Reliance Steel & Aluminum Co. Reports Fourth Quarter And Full Year 2015 Financial Results

LOS ANGELES, Feb. 18, 2016

Fourth Quarter 2015 Financial Highlights

• Sales were $2.03 billion, down 21.4% from $2.58 billion in the fourth quarter of 2014 and down 11.4% from $2.29 billion in the third quarter of 2015.
• Tons sold were down 6.1% from the fourth quarter of 2014 and down 7.1% from the third quarter of 2015, with the average selling price per ton sold down 16.6% from the fourth quarter of 2014 and down 4.5% from the third quarter of 2015.
• Net income attributable to Reliance was $68.6 million, down 25.7% from $92.3 million in the fourth quarter of 2014 and up 33.5% from $51.4 million in the third quarter of 2015.
• Earnings per diluted share were $0.94, down 20.3% from $1.18 in the fourth quarter of 2014 and up 36.2% from $0.69 in the third quarter of 2015.
• Non-GAAP earnings per diluted share were $0.87, down 13.9% from $1.01 in the fourth quarter of 2014 and down 25.0% from $1.16 in the third quarter of 2015.
• A pre-tax LIFO inventory valuation credit adjustment, or income, of $42.0 million, is included in cost of sales compared to a pre-tax LIFO charge, or expense, of $24.5 million in the fourth quarter of 2014 and a credit of $35.0 million in the third quarter of 2015.
• The effective tax rate was 27.1%, compared to 26.6% in the fourth quarter of 2014 and 32.1% in the third quarter of 2015.
• Cash flow from operations was $308.7 million in the fourth quarter of 2015 and net debt-to-total capital was 31.8% at December 31, 2015.
• Reliance repurchased $13.2 million of its common stock, or 0.2 million shares, at an average price of $54.63 per share, during the fourth quarter of 2015.
• A quarterly cash dividend of $0.40 per share was declared on February 16, 2016 for stockholders of record as of March 11, 2016 and will be payable on March 31, 2016.

Full Year 2015 Financial Highlights 

• Sales were $9.35 billion, down 10.5% from $10.45 billion in 2014.
• Tons sold were down 2.8% from 2014 and the average selling price per ton sold was down 8.6%.
• Net income attributable to Reliance was $311.5 million, down 16.2% from $371.5 million in 2014.
• Earnings per diluted share were $4.16, down 12.1% from $4.73 in 2014.
• Non-GAAP earnings per diluted share were $4.55, down 5.8% from $4.83 in 2014.
• A pre-tax LIFO inventory valuation credit adjustment, or income, of $117.0 million, is included in cost of sales compared to a pre-tax LIFO charge, or expense, of $54.5 million in 2014.
• The effective tax rate was 31.1% for both 2015 and 2014.
• Cash flow from operations was a record $1.0 billion, compared to $356.0 million in 2014.
• Reliance repurchased $355.5 million of its common stock, or 6.2 million shares, at an average price of $57.39 per share in 2015. On October 20, 2015, the Board of Directors amended Reliance's existing share repurchase program increasing by 7.5 million shares the total shares authorized for repurchase and extending the share repurchase program through December 2018.

Management Commentary

"We were very pleased with our strong operational execution throughout 2015 despite a very challenging economic environment that continued to pressure metals pricing," said Gregg Mollins, President and Chief Executive Officer of Reliance.  "We finished the year generating record cash flow from operations of $1.0 billion, which affords us ample liquidity and financial flexibility to execute on our capital allocation priorities. We were also successful in reducing inventory, a key area of focus for Reliance in 2015, by an additional $193.3 million during the quarter, and $433.1 million for the year.  We once again increased our fourth quarter FIFO gross profit margin to 26.7%, up 30 basis points from the prior quarter, and up 160 basis points from the fourth quarter of 2014.  The ability of our managers in the field to increase our FIFO gross profit margin in each successive quarter of 2015, during a period when metals pricing declined each successive quarter, reflects the outstanding quality of people that we have throughout Reliance."  

Mr. Mollins continued, "Notwithstanding the slumping energy market and ongoing concerns over slowed growth in China, demand trends held up relatively well during the fourth quarter, yet were softer than anticipated.  Fourth quarter demand also reflected the normal seasonal slowdown caused by fewer shipping days due to the holiday season and holiday-related closures by many of our customers.  Our fourth quarter tons sold were down 7.1% from the third quarter, and once again outperformed the MSCI industry average decline of 10.1%. For the full year of 2015 compared to 2014, we outpaced the industry with a 2.8% decline in tons sold compared to the MSCI industry average decline of 7.5%.   Pricing was also softer than anticipated in the fourth quarter, despite some recent price increases on flat-rolled carbon steel and plate. We had expected fourth quarter pricing to be down 1% to 2%; however, conditions continued to soften throughout the quarter resulting in our average selling price per ton sold declining 4.5% compared to the prior quarter, and 16.6% compared to the fourth quarter of 2014."

Mr. Mollins concluded, "Despite the challenges we face in our industry at large, I am very pleased with our 2015 performance which reflected superior operational execution. Our performance enabled us to continue to grow our market share, increase our gross profit margins, generate significant cash to fund our growth strategy - including the acquisition of Tubular Steel, Inc. on January 1, 2016 - and return value to our stockholders.  We remain optimistic about the year ahead and look forward to building upon our operational momentum."