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REL I ANCE STEEL & ALUMINUM CO.
GROWING OUR FAMI LY
9
SHAREHOLDER LETTER
acquisition to-date. Metals USA added 44 strategically
located service centers across the United States,
complementing our customer base, product mix, and
geographic footprint. The transaction was immediately
accretive to our bottom-line results and provided us the
opportunity to identify certain areas where we could
rationalize facilities, reducing our overall costs, and allowing
us to more efficiently service our customers. The level
of support and cooperation exhibited between existing
Reliance companies and the newly acquired Metals
USA operations has been fantastic and we are extremely
pleased with the progress we have made by integrating
Metals USA into the Reliance family of companies.
In November, we acquired Haskins Steel Co., Inc., a
processor and distributor of primarily carbon steel and
aluminum products of various shapes and sizes to a
diverse customer base in the Pacific Northwest. Haskins,
headquartered in Spokane, Washington, will enhance
our penetration into this important geographic region.
Since our IPO in 1994, we have completed a total of 56
acquisitions. Today, we are the largest metals service
center company in North America with significant potential
TO OUR SHAREHOLDERS:
In spite of difficult market
conditions that persisted throughout the year, our
strong performance in 2013 was a testament to our
operational excellence coupled with our ability to
consistently execute on our growth strategies. Overall,
demand in 2013 ended up essentially flat compared
to 2012, though we did see momentum building in
the second half of the year. Reliance’s tons sold on a
same-store basis increased approximately 1% in 2013.
Including the impact of acquisitions, total tons sold
increased significantly resulting in net sales of $9.2
billion in 2013, an increase of 9.3% over the prior year.
Market pricing had a significant impact on our profitability.
Our average selling price per ton sold was down 10%
from the prior year, resulting in lower earnings for the
current year despite the higher levels of net sales.
However, strong performance by our managers in the
field resulted in gross profit margins holding relatively
steady in 2013 versus 2012. This consistent execution
reflects our commitment to remaining highly focused on
managing all aspects of the business that are within
our control, which continues to mitigate much of the
impact of the challenging pricing environment.
Based on MSCI data, Reliance continued to surpass the
broader metals service center industry, due mainly to sales
from our acquisitions as well as a slow but steady recovery
in demand. Reliance’s outperformance of the metals
service center industry is further evidence of our ability to
augment organic growth with strategic acquisitions along
with our excellent track-record of operational and financial
excellence and our commitments to safety, employee
satisfaction, and customer service.
Our success in 2013 was also due in part to our
exposure to higher-growth industries, such as commercial
aerospace, energy and automotive. The specialty
products and processes required in these industries
command higher average selling prices and helped
improve our overall profitability. Of note, our automotive
end-market, which we support mostly through our toll
processing operations in the U.S. and Mexico, was one
area of our business that exhibited particular strength
in 2013.
One of the most important highlights of 2013 was the
completion of the Metals USA Holdings Corp. acquisition
in April for a purchase price of $1.25 billion, our largest
for continued growth in a highly fragmented industry.
Our acquisition strategy supports our ability to profitably
grow Reliance, even when faced with economic and cyclical
headwinds. Going forward, acquisitions will remain an
important element of our overall growth strategy. We expect
to continue to be a consolidator in our highly fragmented
industry by making strategic acquisitions of well-managed
metals service centers and processors with end-market
exposure that supports our diversification strategy.
Our balance sheet remains strong, providing us ample
flexibility to leverage potential future growth opportunities
through both internal investments and acquisitions.
After funding our acquisition of Metals USA, including
the issuance of $500 million of 4.5% ten-year senior
notes, we used excess cash to pay down $330 million
of debt in 2013. We will continue to take a balanced
approach to debt reduction while still supporting our
working capital needs, investing in capital expenditures,
and paying our quarterly dividend. Our 2013 cash flow
from operations was over $633 million due to solid
working capital management, which helped to fund our
capital expenditures of $168 million, the majority of
which was spent on growth activities.
NET SALES (IN MILLIONS)
EARNINGS PER SHARE (DILUTED)
NET INCOME (IN MILLIONS)
RETURN ON EQUITY
2013
2013
2013
2013
2012
2012
2012
2012
2011
2011
2011
2011
2010
2010
2010
2010
2009
2009
2009
2009
$9,223.8
$4.14
$321.6
9%
$8,442.3
$5.33
$403.5
13%
$8,134.7
$4.58
$343.8
12%
$6,312.8
$2.61
$194.4
8%
$5,318.1
$2.01
$148.2
6%