SEC Filings

10-Q
RELIANCE STEEL & ALUMINUM CO filed this Form 10-Q on 11/13/2000
Entire Document
 
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industries being among the higher priced products sold by the Company.

Total gross profit increased to $118,398 for the quarter ended September 30,
2000, an increase of 13.0% over the same period of 1999. The increase in gross
profit was primarily due to the inclusion of the gross profit of the
Acquisitions. Expressed as a percentage of sales, gross profit decreased to
26.7% in 2000 from 27.6% in 1999. This reduction in gross margin was anticipated
as selling prices and material costs for most products began to decline in the
second quarter of 2000, which, along with slowing demand in certain regions and
industries, has caused several other service center companies to have excess
inventory. As these conditions persist through the fourth quarter of 2000,
margins are expected to continue to tighten due to the impact on the market from
inventory reductions.

Warehouse, delivery, selling and general and administrative ("operating")
expenses increased $8,721, or 12.4%, in the third quarter of 2000 compared to
the corresponding period of 1999. The dollar increase in expenses reflects the
increase in sales volume for the 2000 period, which includes the sales and
related expenses of the Acquisitions. As a percent of sales, these expenses
decreased to 17.8% in the 2000 period, from 18.5% in the comparable 1999 period.
This improvement was primarily due to the increase in average selling prices
discussed above.

Depreciation and amortization expense increased 9.6% during the three months
ended September 30, 2000 compared to the corresponding period of 1999. This
increase is primarily due to the inclusion of depreciation expense related to
the assets of the Acquisitions and the amortization of goodwill resulting from
the Acquisitions.

Interest expense increased 21.2% in the 2000 quarter as compared to the 1999
quarter. This increase is primarily due to a higher level of outstanding debt in
the 2000 quarter, related to funding the acquisitions made subsequent to the
corresponding 1999 quarter, which include Arrow Metals, Hagerty, Toma and
United. The outstanding debt also increased due to borrowings to repurchase
$12,360 of the Company's common stock during 2000, and to fund working capital
needs.

Equity earnings from 50%-owned company decreased by $828 during the 2000 quarter
as compared to the 1999 quarter. This decrease was primarily due to the weakness
in demand experienced in the Pacific Northwest region, related mainly to the
truck trailer and rail car markets.

The effective income tax rate was 40.0% for the three months ended September 30,
2000, compared to 39.5% for the 1999 period. The 1999 period reflected the
estimated benefit of the tax free life insurance proceeds received under the
Company's Supplemental Executive Retirement Plan ("SERP").

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999 (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS)

Consolidated net sales increased 15.7% to $1,315,396, for the nine months ended
September 30, 2000, compared to the first nine months of 1999. The 2000 period
includes an increase of 10.3% in tons sold and an increase in the average
selling price per ton of 4.8%. The increase in tons sold was primarily due to
the inclusion of the sales of the Acquisitions during the nine months ended
September 30, 2000. The increase also reflects improvements in sales to the
semiconductor and electronics industries, along with recent improvements in
sales to the aerospace industry. Declining demand has recently been noted in the
Pacific Northwest and Eastern regions of the United States, along with the
continued slow demand in the truck trailer and rail car markets. The average
selling price increase of 4.8% for the 2000 period resulted mainly from general
price increases for most products during the 2000 period as compared to the 1999
period, along with shifts in product mix to the higher priced products discussed
above.

Same store sales of $1,161,953 increased by 8.3%, which reflects tons sold
consistent with the 1999 period, and an increase in the average selling price
per ton of 8.3%. The increase in the average selling price is primarily due to
increased selling prices of most of the Company's products during the 2000
period, as compared to the 1999 period. Increased sales to the semiconductor and
related industries, and to the aerospace industry, also contributed to the


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