Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | RELIANCE STEEL & ALUMINUM CO | |
Entity Central Index Key | 861,884 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 72,882,222 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 133.8 | $ 122.8 |
Accounts receivable, less allowance for doubtful accounts of $17.2 at March 31, 2017 and $15.3 at December 31, 2016 | 1,147.7 | 960.2 |
Inventories | 1,680.2 | 1,532.6 |
Prepaid expenses and other current assets | 63.9 | 72.9 |
Total current assets | 3,025.6 | 2,688.5 |
Property, plant and equipment: | ||
Land | 230 | 228.2 |
Buildings | 1,067.9 | 1,059.2 |
Machinery and equipment | 1,663.7 | 1,647.3 |
Accumulated depreciation | (1,310.2) | (1,272.5) |
Property, plant and equipment, net | 1,651.4 | 1,662.2 |
Goodwill | 1,829.2 | 1,827.4 |
Intangible assets, net | 1,138.5 | 1,151.3 |
Cash surrender value of life insurance policies, net | 44 | 46.9 |
Other assets | 35.7 | 35 |
Total assets | 7,724.4 | 7,411.3 |
Current liabilities: | ||
Accounts payable | 402.4 | 302.2 |
Accrued expenses | 94.7 | 83.7 |
Accrued compensation and retirement costs | 96.5 | 140.8 |
Accrued insurance costs | 43.5 | 40.6 |
Current maturities of long-term debt and short-term borrowings | 71.3 | 82.5 |
Income taxes payable | 57.6 | 6.2 |
Total current liabilities | 766 | 656 |
Long-term debt | 1,951.9 | 1,846.7 |
Long-term retirement costs | 90.6 | 89.6 |
Other long-term liabilities | 11.3 | 13 |
Deferred income taxes | 628.6 | 626.9 |
Commitments and contingencies | ||
Equity: | ||
Preferred stock, $0.001 par value: Authorized shares — 5,000,000 None issued or outstanding | ||
Common stock and additional paid-in capital, $0.001 par value: Authorized shares — 200,000,000 Issued and outstanding shares – 72,879,606 at March 31, 2017 and 72,682,793 at December 31, 2016 | 597.9 | 590.3 |
Retained earnings | 3,742 | 3,663.2 |
Accumulated other comprehensive loss | (94.8) | (104.7) |
Total Reliance stockholders' equity | 4,245.1 | 4,148.8 |
Noncontrolling interests | 30.9 | 30.3 |
Total equity | 4,276 | 4,179.1 |
Total liabilities and equity | $ 7,724.4 | $ 7,411.3 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts | $ 17.2 | $ 15.3 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, Authorized shares | 5,000,000 | 5,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, Authorized shares | 200,000,000 | 200,000,000 |
Common stock, Issued shares | 72,879,606 | 72,682,793 |
Common stock, outstanding shares | 72,879,606 | 72,682,793 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF INCOME | ||
Net sales | $ 2,419.3 | $ 2,162.7 |
Costs and expenses: | ||
Cost of sales (exclusive of depreciation and amortization shown below) | 1,697.7 | 1,526 |
Warehouse, delivery, selling, general and administrative | 476.2 | 449.5 |
Depreciation and amortization | 55.2 | 56.1 |
Total costs and expenses | 2,229.1 | 2,031.6 |
Operating income | 190.2 | 131.1 |
Other expense: | ||
Interest | (17.3) | (21.7) |
Other expense, net | (4.4) | (0.2) |
Income before income taxes | 168.5 | 109.2 |
Income tax provision | 55.1 | 15.7 |
Net income | 113.4 | 93.5 |
Less: Net income attributable to noncontrolling interests | 1.7 | 1.3 |
Net income attributable to Reliance | $ 111.7 | $ 92.2 |
Earnings per share attributable to Reliance stockholders: | ||
Diluted earnings per common share (in dollars per share) | $ 1.52 | $ 1.27 |
Basic earnings per common share (in dollars per share) | 1.53 | 1.28 |
Cash dividends per share (in dollars per share) | $ 0.45 | $ 0.40 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income | $ 113.4 | $ 93.5 |
Other comprehensive income: | ||
Foreign currency translation gain | 7.6 | 15.7 |
Pension and postretirement benefit adjustments, net of tax | 2.3 | |
Total other comprehensive income | 9.9 | 15.7 |
Comprehensive income | 123.3 | 109.2 |
Less: Comprehensive income attributable to noncontrolling interests | 1.7 | 1.3 |
Comprehensive income attributable to Reliance | $ 121.6 | $ 107.9 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities: | ||
Net income | $ 113.4 | $ 93.5 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
Depreciation and amortization expense | 55.2 | 56.1 |
Deferred income tax provision | 0.2 | 2.3 |
Gain on sales of property, plant and equipment | (3.9) | (0.5) |
Stock-based compensation expense | 5.5 | 3.3 |
Other | 4 | 1 |
Changes in operating assets and liabilities (excluding effect of businesses acquired): | ||
Accounts receivable | (186.7) | (80.3) |
Inventories | (146.5) | (29.3) |
Prepaid expenses and other assets | 9.2 | 17 |
Accounts payable and other liabilities | 128.9 | 92.3 |
Net cash (used in) provided by operating activities | (20.7) | 155.4 |
Investing activities: | ||
Purchases of property, plant and equipment | (34.1) | (34.4) |
Acquisitions, net of cash acquired | (1.3) | (290.9) |
Other | 3.4 | (6.2) |
Net cash used in investing activities | (32) | (331.5) |
Financing activities: | ||
Net short-term debt repayments | (3.8) | (6.2) |
Proceeds from long-term debt borrowings | 339 | 399 |
Principal payments on long-term debt | (242.1) | (188) |
Dividends and dividend equivalents paid | (33.7) | (29) |
Exercise of stock options | 2.8 | 16.5 |
Other | (1.8) | (2.6) |
Net cash provided by financing activities | 60.4 | 189.7 |
Effect of exchange rate changes on cash | 3.3 | 2.6 |
Increase in cash and cash equivalents | 11 | 16.2 |
Cash and cash equivalents at beginning of year | 122.8 | 104.3 |
Cash and cash equivalents at end of period | 133.8 | 120.5 |
Supplemental cash flow information: | ||
Interest paid during the period | 8.1 | 5.1 |
Income taxes paid during the period, net | $ 3 | $ 5.7 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation Principles of Consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) 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 U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements, have been included. The results of operations for the first quarter of 2017 are not necessarily indicative of the results for the full year ending December 31, 2017. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2016, included in Reliance Steel & Aluminum Co.’s (“Reliance”, the “Company”, “we”, “our” or “us”) Annual Report on Form 10-K. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Our consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. Our investments in unconsolidated subsidiaries are recorded under the equity method of accounting. |
Impact of Recently Issued Accou
Impact of Recently Issued Accounting Guidance | 3 Months Ended |
Mar. 31, 2017 | |
Impact of Recently Issued Accounting Guidance | |
Impact of Recently Adopted Accounting Guidance | 2. Impact of Recently Issued Accounting Guidance Impact of Recently Issued Accounting Standards—Adopted Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost— In March 2017, the Financial Accounting Standards Board (“FASB”) issued accounting changes to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost in the income statement, and to narrow the amounts eligible for capitalization in assets. The amendments require the service cost component be reported in the same line as other compensation costs and the other components of net periodic benefit cost be presented in the income statement outside of operating income. We adopted these changes in the first quarter of 2017 on a retrospective basis. As a result of the adoption, we retrospectively adjusted the presentation of our 2016 first quarter income statement, decreasing Warehouse, delivery, selling, general and administrative expense by $1.3 million and increasing Other expense, net by $1.3 million. The adjustment to the income statement presentation for the first quarter of 2016 was estimated using the components of net periodic benefit cost other than service cost included in Note 11 — “Employee Benefits” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. We include the components of net periodic benefit cost other than service cost in Other Expense, net in all periods presented. The amendment requiring only the service cost component of net periodic benefit cost to be eligible for capitalization in assets did not impact our asset capitalization policies. The adoption of these changes did not have a material impact on our consolidated financial statements. Clarifying the Definition of a Business— In January 2017, the FASB issued accounting changes to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The accounting changes provide a screen to determine when a set of assets and activities is not a business. These accounting changes, which will be applied to our future acquisitions, were adopted during the first quarter of 2017. The adoption of these accounting changes will not have a material impact on our consolidated financial statements. Impact of Recently Issued Accounting Standards—Not Yet Adopted Classification of Certain Cash Receipts and Cash Payments —In August 2016, the FASB issued accounting changes that clarifies the presentation and classification of certain cash receipts and payments in the statement of cash flows with the objective of reducing the existing diversity in practice with respect to eight types of cash flows. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2017, or January 1, 2018 for the Company. Early adoption is permitted. The adoption of this standard will not have a material impact on our consolidated financial statements. Leases —In February 2016, the FASB issued accounting changes which will require lessees to recognize most long-term leases on-balance sheet through the recognition of a right-of-use asset and a lease liability. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2018, or January 1, 2019 for the Company. Early adoption is permitted. We have implemented a lease management system and are developing processes necessary to implement these accounting changes. We expect the adoption of these accounting changes will materially increase our assets and liabilities, but will not have a material impact on our net income or equity. We have not yet made any decision with respect to the timing or method of adoption of these accounting changes. Revenue from Contracts with Customers — In May 2014, the FASB issued accounting changes, which replace most of the detailed guidance on revenue recognition that currently exists under U.S. GAAP. Under the new guidance an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company will adopt the new guidance on January 1, 2018. We primarily sell our inventories in the “spot market” pursuant to fixed price purchase orders and do not enter into transactions with multiple performance obligations. As such, we do not expect this standard to have a material impact on our consolidated financial statements. During 2017, we will continue to evaluate this standard and update the disclosures on its impact. We have not yet made any decision with respect to the method of adoption of these accounting changes. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Acquisitions | 3. Acquisitions 2016 Acquisitions On August 1, 2016, through our wholly owned subsidiary American Metals Corporation, we acquired Alaska Steel Company (“Alaska Steel”), a full-line metal distributor headquartered in Anchorage, Alaska. Our acquisition of Alaska Steel was our first entry into the Alaska market. Alaska Steel provides steel, aluminum, stainless and specialty metals and related processing services to a variety of customers in diverse industries including infrastructure and energy throughout Alaska. Alaska Steel’s net sales were $3.8 million for the first quarter of 2017. On April 1, 2016, we acquired Best Manufacturing, Inc. (“Best Manufacturing”), a custom sheet metal fabricator of steel and aluminum products on both a direct and toll basis. Best Manufacturing, headquartered in Jonesboro, Arkansas, provides various precision fabrication services including laser cutting, shearing, computer numerated control (“CNC”) punching, CNC forming and rolling, as well as welding, assembly, painting, inventory management and engineering expertise. Best Manufacturing’s net sales were $5.6 million for the first quarter of 2017. On January 1, 2016, we acquired Tubular Steel, Inc. (“Tubular Steel”), a distributor and processor of carbon, alloy and stainless steel pipe, tubing and bar products. Tubular Steel, headquartered in St. Louis, Missouri, has six locations and a fabrication business that supports its diverse customer base. Tubular Steel’s net sales were $34.1 million for the first quarter of 2017. We funded our 2016 acquisitions with borrowings on our revolving credit facility and cash on hand. The preliminary allocation of the total purchase price of our 2016 acquisitions to the fair values of the assets acquired and liabilities assumed was as follows: (in millions) Cash $ Accounts receivable Inventories Property, plant and equipment Goodwill Intangible assets subject to amortization Intangible assets not subject to amortization Other current and long-term assets Total assets acquired Current and long-term debt Other current and long-term liabilities Total liabilities assumed Net assets acquired $ The acquisitions discussed in this note have been accounted for under the acquisition method of accounting and, accordingly, the respective purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of each acquisition. The accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date. The consolidated balance sheets reflect the allocation of each acquisition’s purchase price as of March 31, 2017 and December 31, 2016. The purchase price allocation for the 2016 acquisition of Alaska Steel is preliminary and is pending the completion of various pre-acquisition income tax returns. The measurement periods for purchase price allocations do not exceed 12 months from the acquisition date. |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill. | |
Goodwill | 4. Goodwill The change in the carrying amount of goodwill is as follows: (in millions) Balance at January 1, 2017 $ 1,827.4 Acquisition 1.3 Effect of foreign currency translation 0.5 Balance at March 31, 2017 $ 1,829.2 We had no accumulated impairment losses related to goodwill at March 31, 2017. |
Intangible Assets, net
Intangible Assets, net | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets, net | |
Intangible Assets, net | 5. Intangible Assets, net Intangible assets, net consisted of the following: March 31, 2017 December 31, 2016 Weighted Average Gross Gross Amortizable Carrying Accumulated Carrying Accumulated Life in Years Amount Amortization Amount Amortization (in millions) Intangible assets subject to amortization: Covenants not to compete 4.8 $ 1.1 $ (0.7) $ 1.1 $ (0.6) Customer lists/relationships 14.6 737.3 (352.3) 736.7 (338.9) Software 10.0 8.1 (8.1) 8.1 (8.1) Other 5.2 6.3 (5.6) 6.3 (5.5) 752.8 (366.7) 752.2 (353.1) Intangible assets not subject to amortization: Trade names 752.4 — 752.2 — $ 1,505.2 $ (366.7) $ 1,504.4 $ (353.1) We recognized amortization expense for intangible assets of $13.4 million and $13.6 million for the first quarter of 2017 and 2016, respectively. Foreign currency translation gains related to intangible assets, net, were $0.6 million during the first quarter of 2017. The following is a summary of estimated aggregate amortization expense for the remaining nine months of 2017 and each of the succeeding five years: (in millions) 2017 (remaining nine months) $ 37.0 2018 46.0 2019 45.9 2020 45.9 2021 42.0 2022 33.9 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2017 | |
Debt | |
Debt | 6. Debt Debt consisted of the following: March 31, December 31, 2017 2016 (in millions) Unsecured revolving credit facility due September 30, 2021 $ 652.0 $ 540.0 Unsecured term loan due from June 30, 2017 to September 30, 2021 585.0 600.0 Senior unsecured notes due April 15, 2023 500.0 500.0 Senior unsecured notes due November 15, 2036 250.0 250.0 Other notes and revolving credit facilities 51.3 55.0 Total 2,038.3 1,945.0 Less: unamortized discount and debt issuance costs (15.1) (15.8) Less: amounts due within one year and short-term borrowings (71.3) (82.5) Total long-term debt $ 1,951.9 $ 1,846.7 Unsecured Credit Facility On September 30, 2016, we entered into a $2.1 billion unsecured five-year credit agreement (“Credit Agreement”) comprised of a $1.5 billion unsecured revolving credit facility and a $600.0 million unsecured term loan, with an option to increase the revolving facility for up to $500.0 million at our request, subject to approval of the lenders and certain other customary conditions. The term loan due September 30, 2021 amortizes in quarterly installments, with an annual amortization of 5% through September 2018 and 10% thereafter until June 2021, with the balance to be paid at maturity. Interest on borrowings from the revolving credit facility and term loan at March 31, 2017 was at variable rates based on LIBOR plus 1.25% or the bank prime rate plus 0.25% and included a commitment fee at an annual rate of 0.15% on the unused portion of the revolving credit facility. The applicable margins over LIBOR rate and base rate borrowings, along with commitment fees, are subject to adjustment every quarter based on our leverage ratio, as defined in the Credit Agreement. All borrowings under the Credit Agreement may be prepaid without penalty. Weighted average interest rates on borrowings outstanding on the revolving credit facility were 2.21% and 2.16% as of March 31, 2017 and December 31, 2016, respectively. Weighted average interest rates on borrowings outstanding on the term loan were 2.23% and 2.02% as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017, we had $652.0 million of outstanding borrowings, $62.5 million of letters of credit issued and $785.5 million available for borrowing on the revolving credit facility. Senior Unsecured Notes On November 20, 2006, we entered into an indenture (the “2006 Indenture”), for the issuance of $600.0 million of unsecured debt securities. The total debt issued was comprised of two tranches, (a) $350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid on November 15, 2016 and (b) $250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036. On April 12, 2013, we entered into an indenture (the “2013 Indenture” and, together with the 2006 Indenture, the “Indentures”), for the issuance of $500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing on April 15, 2023. Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. The senior unsecured notes include provisions that require us to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest in the event of both a change in control and a downgrade of our credit rating. Other Notes and Revolving Credit Facilities Revolving credit facilities with a combined credit limit of approximately $65.6 million are in place for operations in Asia and Europe with combined outstanding balances of $40.8 million and $44.4 million as of March 31, 2017 and December 31, 2016, respectively. Various industrial revenue bonds had combined outstanding balances of $10.5 million and $10.6 million as of March 31, 2017 and December 31, 2016, respectively, and have maturities through 2027. Covenants The Credit Agreement includes customary representations, warranties and covenants, and acceleration, indemnity and events of default provisions, including, among other things, two financial covenants. The financial covenants require us to maintain an interest coverage ratio and a maximum leverage ratio. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes | |
Income Taxes | 7. Income Taxes Our effective income tax rates for the first quarter of 2017 and 2016 were 32.7% and 14.4%, respectively. During the first quarter of 2016, favorable developments occurred toward the resolution of a tax position that was previously uncertain. The re-measurement of that tax position lowered our income tax provision by $17.6 million and our effective income tax rate by 16.1% in the first quarter of 2016. Other permanent items that lowered our effective income tax rates from the federal statutory rate were not materially different during both years and relate mainly to company-owned life insurance policies, domestic production activities deductions and foreign income levels that are taxed at rates lower than the U.S. statutory rate of 35%. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2017 | |
Equity | |
Equity | 8. Equity Common Stock As of March 31, 2017, we had authorization to purchase a total of approximately 8.4 million shares under our existing share repurchase plan, or about 12% of outstanding shares. There were no share repurchases in the first quarter of 2017. Repurchased and subsequently retired shares are restored to the status of authorized but unissued shares. Common stock and additional paid-in capital activity included the following: Three Months Ended March 31, 2017 Weighted Average Shares Amount Exercise Price (in millions, except share and per share amounts) Stock-based compensation (1) $ Stock options exercised $ Total $ (1) Stock-based compensation expense reduced by $0.7 million of payments we made to tax authorities on our employees’ behalf for shares withheld related to net share settlements. Dividends On April 25, 2017, our Board of Directors declared the 2017 second quarter cash dividend of $0.45 per share. The dividend is payable on June 16, 2017 to stockholders of record as of May 26, 2017. During the first quarters of 2017 and 2016, we declared and paid a quarterly dividend of $0.45 per share and $0.40 per share, or $32.8 million and $28.9 million in total, respectively. During the first quarters of 2017 and 2016, we paid $0.9 million in dividend equivalents with respect to vested restricted stock units (“RSUs”). Stock-Based Compensation We make annual grants of long-term incentive awards to officers and key employees in the forms of service-based and performance-based RSUs that generally have 3-year vesting periods. The performance-based RSU awards are subject to both service and performance goal criteria. We also grant restricted stock to the non-employee members of the Board of Directors. The fair value of the RSUs and restricted stock awards is determined based on the closing stock price of our common stock on the grant date. A summary of the status of our unvested restricted stock grants and service-based and performance-based RSUs as of March 31, 2017 and changes during the quarter then ended is as follows: Weighted Average Grant Unvested Shares Shares Date Fair Value Unvested at January 1, 2017 985,540 $ Granted (1) 446,525 Vested (3,939) Cancelled (6,886) Unvested at March 31, 2017 $ Shares reserved for future grants (all plans) (1) 446,525 RSUs, including 169,009 performance-based RSUs. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss included the following: Pension and Accumulated Foreign Currency Postretirement Other Translation Benefit Adjustments, Comprehensive (Loss) Gain Net of Tax (Loss) Income (in millions) Balance as of January 1, 2017 $ (79.9) $ (24.8) $ (104.7) Current-period change 7.6 2.3 9.9 Balance as of March 31, 2017 $ (72.3) $ (22.5) $ (94.8) Foreign currency translation adjustments are not generally adjusted for income taxes as they relate to indefinite investments in foreign subsidiaries. Pension and postretirement benefit adjustments are net of taxes of $13.5 million and $14.9 million as of March 31, 2017 and December 31, 2016, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 9. Commitments and Contingencies Environmental Contingencies We are currently involved with a certain environmental remediation project related to activities at former manufacturing operations of Earle M. Jorgensen Company (“EMJ”), our wholly owned subsidiary, which were sold many years prior to Reliance’s acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ had maintained insurance policies during the time it owned the manufacturing operations that have covered costs incurred to date, and are expected to continue to cover the majority of the related costs. We do not expect that this obligation will have a material adverse impact on our consolidated financial position, results of operations or cash flows. Legal Matters From time to time, we are named as a defendant in legal actions. Generally, these actions arise out of our normal course of business. We are not currently a party to any pending legal proceedings other than routine litigation incidental to the business. We expect that these matters will be resolved without having a material adverse effect on our results of operations or financial condition. We maintain general liability insurance against risks arising out of our normal course of business. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share | |
Earnings Per Share | 10. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, 2017 2016 (in millions, except share and per share amounts) Numerator: Net income attributable to Reliance $ $ Denominator: Weighted average shares outstanding Dilutive effect of stock-based awards Weighted average diluted shares outstanding Earnings per share attributable to Reliance stockholders: Diluted $ $ Basic $ $ Potentially dilutive securities whose effect would have been antidilutive were not significant for the first quarters of 2017 and 2016. |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
2016 Acquisitions | |
Acquisitions | |
Schedule of allocation of the purchase price of acquisition to the fair value of the assets acquired and liabilities assumed | (in millions) Cash $ Accounts receivable Inventories Property, plant and equipment Goodwill Intangible assets subject to amortization Intangible assets not subject to amortization Other current and long-term assets Total assets acquired Current and long-term debt Other current and long-term liabilities Total liabilities assumed Net assets acquired $ |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill. | |
Schedule of changes in the carrying amount of goodwill | (in millions) Balance at January 1, 2017 $ 1,827.4 Acquisition 1.3 Effect of foreign currency translation 0.5 Balance at March 31, 2017 $ 1,829.2 |
Intangible Assets, net (Tables)
Intangible Assets, net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets, net | |
Summary of intangible assets, net | March 31, 2017 December 31, 2016 Weighted Average Gross Gross Amortizable Carrying Accumulated Carrying Accumulated Life in Years Amount Amortization Amount Amortization (in millions) Intangible assets subject to amortization: Covenants not to compete 4.8 $ 1.1 $ (0.7) $ 1.1 $ (0.6) Customer lists/relationships 14.6 737.3 (352.3) 736.7 (338.9) Software 10.0 8.1 (8.1) 8.1 (8.1) Other 5.2 6.3 (5.6) 6.3 (5.5) 752.8 (366.7) 752.2 (353.1) Intangible assets not subject to amortization: Trade names 752.4 — 752.2 — $ 1,505.2 $ (366.7) $ 1,504.4 $ (353.1) |
Summary of estimated aggregate amortization expense | The following is a summary of estimated aggregate amortization expense for the remaining nine months of 2017 and each of the succeeding five years: (in millions) 2017 (remaining nine months) $ 37.0 2018 46.0 2019 45.9 2020 45.9 2021 42.0 2022 33.9 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt | |
Summary of debt | March 31, December 31, 2017 2016 (in millions) Unsecured revolving credit facility due September 30, 2021 $ 652.0 $ 540.0 Unsecured term loan due from June 30, 2017 to September 30, 2021 585.0 600.0 Senior unsecured notes due April 15, 2023 500.0 500.0 Senior unsecured notes due November 15, 2036 250.0 250.0 Other notes and revolving credit facilities 51.3 55.0 Total 2,038.3 1,945.0 Less: unamortized discount and debt issuance costs (15.1) (15.8) Less: amounts due within one year and short-term borrowings (71.3) (82.5) Total long-term debt $ 1,951.9 $ 1,846.7 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity | |
Schedule of common stock and additional paid-in capital activity | Three Months Ended March 31, 2017 Weighted Average Shares Amount Exercise Price (in millions, except share and per share amounts) Stock-based compensation (1) $ Stock options exercised $ Total $ (1) Stock-based compensation expense reduced by $0.7 million of payments we made to tax authorities on our employees’ behalf for shares withheld related to net share settlements. |
Summary of the status of the Company's unvested restricted stock grants and restricted stock units and changes during the year | Weighted Average Grant Unvested Shares Shares Date Fair Value Unvested at January 1, 2017 985,540 $ Granted (1) 446,525 Vested (3,939) Cancelled (6,886) Unvested at March 31, 2017 $ Shares reserved for future grants (all plans) (1) 446,525 RSUs, including 169,009 performance-based RSUs. |
Schedule of accumulated other comprehensive loss | Pension and Accumulated Foreign Currency Postretirement Other Translation Benefit Adjustments, Comprehensive (Loss) Gain Net of Tax (Loss) Income (in millions) Balance as of January 1, 2017 $ (79.9) $ (24.8) $ (104.7) Current-period change 7.6 2.3 9.9 Balance as of March 31, 2017 $ (72.3) $ (22.5) $ (94.8) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share | |
Computation of basic and diluted earnings per share | Three Months Ended March 31, 2017 2016 (in millions, except share and per share amounts) Numerator: Net income attributable to Reliance $ $ Denominator: Weighted average shares outstanding Dilutive effect of stock-based awards Weighted average diluted shares outstanding Earnings per share attributable to Reliance stockholders: Diluted $ $ Basic $ $ |
Impact of Recently Issued Acc23
Impact of Recently Issued Accounting Guidance (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Impact of Recently Issued Accounting Standards—Adopted | ||
Warehouse, delivery, selling, general and administrative | $ 476.2 | $ 449.5 |
Other expense, net | $ 4.4 | 0.2 |
Impact of Recently Issued Accounting Standards—Adopted | Improvements to Employee Share-Based Payment Accounting | ||
Impact of Recently Issued Accounting Standards—Adopted | ||
Warehouse, delivery, selling, general and administrative | (1.3) | |
Other expense, net | $ 1.3 |
Acquisitions (Details)
Acquisitions (Details) $ in Millions | 3 Months Ended | |||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | Jan. 01, 2016location | |
Acquisitions | ||||
Net sales | $ 2,419.3 | $ 2,162.7 | ||
Allocation of the total purchase price of the acquisitions to the fair value of the assets acquired and liabilities assumed | ||||
Goodwill | 1,829.2 | $ 1,827.4 | ||
2016 Acquisitions | ||||
Allocation of the total purchase price of the acquisitions to the fair value of the assets acquired and liabilities assumed | ||||
Cash | 1.5 | |||
Accounts receivable | 14.1 | |||
Inventories | 66.6 | |||
Property, plant and equipment | 62.2 | |||
Goodwill | 104.7 | |||
Intangible assets subject to amortization | 77.1 | |||
Intangible assets not subject to amortization | 38.2 | |||
Other current and long-term assets | 0.5 | |||
Total assets acquired | 364.9 | |||
Current and long-term debt | 6.1 | |||
Other current and long-term liabilities | 7.3 | |||
Total liabilities assumed | 13.4 | |||
Net assets acquired | 351.5 | |||
Alaska Steel | ||||
Acquisitions | ||||
Net sales | 3.8 | |||
Best Manufacturing | ||||
Acquisitions | ||||
Net sales | 5.6 | |||
Tubular Steel | ||||
Acquisitions | ||||
Number of locations of the acquiree entity | location | 6 | |||
Net sales | $ 34.1 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Change in the carrying amount of goodwill | |
Balance at the beginning of the period | $ 1,827.4 |
Acquisition | 1.3 |
Effect of foreign currency translation | 0.5 |
Balance at the end of the period | 1,829.2 |
Accumulated impairment losses | 0 |
2016 Acquisitions | |
Change in the carrying amount of goodwill | |
Balance at the end of the period | $ 104.7 |
Intangible Assets, net (Details
Intangible Assets, net (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Intangible assets subject to amortization: | |||
Intangible assets subject to amortization, Gross Carrying Amount | $ 752.8 | $ 752.2 | |
Intangible assets subject to amortization, Accumulated Amortization | (366.7) | (353.1) | |
Intangible assets | |||
Intangible assets, Gross Carrying Amount | 1,505.2 | 1,504.4 | |
Amortization expense for intangible assets | 13.4 | $ 13.6 | |
Changes in intangible assets due to foreign currency translation gains | 0.6 | ||
Summary of estimated aggregate amortization expense for the remaining of 2017 and each of the succeeding five years | |||
2017 (remaining nine months) | 37 | ||
2,018 | 46 | ||
2,019 | 45.9 | ||
2,020 | 45.9 | ||
2,021 | 42 | ||
2,022 | 33.9 | ||
Trade names | |||
Intangible assets not subject to amortization: | |||
Intangible assets not subject to amortization, Gross Carrying Amount | $ 752.4 | 752.2 | |
Covenants not to compete | |||
Intangible assets subject to amortization: | |||
Weighted average amortizable life in years | 4 years 9 months 18 days | ||
Intangible assets subject to amortization, Gross Carrying Amount | $ 1.1 | 1.1 | |
Intangible assets subject to amortization, Accumulated Amortization | $ (0.7) | (0.6) | |
Customer lists/relationships | |||
Intangible assets subject to amortization: | |||
Weighted average amortizable life in years | 14 years 7 months 6 days | ||
Intangible assets subject to amortization, Gross Carrying Amount | $ 737.3 | 736.7 | |
Intangible assets subject to amortization, Accumulated Amortization | $ (352.3) | (338.9) | |
Software | |||
Intangible assets subject to amortization: | |||
Weighted average amortizable life in years | 10 years | ||
Intangible assets subject to amortization, Gross Carrying Amount | $ 8.1 | 8.1 | |
Intangible assets subject to amortization, Accumulated Amortization | $ (8.1) | (8.1) | |
Other | |||
Intangible assets subject to amortization: | |||
Weighted average amortizable life in years | 5 years 2 months 12 days | ||
Intangible assets subject to amortization, Gross Carrying Amount | $ 6.3 | 6.3 | |
Intangible assets subject to amortization, Accumulated Amortization | $ (5.6) | $ (5.5) |
Debt - Summary (Details)
Debt - Summary (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Nov. 15, 2016 |
Debt | |||
Total | $ 2,038.3 | $ 1,945 | |
Less: unamortized discount and debt issuance costs | (15.1) | (15.8) | |
Less: amounts due within one year and short-term borrowings | (71.3) | (82.5) | |
Total long-term debt | 1,951.9 | 1,846.7 | |
Unsecured revolving credit facility due September 30, 2021 | |||
Debt | |||
Total | 652 | 540 | |
Unsecured term loan due from June 30, 2017 to September 30, 2021 | |||
Debt | |||
Total | 585 | 600 | |
Senior unsecured notes due November 15, 2016 | |||
Debt | |||
Total | $ 0 | ||
Senior unsecured notes due April 15, 2023 | |||
Debt | |||
Total | 500 | 500 | |
Senior unsecured notes due November 15, 2036 | |||
Debt | |||
Total | 250 | 250 | |
Other notes and revolving credit facilities | |||
Debt | |||
Total | $ 51.3 | $ 55 |
Debt - Other (Details)
Debt - Other (Details) $ in Millions | Apr. 12, 2013USD ($) | Nov. 20, 2006USD ($)item | Sep. 30, 2016USD ($) | Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | Nov. 15, 2016USD ($) |
Debt | ||||||
Outstanding Debt | $ 2,038.3 | $ 1,945 | ||||
Number of financial covenants | item | 2 | |||||
Credit Agreement | ||||||
Debt | ||||||
Maximum borrowing capacity | $ 2,100 | |||||
Debt term | 5 years | |||||
Unsecured revolving credit facility due September 30, 2021 | ||||||
Debt | ||||||
Maximum borrowing capacity | $ 1,500 | |||||
Outstanding Debt | $ 652 | $ 540 | ||||
Additional maximum borrowing capacity under the credit agreement subject to approval of the lenders and certain other conditions | 500 | |||||
Commitment fee on unused portion of revolving credit facility (as a percent) | 0.15% | |||||
Weighted average fixed interest rate (as a percent) | 2.21% | 2.16% | ||||
Letters of credit outstanding | $ 62.5 | |||||
Available on the revolving credit facility | $ 785.5 | |||||
Unsecured revolving credit facility due September 30, 2021 | LIBOR | ||||||
Debt | ||||||
Variable interest rate | LIBOR | |||||
Interest rate added to base (as a percent) | 1.25% | |||||
Unsecured revolving credit facility due September 30, 2021 | Bank prime rate | ||||||
Debt | ||||||
Variable interest rate | bank prime | |||||
Interest rate added to base (as a percent) | 0.25% | |||||
Unsecured term loan due from June 30, 2017 to September 30, 2021 | ||||||
Debt | ||||||
Outstanding Debt | $ 585 | $ 600 | ||||
Debt amount | $ 600 | |||||
Annual amortization of term loan through September 2018 (as a percent) | 5.00% | |||||
Annual amortization of term loan thereafter until June 2021 (as a percent) | 10.00% | |||||
Weighted average fixed interest rate (as a percent) | 2.23% | 2.02% | ||||
Unsecured term loan due from June 30, 2017 to September 30, 2021 | LIBOR | ||||||
Debt | ||||||
Variable interest rate | LIBOR | |||||
Interest rate added to base (as a percent) | 1.25% | |||||
Unsecured term loan due from June 30, 2017 to September 30, 2021 | Bank prime rate | ||||||
Debt | ||||||
Variable interest rate | bank prime rate | |||||
Interest rate added to base (as a percent) | 0.25% | |||||
Senior Unsecured Notes | ||||||
Debt | ||||||
Percentage of principal amount at which the notes may be required to be repurchased in event of a change of control and a downgrade of the entity's credit rating | 101.00% | |||||
Senior unsecured notes issued November 20, 2006 | ||||||
Debt | ||||||
Issuance of debt | $ 600 | |||||
Number of tranches comprising the debt issuance | item | 2 | |||||
Senior unsecured notes due November 15, 2016 | ||||||
Debt | ||||||
Outstanding Debt | $ 0 | |||||
Interest rate (as a percent) | 6.20% | |||||
Lump sum payment on maturity | $ 350 | |||||
Issuance of debt | $ 350 | |||||
Senior unsecured notes due November 15, 2036 | ||||||
Debt | ||||||
Outstanding Debt | $ 250 | $ 250 | ||||
Interest rate (as a percent) | 6.85% | |||||
Issuance of debt | $ 250 | |||||
Senior unsecured notes due April 15, 2023 | ||||||
Debt | ||||||
Outstanding Debt | 500 | 500 | ||||
Interest rate (as a percent) | 4.50% | |||||
Issuance of debt | $ 500 | |||||
Other separate revolving credit facilities | ||||||
Debt | ||||||
Maximum borrowing capacity | 65.6 | |||||
Outstanding Debt | 40.8 | 44.4 | ||||
IRB | ||||||
Debt | ||||||
Outstanding Debt | $ 10.5 | $ 10.6 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Taxes | ||
Effective tax rate (as a percent) | 32.70% | 14.40% |
Decrease in tax provision due to re-measurement of tax position | $ 17.6 | |
Decrease in effective tax rate due to re-measurement of tax position (as a percent) | 16.10% | |
Income tax at U.S. federal statutory tax rate (as a percent) | 35.00% | 35.00% |
Equity - Share Repurchases, Div
Equity - Share Repurchases, Dividends, Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 25, 2017 | Mar. 31, 2017 | Mar. 31, 2016 |
Share Repurchase Plan | |||
Number of shares authorized by the Board of Directors to be repurchased under share repurchase plan | 8,400,000 | ||
Number of shares authorized by the Board of Directors to be repurchased under share repurchase plan, expressed as a percentage of outstanding shares (as a percent) | 12.00% | ||
Number of shares repurchased under stock repurchase plan | 0 | ||
Dividends | |||
Common stock quarterly dividend per share (in dollars per share) | $ 0.45 | ||
Common stock dividend quarterly declared and paid per share (in dollars per share) | $ 0.45 | $ 0.40 | |
Dividends paid | $ 32.8 | $ 28.9 | |
Changes in unvested restricted stock grants and RSUs | |||
Unvested at the beginning of the period (in shares) | 985,540 | ||
Granted (in shares) | 446,525 | ||
Vested (in shares) | (3,939) | ||
Cancelled (in shares) | (6,886) | ||
Unvested at the end of the period (in shares) | 1,421,240 | ||
Shares reserved for future grants (all plans) | 1,635,660 | ||
Weighted Average Grant Date Fair Value | |||
Unvested at the beginning of the period (in dollars per share) | $ 64.34 | ||
Granted (in dollars per shares) | 79.60 | ||
Vested (in dollars per shares) | 61.45 | ||
Cancelled (in dollars per shares) | 64.31 | ||
Unvested at the end of the period (in dollars per shares) | $ 69.15 | ||
Common Stock Including Additional Paid in Capital | |||
Common Stock and Additional Paid-In (in Shares) | |||
Stock-based compensation ( in shares) | 141,508 | ||
Stock options exercised (in shares) | 55,305 | ||
Total ( in shares) | 196,813 | ||
Payments made to tax authorities on employees' behalf | $ 0.7 | ||
Common Stock and Additional Paid-In (in Amount) | |||
Stock-based compensation | 4.8 | ||
Stock options exercised | 2.8 | ||
Total | $ 7.6 | ||
Weighted Average Exercise/(Purchase) Price | |||
Stock options exercised (in dollars per share) | $ 49.82 | ||
RSU's | |||
Dividends | |||
Dividend equivalents | $ 0.9 | $ 0.9 | |
Stock-Based Compensation | |||
Vesting period (in years) | 3 years | ||
Changes in unvested restricted stock grants and RSUs | |||
Granted (in shares) | 446,525 | ||
RSU's | Performance-based | |||
Changes in unvested restricted stock grants and RSUs | |||
Granted (in shares) | 169,009 |
Equity - Accumulated Other Comp
Equity - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Schedule of accumulated other comprehensive loss | ||
Balance at the beginning of the period | $ (104.7) | |
Current-period change | 9.9 | |
Balance as of March 31, 2017 | (94.8) | |
Deferred tax assets in accumulated other comprehensive loss, pension liabilities | 13.5 | $ 14.9 |
Foreign Currency Transaction (Loss) Gain | ||
Schedule of accumulated other comprehensive loss | ||
Balance at the beginning of the period | (79.9) | |
Current-period change | 7.6 | |
Balance as of March 31, 2017 | (72.3) | |
Pension and Postretirement Benefit Adjustments, Net of Tax | ||
Schedule of accumulated other comprehensive loss | ||
Balance at the beginning of the period | (24.8) | |
Current-period change | 2.3 | |
Balance as of March 31, 2017 | $ (22.5) |
Commitments and Contingencies -
Commitments and Contingencies - (Details) | Mar. 31, 2017 |
Environmental Contingencies | |
Ownership interest in domestic subsidiaries (as a percent) | 100.00% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator: | ||
Net income attributable to Reliance | $ 111.7 | $ 92.2 |
Denominator: | ||
Weighted average shares outstanding (in shares) | 72,841,878 | 71,929,821 |
Dilutive effect of stock-based awards (in shares) | 573,487 | 778,528 |
Weighted average diluted shares outstanding (in shares) | 73,415,365 | 72,708,349 |
Earnings per share attributable to Reliance stockholders - diluted (in dollars per share) | $ 1.52 | $ 1.27 |
Earnings per share attributable to Reliance stockholders - basic (in dollars per share) | $ 1.53 | $ 1.28 |