RELIANCE STEEL & ALUMINUM CO [RS] Filings

10-Q 1 rs-20220930x10q.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 September 30, 2022

☐	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


(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 October 28, 2022, 58,690,903 shares of the registrant’s common stock, $0.001 par value, were outstanding.

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RELIANCE STEEL & ALUMINUM CO.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		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	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 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,
	2022		2021*
ASSETS
Current assets:
Cash and cash equivalents	$	643.7	$	300.5
Accounts receivable, less allowance for credit losses of $29.4 at September 30, 2022 and $26.7 at December 31, 2021		1,856.9		1,683.0
Inventories		2,175.8		2,065.0
Prepaid expenses and other current assets		87.3		111.6
Income taxes receivable		47.5		—
Total current assets		4,811.2		4,160.1
Property, plant and equipment:
Land		260.8		260.1
Buildings		1,338.1		1,285.0
Machinery and equipment		2,385.0		2,241.4
Accumulated depreciation		(2,054.1)		(1,949.7)
Property, plant and equipment, net		1,929.8		1,836.8
Operating lease right-of-use assets		217.6		224.6
Goodwill		2,103.9		2,107.6
Intangible assets, net		1,030.4		1,077.7
Cash surrender value of life insurance policies, net		26.9		44.9
Other assets		82.4		84.3
Total assets	$	10,202.2	$	9,536.0

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable	$	481.6	$	453.9
Accrued expenses		160.4		148.2
Accrued compensation and retirement costs		234.9		294.0
Accrued insurance costs		39.5		41.0
Current maturities of long-term debt and short-term borrowings		509.5		5.0
Current maturities of operating lease liabilities		53.3		58.6
Income taxes payable		—		64.3
Total current liabilities		1,479.2		1,065.0
Long-term debt		1,138.8		1,642.0
Operating lease liabilities		165.2		162.5
Deferred compensation and retirement costs		74.1		81.0
Other long-term liabilities		8.9		7.0
Deferred income taxes		480.5		484.8
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—59,022 at September 30, 2022 and 61,806 at December 31, 2021		0.1		0.1
Retained earnings		6,960.5		6,155.3
Accumulated other comprehensive loss		(113.9)		(68.9)
Total Reliance stockholders’ equity		6,846.7		6,086.5
Noncontrolling interests		8.8		7.2
Total equity		6,855.5		6,093.7
Total liabilities and equity	$	10,202.2	$	9,536.0

* Amounts derived from audited financial statements.

See accompanying notes to unaudited consolidated financial statements.

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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,
	2022		2021		2022		2021
Net sales	$	4,247.2	$	3,847.4	$	13,414.2	$	10,104.6

Costs and expenses:
Cost of sales (exclusive of depreciation and amortization shown below)		3,008.2		2,636.3		9,292.7		6,857.6
Warehouse, delivery, selling, general and administrative (SG&A)		630.1		606.8		1,890.6		1,688.6
Depreciation and amortization		60.4		56.7		178.8		172.1
		3,698.7		3,299.8		11,362.1		8,718.3

Operating income		548.5		547.6		2,052.1		1,386.3

Other (income) expense:
Interest expense		15.6		15.6		46.8		47.0
Other expense (income), net		8.9		(0.6)		21.5		3.6
Income before income taxes		524.0		532.6		1,983.8		1,335.7
Income tax provision		129.6		135.9		490.9		340.6
Net income		394.4		396.7		1,492.9		995.1
Less: Net income attributable to noncontrolling interests		0.9		1.0		3.3		3.4
Net income attributable to Reliance	$	393.5	$	395.7	$	1,489.6	$	991.7

Earnings per share attributable to Reliance stockholders:
Basic	$	6.55	$	6.25	$	24.35	$	15.61
Diluted	$	6.45	$	6.15	$	23.98	$	15.35

Shares used in computing earnings per share:
Basic		60,055		63,275		61,175		63,526
Diluted		60,984		64,350		62,114		64,617

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	394.4	$	396.7	$	1,492.9	$	995.1
Other comprehensive (loss) income:
Foreign currency translation loss		(32.0)		(8.3)		(51.3)		(5.0)
Postretirement benefit plan adjustments, net of tax		6.4		—		6.3		—
Total other comprehensive loss		(25.6)		(8.3)		(45.0)		(5.0)
Comprehensive income		368.8		388.4		1,447.9		990.1
Less: Comprehensive income attributable to noncontrolling interests		0.9		1.0		3.3		3.4
Comprehensive income attributable to Reliance	$	367.9	$	387.4	$	1,444.6	$	986.7

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Total equity, beginning balance	$	6,863.1	$	5,639.0	$	6,093.7	$	5,122.7

Common stock and additional paid-in capital:
Beginning balance		0.1		5.7		0.1		0.1
Stock-based compensation		18.6		17.2		48.4		55.1
Common stock withheld related to net share settlements		(4.5)		(0.9)		(21.6)		(9.2)
Repurchase of common shares		(14.1)		(21.9)		(26.8)		(45.9)
Ending balance		0.1		0.1		0.1		0.1

Retained earnings:
Beginning balance		6,942.5		5,700.6		6,155.3		5,193.2
Net income attributable to Reliance		393.5		395.7		1,489.6		991.7
Cash dividends and dividend equivalents		(52.9)		(43.7)		(163.5)		(132.3)
Repurchase of common shares		(322.6)		(109.1)		(520.9)		(109.1)
Ending balance		6,960.5		5,943.5		6,960.5		5,943.5

Accumulated other comprehensive loss:
Beginning balance		(88.3)		(74.6)		(68.9)		(77.9)
Other comprehensive loss		(25.6)		(8.3)		(45.0)		(5.0)
Ending balance		(113.9)		(82.9)		(113.9)		(82.9)

Total Reliance stockholders' equity, ending balance		6,846.7		5,860.7		6,846.7		5,860.7

Noncontrolling interests:
Beginning balance		8.8		7.3		7.2		7.3
Comprehensive income		0.9		1.0		3.3		3.4
Capital contribution		—		—		0.3		—
Dividends paid		(0.9)		(1.1)		(2.0)		(3.5)
Ending balance		8.8		7.2		8.8		7.2

Total equity, ending balance	$	6,855.5	$	5,867.9	$	6,855.5	$	5,867.9

Dividends declared per share	$	0.875	$	0.6875	$	2.625	$	2.0625

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Nine Months Ended
	September 30,
	2022		2021
Operating activities:
Net income	$	1,492.9	$	995.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		178.8		172.1
Provision for credit losses		5.6		10.6
Deferred income tax benefit		(1.1)		(0.2)
Stock-based compensation expense		48.4		55.1
Net loss on life insurance policies and deferred compensation plan assets		22.8		3.2
Postretirement benefit plan settlement expense		2.3		—
Other		1.7		(4.5)
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable		(191.6)		(774.6)
Inventories		(126.6)		(453.3)
Prepaid expenses and other assets		20.0		47.7
Accounts payable and other liabilities		(143.3)		354.4
Net cash provided by operating activities		1,309.9		405.6

Investing activities:
Purchases of property, plant and equipment		(249.7)		(178.9)
Proceeds from sales of property, plant and equipment		9.8		26.8
Other		(4.5)		3.9
Net cash used in investing activities		(244.4)		(148.2)

Financing activities:
Net short-term debt repayments		(0.8)		(0.8)
Principal payments on long-term debt		—		(0.3)
Dividends and dividend equivalents paid		(163.5)		(132.3)
Share repurchases		(547.7)		(155.0)
Payments for taxes related to net share settlements		(21.6)		(9.2)
Other		22.5		(4.2)
Net cash used in financing activities		(711.1)		(301.8)
Effect of exchange rate changes on cash and cash equivalents		(11.2)		(0.7)
Increase (decrease) in cash and cash equivalents		343.2		(45.1)
Cash and cash equivalents at beginning of year		300.5		683.5
Cash and cash equivalents at end of period	$	643.7	$	638.4

Supplemental cash flow information:
Interest paid during the period	$	39.1	$	39.1
Income taxes paid during the period, net	$	596.8	$	297.3

See accompanying notes to unaudited consolidated financial statements.

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RELIANCE STEEL & ALUMINUM CO.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

Note 1. Summary of Significant Accounting Policies

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, 2022 are not necessarily indicative of the results for the full year ending December 31, 2022. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2021, 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. 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.

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.

Inventories

The majority of our inventory is valued using the last-in, first-out (“LIFO”) method, which is not in excess of market. 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.

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. To the extent that, prior to December 31, 2022, we enter into any contract modifications for which the optional expedients are applied, the adoption of this standard is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

Note 2. Acquisitions

2021 Acquisitions

In the fourth quarter of 2021, we acquired each of Merfish United, Inc., Admiral Metals Servicenter Company, Incorporated, Nu-Tech Precision Metals Inc. and Rotax Metals Inc. with cash on hand. Included in our net sales for the nine months ended September 30, 2022 were combined net sales of $681.7 million from our 2021 acquisitions.

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The preliminary allocations of the total purchase for our 2021 acquisitions to the fair values of the assets acquired and liabilities assumed were as follows:


	(in millions)
Cash	$	1.0
Accounts receivable		107.2
Inventories		134.4
Property, plant and equipment		33.6
Operating lease right-of-use assets		29.8
Goodwill		177.0
Intangible assets subject to amortization		116.3
Intangible assets not subject to amortization		51.2
Other current and long-term assets		4.0
Total assets acquired		654.5
Deferred taxes		49.3
Operating lease liabilities		24.6
Other current and long-term liabilities		140.3
Total liabilities assumed		214.2
Net assets acquired	$	440.3

The completion of the purchase price allocations for our 2021 acquisitions are pending the completion of pre-acquisition period tax returns.

Pro forma financial information for all acquisitions

The pro forma summary financial results present the consolidated results of operations as if our 2021 acquisitions had occurred as of January 1, 2021, after the effect of certain adjustments, including depreciation and amortization of certain identifiable property, plant and equipment and intangible assets, and lease cost fair value adjustments.

The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had the 2021 acquisitions been made as of January 1, 2021, or of any potential results which may occur in the future.


	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021

	(in millions, except per share amounts)
Pro forma:
Net sales	$	4,100.8	$	10,780.4
Net income attributable to Reliance	$	435.5	$	1,091.2
Earnings per share attributable to Reliance stockholders:
Basic	$	6.88	$	17.18
Diluted	$	6.77	$	16.89

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Note 3. Revenues

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

	(in millions)
Carbon steel	$	2,371.9	$	2,406.4	$	7,545.2	$	6,163.7
Stainless steel		712.7		621.3		2,284.7		1,613.7
Aluminum		660.3		534.9		2,069.9		1,496.5
Alloy		188.2		143.8		568.5		396.0
Toll processing and logistics		139.5		119.7		414.8		350.9
Copper and brass		81.0		18.1		260.4		49.6
Other and eliminations		93.6		3.2		270.7		34.2
Total	$	4,247.2	$	3,847.4	$	13,414.2	$	10,104.6

Note 4. Goodwill

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


	(in millions)
Balance at January 1, 2022	$	2,107.6
Purchase price allocation adjustments		5.0
Foreign currency translation loss		(8.7)
Balance at September 30, 2022	$	2,103.9

We had no accumulated impairment losses related to goodwill at September 30, 2022 and December 31, 2021.

Note 5. Intangible Assets, net

Intangible assets, net consisted of the following:


		September 30, 2022				December 31, 2021
	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	14.2	$	712.9	$	(467.7)	$	713.0	$	(435.1)
Backlog of orders	7.9		22.0		(2.3)		15.8		(0.2)
Other	9.1		9.9		(9.7)		9.9		(9.4)
			744.8		(479.7)		738.7		(444.7)
Intangible assets not subject to amortization:
Trade names			765.3		—		783.7		—
		$	1,510.1	$	(479.7)	$	1,522.4	$	(444.7)

Certain prior year amounts have been reclassified for consistency with the current period presentation.

Amortization expense for intangible assets was $36.3 million and $27.5 million for the nine months ended September 30, 2022 and 2021, respectively. Foreign currency translation losses related to intangible assets, net were $5.0 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

During the first quarter of 2022, we recorded purchase price adjustments relating to our 2021 acquisitions based on the finalization of intangible asset valuations that decreased trade name intangible assets by $16.9 million, increased the

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Backlog of orders intangible asset by $8.0 million and increased Customer lists/relationships intangible assets by $2.7 million.

The following is a summary of estimated future amortization expense for the remaining three months of 2022 and each of the succeeding five years:


	(in millions)
2022 (remaining three months)	$	11.8
2023		43.5
2024		40.0
2025		35.8
2026		26.3
2027		25.7

Note 6. Debt

Debt consisted of the following:


	September 30,		December 31,
	2022		2021

	(in millions)
Unsecured revolving credit facility maturing September 3, 2025	$	—	$	—
Senior unsecured notes, interest payable semi-annually at 4.50%, effective rate of 4.63%, maturing April 15, 2023		500.0		500.0
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 and revolving credit facilities		11.2		12.4
Total		1,661.2		1,662.4
Less: unamortized discount and debt issuance costs		(12.9)		(15.4)
Less: amounts due within one year and short-term borrowings		(509.5)		(5.0)
Total long-term debt	$	1,138.8	$	1,642.0

The weighted average interest rate on the Company’s outstanding borrowings as of September 30, 2022 and December 31, 2021 was 3.81% and 3.83%, respectively.

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 and includes a $150.0 million letter of credit sublimit. As of September 30, 2022, borrowings under the Credit Agreement were available at variable rates based on LIBOR plus 1.00% 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 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, 2022 and December 31, 2021, we had no outstanding borrowings on the revolving credit facility. As of September 30, 2022 and December 31, 2021, we had $8.3 million and $8.9 million, respectively, of letters of credit outstanding under the revolving credit facility.

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Senior Unsecured Notes

Under the indentures for each series of our senior notes (“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

A revolving credit facility with a credit limit of $7.7 million is in place for an operation in Asia with an outstanding balance of $3.5 million and $4.7 million as of September 30, 2022 and December 31, 2021, respectively.

Various industrial revenue bonds had combined outstanding balances of $7.7 million as of September 30, 2022 and December 31, 2021 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 and/or letters of guarantee in an amount not to exceed $50.0 million in the aggregate. As of September 30, 2022, a total of $21.7 million of letters of credit/guarantee were outstanding under this 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 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, 2022.

Note 7. 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; we have recognized finance right-of-use assets and obligations of less than $1.0 million.

The following is a summary of our lease cost:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

	(in millions)
Operating lease cost	$	23.1	$	19.9	$	69.8	$	58.8

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Supplemental cash flow and balance sheet information is presented below:


	Nine Months Ended
	September 30,
	2022		2021

	(in millions)
Supplemental cash flow information:
Cash payments for operating leases	$	65.4	$	58.9
Right-of-use assets obtained in exchange for operating lease obligations	$	39.0	$	36.6

	September 30,		December 31,
	2022		2021
Other lease information:
Weighted average remaining lease term—operating leases		6.3 years		5.8 years
Weighted average discount rate—operating leases		3.5%		3.3%

Maturities of operating lease liabilities as of September 30, 2022 are as follows:


	(in millions)
2022 (remaining three months)	$	15.8
2023		56.7
2024		46.4
2025		33.8
2026		22.6
Thereafter		71.6
Total operating lease payments		246.9
Less: imputed interest		(28.4)
Total operating lease liabilities	$	218.5

Note 8. Income Taxes

Our effective income tax rate for each of the third quarter and nine months ended September 30, 2022 was 24.7%, compared to 25.5% in the same 2021 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, partially offset by the effects of company-owned life insurance policies.

Note 9. Equity

Dividends

On October 25, 2022, our Board of Directors declared the 2022 fourth quarter cash dividend of $0.875 per share of common stock, payable on December 2, 2022 to stockholders of record as of November 18, 2022.

During the third quarters of 2022 and 2021, we declared and paid quarterly dividends of $0.875 and $0.6875 per share, or $52.5 million and $43.6 million in total, respectively. During the nine months ended September 30, 2022 and 2021, we declared and paid aggregate quarterly dividends of $2.625 and $2.0625 per share, or $160.6 million and $131.2 million in total, respectively. In addition, we paid $2.9 million and $1.1 million in dividend equivalents with respect to vested restricted stock units during the nine months ended September 30, 2022 and 2021, respectively.

Stock-Based Compensation

We make annual grants of long-term 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 have approximately 3-year vesting periods. The PSUs include the right to receive a maximum payout of two shares of our common stock based on performance goals tied to achieving a three-year return on assets result and include service criteria. We also grant the non-

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employee members of our Board of Directors stock awards that are fully vested on the grant date. 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.

In the nine months ended September 30, 2022 and 2021, we made payments of $21.6 million and $9.2 million, respectively, to tax authorities on our employees’ behalf for shares withheld related to net share settlement of vested RSUs.

A summary of the status of our unvested RSUs and PSUs as of September 30, 2022 and changes during the nine months then ended is as follows:


		Weighted
		Average
		Grant Date		Aggregate
	RSUs and PSUs	Fair Value		Fair Value
				(in millions)
Unvested at January 1, 2022	831,597	$	105.12
Granted⁽¹⁾	305,249		187.31
Vested	(25,030)		95.98
Cancelled or forfeited	(24,461)		117.98
Unvested at September 30, 2022	1,087,355	$	128.11	$	170.7
Shares reserved for future grants (all plans)	1,592,761

(1)

Comprised of 56,452 RSUs granted in January 2022 with a fair value of $152.21 per unit, and 136,346 RSUs and 112,451 PSUs granted in March 2022 with a fair value of $195.28 per unit. The service-based RSUs cliff vest on December 1, 2024 and the performance-based RSUs are subject to a three-year performance period ending December 31, 2024.

Share Repurchases

Our share repurchase activity during the nine months ended September 30, 2022 and 2021 was as follows:


	2022					2021
		Average Cost					Average Cost
	Shares	Per Share		Amount		Shares	Per Share		Amount
				(in millions)					(in millions)
First quarter	113,529	$	150.97	$	17.1	—	$	—	$	—
Second quarter	1,085,635		178.61		193.9	147,016		163.50		24.0
Third quarter	1,883,093		178.79		336.7	885,606		147.89		131.0
	3,082,257	$	177.70	$	547.7	1,032,622	$	150.12	$	155.0

On July 26, 2022, our Board of Directors amended our share repurchase program to increase the remaining repurchase authorization to $1.0 billion. The share repurchase program does not obligate us to repurchase any specific number of shares, does not have a specific expiration date and may be suspended or discontinued at any time. Repurchased and subsequently retired shares are restored to the status of authorized but unissued shares. At September 30, 2022, $763.3 million of our common stock remained authorized for repurchase.

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Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss included the following:


	Foreign Currency		Postretirement Benefit		Accumulated Other
	Translation		Plan Adjustments,		Comprehensive
	Loss		Net of Tax		Loss
			(in millions)
Balance as of January 1, 2022	$	(55.2)	$	(13.7)	$	(68.9)
Current-period change		(51.3)		6.3		(45.0)
Balance as of September 30, 2022	$	(106.5)	$	(7.4)	$	(113.9)

Foreign currency translation adjustments have not been adjusted for income taxes. Postretirement benefit plan adjustments are net of taxes of $3.3 million as of September 30, 2022 and December 31, 2021. The income tax effects relating to our postretirement benefit plan adjustments are reflected in our income tax provision in future periods as the postretirement benefit plan adjustments are amortized over service periods and reflected in the amortization of net loss component of our net periodic benefit cost or are otherwise released and recognized as a loss as a result of a plan settlement.

Note 10. Commitments and Contingencies

Environmental Contingencies

We are currently involved with an environmental remediation project related to activities at former manufacturing operations of Earle M. Jorgensen Company (“EMJ”), our wholly owned subsidiary, that were sold many years prior to our acquisition of EMJ in 2006. Although the potential cleanup costs could be significant, EMJ maintained insurance policies during the time it owned the manufacturing operations that have covered costs incurred to date and are expected to continue to cover the majority of the related costs. We do not expect that this obligation will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Legal Matters

From time to time, we are named as a defendant in legal actions. These actions generally arise in the ordinary course of business. We are not currently a party to any pending legal proceedings other than routine litigation incidental to the business. We expect that these matters will be resolved without having a material adverse impact on our consolidated financial position, results of operations or cash flows. We maintain general liability insurance against risks arising in the ordinary course of business.

Risks and Uncertainties

We continue to monitor the impact of the COVID-19 pandemic, and government actions and measures taken to prevent its spread, and the potential to affect our operations. In addition to COVID-19, the conflict between Russia and Ukraine and macroeconomic disruptions such as inflation and the potential for an economic recession or slowdown could also significantly impact the demand for our products and services, as well as those of our customers and suppliers, and our estimates and judgments may be subject to greater volatility than in the past. Refer to Part I, Item 1A “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2021 for further discussion of risks that could adversely affect our estimates and judgments.

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Note 11. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share: