RELIANCE, INC. [RS] Filings

10-Q 1 rs-20240630x10q.htm 10-Q

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 June 30, 2024

☐	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


Reliance, Inc. (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.)

16100 N. 71st Street, Suite 400

Scottsdale, Arizona 85254

(Address of principal executive offices, including zip code)

(480) 564-5700

(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 July 26, 2024, 55,015,528 shares of the registrant’s common stock, $0.001 par value, were outstanding.

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RELIANCE, INC.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		Unaudited Consolidated Statements of Income	1
		Unaudited Consolidated Statements of Comprehensive Income	2
		Unaudited Consolidated Balance Sheets	3
		Unaudited Consolidated Statements of Cash Flows	4
		Unaudited Consolidated Statements of Equity	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	24
	Item 4.	Controls and Procedures	24

PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
	Item 3.	Defaults Upon Senior Securities	25
	Item 4.	Mine Safety Disclosures	25
	Item 5.	Other Information	25
	Item 6.	Exhibits	26

SIGNATURE			27

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

RELIANCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net sales	$	3,643.3	$	3,880.3	$	7,288.1	$	7,845.6

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		2,557.3		2,657.6		5,073.9		5,396.9
Warehouse, delivery, selling, general and administrative		667.7		650.6		1,339.2		1,301.9
Depreciation and amortization		66.6		60.8		130.2		121.9
		3,291.6		3,369.0		6,543.3		6,820.7

Operating income		351.7		511.3		744.8		1,024.9

Other (income) expense:
Interest expense		9.7		9.7		19.4		20.6
Other income, net		(7.7)		(9.3)		(20.5)		(15.1)
Income before income taxes		349.7		510.9		745.9		1,019.4
Income tax provision		81.4		124.6		173.8		248.7
Net income		268.3		386.3		572.1		770.7
Less: net income attributable to noncontrolling interests		0.5		1.2		1.4		2.5
Net income attributable to Reliance	$	267.8	$	385.1	$	570.7	$	768.2

Earnings per share attributable to Reliance stockholders:
Basic	$	4.71	$	6.56	$	9.99	$	13.07
Diluted	$	4.67	$	6.49	$	9.90	$	12.92

Shares used in computing earnings per share:
Basic		56,878		58,688		57,109		58,760
Diluted		57,394		59,346		57,638		59,440

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income	$	268.3	$	386.3	$	572.1	$	770.7
Other comprehensive (loss) income:
Foreign currency translation (loss) gain		(7.4)		0.7		(23.1)		1.2
Postretirement benefit plan adjustments, net of tax		(0.8)		(0.8)		(1.7)		(1.5)
Total other comprehensive loss		(8.2)		(0.1)		(24.8)		(0.3)
Comprehensive income		260.1		386.2		547.3		770.4
Less: comprehensive income attributable to noncontrolling interests		0.5		1.2		1.4		2.5
Comprehensive income attributable to Reliance	$	259.6	$	385.0	$	545.9	$	767.9

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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


	June 30,		December 31,
	2024		2023*
ASSETS
Current assets:
Cash and cash equivalents	$	350.8	$	1,080.2
Accounts receivable, less allowance for credit losses of $27.6 at June 30, 2024 and $24.9 at December 31, 2023		1,650.9		1,472.4
Inventories		2,288.7		2,043.2
Prepaid expenses and other current assets		132.3		140.4
Income taxes receivable		9.8		35.6
Total current assets		4,432.5		4,771.8
Property, plant and equipment:
Land		292.8		281.7
Buildings		1,627.1		1,510.9
Machinery and equipment		2,813.6		2,700.4
Accumulated depreciation		(2,295.9)		(2,244.6)
Property, plant and equipment, net		2,437.6		2,248.4
Operating lease right-of-use assets		241.7		231.6
Goodwill		2,167.0		2,111.1
Intangible assets, net		1,036.2		981.1
Cash surrender value of life insurance policies, net		34.4		43.8
Other long-term assets		98.7		92.5
Total assets	$	10,448.1	$	10,480.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	458.4	$	410.3
Accrued expenses		146.6		118.5
Accrued compensation and retirement benefits		173.8		213.9
Accrued insurance costs		47.0		44.4
Current maturities of long-term debt		0.3		0.3
Current maturities of operating lease liabilities		57.4		56.2
Total current liabilities		883.5		843.6
Long-term debt		1,143.3		1,141.9
Operating lease liabilities		187.6		178.9
Long-term retirement benefits		27.7		25.1
Other long-term liabilities		71.3		64.0
Deferred income taxes		501.7		494.0
Total liabilities		2,815.1		2,747.5
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—55,627 at June 30, 2024 and 57,271 at December 31, 2023		0.1		0.1
Retained earnings		7,724.4		7,798.9
Accumulated other comprehensive loss		(101.5)		(76.7)
Total Reliance stockholders’ equity		7,623.0		7,722.3
Noncontrolling interests		10.0		10.5
Total equity		7,633.0		7,732.8
Total liabilities and equity	$	10,448.1	$	10,480.3

* Derived from audited financial statements.

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Six Months Ended
	June 30,
	2024		2023
Operating activities:
Net income	$	572.1	$	770.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		130.2		121.9
Stock-based compensation expense		26.9		31.6
Other		3.7		2.2
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable		(142.2)		(163.3)
Inventories		(141.0)		(202.1)
Prepaid expenses and other assets		84.5		71.1
Accounts payable and other liabilities		(41.6)		47.6
Net cash provided by operating activities		492.6		679.7

Investing activities:
Acquisitions, net of cash acquired		(346.5)		(24.1)
Purchases of property, plant and equipment		(206.9)		(233.1)
Other		(8.6)		2.2
Net cash used in investing activities		(562.0)		(255.0)

Financing activities:
Net short-term debt repayments		—		(2.2)
Principal payment on long-term debt		—		(505.7)
Cash dividends and dividend equivalents		(127.9)		(120.6)
Share repurchases		(519.3)		(112.8)
Taxes paid related to net share settlement of restricted stock units		(24.1)		(37.3)
Other		17.2		(1.8)
Net cash used in financing activities		(654.1)		(780.4)
Effect of exchange rate changes on cash and cash equivalents		(5.9)		(1.4)
Decrease in cash and cash equivalents		(729.4)		(357.1)
Cash and cash equivalents at beginning of year		1,080.2		1,173.4
Cash and cash equivalents at end of the period	$	350.8	$	816.3

Supplemental cash flow information:
Interest paid during the period	$	18.0	$	23.7
Income taxes paid during the period, net	$	147.7	$	191.0

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per share amounts)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Total equity, beginning balances	$	7,942.7	$	7,354.4	$	7,732.8	$	7,095.9

Common stock and additional paid-in capital:
Beginning balances		0.1		0.1		0.1		0.1
Stock-based compensation		13.9		18.1		26.9		31.6
Taxes paid related to net share settlement of restricted stock units		(0.2)		(0.1)		(13.2)		(7.5)
Repurchase of common shares		(13.7)		(18.0)		(13.7)		(24.1)
Ending balances		0.1		0.1		0.1		0.1

Retained earnings:
Beginning balances		8,025.6		7,432.1		7,798.9		7,173.6
Net income attributable to Reliance		267.8		385.1		570.7		768.2
Cash dividends and dividend equivalents		(62.6)		(58.6)		(127.9)		(120.6)
Taxes paid related to net share settlement of restricted stock units		—		—		(10.9)		(29.8)
Repurchase of common shares		(505.6)		(55.9)		(505.6)		(88.7)
Excise tax on repurchase of common shares		(0.8)		(0.6)		(0.8)		(0.6)
Ending balances		7,724.4		7,702.1		7,724.4		7,702.1

Accumulated other comprehensive loss:
Beginning balances		(93.3)		(86.5)		(76.7)		(86.3)
Other comprehensive loss		(8.2)		(0.1)		(24.8)		(0.3)
Ending balances		(101.5)		(86.6)		(101.5)		(86.6)

Total Reliance stockholders' equity, ending balances		7,623.0		7,615.6		7,623.0		7,615.6

Noncontrolling interests:
Beginning balances		10.3		8.7		10.5		8.5
Comprehensive income		0.5		1.2		1.4		2.5
Acquisition		0.3		—		0.3		—
Dividends paid		(1.1)		—		(2.2)		(1.1)
Ending balances		10.0		9.9		10.0		9.9

Total equity, ending balances	$	7,633.0	$	7,625.5	$	7,633.0	$	7,625.5

Cash dividends declared per common share	$	1.10	$	1.00	$	2.20	$	2.00

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation

In February 2024, we changed our corporate name from Reliance Steel & Aluminum Co. to Reliance, Inc. We will not distinguish between our prior and current corporate name and will refer to our current corporate name throughout this Quarterly Report on Form 10-Q. The accompanying unaudited consolidated financial statements include the accounts of Reliance, Inc. (formerly Reliance Steel & Aluminum Co.) and its subsidiaries (collectively “Reliance”, the “Company”, “we”, “our” or “us”). These 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, the consolidated 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. Interim results are not necessarily indicative of the results for a full year. All significant intercompany accounts and transactions have been eliminated. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. Investments in unconsolidated subsidiaries are recorded under the equity method of accounting. These consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and accompanying notes included in Reliance’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

We have recast certain prior period amounts in the statement of equity for the six months ended June 30, 2023, to conform to the current presentation. The recasting of the prior period information did not have an impact on the ending balances presented.

Inventories

The majority of our inventory is valued using the last-in, first-out (“LIFO”) method, which is not in excess of market. Under this method, older costs are included in inventory, which may be higher or lower than current costs. We estimate the effect of LIFO on interim periods by allocating the projected year-end LIFO calculation to interim periods on a pro rata basis.

Impact of Recently Issued Accounting Standards—Not Yet Adopted

Segment Reporting—In November 2023, the Financial Accounting Standards Board (“FASB”) issued changes that require disclosure of significant expenses and other segment items included in the measure of segment profitability that the chief operating decision maker uses to assess segment performance and make decisions about resource allocation. Under these changes, companies like Reliance with a single reportable segment are required to provide the same disclosures as companies with multiple segments. These changes will be effective for our fiscal years beginning January 1, 2024 and quarterly periods beginning January 1, 2025, with early adoption permitted. As the guidance only requires additional disclosure, there will be no impact to our results of operations, financial condition or cash flows.

Improvement to Income Tax Disclosures—In December 2023, the FASB issued changes to expand the disclosure requirements for income taxes. The changes require disaggregated information about our effective tax rate reconciliation and income taxes paid. These changes will be effective for our fiscal years beginning January 1, 2025, with early adoption

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permitted. As the guidance only requires additional disclosure, there will be no impact to our results of operations, financial condition or cash flows.

Note 2. Acquisitions

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. Headquartered in Tifton, Georgia, Cooksey Steel operates three locations, servicing a diverse range of customers.

On April 1, 2024, we acquired American Alloy Steel, Inc. (“American Alloy”) with cash on hand. American Alloy, headquartered in Houston, Texas, operates five metals service centers and a plate fabrication business in the U.S. American Alloy is a distributor of specialty carbon and alloy steel plate and round bar, including pressure vessel quality (PVQ) material.

On April 1, 2024, we acquired, with cash on hand, Mid-West Materials, Inc. (“MidWest Materials”), a flat-rolled steel service center that primarily services North American original equipment manufacturers. 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.

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

Our completed acquisitions increase our capacity and enhance our product, customer and geographic diversification. We have not diversified outside our core business of providing metal distribution and processing solutions since our inception.

The preliminary allocations of the purchase prices for our completed 2024 acquisitions to the fair values of the assets acquired and liabilities assumed were as follows:


	(in millions)
Cash	$	5.6
Accounts receivable		43.2
Inventories		109.9
Prepaid expenses and other current assets		1.0
Property, plant and equipment		99.7
Operating lease right-of-use assets		1.2
Goodwill		57.0
Intangible assets subject to amortization		36.5
Intangible assets not subject to amortization		38.9
Total assets acquired		393.0
Deferred taxes		7.1
Operating lease liabilities		1.2
Other current and long-term liabilities		32.3
Total liabilities assumed		40.6
Noncontrolling interest		0.3
Net assets acquired	$	352.1

The completion of the purchase price allocations for our 2024 acquisitions are pending the completion of certain purchase price adjustments based on intangible asset valuations and various pre-acquisition period income tax returns.

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Summary purchase price allocation information for all acquisitions

All of the acquisitions discussed in this note have been accounted for under the acquisition method of accounting and, accordingly, each purchase price has been allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of each acquisition. The accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date. The consolidated balance sheets reflect the allocations of each acquisition’s purchase price as of June 30, 2024. The measurement periods for purchase price allocations do not exceed 12 months from the acquisition date.

As part of the purchase price allocations for the 2024 acquisitions, we allocated $38.9 million to the trade names acquired. We determined that all of the trade names acquired in connection with these acquisitions had indefinite lives since their economic lives are expected to approximate the life of each company acquired. We recorded other identifiable intangible assets related to customer relationships for the 2024 acquisitions of $36.3 million with weighted average lives of 13.3 years and non-compete agreements of $0.2 million with lives of 5.0 years. The goodwill arising from our 2024 acquisitions consists largely of expected strategic benefits, including enhanced financial and operational scale, as well as expansion of acquired product and processing know-how across our enterprise. Goodwill of $28.8 million from our 2024 acquisitions is expected to be deductible for income tax purposes.

Unaudited pro forma financial information for all acquisitions

The pro forma summary financial results present the consolidated results of operations as if our 2024 acquisitions had occurred as of January 1, 2023, after the effect of certain adjustments, including amortization of inventory step-down to fair value adjustments included in cost of sales, depreciation and amortization of certain identifiable property, plant and equipment and intangible assets.

The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had the 2024 acquisitions been made as of January 1, 2023, or of any potential results which may occur in the future.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

	(in millions, except per share amounts)
Pro forma:
Net sales	$	3,643.3	$	4,018.9	$	7,385.1	$	8,122.0
Net income attributable to Reliance	$	266.3	$	395.1	$	571.7	$	787.5
Earnings per share attributable to Reliance stockholders:
Basic	$	4.68	$	6.73	$	10.01	$	13.40
Diluted	$	4.64	$	6.66	$	9.92	$	13.25

The pro forma amounts presented for the second quarter and six months ended June 30, 2023 include $2.2 million and $4.7 million, respectively, of non-recurring inventory step-down to fair value adjustments amortization credits.

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Note 3. Revenues

The following table presents our net sales disaggregated by product and service:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

	(in millions)
Carbon steel	$	2,025.7	$	2,141.2	$	4,038.6	$	4,269.7
Aluminum		587.8		639.7		1,183.9		1,309.9
Stainless steel		521.8		604.0		1,081.7		1,261.3
Alloy		166.8		186.8		338.7		378.2
Toll processing and logistics		161.2		154.5		319.0		309.9
Copper and brass		87.0		77.9		162.3		159.9
Other and eliminations		93.0		76.2		163.9		156.7
Total	$	3,643.3	$	3,880.3	$	7,288.1	$	7,845.6

Note 4. Goodwill

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


	(in millions)
Balance at January 1, 2024	$	2,111.1
Acquisitions		57.0
Purchase price allocation adjustments		2.1
Effect of foreign currency translation		(3.2)
Balance at June 30, 2024	$	2,167.0

We had no accumulated impairment losses related to goodwill at June 30, 2024 and December 31, 2023.

Note 5. Intangible Assets, Net

Intangible assets, net consisted of the following:


		June 30, 2024				December 31, 2023
	Weighted Average	Gross				Gross
	Amortizable	Carrying		Accumulated		Carrying		Accumulated
	Life in Years	Amount		Amortization		Amount		Amortization

		(in millions)
Intangible assets subject to amortization:
Customer lists/relationships	14.0	$	751.5	$	(539.9)	$	716.0	$	(520.5)
Backlog of orders	7.9		22.1		(7.2)		22.9		(6.0)
Other	9.3		10.2		(9.5)		10.0		(9.5)
			783.8		(556.6)		748.9		(536.0)
Intangible assets not subject to amortization:
Trade names			809.0		—		768.2		—
		$	1,592.8	$	(556.6)	$	1,517.1	$	(536.0)

Intangible assets recorded in connection with our 2024 acquisitions were $75.4 million, including $38.9 million allocated to the trade names acquired, which are not subject to amortization. See Note 2—“Acquisitions” for further discussion of intangible assets recorded in the preliminary purchase price allocations for our 2024 acquisitions.

Amortization expense for intangible assets was $21.1 million and $23.0 million for the six months ended June 30, 2024 and 2023, respectively. Foreign currency translation loss on Intangible assets, net was $1.4 million for the six months ended June 30, 2024 compared to foreign currency translation gain of $1.2 million for the six months ended June 30, 2023.

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The following is a summary of estimated future amortization expense:


	(in millions)
2024 (remaining six months)	$	21.4
2025		38.9
2026		29.5
2027		28.8
2028		27.3
Thereafter		81.3
	$	227.2

Note 6. Debt

Debt consisted of the following:


	June 30,		December 31,
	2024		2023

	(in millions)
Unsecured revolving credit facility maturing September 3, 2025	$	—	$	—
Senior unsecured notes, interest payable semi-annually at 1.30%, effective rate of 1.53%, maturing August 15, 2025		400.0		400.0
Senior unsecured notes, interest payable semi-annually at 2.15%, effective rate of 2.27%, maturing August 15, 2030		500.0		500.0
Senior unsecured notes, interest payable semi-annually at 6.85%, effective rate of 6.91%, maturing November 15, 2036		250.0		250.0
Other notes		1.4		1.4
Total		1,151.4		1,151.4
Less: unamortized discount and debt issuance costs		(7.8)		(9.2)
Less: amounts due within one year		(0.3)		(0.3)
Total long-term debt	$	1,143.3	$	1,141.9

The weighted average effective interest rate on the Company’s outstanding borrowings as of June 30, 2024 and December 31, 2023 was 3.02%.

Unsecured Credit Facility

On September 3, 2020, we entered into a $1.5 billion unsecured five-year Amended and Restated Credit Agreement that amended and restated our then-existing $1.5 billion unsecured revolving credit facility. As of June 30, 2024, borrowings under the Credit Agreement were available at variable rates based on the Secured Overnight Financing Rate (“SOFR”) plus 1.10% or the bank prime rate and we currently pay a commitment fee at an annual rate of 0.175% on the unused portion of the revolving credit facility. The applicable margins over SOFR and base rate borrowings, along with commitment fees, are subject to adjustment every quarter based on our leverage ratio, as defined in the Credit Agreement. All borrowings under the Credit Agreement may be prepaid without penalty.

As of June 30, 2024 and December 31, 2023, we had no outstanding borrowings on the revolving credit facility. We had $1.4 million of letters of credit outstanding under the revolving credit facility as of June 30, 2024 and December 31, 2023.

Senior Unsecured Notes

Under the indentures for each series of our senior notes (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

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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

A revolving credit facility with a credit limit of $7.5 million is in place for an operation in Asia with no outstanding balance as of June 30, 2024 and December 31, 2023.

Various industrial revenue bonds had combined outstanding balances of $1.4 million as of June 30, 2024 and December 31, 2023 and have maturities through 2027.

We have a $50.0 million standby letters of credit/letters of guarantee agreement with one of the lenders under our Credit Agreement. A total of $42.6 million and $40.9 million were outstanding under this facility as of June 30, 2024 and December 31, 2023, respectively.

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 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.

Note 7. Leases

Our metals service center leases are comprised of processing and distribution facilities, equipment, automobiles, 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; we have an insignificant amount of recognized finance right-of-use assets and obligations.

The following is a summary of our lease cost:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

					(in millions)
Operating lease cost	$	25.9	$	23.4	$	51.1	$	47.0

Supplemental cash flow and balance sheet information is presented below:


	Six Months Ended
	June 30,
	2024		2023

	(in millions)
Supplemental cash flow information:
Cash payments for operating leases	$	51.3	$	46.7
Right-of-use assets obtained in exchange for operating lease obligations	$	54.0	$	35.6

	June 30,		December 31,
	2024		2023
Other lease information:
Weighted average remaining lease term—operating leases		6.2 years		5.8 years
Weighted average discount rate—operating leases		4.5%		4.3%

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Maturities of operating lease liabilities as of June 30, 2024 are as follows:


	(in millions)
2024 (remaining six months)	$	34.9
2025		60.8
2026		47.9
2027		37.4
2028		29.7
Thereafter		74.4
Total operating lease payments		285.1
Less: imputed interest		(40.1)
Total operating lease liabilities	$	245.0

Note 8. Income Taxes

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. 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.

Note 9. Equity

Stock-Based Compensation Plans

We make annual grants of long-term equity incentive awards to officers and key employees in the forms of service-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) that each have approximately 3-year vesting periods. Each PSU includes the right to receive, based on a sliding scale, up to a maximum of two shares of our common stock for each vested PSU, that is tied to achieving a return on assets target over a 3-year measurement period and continued service. We also grant the non-management members of our Board of Directors fully vested stock awards. The fair values of the RSUs, PSUs and stock awards are determined based on the closing stock price of our common stock on the grant date.

A summary of the status of our unvested RSUs and PSUs as of June 30, 2024 and changes during the six months then ended is as follows:


		Weighted
		Average
		Grant Date
	RSU and PSU	Fair Value
	Aggregate Units	Per Unit
Unvested at January 1, 2024	437,239	$	213.06
Granted⁽¹⁾	170,611		289.07
Vested	(5,194)		208.03
Cancelled or forfeited	(27,238)		226.17
Unvested at June 30, 2024	575,418	$	235.02
Shares reserved for future grants (all plans)	1,332,023

(1)	Comprised of 100,669 RSUs and 69,942 PSUs granted in February 2024. The RSUs cliff vest on December 1, 2026 and the PSUs vest upon the completion of a 3-year performance period ending December 31, 2026.

As of June 30, 2024, there was $88.0 million of total unrecognized compensation cost related to unvested RSUs and PSUs that is expected to be recognized, net of actual forfeitures and cancellations, over a weighted average period of 1.8 years.

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Dividends

On July 23, 2024, our Board of Directors declared the 2024 third quarter cash dividend of $1.10 per share of common stock, payable on August 30, 2024 to stockholders of record as of August 16, 2024.

During the second quarters of 2024 and 2023, we declared and paid quarterly dividends of $1.10 and $1.00 per share, or $62.5 million and $58.6 million in total, respectively. During the six months ended June 30, 2024 and 2023, we declared and paid aggregate quarterly dividends of $2.20 and $2.00 per share, or $125.7 million and $117.6 million in total, respectively. In addition, we paid $2.2 million and $3.0 million in dividend equivalents with respect to vested RSUs and PSUs during the six months ended June 30, 2024 and 2023, respectively.

Share Repurchases

Our share repurchase activity during the six months ended June 30, 2024 and 2023 was as follows:


	2024					2023
		Average Cost					Average Cost
	Shares	Per Share		Amount		Shares	Per Share		Amount
				(in millions)					(in millions)
First quarter	—	$	—	$	—	160,224	$	242.86	$