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locations in U.S. states and foreign countries (Belgium, Canada, China, France, India, Malaysia, Mexico, Singapore, South Korea, Turkey, the United Arab Emirates and the United Kingdom) at December 31, 2023 that provides value-added metals processing services and distributes a full line of more than metal products.
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billion and $ billion as of December 31, 2023 and 2022, respectively. The aggregate fair values of these senior unsecured notes based on quoted market prices were $ billion and $ billion at December 31, 2023 and 2022, respectively, compared to their aggregate carrying values of $ billion and $ billion, respectively. The estimated fair values of our senior unsecured notes are based on Level 2 inputs, including benchmark yields, reported trades and broker/dealer quotes. Fair values of our other financial instruments, which include deferred compensation plan assets held within grantor trusts, are comprised of marketable securities that are generally based on quoted market prices for identical instruments that trade in active markets.
operating segment and reporting unit for goodwill impairment purposes. We calculate the fair value of the reporting unit using our market capitalization or the discounted cash flow method, as necessary, and compare the fair value to the carrying value of the reporting unit to determine if impairment exists. We perform our annual impairment evaluations of goodwill and other indefinite-lived intangible assets on November 1 of each year. impairment of goodwill was determined to exist in any of the years presented. impairment losses were recognized related to our other intangible assets with indefinite lives in 2023 and 2022. We recognized impairment losses of $ million related to our other intangible assets with indefinite lives in 2021.
and machinery and equipment over three to .
As of December 31, 2023, 2022 and 2021, noncash investing activity included $ million, $ million and $ million of capital expenditures, respectively, included in accounts payable/accrued expenses.
Intangible assets with finite useful lives are amortized over their useful lives. We periodically review the recoverability of our property, plant and equipment and intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We didn’t recognize any impairment losses for long-lived assets in any of the years presented.
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performance obligation: sale of processed or unprocessed metal product. Control of the metal products we sell transfers to our customers upon delivery for orders with free on board (“FOB”) destination terms or upon shipment for orders with FOB shipping point terms. Shipping and handling charges to our customers are included in net sales. We account for all shipping and handling of our products as fulfillment activities and not as a promised good or service. Costs incurred in connection with the shipping and handling of our products are typically included in operating expenses whether we use a third-party carrier or our own trucks. In 2023, 2022 and 2021, shipping and handling costs included in Warehouse, delivery, selling, general and administrative (“SG&A”) expenses were $ million, $ million and $ million, respectively. Shipment and delivery of our orders generally occur on the same day due to the close proximity of our customers and our metals service center locations.
Toll Processing and Logistics
Toll processing services relate to the processing of customer-owned metal. Logistics services primarily include transportation and storage services for metal we toll process. Revenue for these services is recognized over time as the toll processing or logistics services are performed. The toll processing services are generally short-term in nature with the service being performed in less than .
Seasonality
Some of our customers are in seasonal businesses, especially customers in the construction industry and related businesses. Our overall operations have not shown any material seasonal trends as a result of our geographic, product and customer diversity. Typically, revenues in the months of July, November and December have been lower than in other months because of a reduced number of working days for shipments of our products, resulting from holidays observed by the Company as well as vacation and extended holiday closures at some of our customers. The number of shipping days in each quarter also has an impact on our quarterly sales and profitability. We cannot predict whether period-to-period
47
million, $ million and $ million in 2023, 2022 and 2021, respectively, and is included in the Warehouse, delivery, selling, general and administrative caption of our consolidated statements of income.
million, $ million and $ million of losses in 2023, 2022 and 2021, respectively.
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million from our 2021 acquisitions.
Unaudited Pro forma financial information for 2021 acquisitions
The following unaudited pro forma summary financial results present the consolidated results of operations as if our 2021 acquisitions had occurred as of January 1, 2020, after the effect of certain adjustments, including non-recurring acquisition-related costs, amortization of inventory step-up to fair value adjustments included in cost of sales, depreciation and amortization of certain identifiable property, plant and equipment and intangible assets, and lease cost fair value adjustments. The pro forma summary financial results for the year ended December 31, 2021 excluded $ million of acquisition-related costs.
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, 2020, or of any potential results which may occur in the future (dollars are shown in millions, except per share amounts):
Net income attributable to Reliance
$
Earnings per share attributable to Reliance stockholders:
Basic
$
Diluted
$
% to %. The financial results of investees are generally consolidated when the ownership interest is greater than %.
Operations that are majority owned by us are as follows: Indiana Pickling and Processing Company in which our wholly-owned subsidiary, Feralloy Corporation, has a % ownership interest and Valex Corp.’s operations in South Korea, in which our wholly-owned subsidiary, Valex Corp., has a % ownership interest. The results of these majority-owned operations are consolidated in our financial results. The portion of the earnings related to the noncontrolling shareholder interests has been reflected in the Net income attributable to noncontrolling interests caption in the accompanying consolidated statements of income.
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$
Cost on FIFO method higher than LIFO value
()
()
Inventories—stated on LIFO method
Inventories—stated on FIFO method
$
$
The changes in the LIFO inventory valuation reserve were as follows:
)
$
()
$
Cost decreases for the majority of our products were the primary cause of the 2023 and 2022 LIFO inventory valuation reserve change resulting in a credit, or income. Cost increases for the majority of our products were the primary cause of the 2021 LIFO inventory valuation reserve change resulting in a charge, or expense. There were insignificant liquidations of LIFO inventory quantities for all years presented.
$
$
Aluminum
Stainless steel
Alloy
Toll processing and logistics
Copper and brass
Other and eliminations
Total
$
$
$
50
Purchase price allocation adjustments
Effect of foreign currency translation
()
Balance at December 31, 2022
Acquisition
Effect of foreign currency translation
Balance at December 31, 2023
$
We had accumulated impairment losses related to goodwill at December 31, 2023 and 2022.
$
$
()
$
$
()
Backlog of orders
()
()
Other
()
()
()
()
Intangible assets not subject to amortization:
Trade names
—
—
$
$
()
$
$
()
Amortization expense for intangible assets amounted to $ million, $ million and $ million in 2023, 2022 and 2021, respectively. Foreign currency translation gains were $ million in 2023 compared to losses of $ million in 2022.
As part of the purchase price allocation of our acquisition of Southern Steel Supply, LLC on May 1, 2023, we allocated a total of $ million to the intangible assets acquired.
During 2021, we recognized impairment losses of $ million on our trade name intangible assets.
The following is a summary of estimated future amortization expense:
2025
2026
2027
2028
Thereafter
$
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Our wholly owned subsidiary, Earle M. Jorgensen Company (“EMJ”), is the owner and beneficiary of life insurance policies on all former nonunion employees of a predecessor company, including certain current employees of EMJ. These policies, by providing payments to EMJ upon the death of covered individuals, were designed to provide cash to EMJ in order to repurchase shares held by employees in EMJ’s former employee stock ownership plan and shares held individually by employees upon the termination of their employment. Reliance is also the beneficiary of key person life insurance policies held by a grantor trust for the benefit of participants of the Reliance Supplemental Executive Retirement Plan.
Cash surrender value of life insurance policies, net increases by a portion of premiums paid and from interest and investment earnings and decreases by cost of insurance charges, investment losses and interest on policy loans, as applicable.
Annually, we borrow against the cash surrender value of policies to pay a portion of the premiums and accrued interest owed on loans against those policies. We borrowed $ million, $ million and $ million, respectively, against the cash surrender value of certain policies, which was used to partially pay premiums and accrued interest owed of $ million, $ million and $ million in 2023, 2022 and 2021, respectively. The interest rate on outstanding borrowings under the EMJ life insurance policies is fixed at % and the portion of the policy cash surrender value that the borrowings relate to earns interest and dividend income at %. The unborrowed portion of the policy cash surrender value earns income at a rate commensurate with certain risk-free U.S. Treasury bond yields but not less than %. All other life insurance policies earn investment income or incur losses based on the performance of the underlying investments held by the policies.
As of December 31, 2023 and 2022, loans and accrued interest outstanding on EMJ’s life insurance policies were $ million and $ million, respectively.
Income earned on our life insurance policies and redemptions, interest expense on borrowings against cash surrender values and cost of insurance charges are included in the Other (income) expense, net caption in the accompanying consolidated statements of income as follows:
)
$
()
$
()
Interest expense on life insurance policy loans
Life insurance policy cost of insurance
Income from life insurance policy redemptions
()
()
()
Life insurance policy expense, net
$
$
$
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%, effective rate of %, redeemed on January 15, 2023
Senior unsecured notes, interest payable semi-annually at %, effective rate of %, maturing August 15, 2025
Senior unsecured notes, interest payable semi-annually at %, effective rate of %, maturing August 15, 2030
Senior unsecured notes, interest payable semi-annually at %, effective rate of %, maturing November 15, 2036
Other notes and revolving credit facilities
Total
Less: unamortized discount and debt issuance costs
()
()
Less: amounts due within one year and short-term borrowings
()
()
Total long-term debt
$
$
The weighted average interest rate on the Company’s outstanding borrowings as of December 31, 2023 and 2022 was % and %, respectively.
Unsecured Credit Facility
On September 3, 2020, we entered into a $ billion unsecured Amended and Restated Credit Agreement that amended and restated our then-existing $ billion unsecured revolving credit facility. On January 12, 2023, the agreement was amended to change the reference rate from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) (as amended, the “Credit Agreement”). As of December 31, 2023, borrowings under the Credit Agreement were available at variable rates based on plus % or the and we currently pay a commitment fee at an annual rate of % 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 December 31, 2023 and 2022, we had outstanding borrowings on the revolving credit facility. As of December 31, 2023 and 2022, we had $ million and $ million of letters of credit outstanding, respectively, under the revolving credit facility.
Senior Unsecured Notes
On January 15, 2023, we redeemed in full the $ million aggregate outstanding principal amount of our % senior notes due April 15, 2023 using cash on hand.
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 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 % of their principal amount plus accrued and unpaid interest.
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Various industrial revenue bonds had combined outstanding balances of $ million and $ million as of December 31, 2023 and 2022, respectively, and have maturities through 2027.
We have a $ million standby letters of credit/letters of guarantee agreement with one of the lenders under our Credit Agreement. As of December 31, 2023 and 2022, a total of $ million and $ million were outstanding under this facility, 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, 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 under our Credit Agreement at December 31, 2023.
Debt Maturities
The following is a summary of aggregate maturities of long-term debt for each of the next five years and thereafter:
2025
2026
2027
2028
Thereafter
$
million.
The following is a summary of our lease cost:
$
$
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$
$
Right-of-use assets obtained in exchange for operating lease obligations
$
$
$
December 31,
December 31,
2023
2022
Other lease information:
Weighted average remaining lease term—operating leases
years
years
Weighted average discount rate—operating leases
%
%
The following is a summary of aggregate maturities of operating lease liabilities for each of the next five years and thereafter:
2025
2026
2027
2028
Thereafter
Total operating lease payments
Less: imputed interest
()
Total operating lease liabilities
$
$
$
State
Foreign
Deferred:
Federal
()
()
State
()
()
Foreign
()
()
()
()
$
$
$
55
$
$
International
Income before income taxes
$
$
$
The reconciliation of income tax at the U.S. federal statutory tax rate to income tax expense is as follows:
%
%
%
State income tax, net of federal tax effect
Foreign earnings taxed at (lower) higher rates
()
Net effect of life insurance policies
()
()
()
Net effect of changes in unrecognized tax benefits
—
—
Stock-based compensation
—
—
Other, net
()
()
()
Effective tax rate
%
%
%
Significant components of our deferred tax assets and liabilities are as follows:
$
Inventory costs capitalized for tax purposes
LIFO inventories
—
Accrued expenses not currently deductible for tax
Stock-based compensation
Net operating loss carryforwards
Tax credits carryforwards
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment, net
()
()
Goodwill and other intangible assets
()
()
LIFO inventories
()
—
Other
()
()
Total deferred tax liabilities
()
()
Net deferred tax liabilities
$
()
$
()
As of December 31, 2023, we had $ million of state and $ million of acquired federal net operating loss carryforwards (“NOLs”), which are available to offset future income taxes. The state and federal NOLs expire in various years from 2024 through 2043, if not utilized. We believe that it is more likely than not that we will be able to realize these NOLs within their respective carryforward periods.
The Company believes it is more likely than not that it will generate sufficient future taxable income to realize its deferred tax assets.
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$
$
(Decreases) increases in tax positions for prior years
()
—
Increases in tax positions for current year
—
Settlements
()
()
—
Lapse of statute of limitations
()
()
()
Unrecognized tax benefits at December 31
$
$
$
As of December 31, 2023, $ million of unrecognized tax benefits would impact the effective tax rate if recognized. Accrued interest and penalties, net of applicable tax effect, related to uncertain tax positions were $ million and $ million as of December 31, 2023 and 2022, respectively. Although the timing, settlement or closure of audits is not certain, we do not anticipate our unrecognized tax benefits will increase or decrease significantly over the next twelve months.
shares were authorized for future grant under our various stock-based compensation plans. Awards that expire or are canceled without delivery of shares of our common stock and shares withheld related to net share settlements of vested restricted stock units generally become available for issuance under the plans. As RSUs and PSUs vest, we issue new shares of Reliance common stock.
Restricted Stock Units
$
2025
2022
$
2024
2021
$
2023
Each RSU and PSU includes a service-based condition and consists of a right to receive shares of our common stock and dividend equivalent rights, subject to forfeiture, equal to the accrued cash or stock dividends where the record date for such dividends is after the grant date but before the award is settled. The RSUs provide the right to receive share of our common stock and cliff vest on December 1 upon satisfaction of an approximately service-based condition. The PSUs include performance goals and the right to receive a maximum of shares of our common stock and vest only upon the satisfaction of the service-based condition and certain performance targets for 3-year periods ending December 31.
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$
Granted
Vested
()
Cancelled or forfeited
()
Unvested at December 31, 2023
$
Shares reserved for future grants (all plans)
The fair values as of the respective vesting dates of RSUs and PSUs vested during 2023, 2022 and 2021 were $ million, $ million and $ million, respectively. PSUs totaling units that vested on December 31, 2023 were settled in February 2024 through the issuance of equivalent shares of our common stock.
Stock Awards
In 2023, 2022 and 2021, we granted , and stock awards, in total, respectively, to the non-employee members of the Board of Directors that were fully vested on the grant date. The fair values of the stock awards granted in 2023, 2022 and 2021, were $ per share, $ per share and $ per share, respectively, determined based on the closing price of our common stock on the respective grant dates.
Unrecognized Compensation Cost and Tax Benefits
As of December 31, 2023, there was $ 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 years.
The tax benefit realized from our stock-based compensation plans in 2023, 2022 and 2021 was $ million, $ million and $ million, respectively.
of service and the Company contribution vests at % per year. We have other defined contribution plans that include the Precision Strip Retirement and Savings Plan and plans at certain domestic and foreign subsidiaries that have not merged their plans into the Master 401(k) Plan as of December 31, 2023 (collectively, the “Other Defined Contribution Plans”).
We also sponsor the Reliance Steel & Aluminum Co. Employee Stock Ownership Plan, a tax-qualified noncontributory employee stock ownership plan, for certain salaried and hourly employees of the Company. The plan is closed to new enrollees and the Company is not currently making annual contributions to the plan.
Supplemental Executive Retirement Plans
Effective January 1996, we adopted the Supplemental Executive Retirement Plan (“Reliance SERP”), which is a nonqualified pension plan that provides postretirement pension benefits to certain key officers of the Company. The
58
Life insurance policies were purchased for most individuals covered by the Reliance SERP and held within a grantor trust. See Note 8—“Cash Surrender Value of Life Insurance Policies, Net” for further discussion of our life insurance policies. Separate supplemental executive retirement plans exist for certain wholly owned subsidiaries of the Company (together with the Reliance SERP, the “SERPs”), each of which provides postretirement pension benefits to certain former key employees. All SERPs have been frozen to new participants since 2009.
Deferred Compensation Plan
In December 2008, the Reliance Deferred Compensation Plan (the “DCP”) was established for certain officers and key employees of the Company. Account balances from various compensation plans of subsidiaries were contributed and consolidated into this new deferred compensation plan. Plan participants may contribute a portion of their eligible compensation to the plan and Reliance currently makes contributions to the plan for certain participants.
During 2021, we established a grantor trust to fund our obligations under the DCP. The grantor trust is an irrevocable grantor trust to which we may contribute assets for the purpose of funding the DCP. Although we may not use the assets of the grantor trust for any purpose other than meeting our obligations under the DCP, the assets of the grantor trust remain subject to the claims of our creditors. The aggregate fair value of the marketable securities held by the grantor trust as of December 31, 2023 and 2022 were $ million and $ million, respectively, and the amount of our obligations to the participants under the DCP on those dates were also $ million and $ million, respectively. The grantor trust assets and our liability under the DCP are included in the Other long-term assets and Other long-term liabilities captions of our consolidated balance sheets. The Company expects to contribute $ million to the plan during 2024.
Multiemployer Plans
Certain of our union employees participate in plans collectively bargained and maintained by multiple employers and a labor union. We do not recognize on our balance sheet any amounts relating to these plans. For 2023, 2022 and 2021 our contributions to these plans were $ million, $ million and $ million, respectively. Some of the plans we participate in are in endangered, critical or critical and declining status and have adopted rehabilitation plans. If we were to withdraw our participation from these plans, we would be required to recognize a liability on our balance sheet and the amount could be significant.
Defined Benefit Plan
Our wholly owned subsidiary, EMJ, maintains a qualified defined benefit pension plan (the “Defined Benefit Plan”) for certain union employees. The plan generally provides benefits of stated amounts for each year of service or provides benefits based on the participant’s hourly wage rate and years of service. The plan permits the sponsor, at any time, to amend or terminate the plan.
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$
$
$
Service cost
Interest cost
Actuarial loss (gain)(1)
()
()
Benefits paid
()
()
()
()
Plan amendment
—
—
—
Plan settlement
—
()
—
—
Benefit obligation at end of year
$
$
$
$
Change in plan assets:
Fair value of plan assets at beginning of year
N/A
N/A
$
$
Actual return on plan assets
N/A
N/A
()
Benefits paid
N/A
N/A
()
()
Fair value of plan assets at end of year
N/A
N/A
$
$
Funded status:
Funded status of the plans
$
()
$
()
$
$
Items not yet recognized as component of net periodic pension expense:
Unrecognized net actuarial losses (gains)
$
$
$
()
$
Unamortized prior service cost
—
—
$
$
$
$
| (1) | Actuarial gains in 2022 were primarily due to increases in the discount rate used to measure the obligations. |
As of December 31, 2023 and 2022, the following amounts were recognized on the balance sheet:
$
Current liabilities
()
()
—
—
Noncurrent liabilities
()
()
—
—
Accumulated other comprehensive loss
Net amount recognized
$
()
$
()
$
$
The accumulated benefit obligation for the SERPs was $ million and $ million as of December 31, 2023 and 2022, respectively.
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$
$
$
$
$
Interest cost
Expected return on plan assets
—
—
—
()
()
()
Settlement loss
—
—
—
—
—
Prior service cost
—
—
—
Amortization of net loss
—
—
—
$
$
$
$
$
$
Net periodic benefit cost related to the SERPs and the Defined Benefit Plan is presented in our consolidated statements of income, as summarized below:
| | | | | | | | | | | | | | | | | |
| SERPs | | Defined Benefit Plan | ||||||||||||||
| Year Ended December 31, | | Year Ended December 31, | ||||||||||||||
| 2023 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2021 | ||||||
| (in millions) | | (in millions) | ||||||||||||||
Amounts recognized in the statement of income: | | | | | | | | | | | | | | | | | |
Warehouse, delivery, selling, general and administrative expense | $ |
| | $ |
| | $ |
| | $ |
| | $ |
| | $ |
|
Other expense (income), net | |
| | |
| | |
| | | () | | | () | | | () |
| $ |
| | $ |
| | $ |
| | $ |
| | $ |
| | $ |
|
Assumptions used to determine net periodic benefit cost are detailed below:
%
%
%
%
%
%
Expected long-term rate of return on plan assets
N/A
N/A
N/A
%
%
%
Rate of compensation increase
%
%
%
N/A
N/A
N/A
Assumptions used to determine the benefit obligation are detailed below:
%
%
%
%
Expected long-term rate of return on plan assets
N/A
N/A
%
%
Rate of compensation increase
%
%
N/A
N/A
Employer contributions of $ million are expected during 2024 to the SERPs and ne for the Defined Benefit Plan.
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%
%
Debt securities
Cash and cash equivalents
Total
%
%
Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term. The investment goal is a return on assets that is at least equal to the assumed actuarial rate of return over the long-term within reasonable and prudent levels of risk. We establish our estimated long-term return on plan assets assumption considering various factors including the targeted asset allocation percentages, historic returns and expected future returns.
The fair value measurements of the investments held by our Defined Benefit Plan fall within the following levels of the fair value hierarchy as of December 31, 2023 and 2022:
$
—
$
—
$
U.S. government, state and agency
—
—
Corporate debt securities(2)
—
—
Mutual funds(3)
—
—
Interest bearing cash
—
—
Total investments at fair value
$
$
$
—
$
December 31, 2022
Common stock(1)
$
$
—
$
—
$
U.S. government, state and agency
—
—
Corporate debt securities(2)
—
—
Mutual funds(3)
—
—
Interest bearing cash
—
—
Total investments at fair value
$
$
$
—
$
| (1) | Comprised primarily of securities of large domestic and foreign companies. Valued at the closing price reported on the active market on which the individual securities are traded on national exchanges. |
| (2) | Valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing values on a combination of inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. |
| (3) | Mutual funds held are registered with the United States Securities and Exchange Commission. These funds are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds held are deemed to be actively traded. |
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$
2025
2026
2027
2028
2029-2033
Contributions to Reliance Sponsored Retirement Plans
Our expense for Reliance-sponsored retirement plans was as follows:
$
$
Precision Strip Retirement and Savings Plan
Deferred Compensation Plan
Other Defined Contribution Plans
Defined Benefit Plan
Supplemental Executive Retirement Plans
$
$
$
consecutive years. Our Board of Directors increased the quarterly dividend to $ per share in February 2021 from $ per share, to $ per share in February 2022, to $ per share in February 2023 and to $ per share in February 2024. The holders of Reliance common stock are entitled to vote per share on each matter submitted to a vote of stockholders.
Shares Outstanding
Issued and outstanding common shares were as follows:
Issued to settle RSUs and PSUs, net of withheld shares
Repurchased
()
()
()
Issued and outstanding common shares, ending balances
Share Repurchases
On October 24, 2023, our Board of Directors renewed our share repurchase program to increase the remaining repurchase authorization to $ billion effective October 30, 2023. Our $ billion share repurchase program authorized
63
Our share repurchase activity for the past three years consisted of the following:
$
$
2022
$
$
2021
$
$
The table above excludes taxes paid for shares withheld to settle employees’ tax withholding obligations related to net share settlements upon the vesting of restricted stock units of $ million, $ million and $ million for 2023, 2022 and 2021, respectively. Additionally, our share repurchases exclude excise tax due under the Inflation Reduction Act of 2022.
Preferred Stock
We are authorized to issue shares of preferred stock, par value $ per share. shares of our preferred stock are issued and outstanding. Our restated articles of incorporation provide that shares of preferred stock may be issued from time to time in or more series by the Board. The Board can fix the preferences, conversion and other rights, voting powers, restrictions and limitations as to dividends, qualifications and terms and conditions of redemption of each series of preferred stock. The rights of preferred stockholders may supersede the rights of common stockholders.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss included the following:
)
$
()
$
()
Current-year change
Balance as of December 31, 2023
$
()
$
()
$
()
Foreign currency translation adjustments have not been adjusted for income taxes. Pension and 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 recognized as a loss as a result of plan settlements.
Pension and postretirement benefit adjustments are net of taxes of $ million and $ million as of December 31, 2023 and 2022, respectively. The income tax effects are released from accumulated other comprehensive loss and included in our income tax provision as obligations under our pension and postretirement plans are settled. In 2022, $ million of income tax effects were released related to the partial settlement of the Reliance SERP. See Note 13—“Employee Benefits” for further information on our 2022 plan settlement.
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$
()
$
()
(Income) loss on deferred compensation plan assets
()
()
Life insurance policy expense, net
Foreign currency transaction losses
All other, net
()
()
()
$
()
$
$
million, with amounts in 2024, 2025 and thereafter being $ million, $ million and $ million, respectively.
Collective Bargaining Agreements
As of December 31, 2023, approximately , or %, of our total employees were covered by collective bargaining agreements at of our different locations, which expire at various times over the next . Approximately of our employees are covered by different collective bargaining agreements that will expire during 2024.
Environmental Contingencies
We are subject to extensive and changing federal, state, local and foreign laws and regulations designed to protect the environment, including those relating to the use, handling, storage, discharge and disposal of hazardous substances and the remediation of environmental contamination. Our operations use minimal amounts of such substances.
We believe we are in material compliance with environmental laws and regulations; however, we are from time to time involved in administrative and judicial proceedings and inquiries relating to environmental matters. Some of our owned or leased properties are located in industrial areas with histories of heavy industrial use. We may incur some environmental liabilities because of the location of these properties. In addition, we are currently involved with an environmental remediation project related to activities at former manufacturing operations of 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 condition, results of operations or cash flows. We maintain general liability insurance against risks arising in the ordinary course of business.
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$
$
Denominator:
Weighted average shares outstanding
Dilutive effect of stock-based awards
Weighted average diluted shares outstanding
Earnings per share attributable to Reliance stockholders:
Basic
$
$
$
Diluted
$
$
$
The computations of diluted earnings per share using the treasury stock method for 2023, 2022 and 2021 do not include , and weighted average shares, respectively, in respect of outstanding RSUs and PSUs, because their inclusion would have been anti-dilutive.
operating and reportable segment—metals service centers. Although a variety of products or services are sold at our various locations, in total, gross sales were comprised of the following in each of the three years ended December 31:%
%
%
Aluminum
Stainless steel
Alloy
Toll processing and logistics
Copper and brass
Other
Total
%
%
%
The following table summarizes consolidated financial information of our U.S. and foreign operations:
$
$
Long-lived assets
Year Ended December 31, 2022:
Net sales
Long-lived assets
Year Ended December 31, 2021:
Net sales
Long-lived assets
66
$
$
$
—
$
Year Ended December 31, 2022:
Allowance for credit losses
$
$
$
$
—
$
Year Ended December 31, 2021:
Allowance for credit losses
$
$
$
$
$
| (1) | Uncollectible accounts written off. |
See accompanying report of independent registered public accounting firm.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, or CEO, and chief financial officer, or CFO, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of the Company’s management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2023 at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
An evaluation was also performed under the supervision and with the participation of our management, including our CEO and CFO, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report, which is included in Item 9A.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Reliance, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Reliance, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule II of valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 29, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
| |
| /s/ KPMG LLP |
Los Angeles, California
February 29, 2024
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Item 9B. Other Information
During the fourth quarter ended December 31, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) , or modified a trading arrangement or trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information about our Code of Conduct, which applies to our executive officers and senior management, our directors, including our audit committee and audit committee financial experts and the procedures by which stockholders can recommend director nominees, and our executive officers will be in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to be held on May 15, 2024 (the “Proxy Statement”) and is incorporated herein by reference.
Item 11. Executive Compensation
Information relating to our executive officer and director compensation and the compensation committee of the Board of Directors will be included in the Proxy Statement and is incorporated herein by reference (excluding the information contained under the heading “Executive Compensation Tables—Pay Versus Performance Disclosure”).
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information relating to security ownership of certain beneficial owners of our common stock and information relating to the security ownership of our management will be included in the Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Information regarding certain relationships and related transactions and director independence will be included in the Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information regarding principal accountant fees and services will be included in the Proxy Statement and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this report: |
| (1) | Financial Statements (included in Item 8). |
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
| (2) | Financial Statement Schedules |
Schedule II—Valuation and Qualifying Accounts
All other schedules have been omitted since the required information is not significant or is included in the consolidated financial statements or notes thereto or is not applicable.
| (3) | Exhibits |
| | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | | Incorporated by Reference | ||||
Exhibit |
| Description |
| Form |
| Exhibit |
| Filing Date/ Period End Date |
3.01 | | | 8-K | | 3.1 | | 6/1/2015 | |
3.02 | | | 8-K | | 3.1 | | 2/15/2024 | |
3.03 | | | 8-K | | 3.2 | | 2/15/2024 | |
4.01 | | | 8-K | | 10.01 | | 11/20/2006 | |
4.02 | | Forms of the Notes and the Exchange Notes under the Indenture. | | 8-K | | 10.02 | | 11/20/2006 |
4.03 | | | 8-K | | 4.1 | | 4/12/2013 | |
4.04 | | | 8-K | | 4.2 | | 4/12/2013 | |
4.05 | | Description of Registrant’s Securities Registered Pursuant to Section 12 of the Exchange Act. | | 10-K | | 4.05 | | 12/31/2019 |
4.06 | | | 8-K | | 4.1 | | 8/3/2020 | |
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| | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | | Incorporated by Reference | ||||
Exhibit |
| Description |
| Form |
| Exhibit |
| Filing Date/ Period End Date |
4.07 | | | 8-K | | 4.2 | | 8/3/2020 | |
10.01† | | | 10-K | | 10.15 | | 12/31/2008 | |
10.02† | | | DEF 14A | | Appendix A | | 4/1/2011 | |
10.03† | | Registrant’s Amended and Restated Deferred Compensation Plan effective January 1, 2013. | | 10-K | | 10.09 | | 12/31/2012 |
10.04† | | Registrant’s Amendment No. 1 to Amended and Restated Stock Option and Restricted Stock Plan. | | 8-K | | 4.1 | | 5/15/2013 |
10.05† | | Registrant’s Form of Indemnification Agreement for officers and directors. | | 8-K | | 10.1 | | 2/16/2016 |
10.06† | | Form of Restricted Stock Unit Award Agreement – ROA Performance. | | 10-Q | | 10.3 | | 3/31/2016 |
10.07† | | | 10-Q | | 10.4 | | 3/31/2016 | |
10.08† | | Registrant’s Second Amended and Restated 2015 Incentive Award Plan. | | 8-K | | 10.1 | | 5/22/2020 |
10.09† | | | 8-K | | 10.2 | | 5/22/2020 | |
10.10 | | | 8-K | | 10.1 | | 9/10/2020 | |
10.11† | | Registrant’s First Amendment to Deferred Compensation Plan effective December 22, 2020. | | 10-K | | 10.15 | | 12/31/2020 |
10.12 | | | 10-K | | 10.12 | | 12/31/2022 | |
10.13† | | | 10-Q | | 10.1 | | 3/31/2023 | |
21* | | | | | | | | |
23* | | Consent of Independent Registered Public Accounting Firm—KPMG LLP. | | | | | | |
24* | | | | | | | | |
31.1* | | | | | | | | |
31.2* | | | | | | | | |
32** | | | | | | | | |
97.1* | | Registrant’s Amended and Restated Compensation Recovery Policy. | | | | | | |
101* | | The following financial information from Reliance, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these consolidated financial statements. | | | | | | |
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| | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | | Incorporated by Reference | ||||
Exhibit |
| Description |
| Form |
| Exhibit |
| Filing Date/ Period End Date |
104* | | The cover page from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL (included in Exhibit 101). | | | | | | |
| | | | | | | ||
* Filed herewith. | | | | | | | ||
** Furnished herewith. † Indicates management contract or compensatory plan or arrangement. | | | | | | | ||
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 29, 2024.
| RELIANCE, INC. | |
| By: | /s/ Arthur Ajemyan |
| | Arthur Ajemyan |
| | Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
POWER OF ATTORNEY
The officers and directors of Reliance, Inc. whose signatures appear below hereby constitute and appoint Karla R. Lewis and Arthur Ajemyan, or any of them, to act severally as attorneys-in-fact and agents, with power of substitution and resubstitution, for each of them in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons in the capacities and on the dates indicated.
Signatures |
| Title |
| Date |
|---|---|---|---|---|
| | | | |
/s/ Mark V. Kaminski | | Chair of the Board; Director | | February 29, 2024 |
Mark V. Kaminski | ||||
| | | | |
/s/ Karla R. Lewis | | President and Chief Executive Officer (Principal Executive Officer); Director | | February 29, 2024 |
Karla R. Lewis | ||||
| | | | |
/s/ Lisa L. Baldwin | | Director | | February 29, 2024 |
Lisa L. Baldwin | ||||
| | | | |
/s/ Karen W. Colonias | | Director | | February 29, 2024 |
Karen W. Colonias | ||||
| | | | |
/s/ Frank J. Dellaquila | | Director | | February 29, 2024 |
Frank J. Dellaquila | ||||
| | | | |
/s/ James D. Hoffman | | Director | | February 29, 2024 |
James D. Hoffman | ||||
| | | | |
/s/ Robert A. McEvoy | | Director | | February 29, 2024 |
Robert A. McEvoy | ||||
| | | | |
/s/ David W. Seeger | | Director | | February 29, 2024 |
David W. Seeger | ||||
| | | | |
/s/ Douglas W. Stotlar | | Director | | February 29, 2024 |
Douglas W. Stotlar | ||||
| | | | |
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