Reliance Reports 3rd Quarter Results
10/19/2007 - Reliance Steel & Aluminum reported net income of $93.6 million on sales of $1.81 billion for the third quarter and record net income of $328.0 million on record sales of $5.55 billion for the nine months ended September 30, 2007.
Reliance Steel & Aluminum Co. reported net income of $93.6 million on sales of $1.81 billion for the third quarter and record net income of $328.0 million on record sales of $5.55 billion for the nine months ended September 30, 2007.
Third Quarter Results—The $93.6 million net income compares with net income of $107.5 million for the 2006 third quarter. Earnings per diluted share of $1.22 compare with earnings per diluted share of $1.41 for the 2006 third quarter. Sales of $1.81 billion reflect an increase of 11.4% compared with 2006 third quarter sales of $1.63 billion.
Results include in cost of sales a $12.5-million pre-tax LIFO expense ($.10 per diluted share) compared with a $33.3-million pre-tax LIFO expense ($.27 per diluted share) in the 2006 third quarter.
Nine Month Results—Record net income of $328.0 million reflects a 17.2% increase compared with net income of $279.9 million for the same period in 2006. Earnings per diluted share of $4.28 compare with earnings of $3.83 per diluted share for the nine months ended September 30, 2006. Sales, a record $5.55 billion, reflect an increase of 33% compared with 2006 nine month sales of $4.17 billion.
Results include in cost of sales a $45.0-million pre-tax LIFO expense ($.37 per diluted share), compared with a $56.3-million pre-tax LIFO expense ($.48 per diluted share) in the 2006 year-to-date period. All share and per-share amounts have been adjusted for the two-for-one common stock split effective July 19, 2006.
Management Comments—“Considering the overall market factors, we are pleased with the 2007 third quarter results,” said David H. Hannah, CEO of Reliance. “Demand for our products was relatively steady for a third quarter with volume off as we expected only about 4% from our record 2007 second quarter amounts. We managed our receivables and inventory well, which, when combined with our operating profits, resulted in very strong cash flow. Gross profit management in an environment of falling prices is always a challenge. The significant and rapid drop in stainless steel prices resulting from the drop in nickel surcharges complicated the situation even further. This scenario caused our gross profit to decline 2% from the prior quarter, about double what we estimated for our third quarter earnings per share guidance.”
“Effective July 1, 2007, we completed the acquisition of Clayton Metals, Inc., headquartered in Wood Dale, Ill., with three additional service centers in California, North Carolina and New Jersey. Clayton’s sales were $123 million for their year ended December 31, 2006. Effective October 1, 2007, we completed the acquisition of the outstanding capital stock of Metalweb plc, headquartered in Birmingham, England, with three additional service centers located in London, Manchester, and Oxford, England.”
Established in 2001, Metalweb specializes in the processing and distribution of primarily aluminum products for non-structural aerospace components and general engineering parts used in high-end industrial applications. Metalweb, which now operates as a subsidiary of Reliance, reported net sales of approximately $53 million for the fiscal year ended May 31, 2007. “This transaction brings an additional global presence to Reliance and marks our first metals service center based in the United Kingdom,” said Hannah.
“We still expect record sales and earnings for 2007. Our strong operating results, cash flow and solid balance sheet with net debt-to-total capital of 36.7% will continue to provide opportunities for future growth. We are proud of our performance and believe that our proven ability to grow both internally and by successful accretive acquisitions through varying market conditions will result in continued strong operating results going forward. We expect demand may soften further in the fourth quarter due to the normal seasonal holiday slowdown as well as cautious buying from our customers, leading us to anticipate relatively flat pricing. As a result, we currently estimate earnings per diluted share for the 2007 fourth quarter in a range of $.95 to $1.05,” Hannah concluded.
Also during the quarter, the company purchased 1,673,467 shares of its common stock at an average cost of $49.10 per share under the Stock Repurchase Plan. As of September 30, 2007, the company had repurchased a total of 12,750,017 shares of its common stock at an average cost of $12.93 per share, since the Stock Repurchase Plan was first adopted in December 1994. Repurchased shares are redeemed and treated as authorized but unissued shares. At September 30, 2007 there were 10,326,533 shares of the company's common stock authorized for repurchase under the Plan.
On July 18, 2007, the Board of Directors declared a regular quarterly cash dividend of $.08 per share of common stock. The company has paid regular quarterly dividends for 47 consecutive years.
Headquartered in Los Angeles, Calif., Reliance Steel & Aluminum is one of the largest metals service center companies in the United States. Through a network of more than 180 locations in 37 states and Belgium, Canada, China, South Korea and the U.K., the company provides value-added metals processing services and distributes a full line of over 100,000 metal products. These products include galvanized, hot-rolled and cold-finished steel; stainless steel; aluminum; brass; copper; titanium and alloy steel sold to more than 125,000 customers in various industries.
