Reliance, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request references 2023 Q4, this is an annual filing; the supplied filing text does not provide clear standalone fourth-quarter results. The company changed its name from Reliance Steel & Aluminum Co. to Reliance, Inc. in February 2024.
Business context
Reliance is a North American metals service-center company distributing and processing more than 100,000 metal products. At year-end it operated more than 315 locations in 40 U.S. states and 12 foreign countries, with one reportable segment. Its business emphasizes small orders, quick delivery and value-added processing; about 98% of 2023 orders were from repeat customers.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $14.806 billion | $17.025 billion |
| Gross profit / margin | $4.547 billion / 30.7% | $5.251 billion / 30.8% |
| Operating income / margin | $1.740 billion / 11.7% | $2.507 billion / 14.7% |
| Net income attributable to Reliance | $1.336 billion | $1.840 billion |
| Diluted earnings per share | $22.64 | $29.92 |
| Operating cash flow | $1.671 billion | $2.119 billion |
| Capital expenditures | $468.8 million | $341.8 million |
- Tons sold rose 3.7% to 5.779 million, while average selling price per ton fell 16.4% to $2,570. The lower selling price more than offset volume growth, driving lower sales and profit.
- Cash and cash equivalents were $1.080 billion at year-end; total debt principal was approximately $1.151 billion. The company reported a 0.8% net debt-to-total capital ratio, versus 6.3% a year earlier, and no borrowings under its $1.5 billion revolving credit facility.
- Current assets were $4.772 billion and current liabilities $844 million. Debt maturities included $400.3 million in 2025. Management said available liquidity should be sufficient for operating needs, investment and shareholder returns.
- Cash returned to stockholders totaled $717.6 million: $238.1 million in dividends and $479.5 million in share repurchases. The board raised the quarterly dividend 10% to $1.10 per share in February 2024.
Material changes versus FY2022
- Sales declined 13.0%, primarily because average selling prices fell; volume growth partly offset the decline.
- Operating income fell 30.6%, and diluted EPS decreased from $29.92 to $22.64. Gross margin was nearly flat, but lower sales reduced operating leverage and SG&A rose 2.3%.
- Operating cash flow declined from $2.119 billion to $1.671 billion as lower profitability was partly offset by reduced working-capital needs.
- Cash used in financing increased, mainly reflecting repayment of $500 million of senior notes in January 2023. The company also spent more on capital expenditures.
Outlook, commentary and risks
- Management budgeted approximately $425 million of capital expenditures for 2024. It expects to pursue organic growth and acquisitions, especially those that add specialty products, processing capabilities or diversification; no quantified earnings or revenue guidance is provided.
- In February 2024, Reliance acquired Cooksey Steel and agreed to acquire American Alloy Steel, subject to regulatory approval and other customary closing conditions. Combined unaudited 2023 revenues for the two businesses were approximately $400 million.
- Management cited healthy demand in key markets, including non-residential construction, aerospace and automotive. It also noted continued exposure to metal-price volatility, cyclicality, inflation, elevated interest rates, supply disruptions, tariffs and geopolitical events.
- Metal-price declines can pressure margins when higher-cost inventory is sold. The company does not use financial derivatives to hedge metal-price or interest-rate exposure.
- Other disclosed risks include supplier concentration and availability, labor constraints, environmental and regulatory obligations, cybersecurity, acquisition integration and possible impairment of goodwill or intangible assets. Approximately 700 employees were covered by collective bargaining agreements expiring in 2024.
- A $164.5 million LIFO inventory reserve credit benefited FY2023 cost of sales as costs declined. No goodwill or indefinite-lived intangible-asset impairment was recorded in 2023.
- The environmental remediation matter relates to former operations; the company said insurance is expected to cover most costs and does not expect a material adverse financial impact. Routine litigation was not expected to have a material impact.
Important facts for investors to verify
- Whether metal prices and selling prices stabilize, and how inventory costs affect gross profit as prices change.
- Whether volume growth and end-market demand can offset lower pricing and higher operating costs.
- Progress and funding for the 2024 capital program, and the regulatory outcome and integration of the American Alloy transaction.
- The timing and funding of the $400.3 million debt maturity in 2025, alongside planned dividends, repurchases and investment.
- Developments in collective bargaining renewals, environmental remediation, and any material legal or cybersecurity events.
- The audited financial statements received an unqualified opinion; KPMG also reported effective internal control over financial reporting as of December 31, 2023.