10-Q 1 rs-20210930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                           to                          

Commission file number: 001-13122

Graphic

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

95-1142616

(I.R.S. Employer

Identification No.)

350 South Grand Avenue, Suite 5100

Los Angeles, California

90071

(Address of principal executive offices, including zip code)

(213) 687-7700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.001 par value

RS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer  

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  

As of October 29, 2021, 62,654,519 shares of the registrant’s common stock, $0.001 par value, were outstanding.

RELIANCE STEEL & ALUMINUM CO.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

1

Item 1.

Financial Statements

Unaudited Consolidated Balance Sheets

1

Unaudited Consolidated Statements of Income

2

Unaudited Consolidated Statements of Comprehensive Income

3

Unaudited Consolidated Statements of Equity

4

Unaudited Consolidated Statements of Cash Flows

5

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II — OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

SIGNATURES

29

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares which are reflected in thousands and par value)

September 30,

December 31,

2021

    

2020*

ASSETS

Current assets:

Cash and cash equivalents

$

638.4

$

683.5

Accounts receivable, less allowance for credit losses of $28.0 at September 30, 2021 and $19.0 at December 31, 2020

1,693.5

926.3

Inventories

1,877.8

1,420.4

Prepaid expenses and other current assets

74.3

80.5

Income taxes receivable

2.1

Total current assets

4,284.0

3,112.8

Property, plant and equipment:

Land

256.2

260.1

Buildings

1,266.2

1,240.0

Machinery and equipment

2,208.6

2,107.8

Accumulated depreciation

(1,928.4)

(1,815.7)

Property, plant and equipment, net

1,802.6

1,792.2

Operating lease right-of-use assets

199.8

204.0

Goodwill

1,935.3

1,935.2

Intangible assets, net

919.5

947.1

Cash surrender value of life insurance policies, net

30.8

43.7

Other assets

80.4

71.8

Total assets

$

9,252.4

$

8,106.8

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

519.4

$

259.3

Accrued expenses

117.0

88.9

Accrued compensation and retirement costs

239.6

165.8

Accrued insurance costs

40.8

42.0

Current maturities of long-term debt and short-term borrowings

4.9

6.0

Current maturities of operating lease liabilities

48.9

51.0

Income taxes payable

36.5

Total current liabilities

1,007.1

613.0

Long-term debt

1,641.4

1,638.9

Operating lease liabilities

151.9

154.1

Long-term retirement costs

105.8

95.8

Other long-term liabilities

22.3

26.7

Deferred income taxes

456.0

455.6

Commitments and contingencies

Equity:

Preferred stock, $0.001 par value: 5,000 shares authorized; none issued or outstanding

Common stock and additional paid-in capital, $0.001 par value and 200,000 shares authorized

Issued and outstanding shares — 62,694 at September 30, 2021 and 63,600 at December 31, 2020

0.1

0.1

Retained earnings

5,943.5

5,193.2

Accumulated other comprehensive loss

(82.9)

(77.9)

Total Reliance stockholders’ equity

5,860.7

5,115.4

Noncontrolling interests

7.2

7.3

Total equity

5,867.9

5,122.7

Total liabilities and equity

$

9,252.4

$

8,106.8

* Amounts derived from audited financial statements.

See accompanying notes to unaudited consolidated financial statements.

1

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

    

2020

    

2021

    

2020

Net sales

$

3,847.4

$

2,085.6

$

10,104.6

$

6,677.8

Costs and expenses:

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

2,636.3

1,409.5

6,857.6

4,606.3

Warehouse, delivery, selling, general and administrative ("SG&A")

606.8

449.2

1,688.6

1,410.4

Depreciation and amortization

56.7

56.4

172.1

170.8

Impairment of long-lived assets

10.0

107.9

3,299.8

1,925.1

8,718.3

6,295.4

Operating income

547.6

160.5

1,386.3

382.4

Other (income) expense:

Interest expense

15.6

15.7

47.0

47.2

Other (income) expense, net

(0.6)

17.8

3.6

23.1

Income before income taxes

532.6

127.0

1,335.7

312.1

Income tax provision

135.9

28.7

340.6

70.2

Net income

396.7

98.3

995.1

241.9

Less: net income attributable to noncontrolling interests

1.0

0.7

3.4

2.4

Net income attributable to Reliance

$

395.7

$

97.6

$

991.7

$

239.5

Earnings per share attributable to Reliance stockholders:

Diluted

$

6.15

$

1.51

$

15.35

$

3.66

Basic

$

6.25

$

1.53

$

15.61

$

3.71

Shares used in computing earnings per share:

Diluted

64,350

64,688

64,617

65,503

Basic

63,275

63,758

63,526

64,578

Cash dividends per share

$

0.6875

$

0.6250

$

2.0625

$

1.8750

See accompanying notes to unaudited consolidated financial statements.

2

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

    

2020

   

2021

   

2020

Net income

$

396.7

$

98.3

$

995.1

$

241.9

Other comprehensive (loss) income:

Foreign currency translation (loss) gain

(8.3)

11.5

(5.0)

(11.2)

Postretirement benefit plan adjustments, net of tax

15.8

19.5

Total other comprehensive (loss) income

(8.3)

27.3

(5.0)

8.3

Comprehensive income

388.4

125.6

990.1

250.2

Less: comprehensive income attributable to noncontrolling interests

1.0

0.7

3.4

2.4

Comprehensive income attributable to Reliance

$

387.4

$

124.9

$

986.7

$

247.8

See accompanying notes to unaudited consolidated financial statements.

3

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except number of shares which are reflected in thousands and per share amounts)

Reliance Stockholders’ Equity

Common Stock and Additional

Accumulated Other

Paid-In Capital

Retained

Comprehensive

Noncontrolling

Shares

    

Amount

    

Earnings

    

(Loss) Income

    

Interests

    

Total

Balance at January 1, 2020

66,854

$

122.2

$

5,189.5

$

(105.1)

$

7.5

$

5,214.1

Net income

61.7

1.2

62.9

Other comprehensive loss

(31.4)

(31.4)

Noncontrolling interest purchased

(6.9)

(1.1)

(8.0)

Dividend to noncontrolling interest holder

(0.5)

(0.5)

Stock-based compensation, net

111

3.8

3.8

Stock options exercised

6

0.3

0.3

Repurchase of common shares

(3,330)

(119.3)

(180.7)

(300.0)

Cash dividends — $0.625 per share and dividend equivalents

(41.9)

(41.9)

Balance at March 31, 2020

63,641

0.1

5,028.6

(136.5)

7.1

4,899.3

Net income

80.2

0.5

80.7

Other comprehensive income

12.4

12.4

Stock-based compensation, net

13

9.0

9.0

Cash dividends — $0.625 per share and dividend equivalents

(39.9)

(39.9)

Balance at June 30, 2020

63,654

9.1

5,068.9

(124.1)

7.6

4,961.5

Net income

97.6

0.7

98.3

Other comprehensive income

27.3

27.3

Dividend to noncontrolling interest holder

(0.8)

(0.8)

Stock-based compensation, net

104

2.2

2.2

Repurchase of common shares

(2)

(0.2)

(0.2)

Cash dividends — $0.625 per share and dividend equivalents

(41.0)

(41.0)

Balance at September 30, 2020

63,756

$

11.1

$

5,125.5

$

(96.8)

$

7.5

$

5,047.3

Balance at January 1, 2021

63,600

$

0.1

$

5,193.2

$

(77.9)

$

7.3

$

5,122.7

Net income

266.9

1.3

268.2

Other comprehensive loss

(1.2)

(1.2)

Dividend to noncontrolling interest holder

(2.4)

(2.4)

Stock-based compensation, net

107

6.5

6.5

Cash dividends — $0.6875 per share and dividend equivalents

(44.8)

(44.8)

Balance at March 31, 2021

63,707

6.6

5,415.3

(79.1)

6.2

5,349.0

Net income

329.1

1.1

330.2

Other comprehensive income

4.5

4.5

Stock-based compensation, net

8

23.1

23.1

Repurchase of common shares

(147)

(24.0)

(24.0)

Cash dividends — $0.6875 per share and dividend equivalents

(43.8)

(43.8)

Balance at June 30, 2021

63,568

5.7

5,700.6

(74.6)

7.3

5,639.0

Net income

395.7

1.0

396.7

Other comprehensive loss

(8.3)

(8.3)

Dividend to noncontrolling interest holder

(1.1)

(1.1)

Stock-based compensation, net

12

16.3

16.3

Repurchase of common shares

(886)

(21.9)

(109.1)

(131.0)

Cash dividends — $0.6875 per share and dividend equivalents

(43.7)

(43.7)

Balance at September 30, 2021

62,694

$

0.1

$

5,943.5

$

(82.9)

$

7.2

$

5,867.9

See accompanying notes to unaudited consolidated financial statements.

4

RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Nine Months Ended

September 30,

2021

    

2020

Operating activities:

Net income

$

995.1

$

241.9

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

172.1

170.8

Impairment of long-lived assets

107.9

Provision for credit losses

10.6

8.3

Deferred income tax benefit

(0.2)

(26.7)

Stock-based compensation expense

55.1

29.9

Postretirement benefit plan settlement expense

19.4

Other

(1.3)

10.3

Changes in operating assets and liabilities (excluding effect of businesses acquired):

Accounts receivable

(774.6)

114.4

Inventories

(453.3)

221.9

Prepaid expenses and other assets

47.7

81.9

Accounts payable and other liabilities

354.4

(37.2)

Net cash provided by operating activities

405.6

942.8

Investing activities:

Purchases of property, plant and equipment

(178.9)

(134.7)

Proceeds from sales of property, plant and equipment

26.8

6.2

Other

3.9

0.8

Net cash used in investing activities

(148.2)

(127.7)

Financing activities:

Net short-term debt (repayments) borrowings

(0.8)

0.7

Proceeds from long-term debt borrowings

1,673.7

Principal payments on long-term debt

(0.3)

(1,615.4)

Debt issuance costs

(6.4)

Dividends and dividend equivalents paid

(132.3)

(122.8)

Share repurchases

(155.0)

(300.2)

Noncontrolling interest purchased

(8.0)

Other

(13.4)

(16.5)

Net cash used in financing activities

(301.8)

(394.9)

Effect of exchange rate changes on cash and cash equivalents

(0.7)

(2.9)

(Decrease) increase in cash and cash equivalents

(45.1)

417.3

Cash and cash equivalents at beginning of year

683.5

174.3

Cash and cash equivalents at end of period

$

638.4

$

591.6

Supplemental cash flow information:

Interest paid during the period

$

39.1

$

34.6

Income taxes paid during the period, net

$

297.3

$

68.3

See accompanying notes to unaudited consolidated financial statements.

5

RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

Note 1. Basis of Presentation

Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, our financial statements reflect all material adjustments, which are of a normal recurring nature, necessary for presentation of financial statements for interim periods in accordance with U.S. GAAP. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results for the full year ending December 31, 2021. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2020, included in the Reliance Steel & Aluminum Co. (“Reliance,” the “Company,” “we,” “our” or “us”) Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Our consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. Our investments in unconsolidated subsidiaries are recorded under the equity method of accounting.

Note 2.  Impact of Recently Issued Accounting Guidance

Impact of Recently Issued Accounting Standards—Adopted

Income Taxes—In December 2019, the Financial Accounting Standards Board (“FASB”) issued accounting changes that simplify the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. We adopted the accounting changes on January 1, 2021. The adoption of these accounting changes did not have a material impact on our consolidated financial statements.

Impact of Recently Issued Accounting Standards—Not Yet Adopted

Reference Rate Reform—In March 2020, the FASB issued accounting changes that provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The accounting changes may be applied prospectively through December 31, 2022. The Company expects to adopt this guidance for any contracts that are modified as a result of reference rate reform. We currently do not expect the transition from LIBOR to have a material impact on our consolidated financial statements.

Note 3.  Acquisition

On October 1, 2021, we acquired Merfish United, Inc. (“Merfish United”), a leading master distributor of carbon steel pipes, copper tubing, plastic pipe, electrical conduit and related products that are distributed to its independent wholesale distributor customers across a variety of end markets in the United States. Merfish United, headquartered in Ipswich, Massachusetts, serves 47 U.S. states through its twelve strategically located distribution centers. Merfish United’s broad product offering includes full lines of steel pipe, copper tubing, plastic pipe, electrical conduit and related products for the

6

commercial, residential, municipal and industrial building markets. No sales of Merfish United were included in our net sales for the nine months ended September 30, 2021. Merfish United’s unaudited total assets and revenues as of September 30, 2021 and for the twelve months then ended were approximately $215 million and $600 million, respectively.

The allocation of the total purchase price for our acquisition of Merfish United to the fair values of the assets acquired and liabilities assumed is not presented as the accounting is incomplete due to the transaction closing in the fourth quarter of 2021.

We funded our acquisition of Merfish United in the fourth quarter of 2021 with cash on hand.

Note 4. Revenues

The following table presents our net sales disaggregated by product and service. Certain sales taxes and value-added taxes collected from customers are excluded from our reported net sales.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

    

2020

    

2021

    

2020

(in millions)

Carbon steel

$

2,406.4

$

1,100.8

$

6,163.7

$

3,490.8

Stainless steel

621.3

341.8

1,613.7

1,083.1

Aluminum

534.9

394.3

1,496.5

1,299.9

Alloy

143.8

91.0

396.0

342.3

Toll processing and logistics

119.7

105.7

350.9

279.6

Other and eliminations

21.3

52.0

83.8

182.1

Total

$

3,847.4

$

2,085.6

$

10,104.6

$

6,677.8

Note 5. Goodwill

The change in the carrying amount of goodwill is as follows:

(in millions)

Balance at January 1, 2021

$

1,935.2

Foreign currency translation gain

0.1

Balance at September 30, 2021

$

1,935.3

We had no accumulated impairment losses related to goodwill at September 30, 2021.

7

Note 6. Intangible Assets, net

Intangible assets, net consisted of the following:

September 30, 2021

December 31, 2020

Weighted Average

Gross

Gross

Amortizable

Carrying

Accumulated

Carrying

Accumulated

Life in Years

    

Amount

  

Amortization

  

Amount

  

Amortization

(in millions)

Intangible assets subject to amortization:

Covenants not to compete

5.0

$

0.7

$

(0.5)

$

0.7

$

(0.5)

Customer lists/relationships

14.9

623.2

(424.1)

623.2

(396.7)

Software

10.0

8.1

(8.1)

8.1

(8.1)

Other

5.1

0.6

(0.6)

1.1

(0.9)

632.6

(433.3)

633.1

(406.2)

Intangible assets not subject to amortization:

Trade names

720.2

720.2

$

1,352.8

$

(433.3)

$

1,353.3

$

(406.2)

Amortization expense for intangible assets was $27.5 million and $30.3 million for the nine months ended September 30, 2021 and 2020, respectively. Foreign currency translation losses related to intangible assets, net, were $0.1 million and $2.8 million for the nine months ended September 30, 2021 and 2020, respectively.

In the nine months ended September 30, 2020, we recognized impairment losses of $67.8 million on our trade names and $30.7 million on our customer lists/relationships intangible assets, mainly related to certain of our energy-related (oil and natural gas) businesses. See Note 13—Impairment and Restructuring Charges” for further discussion.

The following is a summary of estimated future amortization expense for the remaining three months of 2021 and each of the succeeding five years:

(in millions)

2021 (remaining three months)

$

9.0

2022

35.9

2023

31.6

2024

28.1

2025

23.9

2026

14.4

Note 7. Debt

Debt consisted of the following:

September 30,

December 31,

2021

    

2020

(in millions)

Unsecured revolving credit facility maturing September 3, 2025

$

$

Senior unsecured notes due April 15, 2023

500.0

500.0

Senior unsecured notes due August 15, 2025

400.0

400.0

Senior unsecured notes due August 15, 2030

500.0

500.0

Senior unsecured notes due November 15, 2036

250.0

250.0

Other notes and revolving credit facilities

12.6

13.7

Total

1,662.6

1,663.7

Less: unamortized discount and debt issuance costs

(16.3)

(18.8)

Less: amounts due within one year and short-term borrowings

(4.9)

(6.0)

Total long-term debt

$

1,641.4

$

1,638.9

8

Unsecured Credit Facility

On September 3, 2020, we entered into a $1.5 billion unsecured five-year Amended and Restated Credit Agreement (“Credit Agreement”) that amended and restated our then existing $1.5 billion unsecured revolving credit facility. As of September 30, 2021, borrowings under the Credit Agreement were available at variable rates based on LIBOR plus 1.25% or the bank prime rate plus 0.25% and we currently pay a commitment fee at an annual rate of 0.20% on the unused portion of the revolving credit facility. The applicable margins over LIBOR and base rate borrowings, along with commitment fees, are subject to adjustment every quarter based on our total net leverage ratio, as defined in the Credit Agreement. All borrowings under the Credit Agreement may be prepaid without penalty. Our Credit Agreement includes provisions to change the reference rate to the then-prevailing market convention for similar agreements if a replacement rate for LIBOR is necessary during its term.

As of September 30, 2021 and December 31, 2020, we had no outstanding borrowings on the revolving credit facility. As of September 30, 2021, we had $16.0 million of letters of credit issued on the revolving credit facility.

Senior Unsecured Notes

On November 20, 2006, we entered into an indenture (the “2006 Indenture”) for the issuance of $600.0 million of unsecured debt securities. The total issuance was comprised of (a) $350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid on November 15, 2016 and (b) $250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing on November 15, 2036.

On April 12, 2013, we entered into an indenture (the “2013 Indenture”) for the issuance of $500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing on April 15, 2023. 

On August 3, 2020, we entered into an indenture (the “2020 Indenture” and, together with the 2013 Indenture and 2006 Indenture, the “Indentures”) for the issuance of $900.0 million of unsecured debt securities. The total issuance was comprised of (a) $400.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 1.30% per annum, maturing on August 15, 2025 and (b) $500.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 2.15% per annum, maturing on August 15, 2030.

Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. If we experience a change in control accompanied by a downgrade in our credit rating, we will be required to make an offer to repurchase each series of the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest.

Other Notes, Revolving Credit and Letter of Credit/Letters of Guarantee Facilities

Revolving credit facilities with a combined credit limit of $13.4 million are in place for operations in Asia with combined outstanding balances of $4.6 million and $5.4 million as of September 30, 2021 and December 31, 2020, respectively.

Various industrial revenue bonds had combined outstanding balances of $8.0 million and $8.3 million as of September 30, 2021 and December 31, 2020, respectively, and have maturities through 2027.

A standby letters of credit/letters of guarantee agreement with one of the lenders under our Credit Agreement provides letters of credit or letters of guarantee in an amount not to exceed $50.0 million in the aggregate. As of September 30, 2021, a total of $23.0 million of letters of credit/guarantee were issued on the facility.

Covenants

The Credit Agreement and the Indentures include customary representations, warranties, covenants and events of default provisions. The covenants under the Credit Agreement include, among other things, two financial maintenance

9

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, 2021.

Note 8.  Leases

Our metals service center leases are comprised of processing and distribution facilities, equipment, trucks and trailers, ground leases and other leased spaces, such as depots, sales offices, storage and data centers. We also lease various office spaces. Our leases of facilities and other spaces expire at various times through 2045 and our ground leases expire at various times through 2068. Nearly all of our leases are operating leases. Information regarding our insignificant finance leases is not included as it is not meaningful to an understanding of our lease obligations.  

The following is a summary of our lease cost:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

    

2020

    

2021

    

2020

(in millions)

Operating lease cost

$

19.9

$

20.4

$

58.8

$

61.9

Supplemental cash flow and balance sheet information is presented below:

Nine Months Ended

September 30,

    

2021

    

2020

(in millions)

Supplemental cash flow information:

Cash payments for operating leases                 

$

58.9

$

61.5

Right-of-use assets obtained in exchange for operating lease obligations                

$

36.6

$

35.8

September 30,

December 31,

2021

2020

Other lease information:

Weighted average remaining lease term—operating leases

6.1 years

5.7 years

Weighted average discount rate—operating leases