RELIANCE, INC. (RS) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, and the discussion of cautionary statements and significant risks to the Company’s business under Item 1A. “Risk Factors” of this Annual Report on Form 10-K.
Overview
In 2024, demand was relatively healthy in the majority of our end markets, supported by same-store growth in tons sold compared to 2023. Despite growing our tons sold, our operating results declined mainly due to lower metals prices and our net sales of $13.84 billion declined 6.6% compared to $14.81 billion in 2023.
Our same-store and total tons sold increases of 1.0% and 4.0%, respectively, in 2024 compared to 2023 benefited from one additional shipping day and outperformed the 2.0% decline in industry shipments reported by the Metals Service Center Institute (“MSCI”). We believe our outperformance of industry peers is supported by our organic growth activities along with our customer service.
Gross profit margin was 29.7% in 2024 compared to 30.7% in 2023. Our gross profit margin remained strong but was impacted by declines in metals pricing. However, we believe the impact from the decline in metals pricing was mitigated by effective inventory management, our focus on small orders with quick turnaround and value-added processing services.
Earnings per diluted share of $15.56 in 2024 declined 31.3% compared to $22.64 in 2023. Despite increases in our same-store tons sold and total tons sold, our earnings per share declined mainly due to lower metals prices.
Although cash flow from operations of $1.43 billion in 2024 was the third highest in our history, it decreased $241.5 million, or 14.4%, from $1.67 billion in 2023, the second highest in our history, mainly due to lower net income partially offset by lower working capital investment.
Returns to stockholders in 2024 totaled $1.34 billion, comprised of a record $1.09 billion of share repurchases which reduced our outstanding common shares by six percent year-over-year, and $249.7 million of cash dividends, which reflected a 10.0% increase in our regular quarterly dividend rate.
Organic growth activities were substantially comprised of capital expenditures of $430.6 million in 2024 compared to $468.8 million in 2023. We also invested $364.6 million in four acquisitions in 2024.
Effect of Demand and Pricing Changes on our Operating Results
Customer demand has a significant impact on our results of operations. When volume increases, our revenue dollars generally increase, which contributes to increased gross profit dollars. Conversely, when volume declines, we typically produce fewer revenue dollars, which can reduce our gross profit dollars. Variable costs such as certain warehouse, delivery and selling, general and administrative expenses also increase with volume. While we can and do reduce certain variable expenses when volumes decline, we cannot easily reduce our fixed costs.
Pricing for our products generally has a much more significant impact on our results of operations than customer demand. Our revenues generally increase as a result of pricing increases as overall customer demand is not usually impacted by typical mill pricing increases, although customer buying patterns may change. Our selling prices generally increase when the cost of the metals we purchase increase as we are typically able to pass higher metals costs on to our customers. If prices increase and we maintain the same gross profit percentage, we generate higher levels of gross profit and pretax income dollars for the same operational efforts. Conversely, if pricing declines, we will typically generate lower levels of gross profit and pretax income dollars. For more information, see Item 1A. “Risk Factors”.
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In addition, when volume or pricing increases, our working capital requirements typically increase which decreases operating cash flow. Conversely, when customer demand or pricing falls, our investment in working capital typically decreases which improves operating cash flow.
Acquisitions
2024 Acquisitions
To further our growth strategy, we completed four acquisitions in 2024. The consideration of each acquisition in 2024 was funded with cash on hand. Our acquisition strategy enhances our product breadth and value-added processing capabilities, with a continued focus on the diversification of our products, end markets and geographies. Our 2024 acquisitions broaden our geographic base and processing capabilities in new and existing markets.
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On February 1, 2024, we acquired 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. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On April 1, 2024, we acquired American Alloy Steel, Inc. (“American Alloy”), a distributor of specialty carbon and alloy steel plate and round bar, including pressure vessel quality (PVQ) material. Headquartered in Houston, Texas, American Alloy operates five domestic metals service centers and a plate fabrication business. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On April 1, 2024, we acquired Mid-West Materials, Inc. (“MidWest Materials”), a flat-rolled steel service center that primarily services North American original equipment manufacturers. Located 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. |
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| ● | On August 16, 2024, we acquired certain assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”). Headquartered in Iuka, Mississippi, FerrouSouth is a toll processing operation providing flat-roll steel processing, logistical and warehousing services. |
Our 2024 acquisitions contributed $286.2 million to our 2024 net sales.
2023 Acquisition
On May 1, 2023, with cash on hand, we acquired Southern Steel Supply, LLC (“Southern Steel”). Headquartered in Memphis, Tennessee, Southern Steel distributes and processes merchant and structural steel, pipe and tube, steel plate, ornamental products and laser cut and fabricated parts. Southern Steel contributed $36.1 million to our 2024 net sales.
Internal Growth Activities
In 2024, we continued to maintain our focus on internal growth by building new facilities, expanding existing facilities, relocating leased facilities to facilities we own, expanding our processing capabilities and capacity, upgrading processing equipment to increase efficiency, improving the safety and energy efficiency of our operations and enhancing the working environments of our employees. Our capital expenditure budgets have been at historically high levels in recent years and, we believe, significantly contribute to our industry leading financial results. During 2024 and 2023, we spent $430.6 million and $468.8 million on capital expenditures.
We believe the increase in our level of orders that include value-added processing over time has provided stability to our gross profit margin during periods of declining metals prices and contributed to a higher sustainable gross profit margin level. We have made significant investments in capital expenditures in recent years that have expanded our value-added processing capabilities and increased the level of our sales orders that include value-added processing to at least 50%,
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which we believe has been supportive to increases in our sustainable gross profit margin, which is currently estimated at 29%-31%. Our current processing and estimated sustainable gross profit margin level is significantly higher than what we believe to be our historical levels from approximately a decade ago in which our orders that included value-added processing ranged from 40%-45% and our gross profit margins were approximately 25%-27%.
We believe that our ability to make significant investments in processing equipment and facilities is a competitive advantage, as we can expand our services and provide higher quality product to our customers. We believe many metals service center company competitors do not have the ability to expand their processing services in response to their customers’ needs as quickly and at the same scale as Reliance.
Results of Operations
The following sets forth certain income statement data for each of the last three fiscal years (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):
| | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | |||||||||||||||
| | 2024 | | 2023 | | 2022 | | |||||||||||
| | | | | % of | | | | | | % of | | | | | | % of | |
| | $ | Net Sales | | | $ | Net Sales | | | $ | Net Sales | | ||||||
| Net sales | $ | 13,835.0 | | 100.0 | % | | $ | 14,805.9 | | 100.0 | % | | $ | 17,025.0 | | 100.0 | % |
| Cost of sales (exclusive of depreciation and amortization expense shown below)(1) | | 9,728.4 | | 70.3 | | | | 10,258.6 | | 69.3 | | | | 11,773.7 | | 69.2 | |
| Gross profit(2) | | 4,106.6 | | 29.7 | | | | 4,547.3 | | 30.7 | | | | 5,251.3 | | 30.8 | |
| Warehouse, delivery, selling, general and administrative expense (“SG&A”)(3) | | 2,666.2 | | 19.3 | | | | 2,562.4 | | 17.3 | | | | 2,504.2 | | 14.7 | |
| Depreciation expense | | 226.1 | | 1.6 | | | | 201.6 | | 1.4 | | | | 192.1 | | 1.1 | |
| Amortization expense | | 42.6 | | 0.3 | | | | 43.8 | | 0.3 | | | | 48.1 | | 0.3 | |
| Impairment | | 11.7 | | 0.1 | | | | — | | — | | | | — | | — | |
| Operating income | $ | 1,160.0 | | 8.4 | % | | $ | 1,739.5 | | 11.7 | % | | $ | 2,506.9 | | 14.7 | % |
| Net income attributable to Reliance | $ | 875.2 | | 6.3 | % | | $ | 1,335.9 | | 9.0 | % | | $ | 1,840.1 | | 10.8 | % |
| Diluted earnings per share attributable to Reliance stockholders | $ | 15.56 | | | | | $ | 22.64 | | | | | $ | 29.92 | | | |
| Column 1 | Column 2 |
|---|---|
| (1) | Cost of sales included $3.6 million of credits for the amortization of inventory step-down to fair value adjustments in 2024 and charges of $8.1 million for the amortization of inventory step-up to fair value adjustments in 2022, relating to acquisitions. Cost of sales in 2024 and 2023 included $10.2 million and $0.2 million, respectively, of restructuring charges relating to operational changes at certain operations. |
| Column 1 | Column 2 |
|---|---|
| (2) | Gross profit, calculated as net sales less cost of sales, and gross profit margin, calculated as gross profit divided by net sales, are non-GAAP financial measures as they exclude depreciation and amortization expense associated with the corresponding sales. About half of our orders are basic distribution with no processing services performed. For the remainder of our sales orders, we perform “first-stage” processing, which is generally not labor intensive as we are simply cutting the metal to size. Because of this, the amount of related labor and overhead, including depreciation and amortization, is not significant and is excluded from cost of sales. Therefore, our cost of sales is substantially comprised of the cost of the material we sell. We use gross profit and gross profit margin as shown above as measures of operating performance. Gross profit and gross profit margin are important operating and financial measures as their fluctuations can have a significant impact on our earnings. Gross profit and gross profit margin, as presented, are not necessarily comparable with similarly titled measures for other companies. |
| Column 1 | Column 2 |
|---|---|
| (3) | SG&A expense in 2024 included $4.1 million of non-recurring net settlement charges, mainly related to our withdrawal from certain multiemployer pension plans, and 2023 included $3.8 million of nonrecurring gains related to the sale of non-core property, plant and equipment. |
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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Net Sales
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | Dollar | | Percentage | | |||||
| | 2024 | 2023 | Change | Change | | ||||||
| | (dollars in millions) | | | | | | | ||||
| Net sales | $ | 13,835.0 | $ | 14,805.9 | $ | (970.9) | (6.6) | % | |||
| Net sales, same-store | $ | 13,512.7 | $ | 14,775.3 | $ | (1,262.6) | (8.5) | % | |||
| | | | | | | | | | | | |
| | Year Ended December 31, | | Tons | | Percentage | | |||||
| | 2024 | 2023 | Change | Change | | ||||||
| | (tons in thousands) | | | | | | | ||||
| Tons sold | | 6,013.2 | | | 5,779.2 | | | 234.0 | | 4.0 | % |
| Tons sold, same-store | 5,816.5 | | | 5,760.0 | | | 56.5 | | 1.0 | % | |
| | | | | | | | | | | | |
| | Year Ended December 31, | | Price | | Percentage | | |||||
| | 2024 | 2023 | Change | Change | | ||||||
| Average selling price per ton sold | $ | 2,303 | | $ | 2,570 | | $ | (267) | | (10.4) | % |
| Average selling price per ton sold, same-store | $ | 2,325 | | $ | 2,573 | | $ | (248) | | (9.6) | % |
Our tons sold and average selling price per ton sold exclude our toll processed tons. Our average selling price per ton sold includes intercompany transactions that are eliminated from our consolidated net sales. Same-store amounts exclude the contributions from our 2024 and 2023 acquisitions.
Our same-store net sales declined from 2023 mainly due to declines in carbon steel pricing that lowered our average selling price per ton sold despite an increase in tons sold. Demand remained relatively healthy in the majority of the end markets we serve, supported by same-store growth in tons sold.
Since we primarily purchase and sell our inventories in the spot market, our average selling prices generally fluctuate with changes in replacement costs of the various metals we purchase. The mix of products sold can also have an impact on our overall average selling price per ton sold. As carbon steel sales represented 53% of our gross sales in 2024, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.
The mix of our total sales by major commodity products and year-over-year changes in selling prices are presented below:
| | | | | |
|---|---|---|---|---|
| | Year Ended | | ||
| | December 31, 2024 | | ||
| | Sales by | | Average Selling | |
| | Product | | Price Per | |
| | (% of | | Ton Sold | |
| | Total Sales) | (% Change) | | |
| Carbon steel | 53% | | (10.6) | % |
| Aluminum | 16% | | (5.2) | % |
| Stainless steel | 14% | | (13.3) | % |
| Alloy | 5% | | (3.9) | % |
Our 2024 acquisitions did not significantly impact the selling prices of our major commodity products.
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Cost of Sales and Gross Profit
| | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | | | | | | | |||||||||
| | 2024 | | | 2023 | | | | | | | | ||||||
| | | | | % of | | | | | | % of | | | Dollar | | Percentage | | |
| | $ | Net Sales | | $ | Net Sales | | Change | Change | | ||||||||
| | (dollars in millions) | | | | | | | | |||||||||
| Cost of sales | $ | 9,728.4 | | 70.3 | % | | $ | 10,258.6 | | 69.3 | % | | $ | (530.2) | | (5.2) | % |
| Gross profit | $ | 4,106.6 | | 29.7 | % | | $ | 4,547.3 | | 30.7 | % | | $ | (440.7) | | (9.7) | % |
| LIFO income, included in cost of sales | $ | (144.4) | | (1.0) | % | | $ | (164.5) | | (1.1) | % | | $ | 20.1 | | | |
The decrease in cost of sales was attributable to lower average costs per ton sold, mainly due to declines in replacement costs for carbon steel products, partially offset by an increase in tons sold.
Gross profit decreased despite contributions from four acquisitions and an increase in same-store tons sold mainly due to lower net sales as a result of a decrease in average selling price per ton sold.
Our gross profit margin remained strong, but was pressured by lower metals pricing which we believe was mitigated by effective inventory management, our focus on small orders with quick turnaround and value-added processing services.
In addition, we record in cost of sales non-cash adjustments to our LIFO method inventory valuation reserve that, in effect, reflects cost of sales at current replacement costs. The inventory caption of our consolidated balance sheet includes a LIFO method inventory valuation reserve of $434.9 million at December 31, 2024.
See “Net Sales” above for trends in both demand and costs of our products, and product pricing.
Expenses
| | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | | | | | | | |||||||||
| | 2024 | | | 2023 | | | | | | | | ||||||
| | | | | % of | | | | | | % of | | | Dollar | | Percentage | | |
| | $ | Net Sales | | $ | Net Sales | | Change | Change | | ||||||||
| | (dollars in millions) | | | | | | | | |||||||||
| SG&A expense | $ | 2,666.2 | | 19.3 | % | | $ | 2,562.4 | | 17.3 | % | | $ | 103.8 | | 4.1 | % |
| SG&A expense, same-store | $ | 2,593.8 | | 19.2 | % | | $ | 2,557.0 | | 17.3 | % | | $ | 36.8 | | 1.4 | % |
| Depreciation and amortization expense | $ | 268.7 | | 1.9 | % | | $ | 245.4 | | 1.7 | % | | $ | 23.3 | | 9.5 | % |
| Depreciation and amortization expense, same-store | $ | 260.0 | | 1.9 | % | | $ | 244.7 | | 1.7 | % | | $ | 15.3 | | 6.3 | % |
| Impairment | $ | 11.7 | | 0.1 | % | | $ | — | | — | % | | $ | 11.7 | | | |
Our SG&A expense is made up largely of compensation costs (approximately 60-65% historically), which fluctuate based on changes in our headcount levels in response to demand and general inflation, and incentive-based compensation.
Same-store SG&A expense increased mainly due to higher costs associated with wage inflation and increased headcount related to our organic growth activities offset by lower incentive-based compensation resulting from lower profitability. Our SG&A expense as a percentage of sales increased mainly due to lower sales levels.
In addition, same-store SG&A expense in 2024 included non-recurring net settlement charges of $4.1 million, mainly related to our withdrawal from certain multiemployer pension plans, and 2023 included $3.8 million of nonrecurring gains related to the sale of non-core property, plant and equipment.
The increase in same-store depreciation and amortization expense is mainly due to significant increases in capital expenditures in 2023.
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Included in Expenses are $11.7 million of impairment losses in 2024, which included $11.2 million related to the discontinued use of a trade name intangible asset in connection with an operational restructuring.
Operating Income
| | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | | | | | | | |||||||||
| | 2024 | | 2023 | | | | | | | ||||||||
| | | | | % of | | | | | | % of | | | Dollar | | Percentage | | |
| | $ | Net Sales | | $ | Net Sales | | Change | Change | | ||||||||
| | (dollars in millions) | | | | | | | ||||||||||
| Operating income | $ | 1,160.0 | | 8.4 | % | | $ | 1,739.5 | | 11.7 | % | | $ | (579.5) | | (33.3) | % |
Operating income declined mainly as a result of lower metals pricing that decreased gross profit along with a moderate increase in same-store SG&A expense, partially offset by operating income contributions from acquisitions. Our operating income margin was lower mainly due to decreased operating leverage of our SG&A expense due to lower net sales and a lower gross profit margin.
See “Net Sales” above for discussion of trends in demand and product costs and “Expenses” for trends in our operating expenses.
Other (Income) Expense, Net
| | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Year Ended December 31, | | | | | | | | |||||||||
| | 2024 | | | 2023 | | | | | | | | ||||||
| | | | | % of | | | | | | % of | | | Dollar | | | | |
| | $ | Net Sales | | $ | Net Sales | | Change | ||||||||||
| | (dollars in millions) | | | | | | | ||||||||||
| Other income, net | $ | (20.2) | | (0.1) | % | | $ | (41.3) | | (0.3) | % | | $ | 21.1 | | | |
The change in other income, net was mainly due to a decrease in interest income as a result of lower cash and cash equivalent balances and interest earned thereon. See Note 16—“Other (Income) Expense, Net” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on other (income) expense, net.
Income Tax Rate
Our effective income tax rate was 23.0% in 2024 and 2023. The difference between our effective income tax rate and the U.S. federal statutory rate of 21.0% was mainly due to state income taxes partially offset by the net effects of company-owned life insurance policies. See Note 12—“Income Taxes” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on the differences between our effective income tax rates and the U.S. federal statutory rate.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
See discussion in the “Results of Operations” and “Liquidity and Capital Resources” section of Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.
Financial Condition
Operating Activities
Net cash provided by operations of $1.43 billion in 2024 decreased $241.5 million from $1.67 billion in 2023. The decrease was mainly due to a $462.1 million decline in net income partially offset by lower working capital investment. To manage our working capital, we focus on our days sales outstanding and inventory turnover rate as receivables and inventory are the two most significant elements of our working capital. Our average days sales outstanding rates were 41.5
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days and 40.5 days in 2024 and 2023, respectively. Our inventory turnover rate (based on tons) during 2024 was 4.6 times (or 2.6 months on hand) compared to 4.7 times (or 2.6 months on hand) in 2023.
Income taxes paid of $244.9 million in 2024 decreased from $386.3 million in 2023, mainly due to our lower pretax income.
Investing Activities
Net cash used in investing activities of $803.7 million in 2024 increased $319.8 million compared to $483.9 million in 2023. The significant increase was mainly due to $364.6 million spent on acquisitions in 2024 compared to $24.0 million in 2023, partially offset by a $38.2 million decrease in capital expenditures. The majority of our capital expenditures in 2024 and 2023 were related to growth initiatives.
Financing Activities
Net cash used in financing activities of $1.38 billion in 2024 increased $94.1 million from $1.28 billion in 2023. The increase was mainly the result of increased share repurchases partially offset by decreased net debt repayments. Net debt repayments were $0.3 million in 2024 compared to $508.3 million in 2023, which included the redemption of $500.0 million of senior notes. In 2024, we repurchased a record $1.09 billion of our common stock compared to $479.5 million in 2023. Our returns to stockholders also included a 10% increase in our quarterly dividend rate in February 2024 with total dividend payments of $249.7 million in 2024 compared to $238.1 million in 2023.
We have paid regular quarterly dividends to our stockholders for 65 consecutive years and increased the quarterly dividend on our common stock 32 times since our 1994 IPO, with the most recent increase of 9.1% from $1.10 per share to $1.20 per share effective in the first quarter of 2025. We have never reduced or suspended our regular quarterly dividend.
Share Repurchase Plan
See Note 15—“Equity” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information on our share repurchases.
On October 22, 2024, our Board of Directors amended our share repurchase program to replenish the repurchase authorization to $1.5 billion. As of February 25, 2025, we had remaining authorization under the plan to repurchase $1.15 billion of our common stock. The share repurchase program does not obligate us to repurchase any specific number of shares in any prescribed period, does not have a specific expiration date and may be suspended or discontinued at any time.
Purchase Obligations
We had $275.6 million of operating lease obligations as of December 31, 2024, for processing and distribution facilities, equipment, automobiles, trucks and trailers, ground leases and other leased spaces, such as depots, sales offices, storage and data centers. Our expected payments over the next 12 months under these operating leases are $72.5 million. See Note 11—“Leases” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding the maturities of our operating lease obligations.
We have obligations pursuant to pension and postretirement benefit plans. A total of $10.7 million of net liabilities was recognized on the balance sheet at December 31, 2024 and the Company expects to make plan contributions of $0.8 million during 2025. See Note 14—“Employee Benefits” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding our expected payments under these plans.
As of December 31, 2024, we had entered into contracts related to capital expenditures in the amount of $97.7 million, of which $91.4 million is expected to be paid over the next 12 months. Our actual capital expenditure spending over the next 12 months is ultimately dependent on market conditions, lead times and availability of property, plant and equipment when the capital project is initiated.
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We primarily purchase and sell in the spot market and consequently our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time periods (lead times). In addition, some of our purchase orders represent authorizations to purchase rather than binding agreements. We do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months. The total amount of commitments under long-term inventory purchase agreements is estimated at approximately $276.2 million, with amounts in 2025, 2026 and thereafter being $193.4 million, $57.2 million and $25.6 million, respectively.
We have other contractual commitments under long-term service agreements, totaling $74.6 million at December 31, 2024, with amounts in 2025, 2026 and thereafter being $25.8 million, $22.1 million and $26.7 million, respectively.
Debt
On September 10, 2024, we entered into a $1.5 billion unsecured five-year Second Amended and Restated Credit Agreement (“Credit Agreement”) that amended and restated our then-existing $1.5 billion unsecured revolving credit facility. There was no outstanding balance under our revolving credit facility at December 31, 2024 and 2023. We also had an aggregate of $1.15 billion principal amount of senior unsecured note obligations with various maturities through 2036 issued under indentures as of December 31, 2024.
See Note 10—“Debt” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on our amended credit agreement, debt maturities and indentures governing our debt securities.
Liquidity and Capital Resources
We believe our primary sources of liquidity, including funds generated from operations, cash and cash equivalents and our $1.5 billion revolving credit facility, will be sufficient to satisfy our cash requirements and stockholder return activities over the next 12 months and beyond. As of December 31, 2024, we had $318.1 million in cash and cash equivalents and our net debt-to-total capital ratio (net debt-to-total capital is calculated as carrying amount of debt, net of cash, divided by total Reliance stockholders’ equity plus carrying amount of debt, net of cash) was 10.2%.
As of December 31, 2024, we had $401.1 million of debt obligations coming due before our $1.5 billion unsecured revolving credit facility matures on September 10, 2029, including $400.0 million of senior notes due in August 2025.
We believe that we will continue to have sufficient liquidity to fund our future operating needs and to repay our debt obligations as they become due. In addition to funds generated from operations and approximately $1.5 billion available under our unsecured revolving credit facility, we expect to continue to be able to access the capital markets to raise funds, if desired. We believe our investment grade credit ratings enhance our ability to effectively raise capital. We believe our sources of liquidity will continue to be adequate to maintain operations, make necessary capital expenditures, finance strategic growth through acquisitions and internal initiatives, pay dividends and repurchase our common stock.
Covenants
The Credit Agreement and indentures governing our debt securities include customary representations, warranties, covenants and events of default provisions. The covenants under the Credit Agreement include, among other things, a financial maintenance covenant that requires us to comply with a maximum total net leverage ratio. As of December 31, 2024, our total net leverage ratio, calculated in accordance with the Credit Agreement, was 13% compared to the debt covenant maximum of 60%.
We were in compliance with the financial maintenance covenant under our Credit Agreement at December 31, 2024.
Goodwill and Other Intangible Assets
We have one operating segment and also one reporting unit for goodwill impairment purposes. There have been no changes in our reportable segments; we have one reportable segment – metals service centers.
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Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.16 billion at December 31, 2024, or approximately 22% of total assets and 30% of total equity. Additionally, other intangible assets, net amounted to $1.01 billion at December 31, 2024, or approximately 10% of total assets and 14% of total equity. Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests and further evaluation when certain events occur. Other intangible assets with finite useful lives are amortized over their useful lives. We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Refer to Critical Accounting Estimates for further information regarding judgments involved in testing for recoverability of our goodwill and other intangible assets.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The Company’s significant accounting policies, including recently issued accounting pronouncements, are fully described in Note 1—“Summary of Significant Accounting Policies” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data.” When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies are critical due to the fact that they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our most critical accounting estimates include those related to the recoverability of goodwill and other indefinite-lived intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting estimates, as discussed with our Audit Committee, affect our more significant judgments and estimates used in preparing our consolidated financial statements. There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements.
Goodwill and Other Indefinite-Lived Intangible Assets
We annually test for impairment of goodwill and intangible assets deemed to have indefinite lives and, between annual tests, whenever significant events or changes occur based on an assessment of qualitative factors to determine if it is more likely than not that the fair value is less than the carrying value. The qualitative factors we review include a decline in our stock price and market capitalization, a decline in the market conditions of our products and viability of end markets, and developments in our business and the overall economy. We make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets, including calculating the fair value of a reporting unit using the discounted cash flow method, as necessary. We perform the required annual goodwill and indefinite-lived intangible asset impairment test as of November 1 of each year. No impairment of goodwill was determined to exist during the periods presented in the consolidated financial statements. In 2024, we recorded an $11.2 million impairment loss on a trade name intangible asset with an indefinite life. No impairment of intangible assets with indefinite lives was recognized in 2023 and 2022. See Note 8—“Intangible Assets, Net” of Part II, Item 8 “Financial Statements and Supplementary Data” for further details of our impairment loss.
Long-Lived Assets
We periodically review the recoverability of our other long-lived assets, primarily property, plant and equipment and intangible assets subject to amortization. The evaluation is performed at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other assets. An impairment loss may be recognized if the estimated undiscounted cash flows are less than the carrying amount of the assets. We must make assumptions regarding estimated future cash flows and other factors to estimate the fair value of the respective assets to determine the amount of the impairment loss. If these estimates or their related assumptions change in the future, we may be required to record
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impairment charges. We recorded $0.5 million of impairment losses on property, plant and equipment in 2024. No impairment of long-lived assets was recognized in 2023 and 2022.
Impairment tests inherently involve judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Additionally, considerable declines in the market conditions for our products from current levels as well as in the price of our common stock could also significantly impact our impairment analyses. An impairment charge, if incurred, could be material.