01—Abstract
Summary
Summary of the 10-K filed February 24, 2022. Cited figures are marked; the original filing is the authoritative source.
Reliance Steel & Aluminum Co. reported record 2021 results across nearly every key metric.
Net sales rose to $14.09 billiona, up $5.28 billion, or 59.9%, from $8.81 billion in 2020. Net income attributable to Reliance was a record $1.41 billion, and diluted earnings per share were a record $21.97. The gross profit margin was a record 31.9%, despite a LIFO charge of $704.8 million.
Average selling price per ton sold rose 54.3% to $2,594,b and tons sold rose 4.6%. Operating cash flow fell to $799.4 million from $1.17 billion in 2020, mainly because of over $950.0 million in additional working capital requirements, chiefly accounts receivable and inventory. Capital deployment was substantial.
The company acquired four businesses for $439.3 millionc, invested $236.6 million in capital expenditures, and returned $500.5 million to stockholders through $177.0 million of dividends and $323.5 million of share repurchases. In February 2022 the Board raised the quarterly dividend 27.3% to $0.8750 per share. The 2022 capital expenditure budget is a record $350 million.
Total debt was $1.66 billiond at year-end, with no borrowings outstanding under the $1.5 billion revolving credit facility, and cash and cash equivalents were $300.5 million. The filing describes a fragmented metals service center industry, with the company's U.S. revenues representing about 5.8% of the estimated U.S. market.
The company says its results are supported by value-added processing, which was performed on 50% of orders in 2021 compared with a historical range of about 40% to 45%. COVID-19 continued to affect 2021 results through labor shortages, raw material constraints and supply chain disruptions.
02—Key points
Key Highlights
- Record 2021 net sales of $14.09 billion, up 59.9% from $8.81 billion in 2020
- Record net income attributable to Reliance of $1.41 billion and record diluted EPS of $21.97
- Record gross profit margin of 31.9%, despite a LIFO charge of $704.8 million
- Operating cash flow of $799.4 million, down from $1.17 billion in 2020, driven by over $950.0 million of additional working capital needs
- Returned $500.5 million to stockholders in 2021 via $177.0 million of dividends and $323.5 million of share repurchases; quarterly dividend raised 27.3% to $0.8750 for 2022
- Acquired four companies for $439.3 million and spent $236.6 million on capital expenditures; 2022 capex budget is a record $350 million
- Total debt of $1.66 billion at year-end, with no borrowings under the $1.5 billion revolving credit facility and $300.5 million of cash and cash equivalents
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 24, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $14.09B$8.81B | +59.9% |
| SG&A Expenses | $2.31B$1.87B | +23.1% |
| Operating Expenses | $12.14B$8.25B | +47.3% |
| Operating Income | $1.95B$565.80M | +244.5% |
| Interest Expense | $62.70M$62.90M | −0.3% |
| Net Income | $1.42B$372.40M | +280.6% |
| EPS (Basic) | $22.35$5.74 | +289.4% |
| EPS (Diluted) | $21.97$5.66 | +288.2% |
| Shares Outstanding (Basic) | 63.22M64.33M | −1.7% |
| Shares Outstanding (Diluted) | 64.33M65.26M | −1.4% |
05—Questions
Frequently Asked Questions
How did Reliance's profitability change in 2021?
Operating income rose to $1.95 billion from $565.8 million in 2020, and pretax income reached a record $1.88 billion. The company attributes the improvement to record gross profit, a record average selling price per ton sold of $2,594, and strong demand, partly offset by higher incentive compensation and increased SG&A tied to higher shipments. The 2020 results included $157.8 million of impairment and restructuring charges.
Why did operating cash flow decline in 2021 despite record earnings?
Net cash provided by operations was $799.4 million, down from $1.17 billion in 2020. The filing says this was mainly due to significantly increased working capital requirements, chiefly accounts receivable and inventory, driven by strong demand and rising metals prices. Income taxes paid rose to $444.4 million from $87.5 million.
What is Reliance's capital allocation approach?
In 2021 the company acquired four businesses for $439.3 million, funded with cash on hand, and spent $236.6 million on capital expenditures. It returned $500.5 million to stockholders through dividends and share repurchases, with $712.6 million remaining under its $1.0 billion repurchase authorization at year-end. The filing states the company expects to remain opportunistic in repurchasing shares.
How is Reliance's debt position and liquidity?
Total debt was $1.66 billion at December 31, 2021, unchanged from 2020. The company had no outstanding borrowings under its $1.5 billion revolving credit facility, which matures September 3, 2025, and $300.5 million of cash on hand. The interest coverage ratio was 32.4 times against a covenant minimum of 3.0 times, and the company said it was in compliance with all financial covenants.
What are the main risks to the business according to the filing?
The filing highlights volatility in metals prices, which the company generally does not hedge; the risk that it cannot pass higher metal costs to customers; and the potential for rising imports if Section 232 tariffs are removed or reduced. It also cites cyclical end markets, COVID-19 disruptions to labor and supply chains, acquisition integration risk, and exposure to its substantial indebtedness.
06—Continue