EX-99.1 2 a5191977ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Reliance Steel & Aluminum Co. Reports Record 2006 Second Quarter Results; Sales up 91% and Net Income up 105% LOS ANGELES--(BUSINESS WIRE)--July 20, 2006--Reliance Steel & Aluminum Co. (NYSE:RS) reported today its financial results for the second quarter and six months ended June 30, 2006. Net income was a record $100.5 million, or $2.65 earnings per diluted share for the 2006 second quarter. This compares with net income of $49.0 million, or $1.48 earnings per diluted share for the 2005 second quarter. 2006 second quarter sales were a record $1.56 billion, an increase of 91% compared with 2005 second quarter sales of $816.3 million. The 2006 second quarter financial results include in cost of sales a pre-tax LIFO expense amount of $18.0 million, or $.30 per diluted share, compared with no LIFO income or expense recorded in the 2005 second quarter. 2006 second quarter results include the acquisition of Earle M. Jorgensen Company ("EMJ") on April 3, 2006, including the issuance of approximately 4.5 million shares of common stock, for a 15% increase in diluted shares outstanding. For the six-months ended June 30, 2006, net income amounted to a record $172.4 million, up 81% compared with net income of $95.4 million for the same period in 2005. Earnings per diluted share were $4.83 for the six-months ended June 30, 2006, compared with earnings of $2.89 per diluted share for the six-months ended June 30, 2005. Sales for the 2006 year-to-date period were a record $2.5 billion, an increase of 56% compared with 2005 six-month sales of $1.63 billion. The 2006 six-month financial results include in cost of sales a pre-tax LIFO expense amount of $23.0 million, or $.40 per diluted share, compared with a pre-tax LIFO expense amount of $12.5 million, or $.23 per diluted share in the 2005 year-to-date period. David H. Hannah, Chief Executive Officer of Reliance said, "Overall, demand for our products during the second quarter was strong, with notable strength in aerospace, energy, and nonresidential construction. Pricing on all of our products trended upward throughout the quarter. Our April 3, 2006 acquisition of EMJ and our July 1, 2005 acquisition of Chapel Steel favorably and significantly affected our 2006 and 2005 period comparisons. In addition to significantly increasing our operating results, the recent EMJ and Chapel acquisitions have further enhanced our product, customer and geographic diversification, which we believe are important factors in our consistently strong operating performance. Also contributing to our record results was meaningful growth in both volume and pricing of our existing operations." "At this time, we anticipate no significant changes in current business activity, other than the seasonal softness that normally occurs in the third quarter compared to the second quarter. As a result, after giving effect to our two-for-one stock split, we estimate earnings per diluted share for the 2006 third quarter in a range of $1.15 to $1.20," said Hannah. On April 3, 2006, Reliance completed the previously announced acquisition of Earle M. Jorgensen Company (formerly NYSE:JOR). 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. 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 was immediately accretive to Reliance. EMJ now operates as a wholly owned subsidiary of Reliance. On July 11, 2006, Reliance announced that it had reached an agreement to acquire Yarde Metals, Inc., a metals service center company headquartered in Southington, CT. The transaction is expected to be finalized within 60 days, subject to the completion of due diligence and regulatory approvals. Yarde was founded in 1976 and specializes in the processing and distribution of stainless steel and aluminum plate, rod and bar products. Yarde has additional metals service centers in Pelham, NH; East Hanover, NJ; Hauppauge, NY; High Point, NC; Streetsboro, OH; and Limerick, PA and a sales office in Ft. Lauderdale, FL. Yarde's net sales for the fiscal year ended June 30, 2006 were approximately $385 million. On April 19, 2006, the Company's Board of Directors declared the regular quarterly cash dividend of $.10 per share of common stock. The 2006 second quarter cash dividend was paid on June 16, 2006 to shareholders of record May 26, 2006. 2006 marks the 46th consecutive year that Reliance has paid quarterly dividends to its shareholders. On May 17, 2006, Reliance's Board of Directors declared a two-for-one stock split, in the form of a 100% stock dividend on the Company's common stock and a 20% increase in the dividend rate. The common stock split issued one additional share of common stock for each share held by shareholders of record on July 5, 2006. The additional shares were distributed on July 19, 2006. Reliance's total common shares outstanding increased from approximately 37.7 million to 75.4 million. Beginning with the 2006 third quarter dividend payment, the Company's regular quarterly cash dividend will be adjusted to $.06 per share of common stock, representing a 20% increase over the current rate of $.05 per share, after giving effect to the two-for-one stock split. Reliance will host a conference call that will be broadcast live over the Internet (listen only mode) regarding the second quarter and year-to-date financial results for the period ended June 30, 2006. All interested parties are invited to listen to the web cast on July 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 August 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 37 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 Six Months Ended June 30, Ended June 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Income Statement Data: Net sales $1,559,222 $816,342 $2,547,208 $1,628,249 Gross profit 419,873 222,235 690,058 438,171 Operating profit(1) 179,993 88,241 302,107 172,018 EBITDA(2) 194,897 97,423 329,265 189,666 EBIT(2) 178,097 85,316 300,644 166,397 Pre-tax income 161,164 79,110 278,002 153,890 Net income 100,505 49,049 172,360 95,412 EPS - diluted $2.65 $1.48 $4.83 $2.89 Weighted average shares outstanding -- diluted 37,937,496 33,086,102 35,715,940 33,023,552 Gross margin 26.9% 27.2% 27.1% 26.9% Operating profit margin(1) 11.5% 10.8% 11.9% 10.6% EBITDA margin(2) 12.5% 11.9% 12.9% 11.6% EBIT margin(2) 11.4% 10.5% 11.8% 10.2% Pre-tax margin 10.3% 9.7% 10.9% 9.5% Net margin 6.4% 6.0% 6.8% 5.9% Cash dividends per share $.10 $.09 $.20 $.18 June 30, December 31, 2006 2005 ------------ ------------ Balance Sheet Data: Current assets $1,612,466 $847,348 Working capital 1,010,001 513,529 Net fixed assets 709,897 479,719 Total assets 3,460,694 1,769,070 Current liabilities 602,465 333,819 Long-term debt(3) 1,041,326 306,790 Shareholders' equity 1,567,831 1,029,865 Capital expenditures 59,694 53,740 Net debt-to-total capital(4) 40.8% 23.8% Return on equity(5) 25.2% 25.0% Current ratio 2.7 2.5 Book value per share $41.57 $31.11 Cash flow from operations per share(6) $3.24 $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 $5,238 and $5,515 as of June 30, 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 net income and beginning shareholders' equity, adjusted for $360.5 million of common stock issued to fund an acquisition on April 3, 2006. (6) Calculations are based on the latest twelve months. RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) ASSETS June 30, December 31, 2006 2005 ----------- ----------- (Unaudited) Current assets: Cash and cash equivalents $10,104 $35,022 Accounts receivable, less allowance for doubtful accounts of $17,717 at June 30, 2006 and $10,511 at December 31, 2005, respectively 683,566 369,931 Inventories 861,125 387,385 Prepaid expenses and other current assets 22,015 19,009 Deferred income taxes 35,656 36,001 ----------- ----------- Total current assets 1,612,466 847,348 Property, plant and equipment, at cost: Land 106,237 60,207 Buildings 371,561 281,986 Machinery and equipment 520,817 403,403 Accumulated depreciation (288,718) (265,877) ----------- ----------- 709,897 479,719 Goodwill 723,450 384,730 Intangible assets 325,237 44,384 Cash surrender value of life insurance policies, net 55,836 7,299 Deferred income taxes 9,363 -- Other assets 24,445 5,590 ----------- ----------- Total assets $3,460,694 $1,769,070 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $377,250 $184,443 Accrued expenses 56,016 19,234 Accrued compensation and retirement costs 67,432 52,354 Accrued insurance costs 33,770 23,372 Income taxes payable 17,059 4,141 Deferred income taxes 3,835 214 Current maturities of long-term debt 46,556 49,525 Current maturities of capital lease obligations 547 536 ----------- ----------- Total current liabilities 602,465 333,819 Long-term debt 1,036,088 301,275 Capital lease obligations 5,238 5,515 Long-term retirement costs 35,851 15,660 Deferred income taxes 212,149 65,808 Minority interest 1,072 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 -- 37,718,598 at June 30, 2006 and 33,108,999 at December 31, 2005 respectively, stated capital 693,760 325,010 Retained earnings 871,393 704,530 Accumulated other comprehensive income 2,678 325 ----------- ----------- Total shareholders' equity 1,567,831 1,029,865 ----------- ----------- Total liabilities and shareholders' equity $3,460,694 $1,769,070 =========== =========== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF INCOME (In thousands except share and per share amounts) Three Months Six Months Ended June 30, Ended June 30 ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net sales $1,559,222 $816,342 $2,547,208 $1,628,249 Other income, net 376 699 1,654 1,364 ----------- ----------- ----------- ----------- 1,559,598 817,041 2,548,862 1,629,613 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 1,139,349 594,107 1,857,150 1,190,078 Warehouse, delivery, selling, general and administrative 225,267 123,571 362,315 245,353 Depreciation and amortization 16,800 12,107 28,621 23,269 Interest 16,933 6,206 22,642 12,507 ----------- ----------- ----------- ----------- 1,398,349 735,991 2,270,728 1,471,207 ----------- ----------- ----------- ----------- Income before minority interest and income taxes 161,249 81,050 278,134 158,406 Minority interest (85) (1,940) (132) (4,516) ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 161,164 79,110 278,002 153,890 Provision for income taxes 60,659 30,061 105,642 58,478 ----------- ----------- ----------- ----------- Net income $100,505 $49,049 $172,360 $95,412 =========== =========== =========== =========== Earnings per share: Income from continuing operations - diluted $2.65 $1.48 $4.83 $2.89 =========== =========== =========== =========== Weighted average shares outstanding - diluted 37,937,496 33,086,102 35,715,940 33,023,552 =========== =========== =========== =========== Income from continuing operations - basic $2.68 $1.49 $4.87 $2.90 =========== =========== =========== =========== Weighted average shares outstanding - basic 37,557,719 32,915,847 35,360,945 32,848,990 =========== =========== =========== =========== Cash dividends per share $.10 $.09 $.20 $.18 =========== =========== =========== =========== Reconciliation of EBIT and EBITDA Income from continuing operations before income taxes $161,164 $79,110 $278,002 $153,890 Interest expense 16,933 6,206 22,642 12,507 ----------- ----------- ----------- ----------- EBIT 178,097 85,316 300,644 166,397 Depreciation and amortization expense 16,800 12,107 28,621 23,269 ----------- ----------- ----------- ----------- EBITDA $194,897 $97,423 $329,265 $189,666 =========== =========== =========== =========== RELIANCE STEEL & ALUMINUM CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended June 30, --------------------- 2006 2005 ----------- --------- Operating activities: Net income $172,360 $95,412 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,621 23,269 Debt premium amortization (892) -- Deferred income taxes (1,244) (14) (Gain)/Loss on sales of machinery and equipment (401) 2 Minority interest 132 4,516 Stock based compensation expense 2,712 -- Tax benefit of stock options exercised -- 1,509 Excess tax benefits from stock based compensation (1,584) -- Increase in cash surrender value of life insurance policies (6,293) (56) Changes in operating assets and liabilities: Accounts receivable (118,886) (32,039) Inventories (126,208) (19,886) Prepaid expenses and other assets (8,372) (541) Accounts payable and accrued expenses (17,112) 11,129 ----------- --------- Net cash (used in) provided by operating activities (77,167) 83,301 Investing activities: Purchases of property, plant and equipment, net (59,694) (21,060) Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired (343,924) -- Proceeds from sales of property and equipment 2,247 1,129 Premiums paid on life insurance policies (238) -- ----------- --------- Net cash used in investing activities (401,609) (19,931) Financing activities: Proceeds from borrowings 693,316 187,000 Principal payments on long-term debt and short- term borrowings (235,591) (240,250) Payments to minority shareholders (1,291) (6,170) Dividends paid (7,081) (5,923) Excess tax benefits from stock based compensation 1,584 -- Exercise of stock options 2,533 6,203 Issuance of common stock 222 246 ----------- --------- Net cash provided by (used in) financing activities 453,692 (58,894) Effect of exchange rate changes on cash 166 75 ----------- --------- (Decrease)/Increase in cash and cash equivalents (24,918) 4,551 Cash and cash equivalents at beginning of period 35,022 11,659 ----------- --------- Cash and cash equivalents at end of period $10,104 $16,210 =========== ========= Supplemental cash flow information: Interest paid during the period $27,802 $12,372 Income taxes paid during the period $95,999 $57,994 Non-cash investing and financing activities: Issuance of common stock and stock options in connection with acquisition of metals service center $360,453 $-- Issuance of common stock to employee retirement savings plan $2,830 $-- CONTACT: Reliance Steel & Aluminum Co. Kim P. Feazle Investor Relations 213-576-2428 or 713-610-9937 kfeazle@rsac.com investor@rsac.com