Reliance Steel & Aluminum Co. Posts Second Quarter 2015 Results
07/27/2015 - Reliance Steel & Aluminum Co. reported its financial results for the second quarter ended June 30, 2015.
Second Quarter 2015 Financial Highlights
Management Commentary
"I am extremely pleased with our operational performance in the second quarter of 2015, which is a testament to the quality of our management in the field as well as to our business model," said Gregg Mollins, President and Chief Executive Officer of Reliance. "Despite ongoing industry headwinds that further pressured metals pricing in the 2015 second quarter, we were able to increase our FIFO gross profit margin to 25.7%, up from our strong 2015 first quarter level of 25.4%. We believe our long-standing practice of focusing on small, quick turnaround orders, our focus on inventory turnover and our increased investments which provide higher levels of value-added processing to our customers, has allowed us to experience this margin consistency in a difficult business environment. We believe that customer demand is relatively strong and will continue to slowly improve, even though our second quarter demand levels were somewhat lower than we had anticipated. Currently, we see ongoing strength and opportunities for growth in the aerospace end-market and through our toll processing operations related to the automotive market. Although still below peak demand levels, we also continue to be encouraged by momentum in our non-residential construction businesses."
Mr. Mollins continued, "Pricing for all commodity types remained weak primarily due to the historically high levels of imports in the marketplace, resulting in a 5.2% decline in our average selling price per ton sold compared to the prior quarter. Although price changes impact our earnings levels, we believe our disciplined focus on managing all controllable aspects of the business continues to mitigate the negative impact from the difficult market conditions we are currently experiencing. We reduced our FIFO inventory by $163.0 million during the second quarter of 2015, a key area of focus for Reliance. Using our tons on hand at June 30, 2015, our inventory turnover rate was 4.6 times based on first half 2015 shipment volumes, compared to 4.3 times in the prior quarter, approaching our goal of 4.75 turns. This contributed to significant cash flow generation that we were able to use for growth initiatives, shareholder returns and debt reduction."
To continue reading about Reliance's Q2 results, visit www.rsac.com.
- Sales were $2.42 billion, down 7.4% from $2.62 billion in the second quarter of 2014 and down 7.3% from $2.61 billion in the first quarter of 2015.
- Tons sold were down 2.1% from the second quarter of 2014 and down 2.4% from the first quarter of 2015, with the average selling price per ton sold down 6.0% from the second quarter of 2014 and down 5.2% from the first quarter of 2015.
- Net income attributable to Reliance was $90.2 million, down 6.5% from $96.5 million in the second quarter of 2014 and down 11.0% from $101.3 million in the first quarter of 2015.
- Earnings per diluted share were $1.20, down 1.6% from $1.22 in the second quarter of 2014 and down 7.7% from $1.30 in the first quarter of 2015.
- Non-GAAP earnings per diluted share were $1.21, down 6.9% from $1.30 in both the second quarter of 2014 and the first quarter of 2015.
- A pre-tax LIFO credit, or income, of $32.5 million, is included in cost of sales compared to a pre-tax LIFO charge, or expense, of $5.0 million in the second quarter of 2014 and a credit of $7.5 million in the first quarter of 2015.
- The effective tax rate was 32.6%, compared to 36.6% in the second quarter of 2014 and 31.7% in the first quarter of 2015.
- Cash flow from operations was $292.5 million, up from $40.7 million in the second quarter of 2014, and net debt-to-total capital was 33.9% at June 30, 2015.
- Reliance repurchased $200.0 million of its common stock, or 4.4% of December 31, 2014 shares outstanding, in the first half of 2015. The Company repurchased an additional $61.5 million of shares in July 2015, to-date.
- A quarterly cash dividend of $0.40 per share was declared on July 21, 2015 for shareholders of record as of August 14, 2015 and will be payable on September 11, 2015.
Management Commentary
"I am extremely pleased with our operational performance in the second quarter of 2015, which is a testament to the quality of our management in the field as well as to our business model," said Gregg Mollins, President and Chief Executive Officer of Reliance. "Despite ongoing industry headwinds that further pressured metals pricing in the 2015 second quarter, we were able to increase our FIFO gross profit margin to 25.7%, up from our strong 2015 first quarter level of 25.4%. We believe our long-standing practice of focusing on small, quick turnaround orders, our focus on inventory turnover and our increased investments which provide higher levels of value-added processing to our customers, has allowed us to experience this margin consistency in a difficult business environment. We believe that customer demand is relatively strong and will continue to slowly improve, even though our second quarter demand levels were somewhat lower than we had anticipated. Currently, we see ongoing strength and opportunities for growth in the aerospace end-market and through our toll processing operations related to the automotive market. Although still below peak demand levels, we also continue to be encouraged by momentum in our non-residential construction businesses."
Mr. Mollins continued, "Pricing for all commodity types remained weak primarily due to the historically high levels of imports in the marketplace, resulting in a 5.2% decline in our average selling price per ton sold compared to the prior quarter. Although price changes impact our earnings levels, we believe our disciplined focus on managing all controllable aspects of the business continues to mitigate the negative impact from the difficult market conditions we are currently experiencing. We reduced our FIFO inventory by $163.0 million during the second quarter of 2015, a key area of focus for Reliance. Using our tons on hand at June 30, 2015, our inventory turnover rate was 4.6 times based on first half 2015 shipment volumes, compared to 4.3 times in the prior quarter, approaching our goal of 4.75 turns. This contributed to significant cash flow generation that we were able to use for growth initiatives, shareholder returns and debt reduction."
To continue reading about Reliance's Q2 results, visit www.rsac.com.
