RS

Business Context and Reporting Period

Reliance, Inc. (NYSE: RS) is a metals service center company operating primarily in the United States. This Form 10-Q covers the quarterly period ended June 30, 2026, and the six months ended on that date. The Company operates as a single reportable segment following an operational realignment in the first quarter of 2026.

Key Financial Metrics

Note: Debt figures represent long-term debt balances as of June 30, 2026, and December 31, 2025, respectively. Net Debt-to-Capital ratio was 16.2% as of June 30, 2026.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 26.5% in Q2 2026 and 21.2% for the six months ended June 30, 2026, compared to the prior year. This was driven by record tons sold (up 10.8% in Q2) and a 14.5% increase in average selling price (ASP) per ton.
• Profitability: Diluted EPS increased 42.3% in Q2 2026. Operating income margin improved to 9.5% in Q2 2026 from 8.5% in Q2 2025.
• LIFO Impact: LIFO expense significantly increased to $112.5 million in Q2 2026 from $25.0 million in Q2 2025 due to rising metal prices. On a FIFO basis (excluding LIFO), gross profit margin improved 10 basis points year-over-year.
• Working Capital: Accounts receivable increased to $2,210.4 million from $1,539.9 million at year-end 2025, reflecting higher shipment volumes and pricing.

Guidance, Outlook, and Management Commentary

• U.S. Border Wall Project: The Company was awarded a multi-year contract by the U.S. Department of Homeland Security in Q1 2026. Deliveries began in Q2 2026, contributing 5.2 percentage points to tons sold growth and approximately $0.41 to diluted EPS for the quarter. Management noted this project generated favorable operating leverage.
• Market Conditions: Carbon steel prices benefited from tight supply, while aluminum prices remained elevated due to a 50% Section 232 tariff imposed in June 2025. Demand was strong across industrial machinery, shipbuilding, military, and non-residential construction sectors.
• Capital Allocation: The Company returned $364.6 million to stockholders in the first six months of 2026 via $234.2 million in share repurchases and $130.4 million in dividends. The quarterly dividend was increased 4.2% to $1.25 per share in Q1 2026. No shares were repurchased in Q2 2026.
• Liquidity: Management believes current liquidity sources, including a $1.5 billion revolving credit facility (with $980 million remaining capacity) and operating cash flows, are sufficient for the next 12 months.
• Risks: Key risks include trade policy uncertainty (tariffs), inflation, supply chain disruptions, and geopolitical conflicts. The Company noted no material changes to risk factors from the 2025 10-K.

Investor Verification Checklist

• LIFO Reserve Impact: Verify the sustainability of earnings given the $150 million LIFO expense in the first six months of 2026 compared to $50 million in the prior year; review FIFO margins for underlying operational performance.
• Border Wall Contract Duration: Confirm the specific duration and volume commitments of the U.S. Department of Homeland Security contract to assess future revenue visibility.
• Working Capital Trends: Monitor the $670 million increase in accounts receivable to ensure collection rates remain healthy as sales volumes normalize.
• Debt Utilization: Track the utilization of the $1.5 billion revolving credit facility, which increased from $277 million to $520 million in the quarter, and its impact on interest expense.
• Share Repurchase Authorization: Note that $529.3 million remains available under the share repurchase program; monitor future buyback activity given the pause in Q2 2026.