What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 113 added, 121 removed, 75 unchanged (76% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The terms “Company,” “Reliance,” “we,” “our,” and “us” refer to Reliance Steel & Aluminum Co.

The terms “Company,” “Reliance,” “we,” “our,” and “us” refer to Reliance, Inc.

and all its subsidiaries that are consolidated in accordance with U.S.

1 unchanged sentence

This report contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Our forward-looking statements may include, but are not limited to, discussions of our industry and end markets, our business strategies and our expectations concerning future demand and major commodity product pricing and our results of operations, margins, profitability, taxes, liquidity, macroeconomic conditions, including inflation and the possibility of an economic recession or slowdown, litigation matters and capital resources.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “preliminary,” “range,” “intend” and “continue,” the negative of these terms, and similar expressions.

All statements contained in this report, other than statements of historical fact, are forward-looking statements.

Our forward-looking statements may include, but are not limited to, discussions of our industry and end markets, our business strategies and our expectations concerning future demand and major commodity product pricing and our results of operations, margins, profitability, taxes, liquidity, macroeconomic conditions, including inflation, prevailing elevated interest rates and slowing macroeconomic growth, litigation matters and capital resources.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “explore,” “estimate,” “predict,” “potential,” “preliminary,” “range,” “intend” and “continue,” the negative of these terms, and similar expressions.

All statements contained in this report that are not statements of historical fact are forward-looking statements.

These forward-looking statements are based on management’s estimates, projections and assumptions as of the date of such statements.

1 unchanged sentence

Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance.

political and economic conditions such as inflation, a prolonged higher interest rate environment and the possibility of an economic recession that could materially impact us, our customers and suppliers and demand for our products and services.

Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to, actions taken by us, as well as developments beyond our control, including, but not limited to, the impacts of labor constraints and supply chain disruptions and changes in domestic and worldwide political and economic conditions such as inflation, a prolonged higher interest rate environment and slowing macroeconomic growth that could materially impact us, our customers and suppliers and demand for our products and services.

Deteriorations in economic conditions, as a result of inflation, elevated interest rates, economic recession, slowing growth, outbreaks of infectious disease, conflicts such as the war in Ukraine and the evolving events in Israel and Gaza or otherwise, could lead to a decline in demand for our products and services and negatively impact our business, and may also impact financial markets and corporate credit markets which could adversely impact our access to financing, or the terms of any financing.

4 unchanged sentences

You should review any additional disclosures we make in any subsequent press releases and Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC.

Tons sold increased 1.1% and 3.4% for the third quarter and nine months ended September 30, 2023 compared to the same periods in 2022, respectively, due to healthy demand in our key end markets, including non-residential construction (our largest end market) and aerospace, as well as contributions from our organic growth activities.

The 3.4% increase in our tons sold for the nine months ended September 30, 2023 outperformed the 1.0% increase in industry shipments as reported by the Metals Service Center Institute (“MSCI”).

Our net sales declined in the third quarter and nine months ended September 30, 2023 compared to the same periods in 2022 due to declines in our average selling price per ton sold that were partially offset by increases in our tons sold.

Our average selling price per ton sold peaked at an ultimate record in the second quarter of 2022 and subsequently declined thereafter, including through the nine months ended September 30, 2023.

We believe record metals pricing in 2022 was largely driven by supply chain disruptions caused by the onset of the conflict between Russia and Ukraine, labor supply and microchip shortages, and impacts of the COVID-19 pandemic, including the omicron variant surge and lockdowns in China.

Gross profit margins for the third quarter and nine months ended September 30, 2023 were 29.7% and 30.7%, respectively, compared to 29.2% and 30.7% for the respective 2022 periods.

Earnings per diluted share were $4.99 and $17.92 for the third quarter and nine months ended September 30, 2023, respectively, compared to $6.45 and $23.98 for the respective 2022 periods.

Lower gross profit, driven by lower metals prices that more than offset increases in tons sold, contributed to decreases in earnings per share.

Cash flow from operations of $1.15 billion for the nine months ended September 30, 2023 decreased from $1.31 billion for the same period in 2022 due to lower profitability partially offset by lower working capital needs.

Organic growth activities were substantially comprised of capital expenditures of $358.6 million for the nine months ended September 30, 2023 compared to $249.7 million for the same period in 2022.

Returns to stockholders for the nine months ended September 30, 2023 totaled $418.5 million, comprised of $179.3 million of cash dividends and $239.2 million of share repurchases.

On May 1, 2023, we acquired Southern Steel Supply, LLC (“Southern Steel”), a metals service center that offers merchant and structural steel, pipe and tube, steel plate, ornamental products and laser cut and fabricated parts.

Located in Memphis, Tennessee, Southern Steel now operates as a subsidiary of Siskin Steel & Supply Company, Inc., a wholly owned subsidiary of Reliance.

The acquisition was funded with cash on hand.

Included in our net sales for the nine months ended September 30, 2023 were net sales of $20.2 million from Southern Steel.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the other sections of this quarterly report on Form 10-Q, including the consolidated financial statements and related notes contained in Item 1.

In the first quarter of 2024, demand was healthy in the majority of our end markets.

However, our operating results in the first quarter of 2024 declined from the first quarter of 2023, mainly due to lower metals prices and a decrease in tons sold, which was impacted by one less shipping day.

Gross profit margin for the first quarter of 2024 and 2023 was 31.0% and 30.9%, respectively.

We believe strong operational execution of our strategies under our resilient business model, which includes diversity in products, end markets and geographies, and increased levels of value-added processing services during a more challenging metals pricing environment in the first quarter of 2024 supported our gross profit margin at a high level consistent with the first quarter of 2023.

Our first quarter of 2024 same-store net sales decreased 8.8% compared to the first quarter of 2023 as a result of a 6.5% decline in average selling price per ton sold and a 2.9% decline in tons sold.

Our domestic tons sold in the first quarter of 2024 represented approximately 14.9% of total U.S.

industry shipments as reported by the Metals Service Center Institute, up from 14.5% for 2023.

In the first quarter of 2024 compared to the first quarter of 2023, we saw improving demand in non-residential construction and automotive, which we service through our tolling operations;

stable demand in aerospace, and modestly lower demand in semiconductors and across the overall broader manufacturing sectors we serve.

Earnings per diluted share were $5.23 and $6.43 for the first quarter of 2024 and 2023, respectively.

Cash flow from operations of $126.3 million for the first quarter of 2024 decreased from $384.6 million for the first quarter of 2023 due to increased spending on working capital and lower profitability.

Organic growth activities were substantially comprised of capital expenditures of $108.7 million for the first quarter of 2024 compared to $102.9 million for the first quarter of 2023.

We also completed an acquisition in February 2024 for $53.7 million.

Returns to stockholders for the first quarter of 2024 were comprised of $65.3 million of cash dividends.

In the first quarter of 2024, we increased our quarterly dividend rate 10% to $1.10 per common share (or $4.40 on an annualized basis).

2024 Acquisitions

We completed three acquisitions in 2024.

The combined 2023 annual sales of our 2024 acquisitions were nearly $500 million.

● On February 1, 2024, we acquired, with cash on hand, Cooksey Iron & Metal Company (“Cooksey Steel”), a metals service center that processes and distributes finished steel products, including tubing, beams, plates and bars.

Headquartered in Tifton, Georgia, Cooksey Steel operates three locations, servicing a diverse range of customers.

Included in our net sales for the first quarter of 2024 were net sales of $16.1 million from Cooksey Steel.

● On April 1, 2024, we acquired American Alloy Steel, Inc.

(“American Alloy”) with cash on hand.

American Alloy, headquartered in Houston, Texas, operates five metals service centers and a plate fabrication business in the U.S.

American Alloy is a distributor of specialty carbon and alloy steel plate and round bar, including

pressure vessel quality (PVQ) material.

For the year ended December 31, 2023, net sales for American Alloy were approximately $310 million.

● On April 1, 2024, we acquired, with cash on hand, Mid-West Materials, Inc.

(“MidWest Materials”), a flat-rolled steel service center that primarily services North American original equipment manufacturers.

Headquartered in Perry, Ohio, MidWest Materials provides steel products including hot-rolled, high strength hot-rolled, coated, and cold-rolled products that are sold into the trailer manufacturing, agriculture, metal fabrication, and building products markets.

For the year ended December 31, 2023, net sales for MidWest Materials were approximately $87 million.

No sales from American Alloy and MidWest Materials were included in our net sales for the first quarter of 2024.

2023 Acquisition

On May 1, 2023, we acquired, with cash on hand, Southern Steel Supply, LLC (“Southern Steel”).

Southern Steel is headquartered in Memphis, Tennessee and offers merchant and structural steel, pipe and tube, steel plate, ornamental products and laser cut and fabricated parts.

Included in our net sales for the first quarter of 2024 were net sales of $10.6 million from Southern Steel.

Results of Operations

The following sets forth certain income statement data for the third quarter and nine months ended September 30, 2023 and 2022 (dollars are shown in millions, except per share amounts, and certain amounts may not calculate due to rounding):

Three Months Ended

Nine Months Ended

September 30,

The following sets forth certain income statement data for the first quarters of 2024 and 2023 (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):

Three Months Ended March 31,

Cost of sales (exclusive of depreciation and amortization expense shown below)

5 unchanged sentences

Diluted earnings per share attributable to Reliance stockholders

(1) Cost of sales for the nine months ended September 30, 2022 included $8.1 million of non-recurring amortization of inventory step-up to fair value adjustments for our 2021 acquisitions.

(1) Gross profit, calculated as net sales less cost of sales, and gross profit margin, calculated as gross profit divided by net sales, are non-GAAP financial measures as they exclude depreciation and amortization expense associated with the corresponding sales.

6 unchanged sentences

Gross profit and gross profit margin, as presented, are not necessarily comparable with similarly titled measures for other companies.

Third Quarter and Nine Months Ended September 30, 2023 Compared to Third Quarter and Nine Months Ended September 30, 2022

September 30,

First Quarter Ended March 31, 2024 Compared to First Quarter Ended March 31, 2023

Three Months Ended March 31,

(dollars in millions)

Net sales (three months ended)

Net sales (nine months ended)

September 30,

Net sales, same-store

Three Months Ended March 31,

(tons in thousands)

Tons sold (three months ended)

Tons sold (nine months ended)

September 30,

Average selling price per ton sold (three months ended)

Average selling price per ton sold (nine months ended)

Our tons sold and average selling price per ton sold exclude our tons toll processed.

Our average selling price per ton sold includes intercompany transactions that are eliminated from our consolidated net sales.

Our net sales declined from record third-quarter levels in the comparable 2022 periods due to declines in our average selling price per ton sold that were partially offset by increases in tons sold.

The increases in our tons sold were due to healthy demand in our key end markets, including non-residential construction (our largest end market) and aerospace, as well as contributions from our organic growth activities.

Our average selling price per ton sold peaked in the second quarter of 2022 and subsequently declined thereafter, including through the nine months ended September 30, 2023.

Tons sold, same-store

Three Months Ended March 31,

Average selling price per ton sold

Average selling price per ton sold, same-store

Our tons sold and average selling prices per ton sold exclude our tons toll processed.

Our average selling prices per ton sold includes intercompany transactions that are eliminated from our consolidated net sales.

Same-store amounts exclude the results of our 2024 and 2023 acquisitions.

Demand remained relatively healthy in the majority of end markets we serve.

Our same-store net sales declined from the first quarter of 2023 mainly due to lower selling prices and a decrease in tons sold, which was impacted by one less shipping day.

Since we primarily purchase and sell our inventories in the spot market, our average selling prices generally fluctuate similarly with the changes in the costs of the various metals we purchase;

the mix of products sold can also have an impact on our average selling price per ton sold.

As c arbon steel sales represented 53% of our gross sales for the nine months ended September 30, 2023, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.

the mix of products sold can also have an impact on our overall average selling price per ton sold.

As c arbon steel sales represented 53% of our gross sales for the first quarter of 2024, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.

Y ear-over-year changes in the selling prices of our major commodity products and related mix of our tons sold are presented below:

Three Months Ended

Nine Months Ended

Average Selling

Percentage of

Average Selling

Percentage of

Stainless steel

Cost of Sales and Gross Profit

September 30,

Three Months Ended March 31,

(dollars in millions)

Cost of sales (three months ended)

Cost of sales (nine months ended)

Gross profit (three months ended)

Gross profit (nine months ended)

LIFO (income) expense (three months ended)

LIFO (income) expense (nine months ended)

* Not meaningful.

Gross profit in the third quarter and nine months ended September 30, 2023 decreased from the same periods in 2022 mainly due to lower sales as a result of decreases in average selling price per ton sold that more than offset increases in tons sold.

Cost of sales

LIFO income, included in cost of sales

Gross profit in the first quarter of 2024 decreased from the first quarter of 2023 mainly due to lower sales as a result of decreases in average selling price per ton sold and tons sold, which were impacted by one less shipping day.

In addition, we record in cost of sales non-cash adjustments to our LIFO method inventory valuation reserve that, in effect, reflects cost of sales at current replacement costs.

The inventory caption of our consolidated balance sheet included a LIFO method inventory valuation reserve of $638.8 million at September 30, 2023.

Furthermore, cost of sales for the nine months ended September 30, 2022 included $8.1 million of non-recurring amortization of inventory step-up to fair value adjustments related to our 2021 acquisitions that decreased gross profit margin by ten basis points.

We were able to achieve stable gross profit margins despite the significantly different metals pricing environments, with our average selling price per ton sold declining 17.6% during the nine months ended September 30, 2023 compared to the 30.0% increase in our average selling price per ton sold during the nine months ended September 30, 2022.

We believe that our gross profit margins are supported by our product diversity, small order sizes, investments in value-added processing capabilities and healthy demand in the majority of end markets we serve.

The inventory caption of our consolidated balance sheet included a LIFO method inventory valuation reserve of $529.3 million at March 31, 2024.

We believe that our stable year-over-year gross profit margin was supported by our product diversity, small order sizes, investments in value-added processing capabilities and healthy demand in the majority of end markets we serve.

See “Net Sales” above for further discussion on product pricing trends.

September 30,

Three Months Ended March 31,

(dollars in millions)

SG&A expense (three months ended)

SG&A expense (nine months ended)

Depreciation & amortization expense (three months ended)

Depreciation & amortization expense (nine months ended)

Our SG&A expense increased for the nine months ended September 30, 2023 compared to the same period in 2022 mainly due to higher variable costs associated with increases in our tons sold, including increased headcount, and inflationary impacts on wages, which were partially offset by lower incentive-based compensation that is primarily tied to first-in, first-out (“FIFO”) pretax income profitability, which declined 35.1% compared to the same period in 2022.

Our SG&A expense as a percentage of sales for the third quarter and nine months ended September 30, 2023 compared to the same periods in 2022 mainly increased due to lower sales levels.

See “Cost of Sales and Gross Profit” above for discussion of our LIFO method inventory valuation reserve.

SG&A expense, same-store

Depreciation & amortization expense

Our same-store SG&A expense increased mainly due to increased headcount relating to organic growth activities which was partially offset by lower incentive-based compensation resulting from lower profitability.

Our same-store SG&A expense as a percentage of sales increased mainly due to a decrease in sales.

Operating Income

September 30,

Three Months Ended March 31,

(dollars in millions)

Operating income (three months ended)

Operating income (nine months ended)

The decreases in our operating income for the third quarter and nine months ended September 30, 2023 as compared to the same periods in 2022 were mainly a result of lower gross profit, driven by lower metals prices that more than offset increases in tons sold, along with moderate changes in SG&A expense attributable to increases in our tons sold and inflationary impacts on wages.

Our gross profit margins were generally consistent with the same periods in 2022 and consequently the decreases in our operating income margins for the third quarter and nine months ended September 30, 2023 were mainly due to our lower sales levels that decreased operating leverage of our SG&A expenses.

Other (Income) Expense, Net

September 30,

Operating income

The decrease in our operating income was mainly a result of lower gross profit, driven by lower metals prices and a decrease in tons sold, which was impacted by one less shipping day, along with a moderate increase in SG&A expense.

Our operating income margin in the first quarter of 2024 decreased compared to the first quarter of 2023 due to lower sales that decreased operating leverage of our SG&A expense.

See “Net Sales” above for discussion of trends in demand and product costs and “Expenses” for trends in our operating expenses.

Other Income, Net

Three Months Ended March 31,

(dollars in millions)

Other (income) expense, net (three months ended)

Other (income) expense, net (nine months ended)

* Not meaningful.

The changes in other (income) expense, net in the third quarter and nine months ended September 30, 2023 compared to the same periods in 2022 were mainly due to increases in interest income as a result of higher cash and cash equivalent balances and interest rates earned on bank deposits and cash equivalents.

Other income, net

The change in other income, net in the first quarter of 2024 compared to the first quarter of 2023 was mainly due to an increase in interest income as a result of higher cash and cash equivalent balances and interest earned thereon.

Income Tax Rate

Our effective income tax rates for the third quarter and nine months ended September 30, 2023 were 23.7% and 24.2%, respectively, compared to 24.7% for the same 2022 periods.

Our effective income tax rates for the first quarters of 2024 and 2023 were 23.3% and 24.4%, respectively.

The differences between our effective income tax rates and the U.S.

2 unchanged sentences

Operating Activities

Net cash provided by operations of $1.15 billion for the nine months ended September 30, 2023 decreased slightly from $1.31 billion for the same period in 2022.

The impact of lower profitability on operating cash flow was offset by

lower working capital needs, resulting in relatively consistent levels of operating cash flow in both periods.

Net cash provided by operations of $126.3 million in the first quarter of 2024 decreased from $384.6 million in the first quarter of 2023.

The decrease in cash flow from operations was mainly due to lower profitability and increased spending on working capital.

To manage our working capital, we focus on our days sales outstanding and inventory turnover rate as receivables and inventory are the two most significant elements of our working capital.

As of September 30, 2023 and 2022, our days sales outstanding rates were 40.3 days and 39.6 days, respectively.

Our inventory turnover rate (based on tons) during the nine months ended September 30, 2023 was 4.7 times (or 2.6 months on hand), compared to 4.3 times (or 2.8 months on hand) for the same period in 2022.

Income taxes paid were $305.2 million in the nine months ended September 30, 2023 compared to $596.8 million in the same period in 2022.

The decrease in our taxes paid was mainly due to lower estimated tax payments in the nine months ended September 30, 2023 compared to the same period in 2022 as a result of decreased pretax income.

As of March 31, 2024 and 2023, our days sales outstanding rates were 40.8 days and 40.0 days, respectively.

Our inventory turnover rate (based on tons) during the first quarter of 2024 was 4.6 times (or 2.6 months on hand), compared to 4.9 times (or 2.4 months on hand) in the first quarter of 2023.

Investing Activities

Net cash used in investing activities was $367.8 million for the nine months ended September 30, 2023 compared to $244.4 million for the same period in 2022 and was substantially comprised of capital expenditures and the purchase price for our acquisition of Southern Steel on May 1, 2023.

The majority of our capital expenditures in the nine months ended September 30, 2023 and 2022 were related to growth initiatives.

Net cash used in investing activities was $177.4 million in the first quarter of 2024 compared to $102.6 million in the first quarter of 2023 and was substantially comprised of capital expenditures and the purchase price for an acquisition in February 2024.

The majority of our capital expenditures in the first quarters of 2024 and 2023 were related to growth initiatives.

Financing Activities

Net cash used in financing activities was $970.7 million for the nine months ended September 30, 2023 compared to $711.1 million for the same period in 2022, mainly due to the redemption of $500.0 million aggregate outstanding principal amount of senior notes in January 2023 offset by decreased share repurchases .

In the nine months ended September 30, 2023, we spent $239.2 million to repurchase shares of our common stock compared to $547.7 million in the same period in 2022.

Our other stockholder returns included an increase in our quarterly dividend rate with total dividend payments of $179.3 million in the nine months ended September 30, 2023 compared to $163.5 million in the same period in 2022.

We also spent $41.3 million on taxes relating to net share settlement of restricted stock units in the nine months ended September 30, 2023 compared to $21.6 million in the same period in 2022.

On October 24, 2023, our Board of Directors declared the 2023 fourth quarter cash dividend of $1.00 per share.

We have increased our quarterly dividend 30 times since our IPO in 1994, with the most recent increase of 14.3% from $0.875 per share to $1.00 per share effective in the first quarter of 2023.

Net cash used in financing activities was $90.3 million in the first quarter of 2024 compared to $639.2 million in the first quarter of 2023.

The significant decrease was mainly due to the redemption of $500.0 million aggregate outstanding principal amount of senior notes in January 2023 and a decrease in share repurchases.

We did not repurchase any shares in the first quarter of 2024 compared to $38.9 million of share repurchases in the first quarter of 2023.

On April 23, 2024, our Board of Directors declared the 2024 second quarter cash dividend of $1.10 per share.

We have increased our quarterly dividend 31 times since our IPO in 1994, with the most recent increase of 10.0% from $1.00 to $1.10 per share effective in the first quarter of 2024.

We have paid quarterly cash dividends on our common stock for 65 consecutive years and have never reduced or suspended our regular quarterly dividend.

See Note 8—“Equity” to our consolidated financial statements in Part I, Item 1 “Financial Statements” for further information on our 2023 share repurchases.

On October 24, 2023, our Board of Directors amended our share repurchase program to increase the repurchase authorization to $1.5 billion effective October 30, 2023.

Share Repurchase Plan

As of March 31, 2024, we had remaining authorization to repurchase $1.44 billion of our common stock under our $1.5 billion share repurchase program authorized by our Board of Directors on October 24, 2023.

The share repurchase program does not obligate us to repurchase any specific number of shares, does not have a specific expiration date and may be suspended or discontinued at any time.

From 2018 through September 30, 2023, we have repurchased approximately 16.9 million shares at an average cost of $122.20 per share, for a total of $2.07 billion, resulting in a 23.3% reduction in our common shares outstanding.

We have a $1.5 billion unsecured revolving credit facility with no outstanding borrowings at September 30, 2023 under our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”).

We also had an aggregate of $1.15 billion principal amount of senior unsecured note obligations with various maturities through 2036 issued under indentures as of September 30, 2023.

On January 15, 2023, we redeemed in full the $500.0 million aggregate outstanding principal amount of our 4.50% senior notes due April 15, 2023 using cash on hand.

See Note 5—“Debt” to our consolidated financial statements in Part I, Item 1 “Financial Statements” for further information on our debt obligations.

We have a $1.5 billion unsecured revolving credit facility with no outstanding borrowings at March 31, 2024 under our Amended and Restated Credit Agreement (as amended, the “Credit Agreement”).

We also had an aggregate of $1.15 billion principal amount of senior unsecured note obligations with various maturities through 2036 issued under indentures as of March 31, 2024 .

See Note 6—“Debt ” to our consolidated financial statements for further information on our amended credit agreement and indentures governing our debt securities.

Liquidity and Capital Resources

We believe our primary sources of liquidity, including funds generated from operations, cash and cash equivalents and our Credit Agreement, will be sufficient to satisfy our cash requirements and stockholder return activities over the next 12 months and beyond.

As of September 30, 2023, we had $976.9 million in cash and cash equivalents and our net debt-to-total capital ratio (net debt-to-total capital is calculated as carrying amount of debt, net of cash, divided by total Reliance stockholders’ equity plus carrying amount of debt, net of cash) was 2.1%, down from 6.3% as of December 31, 2022.

As of September 30, 2023, we had $400.6 million of debt obligations coming due before our Credit Agreement matures on September 3, 2025.

As of March 31, 2024, we had $934.9 million in cash and cash equivalents and our net debt-to-total capital ratio was 2.6%, up from 0.8% as of December 31, 2023.

As of March 31, 2024, we had $400.3 million of debt obligations coming due before our Credit Agreement matures on September 3, 2025.

We believe that we will continue to have sufficient liquidity to fund our future operating needs and to repay our debt obligations as they become due .

In addition to funds generated from operations and $1.5 billion available under our Credit Agreement, we expect to continue to be able to access the capital markets to raise funds, if desired.

We believe our sources of liquidity will continue to be adequate to maintain operations, make necessary capital expenditures, finance strategic growth through acquisitions and internal initiatives, pay dividends and repurchase shares.

Additionally, we believe our investment grade credit ratings enhance our ability to effectively raise capital, if desired.

In addition to funds generated from operations and approximately $1.5 billion available under our revolving credit facility, we expect to continue to be able to access the capital markets to raise funds, if desired.

We believe our investment grade credit ratings enhance our ability to effectively raise capital.

The Credit Agreement and indentures governing our debt securities include customary representations, warranties, covenants and events of default provisions.

The covenants under the Credit Agreement include, among other things, two financial maintenance covenants that require us to comply with a minimum interest coverage ratio and a maximum leverage ratio.

We were in compliance with all financial maintenance covenants in our Credit Agreement at September 30, 2023.

We were in compliance with all financial maintenance covenants in our Credit Agreement at March 31, 2024.

Some of our customers are in seasonal businesses, especially customers in the construction industry and related businesses.

5 unchanged sentences

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.11 billion at September 30, 2023, or approximately 20% of total assets and 27% of total equity.

Additionally, other intangible assets, net amounted to $990.1 million at September 30, 2023, or approximately 9% of total assets and 13% of total equity.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.13 billion at March 31, 2024, or approximately 20% of total assets and 27% of total equity.

Additionally, other intangible assets, net amounted to $986.1 million at March 31, 2024, or approximately 9% of total assets and 12% of total equity.

Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests and further evaluation when certain events occur.

Other intangible assets with finite useful lives are amortized over their useful lives.

We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

Other intangible assets with finite useful lives are amortized over their estimated useful lives.

We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our Unaudited Consolidated Financial Statements, which have been prepared in accordance with U.S.

When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of

assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain.

Our most critical accounting estimates include those related to goodwill and other indefinite-lived intangible assets and long-lived assets.

When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period.

Some of our accounting policies are critical due to the fact that they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Our most critical accounting estimates include those related to the recoverability of goodwill and other indefinite-lived intangible assets and long-lived assets.

We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our actual results may differ from these estimates under different assumptions or conditions.

During the third quarter ended September 30, 2023, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.

During the quarter ended March 31, 2024, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Website Disclosure

The Company may use its website as a distribution channel of material company information.

Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at www.rsac.com , and our investors relations website, investor.rsac.com .

In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section at investor.rsac.com .

Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at www.reliance.com , and our investors relations website, investor.reliance.com .

In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section at investor.reliance.com .

The website is for informational purposes only and is not intended for use as a hyperlink.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis