Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The terms “Company,” “Reliance,” “we,” “our,” and “us” refer to Reliance, Inc. and all its subsidiaries that are consolidated in accordance with U.S. generally accepted accounting principles, unless otherwise indicated.
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, business strategies, acquisitions, and expectations concerning our future growth and profitability and our ability to generate industry leading returns for our stockholders, as well as future demand and metals 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 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. We caution readers not to place undue reliance on forward-looking statements.
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, changes in domestic and worldwide political and economic conditions due to, among other factors, U.S. and foreign trade policies and the impact on economic conditions, inflation and the increasing likelihood of an economic recession that could materially impact us, our customers and suppliers, metals pricing, and demand for our products and services; U.S. and foreign trade policies affecting metals product markets and pricing specifically; the possibility that the expected benefits of acquisitions and capital expenditures may not materialize as expected; and the impacts of labor constraints and supply chain disruptions. Deteriorations in economic conditions as a result of tariffs or trade barriers, economic policies, inflation, economic recession, slowing growth, outbreaks of infectious disease, or geopolitical conflicts such as in Ukraine and the Middle East, 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”). Important risks and uncertainties about our business can be found elsewhere in this Quarterly Report on Form 10-Q and in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC and in other documents Reliance files or furnishes with the SEC. The Company cannot at this time predict all of the impacts of domestic and foreign tariffs and trade policies, inflation, product price fluctuations, economic recession, outbreaks of infectious disease, geopolitical conflicts and related economic effects, but these factors, individually or in any combination, could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
The statements contained in this quarterly report on Form 10-Q speak only as of the date that they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based. 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.
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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, 2024 and other sections of this quarterly report on Form 10-Q, including the consolidated financial statements and related notes contained in Item 1.
Overview
Underlying demand in the first quarter of 2025 was healthy in the majority of our end markets, most notably in non-residential construction, despite ongoing uncertainty in both domestic and international economic policy. Our tons sold were a record in the first quarter of 2025, however our operating results declined year-over-year, mainly due to lower metals prices and gross profit margin. The declining metals pricing trend we experienced throughout 2024 and into February 2025 reversed with strong metals pricing increases throughout March that held into April.
Our tons sold in the first quarter of 2025 increased 9% year-over-year, reaching a new record of 1.63 million tons, supported by solid organic growth and contributions from our 2024 acquisitions. We believe our shipments also benefited from our long-standing relationships with our domestic mill suppliers and certain customers accelerating their purchases in advance of anticipated carbon steel and aluminum product price increases. Our same-store tons sold increased 5.6% compared to the first quarter of 2024, surpassing the industry-wide decline of 0.5% reported by the Metals Service Center Institute (“MSCI”).
Our gross profit margin of 29.7% for the first quarter of 2025 was strong despite a decline from 31.0% in the first quarter of 2024.
Earnings per diluted share were $3.74 and $5.23 for the first quarters of 2025 and 2024, respectively. Our lower earnings per share year-over-year is mainly due to lower metals prices despite record tons sold in the first quarter of 2025 and an 8% reduction in outstanding shares as a result of share repurchases in the past four quarters.
Cash flow from operations of $64.5 million in the first quarter of 2025 decreased from $126.3 million in the first quarter of 2024 mainly due to lower net income, partially offset by a decrease in working capital investment. Seasonally, the first quarter typically requires the largest working capital investment of the four quarters.
Returns to stockholders in the first quarter of 2025 totaled $318.4 million, comprised of $253.2 million of share repurchases and $65.2 million of cash dividends, which reflected a 9.1% increase in our regular quarterly dividend rate effective in the first quarter of 2025.
Cash used in investing activities in the first quarter of 2025 were mainly comprised of organic growth activities related to capital expenditures of $86.9 million in the first quarter of 2025, which declined from $108.7 million in the first quarter of 2024.
Acquisitions
2024 Acquisitions
We acquired each of Cooksey Iron & Metal Company on February 1, 2024; American Alloy Steel, Inc. and Mid-West Materials, Inc. on April 1, 2024; and certain assets of the FerrouSouth division of Ferragon Corporation on August 16, 2024, with cash on hand. Included in our net sales for the first quarters of 2025 and 2024 were combined net sales of $99.4 million and $16.1 million, respectively, from our 2024 acquisitions.
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Results of Operations
The following sets forth certain income statement data for the first quarters of 2025 and 2024 (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):
Three Months Ended March 31,
2025
2024
% of
% of
$
Net Sales
$
Net Sales
Net sales
$
3,484.7
100.0
%
$
3,644.8
100.0
%
Cost of sales (exclusive of depreciation and amortization expense shown below)
2,451.4
70.3
2,516.6
69.0
Gross profit (1)
1,033.3
29.7
1,128.2
31.0
Warehouse, delivery, selling, general and administrative expense (“SG&A”)
690.2
19.8
671.5
18.4
Depreciation expense
58.3
1.7
53.3
1.5
Amortization expense
10.4
0.3
10.3
0.3
Operating income
$
274.4
7.9
%
$
393.1
10.8
%
Net income attributable to Reliance
$
199.7
5.7
%
$
302.9
8.3
%
Diluted earnings per share attributable to Reliance stockholders
$
3.74
$
5.23
(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. About half of our orders are basic distribution with no processing services performed. For the remainder of our sales orders, we perform “first-stage” processing, which is generally not labor intensive as we are simply cutting the metal to size. Because of this, the amount of related labor and overhead, including depreciation and amortization, is not significant and is excluded from cost of sales. Therefore, our cost of sales is substantially comprised of the cost of the material we sell. We use gross profit and gross profit margin as shown above as measures of operating performance. Gross profit and gross profit margin are important operating and financial measures as their fluctuations can have a significant impact on our earnings. Gross profit and gross profit margin, as presented, are not necessarily comparable with similarly titled measures for other companies.
First Quarter Ended March 31, 2025 Compared to First Quarter Ended March 31, 2024
Net Sales
Three Months Ended March 31,
Dollar
Percentage
2025
2024
Change
Change
(dollars in millions)
Net sales
$
3,484.7
$
3,644.8
$
(160.1)
(4.4)
%
Net sales, same-store
$
3,385.3
$
3,628.7
$
(243.4)
(6.7)
%
Three Months Ended March 31,
Tons
Percentage
2025
2024
Change
Change
(tons in thousands)
Tons sold
1,628.9
1,494.0
134.9
9.0
%
Tons sold, same-store
1,565.7
1,483.3
82.4
5.6
%
Three Months Ended March 31,
Price
Percentage
2025
2024
Change
Change
Average selling price per ton sold
$
2,143
$
2,442
$
(299)
(12.2)
%
Average selling price per ton sold, same-store
$
2,166
$
2,449
$
(283)
(11.6)
%
Our tons sold and average selling price per ton sold exclude our toll processed tons. Our average selling price per ton sold includes intercompany transactions that are eliminated from our consolidated net sales. Same-store amounts exclude the results of our 2024 acquisitions.
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We grew our same-store tons sold and our total tons sold increased to a new quarterly record, surpassing the declining trend in industry shipments as reported by the MSCI. Our record tons sold benefited from solid organic growth, supported by healthy underlying demand in the majority of our end markets, our availability of metals products, contributions from our 2024 acquisitions, and some customers accelerating purchases in advance of anticipated higher metal prices from announced tariffs in March 2025.
Our net sales declined year-over-year due to declines in major commodity selling prices which outweighed record tons sold. Since we primarily purchase and sell our inventories in the spot market, our average selling prices generally fluctuate with the changes in replacement 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 first quarter of 2025, changes in carbon steel prices have the most significant impact on changes in our 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 March 31,
Sales by
Average Selling
Product
Price Per
(% of
Ton Sold
Total Sales)
(% Change)
Carbon steel
53%
(14.5)
%
Aluminum
17%
(1.2)
%
Stainless steel
14%
(10.7)
%
Alloy
4%
(3.4)
%
Our 2024 acquisitions did not significantly impact the selling prices of our major commodity products.
Cost of Sales and Gross Profit
Three Months Ended March 31,
2025
2024
% of
% of
Dollar
Percentage
$
Net Sales
$
Net Sales
Change
Change
(dollars in millions)
Cost of sales
$
2,451.4
70.3
%
$
2,516.6
69.0
%
$
(65.2)
(2.6)
%
Gross profit
$
1,033.3
29.7
%
$
1,128.2
31.0
%
$
(94.9)
(8.4)
%
LIFO expense (income), included in cost of sales
$
25.0
0.7
%
$
(50.0)
(1.4)
%
$
75.0
The decrease in cost of sales was attributable to a lower average cost per ton sold, mainly due to declines in replacement costs for carbon steel products, partially offset by an increase in tons sold.
Gross profit decreased from the first quarter of 2024 mainly due to a lower average selling price per ton sold that outweighed record tons sold, and to a lesser extent a decrease in gross profit margin.
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 includes a LIFO method inventory valuation reserve of $459.9 million as of March 31, 2025.
Our gross profit margin declined from elevated levels in the first quarter of 2024, but remained at a strong level, as our average selling price per ton sold troughed mid-quarter and improved in March to prices that were higher than when the quarter began. Although our major commodity selling prices were higher in the first quarter of 2024, they declined throughout the quarter, which resulted in $50.0 million of LIFO income that increased gross profit margin. In the first quarter of 2025, our major commodity selling prices increased which resulted in $25.0 million of LIFO expense that lowered gross profit margin.
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See “Net Sales” above for trends in both demand and costs of our products, and product pricing.
Expenses
Three Months Ended March 31,
2025
2024
% of
% of
Dollar
Percentage
$
Net Sales
$
Net Sales
Change
Change
(dollars in millions)
SG&A expense
$
690.2
19.8
%
$
671.5
18.4
%
$
18.7
2.8
%
SG&A expense, same-store
$
665.7
19.7
%
$
670.0
18.5
%
$
(4.3)
(0.6)
%
Our same-store SG&A expense in the first quarter of 2025 decreased slightly compared to the first quarter of 2024 mainly due to lower incentive-based compensation, resulting from lower profitability, offset by higher costs associated with wage inflation and increased headcount related to our organic growth activities. SG&A expense as a percentage of sales increased due to a lower average selling price per ton sold; however, operational leverage improved as SG&A expense per ton sold declined nearly 6%.
Operating Income
Three Months Ended March 31,
2025
2024
% of
% of
Dollar
Percentage
$
Net Sales
$
Net Sales
Change
Change
(dollars in millions)
Operating income
$
274.4
7.9
%
$
393.1
10.8
%
$
(118.7)
(30.2)
%
Operating income declined due to lower gross profit, driven by lower metals pricing and gross profit margin, that outweighed an increase in same-store tons sold, improved operational leverage, and contributions from our 2024 acquisitions. Our operating income margin declined as a result of a lower average selling price per ton sold and gross profit margin that outweighed improved operational leverage.
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 rates for the first quarters of 2025 and 2024 were 23.6% and 23.3%, respectively. The differences between our effective income tax rates and the U.S. federal statutory rate of 21.0% were mainly due to state income taxes.
Financial Condition
Operating Activities
Net cash provided by operations of $64.5 million in the first quarter of 2025 decreased $61.8 million from $126.3 million in the first quarter of 2024. The decrease was mainly due to a $103.3 million decline in net income, partially offset by changes in operating assets and liabilities. Changes in operating assets and liabilities (exclusive of acquisitions) used cash of $223.4 million in the first quarter of 2025 compared to $256.9 million in the first quarter of 2024.
Investing Activities
Net cash used in investing activities of $87.6 million in the first quarter of 2025 decreased $89.8 million from $177.4 million in the first quarter of 2024. The decrease was mainly due to $53.7 million spent on an acquisition in the first quarter
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of 2024 and a $21.8 million decrease in capital expenditures. The majority of our capital expenditures in the first quarters of 2025 and 2024 were related to growth activities.
Financing Activities
Net cash used in financing activities of $18.6 million in the first quarter of 2025 decreased $71.7 million from $90.3 million in the first quarter of 2024. The decrease was mainly the result of increased net debt borrowings on our revolving credit facility, partially offset by increased share repurchases. Net debt borrowings were $330.0 million in the first quarter of 2025 compared to no net debt borrowings in the first quarter of 2024. In the first quarter of 2025, we repurchased $253.2 million of our common stock compared to no repurchases in the first quarter of 2024. Our returns to stockholders also included a 9.1% increase in our quarterly dividend rate in February 2025; however, our total dividend payments of $65.2 million in the first quarter 2025 were lower than the $65.3 million paid in the first quarter of 2024 as a result of an approximately 8% reduction in our outstanding common shares from share repurchases in the past four quarters.
On April 21, 2025, our Board of Directors declared the 2025 second quarter cash dividend of $1.20 per share. We have increased our quarterly dividend 32 times since our 1994 IPO, with the most recent increase of 9.1% from $1.10 to $1.20 per share effective in the first quarter of 2025. We have paid quarterly cash dividends on our common stock for 66 consecutive years and have never reduced or suspended our regular quarterly dividend.
Share Repurchase Plan
See Note 10—“Equity ” to our consolidated financial statements for information on our share repurchases.
As of April 25, 2025, we had remaining authorization to repurchase $1.02 billion of our common stock under our $1.5 billion share repurchase program authorized by our Board of Directors on October 22, 2024. The share repurchase program does not obligate us to repurchase any specific number of shares in any prescribed period, does not have a specific expiration date and may be suspended or discontinued at any time.
Debt
We have a $1.5 billion unsecured revolving credit facility with $330.0 million of outstanding borrowings as of March 31, 2025 compared to no outstanding borrowings as of December 31, 2024. We also have an aggregate of $1.15 billion principal amount of senior unsecured note obligations with various maturities through 2036 issued under indentures, including $400.0 million of senior notes due in August 2025 .
See Note 7—“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 $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 March 31, 2025, we had $277.8 million in cash and cash equivalents and our net debt-to-total capital ratio was 14.4%, up from 10.2% as of December 31, 2024.
As of March 31, 2025, we had $401.1 million of debt obligations coming due before our $1.5 billion unsecured revolving credit facility matures on September 10, 2029, including $400.0 million of senior notes due in August 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 approximately $1.17 billion available for borrowing on our unsecured 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. 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 our common stock.
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Covenants
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, 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 under our Credit Agreement as of March 31, 2025.
Seasonality
Some of our customers are in seasonal businesses, especially customers in the construction industry and related businesses. Our overall operations have not shown any material seasonal trends as a result of our geographic, product and customer diversity. Typically, revenues in the months of July, November and December have been lower than in other months because of a reduced number of working days for shipments of our products, resulting from holidays observed by the Company as well as vacation and extended holiday closures at some of our customers. The number of shipping days in each quarter also has an impact on our quarterly sales and profitability. We cannot predict whether period-to-period fluctuations will be consistent with historical patterns. Results of any one or more quarters are therefore not necessarily indicative of annual results.
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 as of March 31, 2025, or approximately 21% of total assets and 30% of total equity. Additionally, other intangible assets, net amounted to $997.0 million as of March 31, 2025, 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. 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
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. 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 quarter ended March 31, 2025, 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, 2024.
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, https://investor.reliance.com . In addition, you may automatically
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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 . Our website address is for informational purposes only and is not intended for use as a hyperlink. We are not incorporating any material on our website into this quarterly report on Form 10-Q.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.