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Reliance Steel & Aluminum Reports Record Nine-Month Results
10/20/2008 - Reliance Steel & Aluminum reports net income of $152.5 million on record sales of $2.57 billion for the third quarter, and record net income of $416.5 million on record sales of $6.58 billion for the nine months ended September 30, 2008.
Reliance Steel & Aluminum Co. reported net income of $152.5 million on record sales of $2.57 billion for the third quarter, and record net income of $416.5 million on record sales of $6.58 billion for the nine months ended September 30, 2008.
Third Quarter Results—The $152.5 million net income represents a 63% increase compared with net income of $93.6 million for the 2007 third quarter. Earnings per diluted share were $2.07, up 70% from $1.22 for the 2007 third quarter. Record sales of $2.57 billion represent a 42% increase compared with 2007 third quarter sales of $1.81 billion. Results include (in cost of sales) a $79.0-million ($.67 per diluted share) pre-tax LIFO expense, compared with a $12.5-million ($.10 per diluted share) pre-tax LIFO expense in the year-ago third quarter.
Nine Month Results—The $416.5 million record net income represents a 27% increase compared with net income of $328.0 million for the same period in 2007. Earnings per diluted share were a record $5.65, which compares with earnings of $4.28 per diluted share for the nine months ended September 30, 2007. Record sales of $6.58 billion represent an 18% increase compared with 2007 nine month sales of $5.55 billion. Results include in cost of sales a $136.5-million ($1.15 per diluted share) pre-tax LIFO expense, compared with a $45.0-million ($.37 per diluted share) pre-tax LIFO expense in the 2007 year-to-date period.
Management Comments—“The 2008 third quarter was reasonably strong from both a demand and pricing perspective, especially in July and August,” said Reliance Chairman and CEO David H. Hannah. “During September we began to see some softening in prices and volume. However, this slowdown was more than offset by our PNA Group acquisition on August 1, which was accretive to our third quarter results.
“Overall, through the first nine months of 2008, demand has not been quite as good as the last couple of years, but we have still been able to post record results,” added Hannah. “We have also been able to grow the company significantly. Additionally, we are comfortable with our balance sheet and we expect free cash flow to increase and debt to decrease over the near term. Through the nine months ended September 30, 2008, we have already surpassed our previous full-year records for net income and earnings per share.
“Looking forward,” continued Hannah, “we expect the business climate to become more difficult over the next couple of quarters. The 2001 to 2003 period was much more difficult for our industry than it is currently. We successfully managed through that period and we expect to do so again.
“Currently we have not seen a significant decrease in the amount of business activity, contrary to what you may be hearing and reading. However, because of the uncertainty regarding the economy going forward—which is complicated even further by the currently unknown impact on the industrial economy of the troubled credit market—we are not comfortable providing 2008 fourth quarter earnings per share guidance at this time,” said Hannah. “We will, during the course of the quarter, communicate any meaningful information regarding our operations as it becomes available,” he added.
On August 1, Reliance completed the acquisition of the outstanding capital stock of PNA Group Holding Corp., a national steel service center group. The transaction value of approximately $1.1 billion included the repayment or refinancing of approximately $725 million of PNA’s debt, including the settlement of Reliance’s cash tender offers for 100% of the outstanding notes of PNA’s subsidiaries. Reliance funded the purchase with proceeds from its new $500-million senior unsecured term loan and borrowings under its existing $1.1-billion credit facility at a weighted average borrowing cost of 4.3% for the 2008 third quarter.
PNA’s subsidiaries include the operating entities Delta Steel, LP, Feralloy Corp., Infra-Metals Co., Metals Supply Company, Ltd., Precision Flamecutting and Steel, LP, and Sugar Steel Corp. PNA processes and distributes primarily carbon steel plate, bar, structural and flat-rolled products, and had revenues of about $1.8 billion for the nine months ended September 30, 2008.
On September 17, Reliance acquired the assets (including inventory, machinery, and equipment) of the Singapore operation of HLN Metal Centre Pte. Ltd. forapproximately $2.6 million. HLN Metal, whose primary business involves processing and distribution of custom-machined materials and sawing of metal products and components, will operate as Reliance Metalcenter Asia Pacific Pte. Ltd. (RMAP).
Headquartered in Los Angeles, Calif., Reliance Steel & Aluminum is the largest metals service center company in North America. Through a network of more than 200 locations in 39 states and Belgium, Canada, China, Mexico, Singapore, South Korea, and the United Kingdom, the company provides value-added metals processing services and distributes a full line of over 100,000 metal products to more than 125,000 customers in a broad range of industries.
