01—Abstract
Summary
Summary of the 10-Q filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Reliance, Inc. reported a decline in profitability for the second quarter and first six months of 2024 compared with the same 2023 periods.
Net sales for the quarter were $3,643.3 milliona versus $3,880.3 million, and net income attributable to Reliance was $267.8 million versus $385.1 million. Diluted earnings per share were $4.67 versus $6.49. Management attributes the lower results mainly to lower metals prices and declines in gross profit margin from a declining metals pricing environment.
Gross profit margin was 29.8% for the quarter versus 31.5% a year earlier, and same-store net sales declined 8.7% in the quarter, driven by a 9.7% decline in average selling price per ton, partly offset by a 0.7% increase in same-store tons sold. During the first half of 2024 the company completed three acquisitions (Cooksey Steel, American Alloy Steel and MidWest Materials) for cash, totaling $346.5 millionb in acquisitions net of cash acquired, and announced an agreement to acquire the FerrouSouth toll processing assets, expected to close in the third quarter of 2024. Cash flow from operations was $492.6 million for the six months, down from $679.7 million.
The company returned $647.2 millionc to stockholders in the first half, including $519.3 million in share repurchases and $127.9 million in cash dividends. Cash and cash equivalents were $350.8 million at June 30, 2024, and the net debt-to-total capital ratio rose to 9.4% from 0.8% at December 31, 2023. Management stated the company was in compliance with all financial maintenance covenants and that its liquidity is sufficient for the next 12 months and beyond.
The Board declared a third-quarter 2024 cash dividend of $1.10d per share, and as of July 25, 2024, $738.5 million remained under the $1.5 billion share repurchase program. The company reported no material changes to its risk factors from its 2023 Form 10-K and no material changes to market risk exposures.
02—Key points
Key Highlights
- Net sales fell to $3,643.3 million in Q2 2024 from $3,880.3 million, and same-store net sales declined 8.7%, driven by a 9.7% decline in same-store average selling price per ton.
- Operating income was $351.7 million in Q2 2024 versus $511.3 million, and gross profit margin declined to 29.8% from 31.5%, mainly reflecting lower carbon steel prices.
- Diluted EPS was $4.67 for Q2 2024 compared with $6.49 a year earlier; for the six months, diluted EPS was $9.90 versus $12.92.
- The company completed three acquisitions in the first half of 2024 for $346.5 million in net cash, and agreed to acquire the FerrouSouth toll processing assets, expected to close in Q3 2024.
- Cash flow from operations was $492.6 million for the six months, down from $679.7 million, mainly due to lower net income.
- Share repurchases totaled $519.3 million in the first half of 2024, and $738.5 million remained under the $1.5 billion program as of July 25, 2024.
- Net debt-to-total capital ratio rose to 9.4% from 0.8% at December 31, 2023, with cash of $350.8 million and $1.5 billion available under the revolving credit facility.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 1, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $3.64B$3.88B | −6.1% |
| SG&A Expenses | $667.70M$650.60M | +2.6% |
| Operating Expenses | $3.29B$3.37B | −2.3% |
| Operating Income | $351.70M$511.30M | −31.2% |
| Net Income | $267.80M$385.10M | −30.5% |
| EPS (Basic) | $4.71$6.56 | −28.2% |
| EPS (Diluted) | $4.67$6.49 | −28.0% |
| Shares Outstanding (Basic) | 56.88M58.69M | −3.1% |
| Shares Outstanding (Diluted) | 57.39M59.35M | −3.3% |
05—Questions
Frequently Asked Questions
Why did Reliance's earnings decline in the second quarter of 2024?
Management attributes the decline mainly to lower metals prices and a declining metals pricing environment, which reduced same-store net sales and gross profit margin. Gross profit margin was 29.8% versus 31.5% in the prior-year quarter, and operating income fell to $351.7 million from $511.3 million, partly offset by contributions from acquisitions.
How is Reliance managing its capital and returning cash to shareholders?
In the first six months of 2024 the company returned $647.2 million to stockholders, comprising $519.3 million in share repurchases and $127.9 million in cash dividends. The Board declared a third-quarter 2024 dividend of $1.10 per share, and $738.5 million remained under the share repurchase program as of July 25, 2024.
Has Reliance's debt position changed?
Total debt principal was $1,151.4 million at June 30, 2024, unchanged from December 31, 2023, with no borrowings under the $1.5 billion revolving credit facility. The net debt-to-total capital ratio increased to 9.4% from 0.8% at year-end 2023, as cash and cash equivalents declined to $350.8 million from $1,080.2 million. The company stated it was in compliance with all financial maintenance covenants.
What acquisitions did Reliance make in 2024?
Reliance acquired Cooksey Iron & Metal Company on February 1, 2024, and American Alloy Steel, Inc. and Mid-West Materials, Inc. on April 1, 2024, all with cash on hand. Net sales from these 2024 acquisitions totaled $115.1 million for the six months ended June 30, 2024. The company also agreed on July 15, 2024 to acquire the FerrouSouth toll processing assets, subject to customary closing conditions, with closing anticipated in the third quarter of 2024.
What is the company's liquidity outlook?
Management believes its primary sources of liquidity, including operating cash flow, cash and cash equivalents, and the $1.5 billion revolving credit facility, will be sufficient to meet cash requirements and stockholder return activities over the next 12 months and beyond. As of June 30, 2024, $400.3 million of debt obligations come due before the revolving credit facility matures on September 3, 2025.
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