EX-99.1 2 a5128199ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Reliance Steel & Aluminum Co. Reports Record 2006 First Quarter Results; Sales up 22% and Net Income up 55% LOS ANGELES--(BUSINESS WIRE)--April 20, 2006--Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the first quarter ended March 31, 2006. Net income was a record $71.9 million, up 55%, or $2.14 earnings per diluted share. This compares with net income of $46.4 million, or $1.41 earnings per diluted share for the 2005 first quarter. 2006 first quarter sales were a record $988 million, an increase of 22% compared with 2005 first quarter sales of $811.9 million. The 2006 first quarter financial results include in cost of sales a pre-tax LIFO expense amount of $5.0 million, or $.09 per diluted share, compared with a pre-tax LIFO expense amount of $12.5 million, or $.24 per diluted share, for the same period in 2005. David H. Hannah, Chief Executive Officer of Reliance, said, "Strong customer demand resulting in increased volumes of metals sold was the key driver of our first quarter performance. Overall, volume was up 27% compared to the 2005 first quarter, and up 12% from the 2005 fourth quarter. The various end-market industries where we sell our products are still doing quite well, with strength in the aerospace and non-residential construction markets leading the way." "We are optimistic regarding the current operating environment and the favorable impact of our recent acquisitions, especially Earle M. Jorgensen Company. We look forward to the opportunity to continue to execute our strategies for future growth and success. At this time, we do not expect any significant changes in demand or pricing and, including the earnings of Earle M. Jorgensen Company, as well as the increase in the number of our shares outstanding as a result of that transaction, we estimate earnings per diluted share for the 2006 second quarter in a range of $2.25 to $2.35," said Hannah. On April 3, 2006, Reliance completed the previously announced acquisition of Earle M. Jorgensen Company formerly (NYSE:JOR) ("EMJ"). The transaction was valued at approximately $984 million, including the assumption of EMJ's net debt, with a per share consideration of $14.21 based on the average closing price of Reliance common stock of $86.43 for the 20-day period ending on the second trading day prior to the closing. Reliance paid $6.50 in cash and issued 0.0892 of a share of Reliance common stock for each share of EMJ common stock outstanding. The per share value was above Reliance's $13.00 per share offer price because the average closing price of Reliance common stock noted above exceeded the upper limit of the collar on the stock portion of the consideration. Based on the closing price of Reliance's common stock on March 31, 2006 of $93.92 per share, the value to EMJ stockholders would have been $14.88 per share of EMJ common stock on that date. At closing, Reliance issued approximately 4.5 million shares of its common stock valued at about $387 million based on the Reliance 20-day average closing price. The cash portion of approximately $387 million, which includes the cash out of certain EMJ options and estimated transaction costs, was financed under Reliance's $600 million syndicated credit facility. Upon closing of the acquisition, Reliance's syndicated credit facility was increased to $700 million. The credit facility and private placement notes of Reliance were amended in February of 2006 to allow for EMJ's senior secured indentures of $250 million, which were assumed by Reliance, in addition to $2.9 million of EMJ's other existing debt. The acquisition will be immediately accretive to Reliance. The combined companies have more than 150 locations in 36 states and Belgium, Canada, China and South Korea with total assets of approximately $3 billion and annual revenues of more than $5 billion. EMJ now operates as a wholly owned subsidiary of Reliance. On February 15, 2006, the Company's Board of Directors declared the regular quarterly cash dividend of $.10 per share of common stock. The 2006 first quarter cash dividend was paid on March 31, 2006 to shareholders of record March 10, 2006. 2006 marks the 46th consecutive year that Reliance has paid quarterly dividends to its shareholders. Reliance will host a conference call that will be broadcast live over the Internet (listen only mode) regarding the first quarter financial results for the period ended March 31, 2006. All interested parties are invited to listen to the web cast on April 20, 2006 at 11:00 a.m. Eastern Time at: http://www.rsac.com/investorinformation or http://www.streetevents.com. Player format: Windows Media. The web cast will remain on the Reliance web site at: www.rsac.com through May 20, 2006 and a printed transcript will be posted on the Reliance web site after the completion of the conference call. Reliance Steel & Aluminum Co., headquartered in Los Angeles, California, is one of the largest metals service center companies in the United States. Through a network of more than 150 locations in 36 states and Belgium, Canada, China and South Korea, the Company provides value-added metals processing services and distributes a full line of over 90,000 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 95,000 customers in various industries. Reliance Steel & Aluminum Co.'s press releases and additional information are available on the Company's web site at www.rsac.com. The Company was named to the 2006 Forbes Platinum 400 List of America's Best Big Companies. This release 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 reports on file with the Securities and Exchange Commission. RELIANCE STEEL & ALUMINUM CO. SELECTED FINANCIAL DATA (In thousands except share and per share amounts) Three Months Ended March 31, ------------------------------- 2006 2005 --------------- -------------- Income Statement Data: Net sales $ 987,986 $ 811,907 Gross profit 270,185 215,936 Operating profit(1) 122,114 83,777 EBITDA(2) 134,368 92,243 EBIT(2) 122,547 81,081 Pre-tax income 116,838 74,780 Net income 71,855 46,363 EPS -- diluted $ 2.14 $ 1.41 Weighted average shares outstanding -- diluted 33,598,332 32,972,593 Gross margin 27.3% 26.6% Operating profit margin(1) 12.4% 10.3% EBITDA margin(2) 13.6% 11.4% EBIT margin(2) 12.4% 10.0% Pre-tax margin 11.8% 9.2% Net margin 7.3% 5.7% Cash dividends per share $ .10 $ .09 March 31, December 31, 2006 2005 --------------- -------------- Balance Sheet and Other Data: Current assets $ 969,816 $ 847,348 Working capital 558,023 513,529 Net fixed assets 504,638 479,719 Total assets 1,926,875 1,769,070 Current liabilities 411,793 333,819 Long-term debt(3) 331,327 306,790 Shareholders' equity 1,102,413 1,029,865 Capital expenditures (year-to-date) 26,109 53,740 Net debt-to-total capital(4) 23.7% 23.8% Return on equity(5) 22.4% 25.0% Current ratio 2.4 2.5 Book value per share $ 33.25 $ 31.11 Cash flow from operations per share(5) $ 8.33 $ 8.22 (1) Operating profit is calculated as net sales less cost of sales, warehouse, delivery, selling, general and administrative expenses and depreciation expense. (2) See Consolidated Statements of Income for reconciliation of EBIT and EBITDA. EBIT is defined as the sum of income before interest expense and income taxes. EBITDA is defined as the sum of income before interest expense, income taxes, depreciation expense and amortization of intangibles. We believe that EBIT and EBITDA are commonly used as a measure of performance for companies in our industry and are frequently used by analysts, investors, lenders and other interested parties to evaluate a company's financial performance and its ability to incur and service debt. EBIT and EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States. The items excluded from EBIT and EBITDA are significant components in understanding and assessing financial performance. EBIT or EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of operating performance or as a measure of liquidity. (3) Long-term debt includes capital lease obligations of $5,377 and $5,515 as of March 31, 2006 and December 31, 2005, respectively. (4) Net debt-to-total capital is calculated as total debt (net of cash) divided by shareholders' equity plus total debt (net of cash). (5) Calculations are based on the latest twelve months. RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) ASSETS March 31, December 31, 2006 2005 --------------- -------------- (Unaudited) Current assets: Cash and cash equivalents $ 34,459 $ 35,022 Accounts receivable, less allowance for doubtful accounts of $11,216 at March 31, 2006 and $10,511 at December 31, 2005, respectively 437,319 369,931 Inventories 444,406 387,385 Prepaid expenses and other current assets 17,650 19,009 Deferred income taxes 35,982 36,001 --------------- -------------- Total current assets 969,816 847,348 Property, plant and equipment, at cost: Land 64,539 60,207 Buildings 291,868 281,986 Machinery and equipment 423,327 403,403 Accumulated depreciation (275,096) (265,877) --------------- -------------- 504,638 479,719 Goodwill 392,276 384,730 Other assets 60,145 57,273 --------------- -------------- Total assets $ 1,926,875 $ 1,769,070 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 238,356 $ 184,443 Accrued expenses 27,973 19,234 Accrued compensation and retirement costs 34,009 52,354 Accrued insurance costs 23,205 23,372 Income taxes payable 42,969 4,141 Deferred income taxes 214 214 Current maturities of long-term debt 44,525 49,525 Current maturities of capital lease obligations 542 536 --------------- -------------- Total current liabilities 411,793 333,819 Long-term debt 325,950 301,275 Capital lease obligations 5,377 5,515 Long-term retirement costs 14,979 15,660 Deferred income taxes 65,376 65,808 Minority interest 987 17,128 Commitments and contingencies -- -- Shareholders' equity: Preferred stock, no par value: Authorized shares -- 5,000,000 None issued or outstanding -- -- Common stock, no par value: Authorized shares -- 100,000,000 Issued and outstanding shares -- 33,160,050 March 31, 2006 and 33,108,999 December 31, 2005 respectively, stated capital 326,468 325,010 Retained earnings 775,164 704,530 Accumulated other comprehensive income 781 325 --------------- -------------- Total shareholders' equity 1,102,413 1,029,865 --------------- -------------- Total liabilities and shareholders' equity $ 1,926,875 $ 1,769,070 =============== ============== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF INCOME (In thousands except share and per share amounts) Three Months Ended March 31, ------------------------------- 2006 2005 --------------- -------------- Net sales $ 987,986 $ 811,907 Other income, net 1,278 665 --------------- -------------- 989,264 812,572 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 717,801 595,971 Warehouse, delivery, selling, general and administrative 137,048 121,782 Depreciation and amortization 11,821 11,162 Interest 5,709 6,301 --------------- -------------- 872,379 735,216 --------------- -------------- Income before minority interest and income taxes 116,885 77,356 Minority interest (47) (2,576) --------------- -------------- Income from continuing operations before income taxes 116,838 74,780 Provision for income taxes 44,983 28,417 --------------- -------------- Net income $ 71,855 $ 46,363 =============== ============== Earnings per share: Income from continuing operations -- diluted $ 2.14 $ 1.41 =============== ============== Weighted average shares outstanding -- diluted 33,598,332 32,972,593 =============== ============== Income from continuing operations -- basic $ 2.17 $ 1.41 =============== ============== Weighted average shares outstanding -- basic 33,139,762 32,781,391 =============== ============== Cash dividends per share $ .10 $ .09 =============== ============== Reconciliation of EBIT and EBITDA Income from continuing operations before income taxes $ 116,838 $ 74,780 Interest expense 5,709 6,301 --------------- -------------- EBIT 122,547 81,081 --------------- -------------- Depreciation and amortization expense 11,821 11,162 --------------- -------------- EBITDA $ 134,368 $ 92,243 =============== ============== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, --------------------------------- 2006 2005 ----------------- --------------- Operating activities: Net income $ 71,855 $ 46,363 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,821 11,162 Deferred income taxes (436) -- (Gain)/Loss on sales of machinery and equipment (527) 113 Minority interest 47 2,576 Stock based compensation expense 1,132 -- Tax benefit of stock options exercised -- 1,387 Excess tax benefits from stock based compensation (963) -- Changes in operating assets and liabilities: Accounts receivable (66,261) (41,878) Inventories (53,935) (33,370) Prepaid expenses and other assets (2,180) 553 Accounts payable and accrued expenses 80,486 48,883 --------------- -------------- Net cash provided by operating activities 41,039 35,789 Investing activities: Purchases of property, plant and equipment, net (26,109) (10,798) Acquisitions of metal service centers and net asset purchases of metal service centers, net of cash acquired (34,826) -- Proceeds from sales of property and equipment 1,678 853 --------------- -------------- Net cash used in investing activities (59,257) (9,945) Financing activities: Proceeds from borrowings 170,000 111,000 Principal payments on long-term debt and short-term borrowings (150,457) (138,250) Payments to minority shareholders (1,291) (541) Dividends paid (3,316) (2,961) Excess tax benefits from stock based compensation 963 -- Exercise of stock options 1,236 5,752 Issuance of common stock 222 246 --------------- -------------- Net cash provided by (used in) financing activities 17,357 (24,754) Effect of exchange rate changes on cash 298 246 --------------- -------------- (Decrease)/Increase in cash and cash equivalents (563) 1,336 Cash and cash equivalents at beginning of period 35,022 11,659 --------------- -------------- Cash and cash equivalents at end of period $ 34,459 $ 12,995 =============== ============== Supplemental cash flow information: Interest paid during the period $ 4,112 $ 3,965 Income taxes paid during the period $ 5,427 $ 1,149 CONTACT: Reliance Steel & Aluminum Co. Kim P. Feazle, Investor Relations 713-610-9937 213-576-2428 kfeazle@rsac.com investor@rsac.com