SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number: 001-13122

RELIANCE STEEL & ALUMINUM CO.
(Exact name of Registrant as specified in its charter)

California	95-1142616
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

350 South Grand Avenue, Suite 5100
Los Angeles, California 90071
(213) 687-7700
(Address of principal executive offices and telephone number)

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

         Yes No

         As of October 31, 2001, 31,569,601 shares of the registrant’s common stock, no par value, were outstanding.

RELIANCE STEEL & ALUMINUM CO.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

             

PART I — FINANCIAL INFORMATION	1
Consolidated Balance Sheets at September 30, 2001 (Unaudited) and December 31, 2000	1
Unaudited Consolidated Statements of Income for the Three and Nine Months in the Periods Ended September 30, 2001 and                   2000	2
Unaudited Consolidated Statements of Cash Flows for the Nine Months in the Periods Ended September 30, 2001 and 2000	4
Notes to Consolidated Financial Statements	5
Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Market Risk	12
PART II — OTHER INFORMATION	13
SIGNATURES	14

i

RELIANCE STEEL & ALUMINUM CO.

CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

ASSETS

				September 30,			December 31,
				2001			2000
				(Unaudited)
Current assets:
	Cash and cash equivalents			$	6,734		$	3,107
	Accounts receivable, less allowance for doubtful accounts of $7,340 at September 30, 2001 and $6,706 at December 31, 2000				207,628			193,106
	Inventories				301,766			271,549
	Prepaid expenses and other current assets				9,004			7,788
	Deferred income taxes				16,456			15,846
		Total current assets			541,588			491,396
Property, plant and equipment, at cost:
	Land				37,834			35,351
	Buildings				163,848			145,625
	Machinery and equipment				220,380			176,891
	Accumulated depreciation				(151,491	)		(112,516	)
					270,571			245,351
Investment in 50%-owned company					12,405			18,990
Goodwill, net of accumulated amortization of $24,535 at September 30, 2001 and $19,155 at December 31, 2000					271,308			232,048
Other assets					10,904			9,458
		Total assets		$	1,106,776		$	997,243
			LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	75,569		$	82,616
	Accrued expenses				39,204			34,366
	Wages and related accruals				15,983			18,772
	Deferred income taxes				7,833			7,833
	Current maturities of long-term debt				10,250			150
		Total current liabilities			148,839			143,737
Long-term debt					348,050			421,825
Deferred income taxes					28,857			28,642
Commitments					—			—
Shareholders’ equity:
	Preferred stock, no par value:
	Authorized shares – 5,000,000
	None issued and outstanding				—			—
	Common stock, no par value:
	Authorized shares – 100,000,000
	Issued and outstanding shares 31,558,351 at September 30, 2001 and 25,131,917 at December 31, 2000, stated capital				290,596			139,231
	Retained earnings				291,556			264,116
	Accumulated other comprehensive loss				(1,122	)		(308	)
		Total shareholders’ equity			581,030			403,039
		Total liabilities and shareholders’ equity		$	1,106,776		$	997,243

         See accompanying notes to consolidated financial statements.

1

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)

		Three Months Ended
		September  30,
		2001			2000
Net sales		$	430,066		$	443,652
Other income, net			923			822
			430,989			444,474
Costs and expenses:
	Cost of sales		311,671			325,254
	Warehouse, delivery, selling, general and administrative		91,608			79,038
	Depreciation and amortization		8,433			7,247
	Interest		6,115			6,909
			417,827			418,448
Income before equity in (loss) earnings of 50%-owned company and income taxes			13,162			26,026
Equity in (loss) earnings of 50%-owned company			(44	)		345
Income before provision for income taxes			13,118			26,371
Provision for income taxes			5,326			10,548
Net income		$	7,792		$	15,823
Earnings per share – diluted		$	.25		$	.57
Weighted average shares outstanding – diluted			31,417,340			27,600,795
Earnings per share – basic		$	.25		$	.58
Weighted average shares outstanding – basic			31,280,710			27,504,329
Cash dividends per share		$	.060		$	.055

         See accompanying notes to consolidated financial statements.

2

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)

		Nine Months Ended
		September 30,
		2001		2000
Net sales		$	1,274,953	$	1,315,396
Other income, net			2,507		2,438
			1,277,460		1,317,834
Costs and expenses:
	Cost of sales		921,419		960,845
	Warehouse, delivery, selling, general and administrative		258,704		238,336
	Depreciation and amortization		23,927		21,120
	Interest		21,007		18,586
			1,225,057		1,238,887
Income before equity in earnings of 50%-owned company and income taxes			52,403		78,947
Equity in earnings of 50%-owned company			339		2,136
Income before provision for income taxes			52,742		81,083
Provision for income taxes			20,780		32,433
Net income		$	31,962	$	48,650
Earnings per share – diluted		$	1.17	$	1.75
Weighted average shares outstanding – diluted			27,397,865		27,796,253
Earnings per share – basic		$	1.17	$	1.76
Weighted average shares outstanding – basic		$	27,246,073		27,693,551
Cash dividends per share		$	.180	$	.165

         See accompanying notes to consolidated financial statements.

3

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

     

			Nine Months Ended
			September 30,
			2001			2000
Operating activities:
Net income			$	31,962		$	48,650
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Depreciation and amortization			23,927			21,120
	Deferred taxes			(335	)		839
	Loss on sales of machinery and equipment			383			431
	Equity in earnings of 50%-owned company			(339	)		(2,136	)
	Foreign currency translation loss			(814	)		—
	Changes in operating assets and liabilities:
		Accounts receivable		22,037			(37,794	)
		Inventories		27,897			(30,009	)
		Prepaid expenses and other assets		(1,897	)		(3,587	)
		Accounts payable and accrued expenses		(23,967	)		(8,204	)
Net cash provided by (used in) operating activities				78,854			(10,690	)
Investing activities:
Purchases of property, plant and equipment, net				(19,990	)		(22,111	)
Proceeds from sales of property and equipment				1,447			542
Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired				(130,797	)		(39,512	)
Dividends received from 50%-owned company				6,924			2,622
Net cash used in investing activities				(142,416	)		(58,459	)
Financing activities:
Proceeds from borrowings				225,000			163,250
Principal payments on long-term debt and short-term borrowings				(304,654	)		(82,806	)
Dividends paid				(4,918	)		(4,622	)
Issuance of common stock				2,005			1,403
Net proceeds from common stock offering				149,756			—
Repurchase of common stock				—			(12,360	)
Net cash provided by financing activities				67,189			64,865
Increase (decrease) in cash and cash equivalents				3,627			(4,284	)
Cash and cash equivalents at beginning of period				3,107			9,862
Cash and cash equivalents at end of period			$	6,734		$	5,578
Supplemental cash flow information:
Interest paid during the period			$	21,850		$	13,368
Income taxes paid during the period				15,273			34,850

         See accompanying notes to consolidated financial statements.

4

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation, with respect to the interim financial statements have been included. The results of operations for the three and nine month periods ended September 30, 2001 are not necessarily indicative of the results for the full year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2000, included in the Reliance Steel & Aluminum Co. (“Reliance” or “the Company”) Annual Report on Form 10-K.

2. Acquisitions

On July 2, 2001, through its recently-formed subsidiary, PDM Steel Service Centers, Inc. (“PDM”), the Company purchased the assets and assumed certain liabilities of the steel service centers division of Pitt-Des Moines, Inc., a publicly-held company, for approximately $93,100,000. Approximately one-half of the purchase price was paid in cash and one-half was paid by promissory note, which was paid off on July 6, 2001, following completion of a public equity offering. PDM processes and distributes carbon steel products consisting primarily of structurals and plate for the capital goods and construction industries. The steel service centers of Pitt-Des Moines, Inc. had sales of approximately $97,000,000 for the six months ended June 30, 2001. PDM operates as a wholly-owned subsidiary of the Company. PDM is headquartered in Stockton, California, and has additional facilities in Fresno and Santa Clara, California; Sparks, Nevada; Spanish Fork, Utah; Cedar Rapids, Iowa; and the General Steel Corporation facility in Woodlands, Washington. The cash portion of this acquisition was funded with borrowings under the Company’s revolving credit facility.

On January 19, 2001, the Company acquired Aluminum and Stainless, Inc. (“A&S”), a privately-held metals service center in Lafayette, Louisiana. A&S processes and distributes primarily aluminum sheet, plate and bar products and had sales of approximately $22,000,000 for the year ended December 31, 2000. A&S operates as a wholly-owned subsidiary of the Company. The acquisition of A&S was funded with borrowings under the Company’s line of credit. In March 2001, A&S opened a branch in New Orleans, Louisiana, established by the purchase of certain assets of an existing metals service center.

On January 18, 2001, the Company acquired Viking Materials, Inc. (“Viking”), a privately-held metals service center in Minneapolis, Minnesota, and a related company, Viking Materials of Illinois, Inc. (“Viking Illinois”), near Chicago, Illinois. Viking provides value-added processing and distribution of primarily carbon steel flat-rolled products and, with Viking Illinois, had combined sales of approximately $90,000,000 for the year ended December 31, 2000. Viking Illinois operates as a wholly-owned subsidiary of Viking, and Viking operates as a wholly-owned subsidiary of the Company. The acquisition of Viking and Viking Illinois was funded with borrowings under the Company’s line of credit.

These transactions have been accounted for under the purchase method of accounting. Accordingly, the accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date. The consolidated financial statements reflect the preliminary allocation of the purchase price. The allocations of purchase price were based upon the preliminary fair values of the net assets purchased. The Company has adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, as they relate to the allocation of the purchase price and amortization of related intangibles related to the PDM acquisition.

5

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

3. Long-Term Debt

Long-term debt consists of the following:

		September 30,			December 31,
		2001			2000
		(in thousands)
Revolving line of credit ($200,000,000 limit) due October 22, 2002, interest at variable rates, weighted average rate of 5.20% during the nine months ended September 30, 2001		$	63,000		$	85,000
Cash advance ($50,000,000 limit) due December 31, 2001, interest at variable rates			—			43,925
Senior unsecured notes due from January 2, 2004 to January 2, 2009, average fixed interest rate 7.22%			75,000			75,000
Senior unsecured notes due from January 2, 2002 to January 2, 2008, average fixed interest rate 7.02%			65,000			65,000
Senior unsecured notes due from October 15, 2005 to October 15, 2010, average fixed interest rate 6.55%			150,000			150,000
Variable Rate Demand Industrial Development Revenue Bonds, Series 1989 A, due July 1, 2014, with interest payable quarterly; average interest rate during the nine months ended September 30, 2001 of 2.61%			2,900			3,050
Variable Rate Demand Revenue Bonds, Series 1999, due March 1, 2009, with average interest rate during the nine months ended September 30, 2001 of 3.35%			2,400			—
	Total		358,300			421,975
Less amounts due within one year			(10,250	)		(150	)
	Total long-term debt	$	348,050		$	421,825

The Company had a syndicated credit agreement with four banks for an unsecured revolving line of credit with a borrowing limit of $200,000,000 which was terminated on October 24, 2001, when it was replaced by a $335,000,000 five-year unsecured line of credit. The new syndicated credit facility is with nine banks and may be increased to $400,000,000. The Company also had a credit agreement that allowed the Company to issue and have outstanding up to a maximum of $10,000,000 of letters of credit. On October 20, 2000, the Company executed an amendment to this credit agreement, providing a cash advance facility of $50,000,000 due April 20, 2001. In February 2001, the cash advance was paid off through an exchange of debt using the Company’s revolving line of credit. An additional amendment was executed in April 2001, extending the $50,000,000 cash advance facility to December 31, 2001. This credit agreement was terminated upon the completion of the refinancing of the Company’s syndicated facility on October 24, 2001. As of September 30, 2001, there were no borrowings outstanding under the cash advance facility. The Company has $290,000,000 of outstanding senior unsecured notes issued in private placements of debt. These notes bear interest at a weighted average fixed rate of 6.83% and have an average life of 9.6 years, maturing from 2002 to 2010.

The Company’s long-term loan agreements require the maintenance of a minimum net worth and include certain restrictions on the amount of cash dividends payable, among other things.

6

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

4. Shareholders’ Equity

On July 5, 2001 the Company issued 6,325,000 shares of its common stock in a public equity offering, including the shares issued on exercise of the over-allotment option, at a price of $25.00 per share for total net proceeds of approximately $149,756,000, after deducting the underwriting discount and estimated offering expenses. The Company used the net proceeds to pay down debt related to the July 2, 2001 acquisition of the steel service centers division of Pitt-Des Moines, Inc., and debt related to other acquisitions, capital expenditures and general working capital needs.

In March 2001, 8,334 shares of common stock were issued to division managers of the Company under the Key-Man Incentive Plan for 2000.

On October 30, 2000, the Company purchased 2,270,000 shares of its common stock at a cost of $19.35 per share under its Stock Repurchase Plan in a private transaction. The stock was purchased from a trust, which is one of the Company’s largest shareholders. Thomas W. Gimbel, a member of the Board, is a co-trustee of the trust from which the shares were acquired. The Stock Repurchase Plan allows the Company to purchase up to 6,000,000 shares of its common stock from time to time in the open market or in privately-negotiated transactions. Repurchased shares are redeemed and treated as authorized but unissued shares. As of September 30, 2001, the Company had repurchased a total of 5,538,275 shares of its common stock under the Stock Repurchase Plan, at an average cost of $14.94 per share. The Company did not repurchase any shares during the nine months ended September 30, 2001.

Accumulated other comprehensive loss of $1,122,000 and $308,000 at September 30, 2001 and December 31, 2000, respectively, consists of foreign currency translation adjustments.

5. Earnings Per Share

The Company calculates basic and diluted earnings per share as required by Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings Per Share. Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is calculated including the dilutive effects of warrants, options, and convertible securities, if any. The following table sets forth the computation of basic and diluted earnings per share:

			Three Months Ended September 30,				Nine Months Ended September 30,
			2001		2000		2001		2000
			(in thousands except per share amounts)
Numerator:
	Net income		$	7,792	$	15,823	$	31,962	$	48,650
Denominator:
	Denominator for basic earnings per share:
		Weighted average shares		31,281		27,504		27,246		27,694
Effect of dilutive securities:
	Stock options			136		97		152		102
	Denominator for dilutive earnings per share:
		Adjusted weighted average shares and assumed conversions		31,417		27,601		27,398		27,796
Earnings per share – diluted			$	.25	$	.57	$	1.17	$	1.75
Earnings per share – basic			$	.25	$	.58	$	1.17	$	1.76

7

RELIANCE STEEL & ALUMINUM CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

The computations of earnings per share for the three and nine months ended September 30, 2000 do not include 385,000 shares of stock options, and for the three months ended September 30, 2001, do not include 37,500 shares of stock options because their inclusion would have been anti-dilutive. There were no anti-dilutive shares of stock options for the nine months ended September 30, 2001, due to fluctuations of the average market price.

6. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 is effective for any business combinations completed after June 30, 2001 and SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives.

The Company has adopted the provisions of SFAS No. 141 for acquisitions completed subsequent to June 30, 2001. The Company will apply the new rules on accounting for goodwill beginning in the first quarter of 2002. During 2002, the Company will perform the first of the required impairment tests of goodwill as of January 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company.

8

RELIANCE STEEL & ALUMINUM CO.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth certain income statement data for each of the periods indicated (dollars are shown in thousands and certain amounts may not calculate due to rounding):

	Three Months Ended September 30,										Nine Months Ended September 30,
	2001					2000					2001					2000
			% of					% of					% of					% of
	$		Net Sales			$		Net Sales			$		Net Sales			$		Net Sales
Net sales	$	430,066		100.0	%	$	443,652		100.0	%	$	1,274,953		100.0	%	$	1,315,396		100.0	%
Gross profit		118,395		27.5			118,398		26.7			353,534		27.7			354,551		27.0
S,G&A expenses		91,608		21.3			79,038		17.8			258,704		20.3			238,336		18.1
Depreciation expense		6,182		1.4			5,345		1.2			17,543		1.4			15,697		1.2
Income from operations	$	20,605		4.8	%	$	34,015		7.7	%	$	77,287		6.1	%	$	100,518		7.6	%

Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000 (dollar amounts in thousands)

In the three months ended September 30, 2001, consolidated net sales decreased 3.1% to $430,066, compared to the same period of 2000. This includes an increase of 14.1% in tons sold and a decrease in the average selling price per ton of 15.5%. Tons sold increased because the 2001 period included the sales of companies acquired in 2001 and late 2000, with $45,000 of sales from the July 2001 acquisition of the net assets of the metals service center business of Pitt-Des Moines, Inc. The average selling price decreased for the 2001 period from both lower metals pricing for most products we sell and from a shift in product mix. Our 2001 acquisitions sell primarily carbon steel products and have increased our percentage of carbon steel products sold by 5.8% to 56.4% in the 2001 quarter as compared to the same quarter of 2000.

Same-store sales (excluding sales of the businesses we acquired since the beginning of 2000) decreased $86,580, or 20.2%, in the three months ended September 30, 2001. The 2001 period tons sold decreased by 11.6%, and the average selling price per ton decreased by 9.6% from the 2000 period. The decrease in same-store tons sold reflects the current business environment, where demand for most products we sell continued to deteriorate throughout the third quarter of 2001, and was further impacted by the tragic events of September 11th. The decrease in the same- store average selling price was primarily due to the lower metals costs for most products during 2001 which continued to decline during the third quarter. We also experienced a change in product mix away from the high-priced products sold to the semiconductor, electronics and related industries that contributed to the decline in our average selling price.

Total gross profit remained flat at $118,395 for the third quarter of 2001 compared to $118,398 in the third quarter of 2000, even though we experienced a 3.1% sales decline. This was due to our gross profit percentage increasing to 27.5% in the three months ended September 30, 2001, from 26.7% in the three months ended September 30, 2000. The improved gross profit percentage is consistent with the 2001 second quarter gross profit percentage of 27.9% and is mainly due to our disciplined sales force maintaining selling prices and management focus on inventory turnover that allows us to react quickly to changes in metals costs.

Warehouse, delivery, selling, general and administrative (“S,G&A”) expenses increased $12,570, or 15.9%, in the third quarter of 2001 compared to the corresponding period of 2000 and amounted to 21.3% of sales in the 2001 third quarter and 17.8% of sales in the 2000 third quarter. The dollar increase in S,G&A expenses includes the expenses of the businesses we acquired after the third quarter of 2000. The third quarter of 2001 S,G&A expense as a percent of sales is up from the 2000 third quarter mainly due to the effect of the lower sales volume and lower pricing

9

being experienced throughout the Company.

Depreciation and amortization expense increased $1,186, or 16.4%, during the three months ended September 30, 2001, compared to the corresponding period of 2000. This increase is primarily because of the depreciation expense related to the assets of the businesses we acquired after the 2000 third quarter, and the amortization of goodwill resulting from the businesses we acquired after the 2000 third quarter.

Interest expense decreased by 11.5% to $6,115 in the 2001 third quarter compared to $6,909 in the 2000 third quarter, mainly because we were able to pay down debt with the proceeds from the July equity offering and with cash generated from operations. Lower interest rates during 2001 also contributed to the decrease in interest expense.

Equity in earnings of our 50%-owned company, American Steel, L.L.C., decreased $389 in the 2001 period compared to the 2000 period primarily due to the current economic conditions, with the Pacific Northwest region being especially weak, mainly related to the truck trailer and railcar markets serviced by American Steel, L.L.C.

Our effective income tax rate increased to 40.6% for the 2001 third quarter, compared to 40.0% for the 2000 third quarter, mainly due to shifts in our geographic composition.

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000 (dollar amounts in thousands)

Consolidated net sales were $1,274,953 for the nine months ended September 30, 2001, a decrease of 3.1% from the nine months ended September 30, 2000. The 2001 nine-month sales represent an increase of 3.8% in tons sold and a decrease in the average selling price per ton of 6.3%. The increase in tons sold was mainly due to the inclusion during the 2001 period of the sales from the businesses we acquired in 2000 and 2001. The average selling price decreased for the 2001 period primarily from both lower metals pricing for most products sold by the Company and from a shift in product mix.

Our same-store sales decreased $177,239, or 13.7%, in the 2001 nine-month period. Same-store tons sold decreased by 10.5% due to continued deterioration of the demand for most products we sell. The same-store average selling price per ton decreased by 3.6% mainly due to lower metal costs for most of our products during 2001. We also experienced a shift in product mix away from sales of higher-priced products to the semiconductor and related electronics industries to more lower-priced carbon steel products. Our one area of strength in 2001, sales for the aerospace industry, increased 7.7% on a same-store tons sold basis during the nine months of 2001, as compared to 2000.

Total gross profit was $353,534 for the first nine months of 2001, a 0.3% decrease, compared to $354,551 in the first nine months of 2000. The 2001 amount includes the gross profit on sales from the companies acquired after the first nine months of 2000. As a percentage of sales, gross profit increased to 27.7% in the nine months ended September 30, 2001, from 27.0% in the nine months ended September 30, 2000. The improved gross profit percentage was mainly due to a continued focus on inventory turnover and due to our disciplined sales force maintaining selling prices.

S,G&A expenses for the nine months ended September 30, 2001 increased $20,368 compared to the corresponding period of 2000, mainly because we included the S,G&A expenses of the businesses we acquired in 2001 and 2000. S,G&A expenses were 20.3% as a percent of sales for the nine-month period of 2001, up from 18.1% for the same nine-month period of 2000. The increase as a percent of sales was because of both the lower sales volumes being experienced throughout the Company and the lower metals pricing in 2001. On a same-store basis, S,G&A expense decreased $4,139 in the 2001 period, mainly due to employee workforce reductions in reaction to the lower sales volumes. Since December 31, 2000, we have reduced our employee headcount by 9.7%.

Depreciation and amortization expense increased $2,807, or 13.3%, during the nine months ended September 30, 2001, compared to the corresponding period of 2000. This increase is primarily due to the inclusion of both the depreciation expense and amortization of goodwill related to our acquisitions made after September 30, 2000.

10

Interest expense increased by 13.0% to $21,007 in the nine months of 2001 compared to $18,586 in the 2000 period, due to the increased borrowings used to fund acquisitions, but was offset somewhat by the current year debt pay downs and lower interest rates.

Equity in earnings of 50%-owned company decreased $1,797 in the first nine months of 2001 compared to the 2000 period, primarily due to the current economic conditions.

Our effective income tax rate was 39.4% for the first nine months of 2001, compared to 40.0% for the same nine months of 2000. The change in our effective rate was primarily due to shifts in our geographic composition and the implementation of certain tax planning strategies during the latter half of 2000.

Liquidity and Capital Resources (dollar amounts in thousands)

At September 30, 2001, working capital amounted to $392,749 compared to $347,659 at December 31, 2000. The increase was primarily due to the additional working capital from our 2001 acquisitions but was offset by decreases in our receivables and inventory. Our receivables and inventory levels decreased due to the decline in sales volumes we have continued to experience throughout 2001. Our capital requirements are primarily for working capital, acquisitions, and capital expenditures for continued improvements in plant capacities and materials handling and processing equipment.

Our primary sources of liquidity are generally from internally generated funds from operations and our revolving line of credit. Our bank facilities at September 30, 2001 allowed for an aggregate of $250,000 in borrowings, with a $200,000 borrowing limit from a syndicated credit facility and an additional $50,000 cash advance available on a second credit facility. At September 30, 2001, $63,000 was outstanding under the $200,000 credit facility and no amounts were outstanding under the cash advance facility. On October 24, 2001, we completed an agreement to renew and expand our revolving credit facility to $335,000. The new $335,000 unsecured five-year revolving credit facility syndication replaced the $200,000 unsecured credit facility and the $10,000 letter of credit agreement that also provided for a $50,000 cash advance facility, both of which were due to mature on October 22, 2002. The agreement allows the Company to increase the new facility to $400,000.

We also have senior unsecured notes outstanding in the aggregate amount of $290,000. The senior notes have maturity dates ranging from 2002 to 2010, with an average life of 9.6 years. The senior notes bear interest at a weighted average fixed rate of 6.83% per annum.

Our operations provided cash of $78,854 in the nine months ended September 30, 2001, as compared to $10,690 of cash used in operations during the corresponding period of 2000, primarily due to decreased inventory and receivables levels in line with the lower sales volumes experienced in 2001.

Our capital expenditures, excluding acquisitions, were $19,990 for the nine months ended September 30, 2001. We had no material commitments for capital expenditures as of September 30, 2001. The purchases of Aluminum and Stainless and Viking Materials were funded with borrowings on our line of credit. The acquisition of the steel service centers division of Pitt-Des Moines, Inc. on July 2, 2001 for approximately $93,100 was funded by borrowings on our line of credit and by a promissory note which was paid off with the net proceeds received from our public equity offering. On July 5, 2001, we issued 6,325,000 shares of our common stock, including the shares issued on exercise of the over-allotment option, at a price of $25.00 per share for total net proceeds of approximately $149,756, after deducting the underwriting discount and estimated offering expenses. The proceeds were used to reduce debt related to the July 2, 2001 acquisition and debt related to other acquisitions, capital expenditures and general working capital needs. We anticipate that funds generated from operations, and funds available under our new line of credit will be sufficient to meet our working capital needs for the foreseeable future.

Seasonality

Some of our customers may be in seasonal businesses, especially customers in the construction industry. As a result of our geographic, product and customer diversity, however, our operations have not shown any material seasonal trends. Revenues in the months of November and December traditionally have been lower than in other months because of a reduced number of working days for shipments of our products and holiday closures for some of our customers. We cannot assure you that period-to-period fluctuations will not occur in the future. Results of any one or more quarters are therefore not necessarily indicative of annual results.

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Market Risk

In the ordinary course of business, we are exposed to various market risk factors, including changes in general economic conditions, domestic and foreign competition, foreign currency exchange rates, and metal pricing and availability. Additionally, we are exposed to market risk primarily related to our fixed rate long-term debt. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Decreases in interest rates may affect our market value of fixed rate debt. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. Based on our debt, we do not consider the exposure to interest rate risk to be material. Our fixed rate debt obligations are not callable until maturity.

This Form 10-Q may contain forward-looking statements relating to future financial results. Actual results may differ materially as a result of factors over which Reliance Steel & Aluminum Co. has no control. These risk factors and additional information are included in the Company’s Annual Report on Form 10-K and the Company’s Prospectus dated June 28, 2001 filed under Rule 424(b).

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

         Not applicable.

Item 2. Changes in Securities.

         (a)  Not applicable.

         (b)  Not applicable.

         (c)  Not applicable.

         (d)  Not applicable.

Item 3. Defaults Upon Senior Securities.

         (a)  Not applicable.

         (b)  Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

         Not applicable.

Item 5. Other Information.

         Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

         (a)  Exhibits:

                10.10 Credit Agreement for the $335 Million Syndicated Credit Facility dated October 24, 2001.

         (b)  Reports on Form 8-K:

                None.

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SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RELIANCE STEEL & ALUMINUM CO.

Dated: November 9, 2001	By: /s/	David H. Hannah David H. Hannah, President and Chief Executive Officer
	By: /s/	Karla R. McDowell Karla R. McDowell, Senior Vice President and Chief Financial Officer

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