INVESTOR PRESENTATION SEPTEMBER 2015

Transcription

1 INVESTOR PRESENTATION SEPTEMBER 2015

2 FORWARD LOOKING STATEMENTS This Presentation contains certain statements that are, or may be deemed to be, forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of Forward looking statements in this Presentation may include, but are not limited to, discussions of our business strategies and our expectations concerning future results of operations, margins, profitability, liquidity and capital resources. In some cases, you can identify forwardlooking statements by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" and "continue," the negative of these terms, and similar expressions. These forward looking statements are based on management's estimates, projections and assumptions as of today s date that may not prove to be accurate. 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, those disclosed in reports we have filed with the Securities and Exchange Commission (the "SEC"). As a result, these statements speak only as of the date that they are made, and Reliance disclaims any and all obligations to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Important risks and uncertainties about our business can be found in our Annual Report on Form 10 K for the year ended December 31, 2014 filed with the SEC. PAGE 2 ::

3 INVESTMENT HIGHLIGHTS The largest metals service center company in North America Diversification of products, customers and geography reduces volatility in operating performance Focus on maximizing profits and manage working capital to maximize cash flow and reduce debt Demonstrated ability to grow existing businesses and also identify and make accretive acquisitions Experienced management team with solid track record PAGE 3 ::

4 INTRODUCTION TO RELIANCE A Fortune 500 company founded in 1939 in Los Angeles; IPO in 1994 NYSE listed company with over $10.45 billion in net sales in 2014 The largest metals service center company in North America Growth through acquisition of nearly 60 service center companies since 1994 IPO, including Metals USA in April 2013, our largest to date Provides value added metals processing services More than 300 locations in 13 countries Distributes a full line of over 100,000 products to more than 125,000 customers, with no customer accounting for >1.4% of sales in 2014 PAGE 4 ::

5 RELIANCE HAS SCALE IN A HIGHLY FRAGMENTED MARKET $221.6 BILLION U.S. METALS WHOLESALE INDUSTRY (2014) ~4.4% Reliance ~5.6% 3 Next Largest Service Centers ~10,600 metal wholesale locations in the U.S operated by ~7,500 companies in 2014 Reliance s U.S. revenues of $9.8 billion in 2014 accounted for ~4.4% of the entire U.S. market ~90% Other Service Centers Reliance s scale results in significant purchasing power with U.S. mills and improved margins PAGE 5 :: SOURCE: IBISWORLD INC. S FEBRUARY 2015 REPORT ON THE U.S WHOLESALING INDUSTRY.

6 THE ROLE OF THE SERVICE CENTER Acquires products from primary metals producers (mills) and provides value added services to process metals to customer specifications Utilizes specialized equipment to process metals, which requires high volume production to achieve cost efficiencies End customers generally not willing or able to invest in the necessary technology and equipment to process metals Customers purchase from service centers to obtain valueadded metals processing, readily available inventory, reliable and timely delivery, flexible order size and quality control Service centers provide value added services that lower costs, increase efficiencies and improve quality PAGE 6 ::

7 KEY RELIANCE DIFFERENTIATORS Diversification reduces volatility Focus on small customers and small orders for higher margins vs. large volume Minimal contract sales mitigates impact of changing metal prices Decentralized operating model retains local brand equity while leveraging Reliance s scale RELIANCE CAPABILITIES (1) END CUSTOMER STATS (1) Services include: Slitting, Cutting, Sawing, Leveling, Shearing, Blanking, Burning, Trepanning, Toll processing Just in time inventory management ~40% of orders delivered next day 100,000+ products 125,000+ customers; no customer >1.4% of sales ~97% of sales from repeat customers ~5,865,000 orders; $1,780 average order value; average 23,640 transactions per business day ~45% of orders include processing PAGE 7 :: (1) NOTE: AS OF AND FOR THE FISCAL YEAR ENDED, DECEMBER 31, 2014.

8 TRACK RECORD OF GROWTH ANNUAL NET SALES AND TONS SOLD $12, $10, Revenue ($m) $8,000 $6,000 $4, Tons sold (m) $2, $ Tons Sold (in millions) Revenue (in millions) 5 Year Net Sales CAGR ( ): 14.5% PAGE 8 ::

9 HIGHLY DIVERSIFIED NET SALES (1) NET SALES BY GEOGRAPHY NET SALES BY COMMODITY Midwest: 31% Southeast: 18% West/Southwest: 14% California: 10% International: 8% Northeast: 6% Mid-Atlantic: 6% Pacific Northwest: 4% Mountain 3% Carbon steel: 52% Aluminum: 19% Stainless steel: 14% Alloy: 7% Other: 6% Toll processing: 2% PAGE 9 :: (1) NOTE: FOR THE SECOND QUARTER ENDED JUNE 30, 2015.

10 HIGHLY DIVERSIFIED NET SALES (1) (CONTINUED) NET SALES BY PRODUCT Carbon Steel Plate: 12% Carbon Steel Structurals: 10% Carbon Steel Tubing: 8% Carbon Steel Bar: 7% Hot Rolled Steel Sheet & Coil: 7% Galvanized Steel Sheet & Coil: 5% Cold Rolled Steel Sheet & Coil: 3% Aluminum Bar & Tube: 6% Heat-Treated Aluminum Plate: 6% Common Alloy Aluminum Sheet & Coil: 5% Common Alloy Aluminum Plate: 1% Heat-Treated Aluminum Sheet & Coil: 1% Stainless Steel Bar & Tube: 6% Stainless Steel Sheet & Coil: 6% Stainless Steel Plate: 2% Alloy Bar, Rod & Tube: 6% Alloy Plate, Sheet & Coil: 1% Miscellaneous: 6% PAGE 10:: (1) NOTE: FOR THE SECOND QUARTER ENDED JUNE 30, Toll Processing: 2%

11 END MARKET DIVERSIFICATION MITIGATES VOLATILITY Sector Current Management Assessment Market Drivers Aerospace Strong Airplane build rates and backlog Automotive (1) Strong Consumer confidence; Regulatory (CAFÉ) Energy Under pressure Oil and gas rig counts; decline in oil prices Heavy Industry Steady Industrial production; U.S. economy Non residential Construction Improving North American industrial construction; ABI; housing recovery PAGE 11 :: (1) PRIMARILY TOLL PROCESSING.

12 GROSS PROFIT MARGINS TRACK CLOSELY TO INDUSTRIAL DISTRIBUTORS Proven track record of maintaining strong gross margins throughout industry cycles 35.0% $2,500 Gross Margin (%) 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% $2,000 $1,500 $1,000 $500 RS Avg. Selling Price / Ton Sold 0.0% RS Avg. Selling Price/Ton Sold RS GM (%) Avg Industrial Distributor GM (%) Avg Service Center GM (%) Avg U.S. Mill GM (%) $0 NOTE: INDUSTRIAL DISTRIBUTOR AVERAGE INCLUDES: W.W. GRAINGER, MSC INDUSTRIAL, WESCO INT L, WATSCO, MRC GLOBAL, AND ANIXTER INT L. MILLS AVERAGE INCLUDES: U.S. STEEL, NUCOR, AK STEEL, ALLEGHENY TECHNOLOGIES, COMMERCIAL METALS CO., STEEL DYNAMICS, ALCOA, AND KAISER. PAGE 12:: METALS SERVICE CENTERS AVERAGE INCLUDES: A.M. CASTLE, OLYMPIC STEEL, WORTHINGTON, RUSSEL METALS AND RYERSON HOLDING CORP.

13 Q FINANCIAL HIGHLIGHTS Q (1) Q (2) Q (3) Net Sales $2.42 B $2.61 B $2.62 B Gross profit margin 27.1% 25.7% 25.7% Operating income margin 6.6% 6.5% 6.7% Net income $90.2 M $101.3 M $96.5 M Non GAAP EPS $1.21 $1.30 $1.30 Tons sold 2.4% compared to Q Average selling price per ton sold 5.2% compared to Q % compared to Q % compared to Q (1) NOTE: FOR THE THREE MONTHS ENDED, JUNE 30, (2) NOTE: FOR THE THREE MONTHS ENDED, MARCH 31, PAGE 13:: (3) NOTE: FOR THE THREE MONTHS ENDED, DECEMBER 31, 2014.

14 HEALTHY CASH FLOW & BALANCE SHEET PROVIDES FINANCIAL FLEXIBILITY FY /31/13 FY /31/14 1H 2015 (1) 6/30/15 Cash flow from operations $633 M $356 M $464 M Capital Expenditures $168 M $190 M $77 M Dividends Paid $97 M $109 M $61 M Stock Repurchases N/A $50 M $200 M Long term debt $2,055 M $2,208 M $2,094 M Total Reliance shareholders equity $3,875 M $4,099 M $4,032 M Net debt to capital 34.1% 34.9% 33.9% Credit facility amount available to borrow $961 M $766 M $856 M PAGE 14:: (1) NOTE: AS OF AND FOR THE SIX MONTHS ENDED, JUNE 30, 2015.

15 CAPITAL ALLOCATION PHILOSOPHY Acquisitions: Continue to be a consolidator in highly fragmented market by making strategic acquisitions of well managed metals service centers and processors CapEx: Make strategic investments in the business to support customers and facilitate organic growth Dividends: Raise our regular quarterly dividend over time as our preferred way of returning capital to shareholders Share Buybacks During the third quarter of 2014, our Board of Directors approved an extension of the existing share repurchase program through December 31, 2017 Repurchased $200 million of common stock year to date as of June 30, 2015 PAGE 15::

16 TWO PRONGED GROWTH STRATEGY Acquisitions 59 acquisitions completed since 1994 IPO Consistent valuation methodology of 12 15% return on investment based on normalized pretax income Immediately accretive with positive cash flow Strong management teams with high levels of integrity that remain in place Brand name stays in the community Businesses that provide high levels of quality and customer service Organic Open facilities in new markets Expand existing facilities Add/upgrade processing equipment Extend capabilities to local markets ~$200 million capital expenditure budget for 2015 PAGE 16::

17 HOW WE OPTIMIZE POST ACQUISITION IMPROVE INVENTORY TURNS, GROSS PROFIT & OPERATING MARGINS Assess and adjust buying and selling practices and implement operating efficiencies to improve financial results GENERALLY ENABLE ACQUIRED COMPANY TO CONTINUE TO OPERATE AS A STAND ALONE COMPANY Strong management teams remain intact Preserve local customer relationships and brand equity Provide entrepreneurial setting to allow management teams to build on past successes BENEFIT OF RELIANCE S EXISTING SUPPLIER RELATIONSHIPS BUILD VALUE OVER TIME BY REINVESTING IN OUR BUSINESSES PAGE 17::

18 DIVIDENDS & SHARE REPURCHASES ENHANCE SHAREHOLDER VALUE QUARTERLY CASH DIVIDENDS PAID $0.50 $0.40 $0.30 $0.20 $0.10 $ Axis Title $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 STOCK PERFORMANCE Axis Title 56 years of consecutive quarterly cash dividends Increased regular dividend 22 times since 1994 IPO Most recent increase of 14% to $0.40 per share of common stock announced in the first quarter of 2015 Dividend payments increased 7,094% since 1994 IPO Stock value CAGR of 15% at June 30, 2015 since 1994 IPO Repurchased $200 million of common stock year to date through June 30, 2015 at average cost of $58.17 per share PAGE 18::

19 RELIANCE S MODEL IS SIMILAR TO INDUSTRIAL DISTRIBUTORS Strong and consistent margin profile Logistics expertise Disciplined inventory management Operates in fragmented market Diversified end market exposure / scale Sticky customer relationships Strong balance sheet and liquidity PAGE 19::

20 BUT TRADES AT A DISCOUNT Operating Margin (FY 2014) 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% AXE GWW MRC RS WCC WSO MSM 4.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Revenue Growth: 3-Year CAGR ( ) P/E NTM EV/EBITDA NTM RS 11.5x 7.4x Industrial Distributors AXE 13.1x 7.8x GWW 16.8x 9.0x MRC 34.5x 11.6x MSM 16.7x 9.6x WCC 10.8x 7.3x WSO 22.0x 11.8x AVG. 19.0x 9.5x PAGE 22:: NOTE: EQUITY MARKET DATA AS OF AUGUST 24, SOURCE: S&P CAPITAL IQ.

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