1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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.)
2550 East 25th Street
Los Angeles, California 90058
(213) 582-2272
---------------------------------------------------------------
(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 [X] No [ ] .
As of July 31, 1996, 10,314,212 shares of the registrant's common
stock, no par value, were outstanding.
2
INDEX
PART I -- FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II -- OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3
PART I -- FINANCIAL INFORMATION
RELIANCE STEEL & ALUMINUM CO.
Consolidated Balance Sheets
(In thousands except share amounts)
JUNE 30 DECEMBER 31
1996 1995
-------------------------------------------
(unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 6,197 $ 18,012
Accounts receivable, less allowance for doubtful
accounts of $3,182 at June 1996 and $3,253 at
December 1995 73,506 68,874
Inventories 76,569 71,976
Prepaid expenses and other assets 4,257 5,550
Deferred income taxes 1,163 2,525
-------------------------------------------
Total current assets 161,692 166,937
Property, plant and equipment, at cost:
Land 16,683 14,873
Buildings 49,161 36,688
Machinery and equipment 71,703 67,802
Allowances for depreciation (53,262) (53,077)
-------------------------------------------
84,285 66,286
Investment in 50%-owned company 27,875 25,561
Purchase price in excess of cost 10,880 1,689
-------------------------------------------
Total assets $284,732 $260,473
===========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 52,384 $ 52,878
Wages and related accruals 3,641 5,292
Income taxes payable 905 5,136
Current maturities of long-term debt 2,900 2,900
-------------------------------------------
Total current liabilities 59,830 66,206
Long-term debt (Note 3) 45,950 30,350
Shareholders' equity (Note 2):
Preferred stock, no par value:
Authorized shares - 5,000,000
None issued or outstanding --- ---
Common stock, no par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 10,314,212 at June 1996 and
10,272,307 at December 1995, stated capital 61,001 60,344
Retained earnings 117,951 103,573
-------------------------------------------
Total shareholders' equity 178,952 163,917
-------------------------------------------
Total liabilities and shareholders' equity $284,732 $260,473
===========================================
See Notes to Consolidated Financial Statements.
NOTE: The Balance Sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
1.
4
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Income (Unaudited)
(In thousands except share and per share amounts)
THREE MONTHS ENDED
JUNE 30
1996 1995
-------------------------------------------
Net sales $164,628 $140,753
Other income 1,366 569
-------------------------------------------
165,994 141,322
Costs and expenses:
Cost of sales 125,506 109,512
Warehouse, delivery, selling, administrative
and general 25,612 21,027
Depreciation and amortization 2,109 1,258
Interest 879 217
-------------------------------------------
154,106 132,014
Income before equity in earnings of 50%-owned company and joint
ventures and income taxes 11,888 9,308
Equity in earnings of 50%-owned company and joint ventures 1,265 376
-------------------------------------------
Income before income taxes 13,153 9,684
Income taxes:
Federal 4,164 3,162
State 1,223 901
-------------------------------------------
5,387 4,063
-------------------------------------------
Net income $ 7,766 $ 5,621
===========================================
Earnings per share $ .74 $ .55
===========================================
Weighted average shares outstanding 10,469,000 10,296,000
===========================================
2.
5
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Income (Unaudited)
(In thousands except share and per share amounts)
SIX MONTHS ENDED
JUNE 30
1996 1995
-------------------------------------------
Net sales $322,262 $277,255
Other income 3,414 1,200
-------------------------------------------
325,676 278,455
Costs and expenses:
Cost of sales 246,091 215,210
Warehouse, delivery, selling, administrative
and general 50,589 42,037
Depreciation and amortization 3,709 2,489
Interest 1,308 473
-------------------------------------------
301,697 260,209
Income before equity in earnings of 50%-owned company and joint
ventures and income taxes 23,979 18,246
Equity in earnings of 50%-owned company and joint ventures 2,480 1,028
-------------------------------------------
Income before income taxes 26,459 19,274
Income taxes:
Federal 8,388 6,293
State 2,461 1,793
-------------------------------------------
10,849 8,086
-------------------------------------------
Net income $ 15,610 $ 11,188
===========================================
Earnings per share $ 1.49 $ 1.07
===========================================
Weighted average shares outstanding 10,454,000 10,458,000
===========================================
3.
6
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
SIX MONTHS ENDED
JUNE 30
1996 1995
----------------------------------------
OPERATING ACTIVITIES
Net income $15,610 $11,188
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,709 2,489
(Gain) loss on sales of machinery and equipment 101 (2)
Net gain on sale of real estate (1,519) ---
Increase in LIFO inventory reserve --- 5,287
Equity in earnings of 50%-owned company and joint ventures (2,480) (1,028)
Changes in operating assets and liabilities:
Accounts receivable 101 (10,507)
Inventories 9,725 (11,481)
Prepaid expenses and other assets 4,522 1,228
Income taxes (4,231) 349
Accounts payable and accrued
expenses (4,367) 12,155
----------------------------------------
Net cash provided by operating activities 21,171 9,678
----------------------------------------
INVESTMENT ACTIVITIES
Purchases of property, plant and equipment (10,693) (4,708)
Proceeds from sales of property and equipment 106 70
Acquisition of CCC Steel, Inc. (24,974) ---
Dividends received from 50%-owned company 165 ---
----------------------------------------
Net cash used in investing activities (35,396) (4,638)
----------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 33,000 ---
Payments on long-term debt (30,018) (1,731)
Dividends paid (1,231) (1,042)
Issuance of common stock 657 312
Repurchase of common stock --- (7,628)
----------------------------------------
Net cash provided by (used in) financing activities 2,408 (10,089)
----------------------------------------
Decrease in cash (11,815) (5,049)
Cash and cash equivalents at beginning of period 18,012 8,343
----------------------------------------
Cash and cash equivalents at end of period $ 6,197 $ 3,294
========================================
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Interest paid during the period $ 1,080 $ 399
Income taxes paid during the period 14,730 7,757
4.
7
RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 month and six month periods
ended June 30, 1996 are not necessarily indicative of the results for the full
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ended
December 31, 1995, included in the Reliance Steel & Aluminum Co. Form 10-K.
2. SHAREHOLDERS' EQUITY
In December 1994, the Board of Directors approved a Stock Repurchase Plan,
authorizing the Company to purchase up to 500,000 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.
In February 1995, the Board of Directors authorized the Company to purchase up
to an additional 500,000 shares. As of June 30, 1996, the Company had
repurchased a total of 651,800 shares of its Common Stock under the Stock
Repurchase Plan at an average cost per share of $12.18. No shares were
repurchased by the Company during the six month period ended June 30, 1996.
In March 1996, 16,573 shares of Common Stock were issued to officers of the
Company under the 1995 Key Man Incentive Plan.
In January 1996, non-qualified stock options to purchase 221,500 shares of the
Company's Common Stock at $18.25 per share were granted at the fair market
value at the date of grant under the Incentive and Non-Qualified Stock Option
Plan. The options become exercisable on a cumulative basis at the rate of 25%
per year, commencing one year from the date of grant and expire five years from
the date of grant.
Earnings per share are computed using the weighted average number of shares of
common stock and common stock equivalents attributable to stock options, which
are not material, outstanding during each period. Common stock equivalents
were calculated using the treasury stock method.
5.
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RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
June 30 December 31
1996 1995
------------------------------------------
(unaudited) (audited)
Revolving line of credit ($100,000 limit), due
July 31, 1999, interest at variable rates, payable monthly $42,000 $25,000
Variable Rate Demand Industrial Development
Revenue Bonds, Series 1989 A, due July 1, 2014
with interest payable quarterly 3,650 3,650
9% Senior Notes, due March 1, 1997, semiannual
payments of $1,400, with interest payable quarterly 3,200 4,600
--------------------------------------------
48,850 33,250
Less current portion (2,900) (2,900)
-----------------------------------------
$45,950 $30,350
=========================================
The Company's long-term loan agreements include certain restrictions on the
amount of corporate borrowings, leasehold obligations, investments, cash
dividends, capital expenditures, and acquisition of the Company's Common Stock,
among other things. In addition, the agreements require the maintenance of
certain financial ratios. In June 1996, the Company's borrowing limit under
the revolving line of credit was increased from $65 million to $100 million,
and the subsidiaries of the Company issued guaranties under the line of credit.
4. ACQUISITION
On April 3, 1996, the Company purchased 100% of the outstanding capital stock
of CCC Steel, Inc. for approximately $25 million in cash. CCC Steel, Inc., was
a privately-held, carbon steel service center, which has facilities in Los
Angeles and Salt Lake City. The pre-tax income and assets of CCC Steel
represented less than 10% of the pre-tax income and assets of the Company at
the date of acquisition. This acquisition was funded by borrowings under the
Company's revolving line of credit.
On January 9, 1996, the Company purchased certain assets of a metals service
center in Albuquerque, New Mexico. These assets were combined with the
Company's existing non-ferrous metal center operations in Albuquerque. This
transaction had no material effect on the Company's results of operations or
financial position.
6.
9
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 the Company's
metals service centers and Valex Corp. for the three month and six month
periods ended June 30, 1996 and June 30, 1995 (dollars are shown in thousands
and certain amounts may not calculate due to rounding):
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------- --------------------------------
1996 1995 1996 1995
-------------------------------------- --------------------------------
% of % of % of % of
$ Net Sales $ Net Sales $ Net Sales $ Net Sales
--------------------------------------------------------------------------------
NET SALES:
Metals service centers . . $150,896 91.7% $131,693 93.6% $291,738 90.5% $259,749 93.7%
Valex Corp. . . . . . . . . 13,732 8.3 9,060 6.4 30,524 9.5 17,506 6.3
-------------------------------------------------------------------------------
Total sales . . . . . . . 164,628 100.0 140,753 100.0 322,262 100.0 277,255 100.0
GROSS PROFIT:
Metals service centers . . 34,128 20.7 28,426 20.2 64,208 19.9 55,933 20.2
Valex Corp. . . . . . . . . 4,994 3.0 2,815 2.0 11,963 3.7 6,112 2.2
-------------------------------------------------------------------------------
Total gross profit . . . 39,122 23.8 31,241 22.2 76,171 23.6 62,045 22.4
OPERATING EXPENSES:
Metals service centers . . 24,778 15.1 20,539 14.6 48,432 15.0 41,178 14.9
Valex Corp. . . . . . . . . 2,943 1.8 1,745 1.2 5,866 1.8 3,348 1.2
-------------------------------------------------------------------------------
Total operating expense . 27,721 16.8 22,284 15.8 54,298 16.8 44,526 16.1
INCOME FROM OPERATIONS:
Metals service centers. . . 9,350 5.7 7,887 5.6 15,776 4.9 14,755 5.3
Valex Corp. . . . . . . . . 2,051 1.2 1,070 .8 6,097 1.9 2,764 1.0
-------------------------------------------------------------------------------
Total operating income. . $11,401 6.9% $ 8,957 6.4% $ 21,873 6.8% $ 17,519 6.3%
===============================================================================
FIFO INCOME FROM OPERATIONS . . $10,548 6.4% $11,653 8.3% $ 21,873 6.8% $ 22,806 8.2%
===============================================================================
Inventories for the Company's metals service centers have been stated on the
last-in, first-out ("LIFO") method, which is not in excess of market. The
Company uses the LIFO method of inventory valuation because it results in a
better matching of costs and revenues. Under the LIFO method, the effect of
suppliers' price increases or decreases is reflected directly in the cost of
goods sold. During periods of increasing prices, LIFO accounting will cause
reported income to be lower than would otherwise result from the use of the
first-in, first-out ("FIFO") method of inventory valuation. The table above
and the discussions which follow present certain information as if the Company
used the FIFO method. This information is for supplementary purposes only in
order to facilitate a comparison of the Company's results of operations with
those of other similar companies who use the FIFO method. Inventories for
Valex Corp. have been stated on the FIFO method, which is not in excess of
market.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS)
Consolidated net sales for the three month period ended June 30, 1996 increased
$23,875, or 17.0%, compared to the same period of 1995. These amounts include
net sales of Valex, which increased $4,672, or 51.6%, in the 1996 period,
compared to the 1995 period. Valex's increase over the first quarter of 1995
is due to an increase in the construction activities of the semiconductor
manufacturing industry. The increase in metals service centers' net sales of
$19,203, or 14.6%, reflects an increase of 50.6% in tons sold which was offset
by a decrease in the average sales price per ton of 23.8% for the three month
period ended June 30, 1996 compared to the corresponding period of 1995. The
tons increased and average selling prices decreased for the 1996 period due
mainly to the change in product mix from the 1995 period. The change in
product mix occurred primarily due to the inclusion in 1996 of the net sales of
CCC Steel, Inc., acquired on April 3, 1996, and of the Los Angeles service
center which Reliance received upon the dissolution of the Feralloy Reliance
Company, L.P. ("FRLP") joint venture on September 30, 1995. These facilities
sell a significant volume of carbon steel products, which generally have lower
prices than other products sold by the Company, such as aluminum and stainless
steel. Excluding the sales from CCC Steel and the Los Angeles service center
results in a decrease in tons sold of 0.7% and a decrease in the average
selling price per ton of 1.1% for the 1996 period compared to the 1995 period.
The average selling price per ton has decreased in response to the softening of
costs of certain metals, and changes in the product mix.
7.
10
Total gross profit increased $7,881, or 25.2%, in the three month period ended
June 30, 1996 compared to the corresponding period of 1995. Expressed as a
percentage of sales, gross profit increased from 22.2% in 1995 to 23.8% in
1996. The increase was due primarily to the gross profit contributed by Valex.
On a FIFO basis, gross profit for the metals service centers decreased to 22.1%
of sales for the three month period ended June 30, 1996, from 23.6% for the
corresponding period of 1995. This decrease was mainly due to the inclusion of
the sales of CCC Steel and the Los Angeles service center, whose products
generally have lower margins overall; and the change in pricing of aluminum and
stainless steel products, which had a restricted supply in the 1995 period but
not in the 1996 period, resulting in a more competitive sales market in 1996.
However, the FIFO gross profit margin for the metals service centers, excluding
CCC Steel, improved slightly in the second quarter of 1996 as compared to first
quarter of 1996. The decrease in the LIFO reserve of $853 during the three
month period ended June 30, 1996 was caused by a softening of the costs of the
Company's raw materials during the 1996 period. Valex's gross profit of $4,994
for the 1996 period increased 77.4% from the same period in 1995. This
increase was due to the increase in Valex sales volume experienced in 1996.
Valex's gross profit was 36.4% of sales for the three month period ended June
30, 1996, compared to 31.1% for the same period in 1995. The increase in gross
profit in 1996 as compared to 1995 was due primarily to increased sales and
production efficiencies. Valex's gross profit percentage declined from 41.5%
in the first quarter of 1996 due to a more competitive sales market in the
second quarter of 1996 caused by a general slowdown in the semiconductor
manufacturing industry.
Warehouse, delivery, selling and general and administrative ("G&A") expenses
increased $4,585, or 21.8%, in the three months ended June 30, 1996 compared to
the corresponding period of 1995 and amounted to 15.6% and 14.9% of sales,
respectively. The dollar increase in expenses reflects the increase in sales
volume for the 1996 period, which includes the sales and related expenses of
CCC Steel and the Los Angeles facility received upon the dissolution of FRLP.
Interest expense increased by $662 due to an increase in the average debt
outstanding during the three months ended June 30, 1996 as compared to the
corresponding period of 1995. The increased debt outstanding related primarily
to the borrowings for the acquisition of CCC Steel in April 1996, and
borrowings made in the third quarter of 1995 to fund a portion of the
acquisition of American Steel, L.L.C. and to pay off debt related to the Los
Angeles operations received upon the dissolution of the FRLP joint venture.
Equity in earnings of a 50%-owned company and joint ventures increased $889 in
the three months ended June 30, 1996, as compared to the same period in 1995.
This increase is due to the acquisition of a 50% interest in American Steel in
July 1995, and the dissolution of the FRLP joint venture in September 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS)
Consolidated net sales increased $45,007, or 16.2%, compared to the first six
months of 1995. These amounts include net sales of Valex, which increased
$13,018, or 74.4%, due to the increased construction activities of the
semiconductor manufacturing industry in 1996. The rate of increase in Valex's
net sales declined from 98.8% in the first quarter of 1996 compared to 51.6% in
the second quarer of 1996 as a result of a general slowing in construction
activity in the second quarter of 1996, which is expected to last through the
third quarter of 1996. The increase in metals service centers' net sales of
$31,989, or 12.3%, reflects an increase of 34.6% in tons sold offset by a
decrease in the average sales price per ton of 15.5% for the first six months
of 1996 compared to the corresponding period of 1995. The tons increased and
the average selling prices decreased for the 1996 period due mainly to the
change in product mix from the first six months of 1995. The change in product
mix occurred mainly due to the inclusion in 1996 of the net sales of CCC Steel,
acquired by the Company in April 1996, and the net sales of the Los Angeles
service center received upon the dissolution of the FRLP joint venture on
September 30, 1995. These facilities sell a significant volume of carbon steel
products, which generally have lower prices than other products sold by the
Company, such as aluminum and stainless steel. If the sales of CCC Steel and
the Los Angeles service center were excluded from the calculation, this would
result in a decrease in tons sold of 0.8% and an increase in the average
selling price per ton of 0.4% for the 1996 period compared to the 1995 period
for the metals service centers.
Included in other income for the first six months of 1996 is a net gain of
$1,519 realized on the sale of the property at the existing Bralco Metals
facility near Los Angeles. Land was purchased in 1995 and construction is in
progress to relocate the Bralco Metals facility, which is expected to occur
during the fourth quarter of 1996.
8.
11
Total gross profit increased $14,126, or 22.8%, in the first six months of 1996
compared to the first six months of 1995. Expressed as a percentage of sales,
gross profit increased from 22.4% in 1995 to 23.6% in 1996. The increase was
primarily due to LIFO inventory accounting and the gross profit contributed by
Valex. On a FIFO basis, gross profit for the metals service centers declined
to 22.0% of sales for the first six months of 1996, compared to 23.6% for the
first six months of 1995; however, the gross profit margin, excluding CCC
Steel, improved slightly in the second quarter of 1996 as compared to the first
quarter of 1996. The LIFO reserve remained constant during the first six
months of 1996, due to a softening of the costs of the Company's raw materials
during the second quarter of 1996. Valex's gross profit increased by $5,851,
or 95.7%, during the first six months of 1996, as compared to the same period
of 1995 and was 39.2% of sales for the first six months of 1996, compared to
34.9% for the same period in 1995. These increases were due to the increase in
Valex sales volume experienced in 1996 and production efficiency gains realized
from capital improvements.
Warehouse, delivery, selling and general and administrative ("G&A") expenses
increased $8,552, or 20.3%, in the first six months of 1996 compared to the
corresponding period of 1995 and amounted to 15.7% and 15.2% of sales,
respectively. The dollar increase in expenses reflects the increase in sales
volume for the 1996 period, which includes the sales and related expenses of
CCC Steel and the Los Angeles facility received upon the dissolution of FRLP.
Interest expense increased by $835 due to an increase in the average debt
outstanding during the first six months of 1996 as compared to the
corresponding period of 1995. This increase was due primarily to borrowings
made for the acquisition of CCC Steel in April 1996, and for borrowings made in
the third quarter of 1995 to fund a portion of the acquisition of American
Steel and to pay off debt related to the Los Angeles operations received upon
the dissolution of the FRLP joint venture.
Equity in earnings of a 50%-owned company and joint ventures increased $1,452
in the first six months of 1996 as compared to the corresponding period of
1995, due to the acquisition of a 50% interest in American Steel in July 1995,
and the dissolution of the FRLP joint venture in September 1995. The FRLP
joint venture was not performing at desired levels for the Company's return on
investment.
Earnings per share for the six month period ended June 30,1996 of $1.49
includes $.09 per share attributable to the sale of the Bralco Metals property.
LIQUIDITY AND CAPITAL RESOURCES (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE
AND PER SHARE AMOUNTS)
At June 30, 1996, working capital amounted to $101,862 compared to $100,731 at
December 31, 1995. The Company's capital requirements are primarily for
working capital, acquisitions and capital expenditures for continued
improvements in plant capacities and material handling and processing
equipment.
The Company's primary sources of liquidity are from internally generated funds
from operations and the Company's revolving credit facility. In June 1996, the
Company's borrowing limit under the revolving line of credit was increased from
$65,000 to $100,000, and the subsidiaries of the Company issued guaranties
under the line of credit.
The increase in cash provided by operations of $11,493 during the six month
period ended June 30, 1996 compared to the corresponding 1995 period was due
primarily to reductions in inventory and accounts receivable, and an increase
in net income.
In December 1994, the Company adopted a Stock Repurchase Plan, authorizing the
Company to purchase up to 500,000 shares of its outstanding Common Stock. In
February 1995, the Company authorized the purchase of up to an additional
500,000 shares. As of June 30, 1996, the Company had repurchased a total of
651,800 shares of its Common Stock, at an average purchase price of $12.18 per
share, all of which are being treated as authorized but unissued shares. The
Company did not repurchase any shares of its Common Stock during the six months
ended June 30, 1996. The Company believes such purchases enhance shareholder
value and reflect its confidence in the long-term growth potential of the
Company.
Capital expenditures were $10,693 for the six months ended June 30, 1996. The
Company purchased CCC Steel for approximately $25,000. The Company had no
material commitments for capital expenditures as of June 30, 1996. The
acquisition of CCC Steel in April 1996, including the repayment of certain of
CCC Steel's debt, was funded by borrowings under the Company's revolving line
of credit. The Company anticipates that funds generated from operations and
funds
9.
12
available under its existing bank line of credit will be more than sufficient
to meet its working capital needs in the foreseeable future.
SEASONALITY
The Company recognizes that some of its customers may be in seasonal
businesses, especially customers in the construction industry. As a result of
the Company's geographic, product and customer diversity, however, the
Company's operations have not shown any material seasonal trends, although the
months of November and December traditionally have been less profitable because
of a reduced number of working days on which the Company is able to ship its
products and seasonal closures for some of its customers. There can be no
assurance that period-to- period fluctuations will not occur. Results of any
one or more quarters are therefore not necessarily indicative of annual
results.
ACQUISITION
On April 3, 1996, the Company purchased 100% of the outstanding capital stock
of CCC Steel, Inc., a privately-held, carbon steel service center with
facilities in Los Angeles and Salt Lake City, for approximately $25 million in
cash. CCC Steel is one of the largest structural steel distribution companies
in the Western U.S.
10.
13
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) 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.
(a) The annual meeting of Reliance Steel & Aluminum Co. shareholders was
held on May 24, 1995.
(b) [Need not be answered because (1) proxies for the meeting were
solicited pursuant to Regulation 14 under the Securities Exchange Act
of 1934, (2) there was no solicitation in opposition to management's
nominees as listed in the proxy statement, and (3) all such nominees
were elected.]
(c) The following is a brief description of matters voted upon at the
meeting:
Four Directors were elected at the annual meeting. Joe D. Crider:
8,862,791 shares were voted for election and 66,836 shares were
withheld. William T. Gimbel: 8,864,991 shares were voted for
election and 64,636 shares were withheld. David H. Hannah:
8,824,151 shares were voted for election and 105,476 shares were
withheld. William I. Rumer: 8,927,291 shares were voted for election
and 2,336 shares were withheld.
The Board of Directors selected Ernst & Young as independent auditors
to audit the financial statements of the Company and its subsidiaries
for 1996, subject to ratification by the shareholders. The selection
was approved: 8,924,259 shares were voted for the proposal, 100
shares were voted against it, and 5,268 shares abstained.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
First Amended and Restated Business Loan Agreement dated June 26,
1996 between the Company and Bank of America.
(b) Form 8-K
The Company filed a Form 8-K, dated April 3,1996, reporting the
acquisition of CCC Steel, Inc.
11.
14
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: August 6, 1996 By: /s/ David H. Hannah
-------------------------------
David H. Hannah
President
By: /s/ Steven S. Weis
-------------------------------
Steven S. Weis
Chief Financial Officer
12.