What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-01 · 97 added, 88 removed, 119 unchanged (61% of the section changed)

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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, prevailing elevated interest rates and slowing macroeconomic growth, litigation matters and capital resources.

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, interest rates and economic 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,” “estimate,” “predict,” “potential,” “preliminary,” “range,” “intend” and “continue,” the negative of these terms, and similar expressions.

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

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.

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 and policies such as inflation, a prolonged higher interest rate environment, slowing macroeconomic growth or changes in tax or tariff policy that could materially impact us, our customers and suppliers, metals pricing, 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 in Ukraine, the Middle East 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.

Other factors which could cause actual results to differ materially from our forward-looking statements include those disclosed in this report and in other reports we have filed with the United States Securities and Exchange Commission (the “SEC”).

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This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 and other sections of this quarterly report on Form 10-Q, including the consolidated financial statements and related notes contained in Item 1.

In the second quarter and first half of 2024, demand was relatively healthy in the majority of our end markets with our same-store tons sold relatively consistent with the prior year periods.

However, our operating results declined from the comparable 2023 periods, despite earnings contributions from three closed acquisitions, mainly due to lower metals prices and declines in gross profit margin from a declining metals pricing environment.

Our second quarter of 2024 same-store and total tons sold increased 0.7% and 4.7%, respectively, compared to the second quarter of 2023, which outperformed the 1.8% decline in industry shipments reported by the Metals Service Center Institute.

We believe our outperformance of industry peers is supported by our organic and inorganic growth activities.

Our second quarter of 2024 same-store net sales decreased 8.7% compared to the second quarter of 2023 as a result of a 9.7% decline in average selling price per ton sold, which was partially offset by a 0.7% increase in tons sold.

Same-store net sales for the six months ended June 30, 2024 were down 8.7% from the same period in 2023, reflecting an 8.1% decrease in average selling price per ton sold and a 1.1% decrease in tons sold, which was impacted by one less shipping day.

Gross profit margins for the second quarter and six months ended June 30, 2024 were 29.8% and 30.4%, respectively, compared to 31.5% and 31.2% for the respective 2023 periods.

Carbon steel products comprise more than half of our total sales.

Our gross profit margins declined from the same periods in 2023 mainly due to declines in prices for carbon steel products throughout the 2024 periods that pressured our gross profit margins.

By comparison, in the comparable 2023 periods, we had relatively stable pricing for carbon steel products.

Earnings per diluted share were $4.67 and $9.90 for the second quarter and six months ended June 30, 2024, respectively, compared to $6.49 and $12.92 for the respective 2023 periods.

Our lower earnings year-over-year are mainly due to lower metals prices.

Pricing for our products generally has a much more significant impact on our operating results than customer demand levels.

Cash flow from operations of $492.6 million for the six months ended June 30, 2024 decreased from $679.7 million for the same period in 2023 mainly due to lower net income.

Organic growth activities were substantially comprised of capital expenditures of $206.9 million for the first half of 2024 compared to $233.1 million for the first half of 2023.

We completed two acquisitions in April 2024 for $292.8 million, following an acquisition in February 2024 for $53.7 million.

Returns to stockholders in the first half of 2024 of $647.2 million were comprised of $127.9 million of cash dividends and $519.3 million of share repurchases.

In the third quarter and nine months ended September 30, 2024, demand was relatively healthy in the majority of our end markets with increases in our same-store tons sold compared to prior year periods.

However, our operating results declined from the comparable 2023 periods, despite earnings contributions from four acquisitions completed in the first three quarters of 2024, mainly due to lower metals prices.

Our same-store and total tons sold increases of 3.7% and 7.1%, respectively, in the third quarter of 2024 compared to the third quarter of 2023 benefited from one additional shipping day and outperformed the 1.2% decline in industry shipments reported by the Metals Service Center Institute.

We believe our outperformance of industry peers is supported by our organic growth activities along with our service levels.

Our third quarter of 2024 same-store net sales decreased 8.0% compared to the third quarter of 2023 as a result of a 11.4% decline in average selling price per ton sold, which was partially offset by a 3.7% increase in tons sold discussed above.

Same-store net sales for the nine months ended September 30, 2024 were down 8.5% from the same period in 2023, reflecting a 9.2% decrease in average selling price per ton sold, which was partially offset by a 0.4% increase in tons sold.

Declines in carbon steel product prices had the most significant impact on our selling price per ton as carbon steel product sales represent over 50% of our sales.

Gross profit margins for the third quarter and nine months ended September 30, 2024 were 29.4% and 30.1%, respectively, compared to 29.7% and 30.7% for the respective 2023 periods.

Our gross profit margins remained strong, but were impacted from declines in metals pricing.

We believe the declines in metals pricing was mitigated by effective inventory management, our focus on orders with quick turnaround and value-added processing.

Earnings per diluted share were $3.61 and $13.55 for the third quarter and nine months ended September 30, 2024, respectively, compared to $4.99 and $17.92 for the respective 2023 periods.

Our lower earnings per share year-over-year are mainly due to lower metals prices despite increases in same-store and total tons sold, and share repurchases.

Cash flow from operations of $956.5 million for the nine months ended September 30, 2024 decreased from $1.15 billion for the same period in 2023 mainly due to lower net income partially offset by a decrease in working capital investment.

Returns to stockholders in the nine months ended September 30, 2024 of $1.14 billion were comprised of $951.3 million of share repurchases and $188.5 million of cash dividends.

Organic growth activities were substantially comprised of capital expenditures of $319.7 million for the nine months ended September 30, 2024 compared to $358.6 million for the same period in 2023.

We completed four acquisitions in the nine months ended September 30, 2024 for $366.7 million.

2024 Acquisitions

We completed three acquisitions in the first half of 2024 and announced an acquisition that is anticipated to close in the third quarter of 2024.

To further our growth strategy, in addition to our organic growth activities, we have completed four acquisitions so far in 2024.

Our acquisition strategy enhances our product breadth and value-added processing capabilities, with a continued focus on the diversification of our products, end markets and geographies.

Our 2024 acquisitions fit our strategy by extending the geographic reach of certain of our existing operations and expanding our product breadth and processing capacity.

● 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.

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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.

● On July 15, 2024, we announced that we had reached an agreement to acquire the toll processing assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”), subject to customary closing conditions.

FerrouSouth is a toll processing operation headquartered in Iuka, Mississippi, which provides flat-rolled steel processing and logistics services.

For the year ended December 31, 2023, net sales for FerrouSouth were approximately $15 million.

No sales of FerrouSouth were included in our net sales for the six months ended June 30, 2024.

Included in our net sales for the six months ended June 30, 2024 were combined net sales of $115.1 million from our completed 2024 acquisitions.

● On August 16, 2024, with cash on hand, we completed the acquisition of certain assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”).

FerrouSouth is a toll processing operation headquartered in Iuka, Mississippi, which provides flat-roll steel processing, logistics and warehousing services.

Included in our net sales for the nine months ended September 30, 2024 were combined net sales of $203.9 million from our 2024 acquisitions.

2023 Acquisition

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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 six months ended June 30, 2024 were net sales of $20.1 million from Southern Steel.

Included in our net sales for the nine months ended September 30, 2024 and 2023 were net sales of $28.8 million and $20.2 million, respectively, from Southern Steel.

Results of Operations

The following sets forth certain income statement data for the second quarter and six months ended June, 30 2024 and 2023 (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):

The following sets forth certain income statement data for the third quarter and nine months ended September 30, 2024 and 2023 (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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

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

Second Quarter and Six Months Ended June 30, 2024 Compared to Second Quarter and Six Months Ended June 30, 2023

Third Quarter and Nine Months Ended September 30, 2024 Compared to Third Quarter and Nine Months Ended September 30, 2023

September 30,

(dollars in millions)

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Net sales, same-store (three months ended)

Net sales (six months ended)

Net sales, same-store (six months ended)

Net sales (nine months ended)

Net sales, same-store (nine months ended)

September 30,

(tons in thousands)

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Tons sold, same-store (three months ended)

Tons sold (six months ended)

Tons sold, same-store (six months ended)

Tons sold (nine months ended)

Tons sold, same-store (nine months ended)

September 30,

Average selling price per ton sold (three months ended)

Average selling price per ton sold, same-store (three months ended)

Average selling price per ton sold (six months ended)

Average selling price per ton sold, same-store (six months ended)

Average selling price per ton sold (nine months ended)

Average selling price per ton sold, same-store (nine months ended)

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

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

Our same-store net sales declined from the comparable 2023 periods mainly due to declines in carbon steel pricing that lowered our average selling price per ton sold.

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

The decline in same-store tons sold for the six months ended June 30, 2024 mainly resulted from one less shipping day compared to the same period in 2023.

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;

Our same-store net sales declined from the comparable 2023 periods mainly due to declines in carbon steel pricing that lowered our average selling price per ton sold despite increases in same-store and total tons sold.

Demand remained relatively healthy in the majority of end markets we serve supported by same-store growth in tons sold from the prior year periods.

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

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 54% of our gross sales for the six months ended June 30, 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:

As c arbon steel sales represented 53% of our gross sales for the nine months ended September 30, 2024, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.

The mix of our total sales by major commodity products and year-over-year changes in selling prices are presented below:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30, 2024

Average Selling

Percentage of

Average Selling

Percentage of

Stainless steel

Our 2024 acquisitions did not significantly impact the year-over-year changes in our major commodity products.

Cost of Sales and Gross Profit

September 30,

(dollars in millions)

Cost of sales (three months ended)

Cost of sales (six months ended)

Cost of sales (nine months ended)

Gross profit (three months ended)

Gross profit (six months ended)

Gross profit (nine months ended)

LIFO income, included in cost of sales (three months ended)

LIFO income, included in cost of sales (six months ended)

Gross profit in the second quarter and six months ended June 30, 2024 decreased from the same periods in 2023 mainly due to lower sales as a result of decreases in average selling price per ton sold partially offset by gross profit contributions from our acquisitions.

Carbon steel products comprise more than half of our total sales.

Our gross profit margins declined from the same periods in 2023 mainly due to declines in prices for carbon steel products throughout the 2024 periods that pressured our gross profit margins.

By comparison, in the comparable 2023 periods, we had relatively stable pricing for carbon steel products.

LIFO income, included in cost of sales (nine months ended)

The decreases in cost of sales in the third quarter and nine months ended September 30, 2024 compared to the same periods in 2024 were due to lower average costs per ton sold, mainly due to declines in replacement costs for carbon steel products, partially offset by increases in tons sold.

See “Net Sales” above for trends in both demand and costs of our products.

Gross profit in the third quarter and nine months ended September 30, 2024 decreased from the same periods in 2023 mainly due to lower net sales as a result of decreases in average selling price per ton sold partially offset by gross profit contributions from our acquisitions.

Our gross profit margins remained strong, but were pressured from declines in metals pricing which we believe were mitigated by effective inventory management, our focus on orders with quick turnaround and value-added processing.

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 $479.3 million at June 30, 2024.

The inventory caption of our consolidated balance sheet includes a LIFO method inventory valuation reserve of $429.3 million at September 30, 2024.

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

September 30,

(dollars in millions)

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SG&A expense, same-store (three months ended)

SG&A expense (six months ended)

SG&A expense, same-store (six months ended)

SG&A expense (nine months ended)

SG&A expense, same-store (nine months ended)

Depreciation & amortization expense (three months ended)

Depreciation & amortization expense (six months ended)

Our same-store SG&A expense for each of the second quarter and six months ended June 30, 2024 were relatively consistent with the same periods in 2023.

Our SG&A expense in the 2024 periods reflected lower incentive-based compensation resulting from lower profitability offset by higher costs associated with wage inflation and increased headcounts related to our organic growth activities.

SG&A expense as a percentage of sales mainly increased due to lower sales levels.

Depreciation & amortization expense (nine months ended)

Our same-store SG&A expense for each of the third quarter and nine months ended September 30, 2024 increased due to higher costs associated with wage inflation and increased headcounts related to our organic growth activities offset

by lower incentive-based compensation resulting from lower profitability.

SG&A expense as a percentage of sales mainly increased due to lower net sales levels.

Our same-store SG&A expense for the nine months ended September 30, 2024 includes $5.1 million of non-recurring settlement expenses, mainly related to our anticipated withdrawal from certain multiemployer pension plans.

Operating Income

September 30,

(dollars in millions)

Operating income (three months ended)

Operating income (six months ended)

Operating income declined for the second quarter and six months ended June 30, 2024 as compared to the same periods in 2023 as a result of lower same-store gross profit, driven by lower net sales and gross profit margin, partially offset by contributions to operating income from our acquisitions.

Our operating income margins in the second quarter and six months ended June 30, 2024 were lower than in the comparable 2023 periods mainly due to lower gross profit margins and decreased operating leverage of our SG&A expense due to lower sales levels.

Operating income (nine months ended)

Operating income declined for the third quarter and nine months ended September 30, 2024 as compared to the same periods in 2023 as a result of lower same-store gross profit, driven by lower net sales and gross profit margin, partially offset by contributions to operating income from our acquisitions.

Our operating income margins in the third quarter and nine months ended September 30, 2024 were lower than in the comparable 2023 periods mainly due to lower gross profit margins and decreased operating leverage of our SG&A expense due to lower sales levels.

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

Income Tax Rate

Our effective income tax rate for each of the second quarter and six months ended June 30, 2024 was 23.3%, compared to 24.4% for the same 2023 periods.

Our effective income tax rate for each of the third quarter and nine months ended September 30, 2024 was 23.3%, compared to 23.7% and 24.2% for the third quarter and nine months ended September 30, 2023, respectively.

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

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Operating Activities

Net cash provided by operations of $492.6 million in the six months ended June 30, 2024 decreased $187.1 million from $679.7 million in the same period in 2023.

The year-over-year decrease was mainly due to a decline of $198.6 million in net income with relatively consistent working capital spend.

Net cash provided by operations of $956.5 million in the nine months ended September 30, 2024 decreased $189.2 million from $1.15 billion in the same period in 2023.

The year-over-year decrease was mainly due to a decline of $294.7 million in net income offset by lower working capital investment.

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 June 30, 2024 and 2023, our days sales outstanding rates were 41.1 days and 40.2 days, respectively.

inventory turnover rate (based on tons) during the six months ended June 30, 2024 was 4.6 times (or 2.6 months on hand), compared to 4.8 times (or 2.5 months on hand) for the same period in 2023.

As of September 30, 2024 and 2023, our days sales outstanding rates were 41.4 days and 40.3 days, respectively.

Our inventory turnover rate (based on tons) during the nine months ended September 30, 2024 was 4.6 times (or 2.6 months on hand), compared to 4.7 times (or 2.6 months on hand) for the same period in 2023.

Investing Activities

Net cash used in investing activities of $562.0 million for the six months ended June 30, 2024 increased $307.0 million from $255.0 million used in the same period in 2023.

The significant increase was mainly due to $346.5 million spent on three acquisitions in 2024 partially offset by $26.2 million less of capital expenditures.

The majority of our capital expenditures in the six months ended June 30, 2024 and 2023 were related to growth initiatives.

Net cash used in investing activities of $673.4 million for the nine months ended September 30, 2024 increased $305.6 million from $367.8 million in the same period in 2023.

The significant increase was mainly due to $366.7 million spent on acquisitions in the 2024 nine-month period compared to $24.1 million in the same period in 2023, partially offset by $38.9 million less of capital expenditures.

The majority of our capital expenditures in the nine months ended September 30, 2024 and 2023 were related to growth activities.

Financing Activities

Net cash used in financing activities of $654.1 million for the six months ended June 30, 2024 declined $126.3 million from $780.4 million in the same period in 2023.

The decrease was mainly the result of lower debt repayments that offset increased share repurchases.

The prior year period included the redemption of $500.0 million of senior notes in January 2023 compared to no debt activity in the six months ended June 30, 2024.

In the six months ended June 30, 2024, we repurchased $519.3 million of our common stock compared to $112.8 million in the same period in 2023.

Our returns to stockholders also included an increase in our quarterly dividend rate of 10% in February 2024 with total dividend payments of $127.9 million in the six months ended June 30, 2024 compared to $120.6 million in the same period in 2023.

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

Net cash used in financing activities of $1.05 billion for the nine months ended September 30, 2024 increased $78.0 million from $970.7 million in the same period in 2023.

The increase was mainly the result of increased share repurchases partially offset by increased net debt borrowings.

Net debt borrowings were $125.0 million in the nine months ended September 30, 2024 compared to net debt repayments of $507.9 million in the same period in 2023, which included the redemption of $500.0 million of senior notes.

In the nine months ended September 30, 2024, we repurchased $951.3 million of our common stock compared to $239.2 million in the same period in 2023.

Our returns to stockholders also included an increase in our quarterly dividend rate of 10% in February 2024 with total dividend payments of $188.5 million in the nine months ended September 30, 2024 compared to $179.3 million in the same period in 2023.

On October 22, 2024, our Board of Directors declared the 2024 fourth 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.

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See Note 9—“Equity ” to our consolidated financial statements for information on our 2024 and 2023 share repurchases.

Subsequent to quarter end, we repurchased an additional 637,669 shares at an average cost of $285.36, for a total of $182.0 million, resulting in $738.5 million remaining as of July 25, 2024 under our $1.5 billion share repurchase program authorized by our Board of Directors effective October 30, 2023.

On October 22, 2024, our Board of Directors amended our share repurchase program to replenish the repurchase authorization to $1.5 billion.

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.

We have a $1.5 billion unsecured revolving credit facility with no outstanding borrowings at June 30, 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 June 30, 2024 .

On September 10, 2024, we entered into a $1.5 billion unsecured five-year Second Amended and Restated Credit Agreement (“Credit Agreement”) that amended and restated our then-existing $1.5 billion unsecured revolving credit facility with $125.0 million of outstanding borrowings at September 30, 2024.

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, 2024 .

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

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We believe our primary sources of liquidity, including funds generated from operations, cash and cash equivalents and our $1.5 billion revolving credit facility, will be sufficient to satisfy our cash requirements and stockholder return activities over the next 12 months and beyond.

As of June 30, 2024, we had $350.8 million in cash and cash equivalents and our net debt-to-total capital ratio was 9.4%, up from 0.8% as of December 31, 2023.

As of June 30, 2024, we had $400.3 million of debt obligations coming due before our $1.5 billion revolving credit facility matures on September 3, 2025.

As of September 30, 2024, we had $314.6 million in cash and cash equivalents and our net debt-to-total capital ratio was 11.5%, up from 0.8% as of December 31, 2023.

As of September 30, 2024, we had $401.4 million of debt obligations coming due before our $1.5 billion revolving credit facility matures on September 10, 2029.

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 .

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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 June 30, 2024.

The covenants under the Credit Agreement include, among other things, a financial maintenance covenant that requires us to comply with a maximum total net leverage ratio.

We were in compliance with the financial maintenance covenant in our Credit Agreement at September 30, 2024.

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

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Goodwill and Other Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.17 billion at June 30, 2024, or approximately 21% of total assets and 28% of total equity.

Additionally, other intangible assets, net amounted to $1.04 billion at June 30, 2024, or approximately 10% of total assets and 14% of total equity.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.17 billion at September 30, 2024, or approximately 21% of total assets and 29% of total equity.

Additionally, other intangible assets, net amounted to $1.03 billion at September 30, 2024, or approximately 10% of total assets and 14% 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.

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

During the quarter ended June 30, 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.

During the quarter ended September 30, 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.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 .

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 https://investor.reliance.com .

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

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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