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F E L LOW S TOC K HOL DE R S
Reliance demonstrated strong operational execution
throughout 2015 despite a very challenging economic
environment that continued to pressure metals pricing.
We achieved record cash flow from operations of $1
billion in 2015, affording us ample liquidity and financial
flexibility to continue to invest in our growth as well as
enhance stockholder value.
In early 2015, we outlined a company-wide plan to place
greater emphasis on inventory management. As part
of this effort, we successfully reduced FIFO inventory
by $433 million during 2015, which contributed to
increasing our 2015 FIFO gross profit margin to 26%,
up 40 basis points from 2014. Furthermore, we increased
our FIFO gross profit margin in each successive quarter
of 2015, ending the year with a fourth quarter 2015
FIFO gross profit margin 160 basis points higher than the
fourth quarter of 2014. Considering that metals pricing
declined sequentially in each quarter during the year,
this was an impressive accomplishment made possible
by the outstanding performance of the men and women
of Reliance. In addition to reduced inventory levels, we
believe that our focus on smaller order sizes and next day
delivery, coupled with the benefits of increased investments
in our value-added processing capabilities, contributed to
our gross profit margin improvements.
Our average order size in 2015 was $1,660, and we
delivered about 40% of our orders within 24 hours
of receiving the order from our customer. We lead the
industry in capital expenditure investments, with the
majority of investments focused on processing equipment
that expands the services we provide our customers. In
2015, we performed processing services on 47% of our
orders. We believe our customer service focused operating
model has enabled us to increase our market share as well
as to enhance our gross profit margins, and represents a
key differentiator of Reliance, especially as compared to
other large service center companies.
Our 2015 sales of $9.35 billion were down 10.5% from our
record sales of $10.45 billion in 2014. Demand declined
somewhat in 2015 compared to 2014, but was still relatively
healthy outside of the energy endmarket. Our same-store tons
sold declined only 3.2%, well ahead of the industry decline
of 7.5% reported by the Metals Service Center Institute. Tons
sold by our energy businesses were down 41% in 2015 from
2014 levels. Excluding the impact of the energy downturn,
our tons sold in 2015 were down only 0.7% compared to
2014. We believe Reliance has been able to growmarket share
in this challenging environment because our decentralized
structure places the day-to-day sales decisions in the hands of
our managers in the field and we have made industry-leading
investments in our facilities and equipment.