 affect Reliance's 2020 results?
Demand fell across nearly all end markets. Tons sold declined 10.8% and average selling price per ton declined 9.6%, reducing net sales by 19.7% to $8.81 billion. Pretax income fell 48.5% to $478.2 million, and the company recorded $179.0 million of non-recurring charges, mostly impairment, restructuring and postretirement plan settlement charges.
Did the company maintain its profitability despite lower sales?
Yes, in part. Gross profit margin reached a record 31.5%, supported by value-added processing on 49% of orders shipped and pricing discipline. However, operating income fell to $565.8 million from $1.01 billion, and diluted EPS declined to $5.66 from $10.34.
How strong is Reliance's balance sheet and liquidity?
The company had $683.5 million of cash and cash equivalents and $1.46 billion available on its revolving credit facility at December 31, 2020. Total debt was $1.66 billion, the net debt-to-total capital ratio was 15.8%, and the company was in compliance with its financial covenants, with an interest coverage ratio of 11.8 times against a 3.0 times minimum.
What are the company's capital allocation priorities?
In 2020 Reliance spent $172.0 million on capital expenditures, mostly growth-related, and paid $164.1 million in dividends and $337.3 million in share repurchases. The 2021 capital expenditure budget is $245 million, though actual spending is expected to be higher. The remaining share repurchase authorization is about 2.8 million shares, and the company expects to remain opportunistic in repurchases.
06—Continue