RELIANCE, INC. 
This report contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our forward-looking statements may include, but are not limited to, discussions of our industry and end markets, our business strategies and our expectations concerning future demand and metal pricing and our results of operations, margins, profitability, taxes, liquidity, macroeconomic conditions, including inflation and the possibility of an economic recession or slowdown, litigation matters and capital resources. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "preliminary," "range," "intend" and "continue," the negative of these terms, and similar expressions. All statements contained in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management's estimates, projections and assumptions as of the date of such statements. We caution readers not to place undue reliance on forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in our forward-looking statements as a result of various important factors, including, but not limited to, actions taken by us, including restructuring and impairment charges, as well as developments beyond our control, including, but not limited to, the impact of the COVID-19 pandemic, as well as the impact of actions taken or contemplated by government authorities to mitigate the spread of the COVID-19 pandemic, and changes in worldwide andU.S. political and economic conditions (including as a result of COVID-19, an economic recession or the ongoing conflict betweenRussia andUkraine ) that materially impact our customers, the demand and availability of our products and services, including further supply disruptions, labor shortages and inflation. Other factors which could cause actual results to differ materially from our forward-looking statements include those disclosed in this report and in other reports we have filed with theUnited States Securities and Exchange Commission (the "SEC"). Important risks and uncertainties about our business can be found in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC and in other documents Reliance files or furnishes with theSEC . The statements contained in this quarterly report on Form 10-Q speak only as of the date that they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based. You should review any additional disclosures we make in any subsequent press releases and Forms 10-K, 10-Q and 8-K filed with or furnished to theSEC .
Overview
We generated record quarterly financial performance in the second quarter of 2022 for the sixth consecutive quarter as a result of continued elevated metals pricing and outstanding operational execution of our strategies under our business model, which continues to prove resilient amidst challenging macroeconomic circumstances bolstered by our diverse array of products, end markets and geographies, as well as consistent support from our domestic suppliers and deep-rooted relationships with our customers.
Certain key results for the second quarter and six months ended
Record quarterly net sales of
? quarter of 2021. Net sales of
2022 were up 46.5% from the same period in 2021.
? Record quarterly average selling price per ton sold of
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Our gross profit in the second quarter (also a quarterly record) and six months
ended
periods in 2021 due to record metals pricing that offset the impact of lower
? gross margins in the 2022 periods. Our gross profit margin for the six months
ended
mainly due to a record gross profit margin of 33.6% in the first quarter of
2021, which benefited from rapid and significant increases in metals prices and
limited metal supply.
Record quarterly earnings per share of
? quarter of 2021. Earnings per share of
2022 were up 90.1% from the same period in 2021.
?
Our record quarterly net sales in the second quarter of 2022 were the result of a record quarterly average selling price per ton sold that increased 34.0% compared to the second quarter of 2021 and a 2.2% increase in tons sold. Our net sales for the six months endedJune 30, 2022 were the result of a 44.7% increase in our average selling price per ton sold and a 1.4% increase in tons sold. We experienced ongoing healthy demand across all of our end markets. However, our tons sold and tons toll processed continue to be limited by macroeconomic challenges including inflation, recessionary concerns and labor and supply-related pressures. Despite our sequential record financial performance since the first quarter of 2021, our tons sold in the second quarter of 2022 remained below pre-pandemic levels in 2019. Our record profitability in the second quarter of 2022 was driven by record metals prices, ongoing strength in demand for most of the products we sell across most of the end markets we serve, a strong gross profit margin and careful expense control. Our gross profit margin in the second quarter of 2022 of 31.9% increased 20 basis points from the second quarter of 2021. Our same-store SG&A expense in the second quarter and six months endedJune 30, 2022 increased$64.8 million , or 11.5%, and$134.9 million , or 12.5%, from the same periods in 2021. Our SG&A expense levels continue to increase from inflationary impacts for wages, fuel, freight and packaging costs and to a lesser extent higher incentive-based compensation attributable to our sequential gross profit and pretax income record results. Despite increases in our SG&A expense, record metals pricing decreased our SG&A expense as a percentage of sales and resulted in record operating income and pretax income margins. Our cash flow from operations of$674.2 million in the six months endedJune 30, 2022 increased$410.8 million compared to the same period in 2021, relatively in-line with the increase in net income of$500.1 million over the same period, demonstrating the high cash flow conversion present in our business. We believe our strong liquidity position that includes significant cash on hand, strong cash flow generation and$1.5 billion revolving credit facility with no borrowings outstanding will support our continued prudent use of capital as we maintain a flexible approach focused on growth, both organically and through acquisitions, and stockholder return activities. We believe our industry-leading results are due to our unique business model and the strong execution of our strategies. We believe our business model characteristics, including broad end market exposure, a wide geographical footprint, diverse product offerings, significant value-added processing capabilities, strong relationships with suppliers, and focus on small order sizes and when-needed delivery differentiate us from our industry peers. We believe these unique business model characteristics and strong operational execution of our strategies that include pricing discipline, concentrating on higher margin business and cross selling inventory within our operating locations enabled us to persevere during the pandemic in 2020 and were the cornerstone of our record quarterly financial results in each of the past six quarters. 2021 Acquisitions In the fourth quarter of 2021, we acquired each ofMerfish United, Inc. ,Admiral Metals Servicenter Company, Incorporated ,Nu-Tech Precision Metals Inc. andRotax Metals Inc. with cash on hand. Included in our net sales for the six months endedJune 30, 2022 were combined net sales of$473.7 million from our 2021 acquisitions. 16 Table of Contents Results of Operations
The following table sets forth certain income statement data for the second
quarter and six months ended
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
% of % of % of % of
$ Net Sales $ Net Sales $ Net Sales $ Net Sales
Net sales $ 4,681.2 100.0 % $ 3,418.8 100.0 % $ 9,167.0 100.0 % $ 6,257.2 100.0 %
Cost of sales (exclusive
of depreciation and
amortization expenses
shown below)(1) 3,185.8 68.1 2,336.6 68.3 6,284.5 68.6 4,221.3 67.5
Gross profit(2) 1,495.4 31.9 1,082.2 31.7 2,882.5 31.4 2,035.9 32.5
Warehouse, delivery,
selling, general and
administrative expense
(SG&A) 648.6 13.9 563.3 16.51,260.5 13.8 1,081.8 17.3 Depreciation expense 47.2 1.0
49.3 1.4 94.1 1.0 97.0 1.6
Amortization expense 12.1 0.3 9.2 0.3
24.3 0.3 18.4 0.3
Operating income $ 787.5 16.8 % $ 460.4 13.5 % $ 1,503.6 16.4 % $ 838.7 13.4 %
(1) Cost of sales in the six months ended
non-recurring amortization of inventory step-up to fair value adjustments for
our 2021 acquisitions.
(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 expenses
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 our 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.
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Second Quarter and Six Months Ended
Net Sales June 30, Dollar Percentage 2022 2021 Change Change (in millions)
Net sales (three months ended)$ 4,681.2 $ 3,418.8 $ 1,262.4 36.9 % Net sales, same-store (three months ended)$ 4,433.9 $ 3,418.8 $ 1,015.1 29.7 % Net sales (six months ended)$ 9,167.0 $ 6,257.2 $ 2,909.8 46.5 % Net sales, same-store (six months ended)$ 8,693.3 $ 6,257.2 $
2,436.1 38.9 %
June 30, Percentage
2022 2021 Change Change
(tons in thousands)Tons sold (three months ended) 1,455.9 1,424.0 31.9 2.2 % Tons sold, same-store (three months ended) 1,411.7 1,424.0 (12.3) (0.9) % Tons sold (six months ended) 2,873.6 2,833.7 39.9 1.4 %
Tons sold, same-store (six months ended) 2,785.9 2,833.7
(47.8) (1.7) %
June 30, Price Percentage
2022 2021 Change Change
Average selling price per ton sold (three
months ended) $ 3,240 $ 2,418 $ 822 34.0 %
Average selling price per ton sold,
same-store (three months ended) $ 3,159 $ 2,418 $ 741 30.6 %
Average selling price per ton sold (six
months ended) $ 3,213 $ 2,220 $ 993 44.7 %
Average selling price per ton sold,
same-store (six months ended) $ 3,138 $ 2,220 $ 918 41.4 %
Our tons sold and average selling price per ton sold exclude our tons toll processed. Our average selling price per ton sold includes intercompany transactions that are eliminated from our consolidated net sales. Same-store amounts exclude the results of our 2021 acquisitions.
Our net sales in the second quarter and six months endedJune 30, 2022 were the highest in our history due to record average selling prices per ton sold and modest increases in tons sold compared to the same periods in 2021. Our record sales in the 2022 periods were supported by ongoing healthy demand in most of the end markets we serve and elevated pricing during the second quarter of 2022. Since we primarily purchase and sell our inventories in the spot market, the changes in our average selling prices generally fluctuate in accordance with the changes in the costs of the various metals we purchase. Our same-store average selling prices per ton sold in the second quarter and six months endedJune 30, 2022 were significantly higher than the comparable 2021 periods mainly due to significant mill price increases for our major product categories. The mix of products sold can also have an impact on our average selling prices. As carbon steel sales represented approximately 54% and 55% of our gross sales for the second quarter and six months endedJune 30, 2022 , respectively, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold. 18
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Our major commodity selling prices changed year-over-year as follows:
Three Months Ended Six Months Ended
June 30 June 30
Same-store Same-store
Average Selling Average Selling Average Selling Average Selling
Price per Ton Sold Price per Ton Sold Price per Ton Sold Price per Ton Sold
(percentage change)
Carbon steel 23.8 % 23.1 % 38.1 % 37.5 %
Stainless steel 51.0 % 51.2 % 53.5 % 53.7 %
Aluminum 32.4 % 33.3 % 32.5 % 33.4 %
Alloy 36.5 % 36.5 % 35.7 % 35.7 %
Cost of Sales
June 30,
2022 2021
% of % of Dollar Percentage
$ Net Sales $ Net Sales Change Change
(dollars in millions)
Cost of sales (three
months ended) $ 3,185.8 68.1 % $ 2,336.6 68.3 % $ 849.2 36.3 %
Cost of sales (six
months ended) $ 6,284.5 68.6 % $ 4,221.3 67.5 % $ 2,063.2 48.9 %
The increases in cost of sales in the second quarter and six months ended June
30, 2022 compared to the same periods in 2021 were mainly due to higher average
costs per ton sold and to a lesser extent, increases in tons sold. See "Net
Sales" above for trends in both demand and costs of our products.
Cost of sales in the six months ended June 30, 2022 included $8.1 million of
non-recurring amortization of inventory step-up to fair value adjustments for
our 2021 acquisitions.
In addition, adjustments to our LIFO method inventory valuation reserve, which
are included in cost of sales and, in effect, reflects cost of sales at current
replacement costs, resulted in expenses of $12.5 million and $200.0 million in
the second quarters of 2022 and 2021, respectively, and expenses of $50.0
million and $300.0 million in the six months ended June 30, 2022 and 2021,
respectively. As of June 30, 2022 , the LIFO method inventory valuation reserve
on our balance sheet was $870.4 million .
Gross Profit
June 30,
2022 2021
% of % of Dollar Percentage
$ Net Sales $ Net Sales Change Change
(dollars in millions)
Gross profit (threemonths ended)$ 1,495.4 31.9 %$ 1,082.2 31.7 %$ 413.2 38.2 % Gross profit (six months ended)$ 2,882.5 31.4 %$ 2,035.9 32.5
%
We generated record gross profit in the second quarter and six months ended
Gross profit in the six months endedJune 30, 2022 was reduced by$8.1 million of non-recurring amortization of inventory step-up to fair value adjustments related to our 2021 acquisitions. Our gross profit margin in the second quarter endedJune 30, 2022 was strong and supported by ongoing healthy demand for the majority of the products we sell. The decline in our gross profit margin in the six months endedJune 30, 2022 compared to the same period in 2021 was mainly due to the 2021 six-month period benefiting from rapid and significant increases in metal prices and limited
metal supply.
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See "Net Sales" and "Cost of Sales" above for further discussion on product
pricing trends and our LIFO inventory valuation reserve adjustments,
respectively.
Expenses
June 30,
2022 2021
% of % of Dollar Percentage
$ Net Sales $ Net Sales Change Change
(dollars in millions)
SG&A expense (three
months ended) $ 648.6 13.9 % $ 563.3 16.5 % $ 85.3 15.1 %
SG&A expense, same-store
(three months ended) $ 628.1 14.2 % $ 563.3 16.5 % $ 64.8 11.5 %
SG&A expense (six months
ended) $ 1,260.5 13.8 % $ 1,081.8 17.3 % $ 178.7 16.5 %
SG&A expense, same-store
(six months ended) $ 1,216.7 14.0 % $ 1,081.8 17.3 % $ 134.9 12.5 %
Depreciation &
amortization expense
(three months ended) $ 59.3 1.3 % $ 58.5 1.7 % $ 0.8 1.4 %
Depreciation &
amortization expense
(six months ended) $ 118.4 1.3 % $ 115.4 1.8 % $ 3.0 2.6 %
Our same-store SG&A expense increases in the second quarter and six months endedJune 30, 2022 were mainly due to higher variable expenses associated with inflationary impacts for wages, fuel, freight and packaging costs and to a lesser extent higher incentive-based compensation attributable to our record gross profit and pretax income. The decreases in our SG&A expense as a percentage of sales in the second quarter and six months endedJune 30, 2022 compared to the same periods in 2021 were mainly due to our record net sales. Operating Income June 30, 2022 2021 % of % of Dollar Percentage $ Net Sales $ Net Sales Change Change (dollars in millions) Operating income (three months ended)$ 787.5 16.8 %$ 460.4 13.5 %$ 327.1 71.0 % Operating income (six months ended)$ 1,503.6 16.4 %$ 838.7 13.4 %$ 664.9 79.3 %
The increases in our operating income in the second quarter and six months endedJune 30, 2022 compared to the same periods in 2021 were due to record gross profit, as a result of record average selling prices per ton sold, fundamentally strong demand and strong gross profit margins, that were partially offset by inflationary increases in certain SG&A expenses and higher incentive compensation. The increases in our operating margins in the second quarter and six months endedJune 30, 2022 were mainly due to our significantly higher sales that decreased our SG&A expense as a percentage of sales, despite increases
in our SG&A expense. Income Tax Rate
Our effective income tax rate for each of the second quarter and six months endedJune 30, 2022 was 24.7%, compared to 25.6% and 25.5% in the same 2021 periods, respectively. The differences between our effective income tax rates and theU.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. 20 Table of Contents Net Income June 30, 2022 2021 % of % of Dollar Percentage $ Net Sales $ Net Sales Change Change (dollars in millions) Net income attributable to Reliance (three months ended)$ 572.8 12.2 %$ 329.1 9.6 %$ 243.7 74.1 % Net income attributable to Reliance (six months ended)$ 1,096.1 12.0 %$ 596.0 9.5
%
The increases in our net income and net income margin in the second quarter and six months endedJune 30, 2022 compared to the same periods in 2021 were mainly due to record operating income and operating income margins as a result of record gross profit and strong gross profit margins, partially offset by higher SG&A expenses.
Liquidity and Capital Resources
Operating Activities
Net cash provided by operations of$674.2 million in the six months endedJune 30, 2022 increased$410.8 million , or 156.0%, from$263.4 million in the same period in 2021. The increase was mainly due to the$500.1 million , or 83.6%, increase in net income that required moderate additional working capital investment in the six months endedJune 30, 2022 when compared to the same period in 2021, mainly due to significantly higher metals pricing and to a lesser extent, the increase in tons sold. To manage our working capital, we focus on our days sales outstanding and on our inventory turnover rate as receivables and inventory are the two most significant elements of our working capital. As ofJune 30, 2022 and 2021, our days sales outstanding rate was 39.2 days and 39.8 days, respectively. Our inventory turnover rate (based on tons) during the six months endedJune 30, 2022 was 4.4 times (or 2.7 months on hand), compared to 5.2 times (or 2.3 months on hand) in the same period in 2021. Income taxes paid were$427.2 million in the six months endedJune 30, 2022 compared to$181.3 million in the same period in 2021. The significant increase in our tax payments was mainly due to higher estimated tax payments in the six months endedJune 30, 2022 compared to the same period in 2021, relating to our significantly higher pretax income, and to a lesser extent income tax extension payments for the 2021 tax year made in the 2022 six-month period without similar income tax extension payments in the same period in 2021.
Investing Activities
Net cash used in investing activities was$149.4 million in the six months endedJune 30, 2022 compared to$98.6 million in the same period in 2021 and was substantially comprised of our capital expenditures partially offset by proceeds from sales of property, plant and equipment. Capital expenditures were$154.2 million in the six months endedJune 30, 2022 compared to$123.8 million in the same period in 2021. The majority of our capital expenditures in the six months endedJune 30, 2022 and 2021 were related to growth initiatives. Proceeds from sales of property, plant and equipment were$9.2 million in the six months endedJune 30, 2022 compared to$26.1 million in the same period in 2021. Our proceeds from sales of property, plant and equipment included$7.4 million of proceeds and$2.0 million of gains from sales of non-core assets in the six months endedJune 30, 2022 compared to$24.4 million of proceeds and$3.3 million of gains from similar sales in the same period in 2021.
Financing Activities
Net cash used in financing activities of$316.5 million in the six months endedJune 30, 2022 increased from$122.4 million net cash used in the same period in 2021, mainly due to increased share repurchases. In the six months endedJune 30, 2022 , we spent$211.0 million to repurchase shares of our common stock compared to$24.0 million spent in the same 21
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period in 2021. Our other stockholder return activities included an increase in our quarterly dividend with total dividend payments of$110.6 million in the six months endedJune 30, 2022 compared to$88.6 million in the same period in 2021. OnJuly 26, 2022 , our Board of Directors declared the 2022 third quarter cash dividend of$0.875 per share. We have increased our quarterly dividend 29 times since our IPO in 1994, with the most recent increase of 27.3% from$0.6875 per share to$0.875 per share effective in the first quarter of 2022. We have paid quarterly cash dividends on our common stock for 63 consecutive years and have never reduced or suspended our regular quarterly dividend. Our share repurchase activity during the six months endedJune 30, 2022 and 2021 was as follows: 2022 2021 Average Cost Average Cost Shares Per Share Amount Shares Per Share Amount (in millions) (in millions) First quarter 113,529$ 150.97 $ 17.1 - $ - $ - Second quarter 1,085,635 178.61 193.9 147,016 163.50 24.0 1,199,164$ 176.00 $ 211.0 147,016$ 163.50 $ 24.0
The$1.0 billion share repurchase program that was authorized by our Board of Directors onJuly 20, 2021 and had remaining authorization to repurchase$401.6 million of our common stock as ofJuly 25, 2022 following our repurchase of 581,648 shares at an average cost of$171.94 per share, for a total of$100.0 million , subsequent to the end of the second quarter of 2022 was increased again onJuly 26, 2022 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. We may repurchase shares through open market purchases, privately negotiated transactions and transactions structured through investment banking institutions under plans relying on Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Repurchased and subsequently retired shares are restored to the status of authorized but unissued shares. Since 2017, we have repurchased approximately 14.6 million shares at an average cost of$105.22 per share, for a total of$1.53 billion . We expect to continue to be opportunistic in our approach to repurchasing shares of our common stock.
Liquidity
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. Our total outstanding debt as ofJune 30, 2022 was$1.66 billion , which was consistent withDecember 31, 2021 . As ofJune 30, 2022 , we had no outstanding borrowings on the revolving credit facility. As ofJune 30, 2022 , we had$504.5 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 total debt, net of cash) was 14.3%, down from 18.1% as ofDecember 31, 2021 . OnSeptember 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 ofJune 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. A revolving credit facility with a combined credit limit of$8.1 million is in place for an operation inAsia with an outstanding balance of$3.7 million and$4.7 million as ofJune 30, 2022 andDecember 31, 2021 , respectively. 22
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During the first quarter of 2022, we increased our 2022 capital expenditure
budget, including unspent amounts from prior years, to
Capital Resources
OnNovember 20, 2006 , we entered into an indenture (the "2006 Indenture") for the issuance of$600.0 million of unsecured debt securities. The total issuance was comprised of (a)$350.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.20% per annum, which matured and were repaid onNovember 15, 2016 and (b)$250.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 6.85% per annum, maturing onNovember 15, 2036 . OnApril 12, 2013 , we entered into an indenture (the "2013 Indenture") for the issuance of$500.0 million aggregate principal amount of senior unsecured notes at the rate of 4.50% per annum, maturing onApril 15, 2023 . OnAugust 3, 2020 , we entered into an indenture (the "2020 Indenture" and, together with the 2013 Indenture and 2006 Indenture, the "Indentures") for the issuance of$900.0 million of unsecured debt securities. The total issuance was comprised of (a)$400.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 1.30% per annum, maturing onAugust 15, 2025 and (b)$500.0 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 2.15% per annum, maturing onAugust 15, 2030 . Under the Indentures, the notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. If we experience a change in control accompanied by a downgrade in our credit rating, we will be required to make an offer to repurchase each series of the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest.
Various industrial revenue bonds had combined outstanding balances of
As of
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, including$500.0 million of senior notes that mature inApril 2023 . In addition to funds generated from operations and nearly$1.5 billion available under our revolving credit facility, we expect to continue to be able to access the capital markets to raise funds, if desired. 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 opportunistically repurchase shares of our common stock. Additionally, we believe our investment grade credit ratings enhance our ability to effectively raise capital, if needed. We expect to continue our acquisition and internal growth and stockholder return activities and anticipate that we will be able to fund such activities as they arise.
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
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Seasonality
Some of our customers are in seasonal businesses, especially customers in the
construction industry and related businesses. However, 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. Particularly in light of the
COVID-19 pandemic, we cannot predict whether period-to-period fluctuations will
be consistent with historical patterns. Results of any one or more quarters are
therefore not necessarily indicative of annual results.
Goodwill , which represents the excess of cost over the fair value of net assets acquired, amounted to$2.11 billion atJune 30, 2022 , or approximately 20% of total assets and 31% of total equity. Additionally, other intangible assets, net amounted to$1.05 billion atJune 30, 2022 , or approximately 10% of total assets and 15% 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 the carrying amount of such assets may not be recoverable.
Critical Accounting Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our Unaudited Consolidated Financial Statements, which have been prepared in accordance withU.S. GAAP. 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 require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical accounting estimates include those related to 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. The impacts of the COVID-19 pandemic increase uncertainty, which has reduced our ability to use past results to estimate future performance. Accordingly, our estimates and judgments may be subject to greater volatility than in the past. During the quarter endedJune 30, 2022 , there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Website Disclosure
The Company may use its website as a distribution channel of material company
information. Financial and other important information regarding the Company is
routinely posted on and accessible through the Company's website
at www.investor.rsac.com. In addition, you may automatically receive email
alerts and other information about the Company when you enroll your email
address by visiting the "Email Alerts" section at www.investor.rsac.com. The
website is for informational purposes only and is not intended for use as a
hyperlink. The Company is not incorporating any material on its website into
this report.
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