1. Reliance Steel & Aluminum Co.
KeyBanc Capital Markets
Basic Materials and
Packaging Conference
September 11, 2008
www.rsac.com
2. FORWARD-LOOKING STATEMENT AND
NON-GAAP MEASURE
This presentation may contain 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. These
forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those projected in
these statements.
Further information on factors that could affect the Companyโs financial
and other results are included in the Companyโs Annual Report on Form
10-K for the year ended December 31, 2007 and other reports on file with
the Securities and Exchange Commission.
For data included within this presentation that is considered a โnon-
GAAP financial measureโ any reconciliations required by Regulation G
will be provided.
3. COMPANY PROFILE
โข A Fortune 500 company founded in 1939 in Los Angeles that went
public in 1994
โข NYSE company with $7.3 billion in 2007 annual net revenues and
$4.0 billion in revenues for the six months ended June 30, 2008
โข Acquired PNA Group on August 1, 2008 with sales of $1.1 billion
for 6 months ended June 30, 2008
โข The largest metals service center company in North America
โข Unique decentralized operating model focused on small
customers which has led to industry leading ROE and EBITDA
โข Distributes a full-line of over 100,000 products
to more than 125,000 customers
โข More than 200 locations in 39 states and Belgium, Canada, China,
Mexico, South Korea and United Kingdom
4. THE ROLE OF RELIANCE
Primary Producers Reliance Steel & Aluminum Co. End Users
> Pre-production > Over 125,000 customers
processing
> Over 5,375,000 orders
> Inventory management (average order size $1,350)
> Just-in-time delivery in 2007
> Over 100,000 products > 21,400 transactions
per business day in 2007
> Approximately 85% of sales
from repeat customers
> Just-in-time 24-hour delivery
representing almost 50%
of orders in 2007
> No customer represented
more than 1.0% of total
2007 sales
5. RECENT ACCOMPLISHMENTS
โข Best-ever 2007 fiscal year financial results with sales of
$7.26 billion, up 26%; net income of $408.0 million, up
15% and $5.36 earnings per diluted share, up 11%
โข Record 2008 six month results with sales of $4.0 billion,
up 7%, and net income of $264.0 million, up 13%
โข Completed five acquisitions in 2007 and two
acquisitions so far in 2008, including the purchase of
PNA Group, Inc. our largest transaction value to-date
โข 25% dividend increase to $.10 per share in February
2008
โข Purchased 4.1 million shares of common stock under
the Share Repurchase Plan in Q1 of 2008 and Q3 of
2007
6. CONTINUED GROWTH THROUGH ACQUISITION
Criteria Strategy
โข โข
Immediately accretive to earnings Improving operating performance
โข โ Gross profit
Provides diversification of
โ Inventory turnover
products, customers, end-markets
โข
or geographies Key operating management and
employees with intimate local market
knowledge remain in place
โข Generates positive free cash flow
โข Decision making authority placed close
โข to the customer
Minimum return hurdles
โข Leveraging Relianceโs supply
โข relationships to ensure highly
Strong local management team
favorable prices
โข โข
Reputation for honesty and Brand name stays in the community
along with existing customer
integrity
relationships
โข
โข React quickly to changes in local
Focus on customer service
markets
โข Best practices learned from corporate
management and sister companies
7. ACQUISITION OF PNA GROUP
โข Rationale
โ Reinforces Relianceโs sector leadership position and
provides increased exposure to favorable steel industry
dynamics
โ PNA positions in heavy carbon products including plate,
bar, strctural and beams fit well with Relianceโs existing
carbon business
โ Provides further geographic, product and customer
diversification
โ Opportunity for operating synergies at PNA
โ Strong cash flow and rapid de-leveraging expected due to
favorable carbon steel dynamics
8. ACQUISITION OF PNA GROUP
โข Purchase price at $1.1 billion (which includes the repayment
and refinancing of PNAโs ~$725 million of outstanding debt)
โข Financed with borrowings on our $1.1 billion credit facility
(initial pricing LIBOR + 0.55%) and a new $500 million term
loan (initial pricing LIBOR + 2.25%)
โ Proforma debt: capital of approximately 50%
โ Completed tender offer for 100% of $250 million of 10.75%
notes and $170 million of toggle notes (LIBOR + 7.0%)
โข Immediately accretive to earnings
9. PNA Group Overview
Modern Geographically Diverse Facilities
โข Leading steel service center group in the U.S.
โ Operator of 23 service centers, with an
additional 7 joint venture facilities in the
U.S. and Mexico
โ Managing partner in 5 joint ventures Feralloy
Infra-Metals
โ Strong management at operating level
Delta
MSC
โข Precision
Growing long products business and leading
Flamecutting
positions in heavy carbon products including Sugar Steel
plate, bar, structural and beams
LTM Adjusted Revenue by Product
โข Key PNA industries: infrastructure, industrial
and commercial construction, machinery and
Flat rolled
equipment manufacturing, oil and gas,
25%
telecommunications and utilities
Long
โข products and
2007 sales of $1.6 billion and EBITDA of $101.6
plates 75%
million
2007 Revenue: $1,632
โข 2008 six month sales of $1.1 billion and million
EBITDA of $134.1 million
9
10. INTERNAL GROWTH ACCOMPLISHMENTS
โข Liebovich Bros. opened a new facility in WI and Siskin Steel
& Supply expanded facility in TN
โข Phoenix Metals added new locations in OH and PA and
moved into a larger, more efficient facility in AL
โข Precision Strip expanded AL facility and increased
Allegheny Steel Distributors facility in PA
โข Doubled the size of AMI Metals facility in Belgium and
expanded the Valex Korea operation
โข New Valex facility in Shanghai, China
โข $124 million in 2007 and budgeted $210 million for 2008
0
11.
12. 2008 RELIANCE SIX MONTH SALES BY PRODUCT
12% Carbon Steel Plate
10% Carbon Steel Tubing
10% Carbon Steel Bar
8% Carbon Steel Structurals
4% Galvanized Steel S & C
3% Hot Rolled Steel S & C
2% Cold Rolled Steel S & C
7% Aluminum Bar & Tube
5% Heat Treated Aluminum Plate
4% Common Alloy Aluminum S & C
1% Heat Treated Aluminum S & C
1% Common Alloy Aluminum Plate
8% Stainless Steel Bar & Tube
6% Stainless Steel S & C
2% Stainless Steel Plate
8% Alloy Bar & Tube
1% Alloy Plate S & C
5% Other
1% Electropolished S S Tubing
2% Toll Processing
3
13. 2008 RELIANCE WITH PNA
SIX MONTH SALES BY PRODUCT
13% Carbon Steel Plate
11% Carbon Steel Tubing
10% Carbon Steel Bar
13% Carbon Steel Structurals
3% Galvanized Steel S & C
7% Hot Rolled Steel S & C
2% Cold Rolled Steel S & C
6% Aluminum Bar & Tube
3% Heat Treated Aluminum Plate
3% Common Alloy Aluminum S & C
1% Heat treated Aluminum S & C
1% Common Alloy Aluminum Plate
6% Stainless Steel Bar & Tube
5% Stainless Steel S & C
2% Stainless Steel Plate
6% Alloy Bar & Tube
1% Alloy Plate, S & C
4% Other
1% Electropolished S S Tubing
2% Toll Processing
4
14. 2008 RELIANCE SIX MONTH
SALES BY COMMODITY
Toll
Other
Alloy 2%
5%
Carbon Steel
9%
49%
Stainless
Steel
17%
Aluminum
18%
5
15. 2008 RELIANCE WITH PNA
SIX MONTH SALES BY COMMODITY
Other Toll
Alloy 4% 2%
7%
Carbon Steel
Stainless
59%
Steel
14%
Aluminum
14%
6
16. 2008 RELIANCE SIX MONTH
SALES BY REGION
International Northeast California
6%
5% 15%
Pacific NW
7%
MidAtlantic
5%
Southeast
20%
Mountain
4%
Midwest West/SW
26% 12%
8
17. 2008 RELIANCE WITH PNA
SIX MONTH SALES BY REGION
International Northeast California
7%
4% 13%
Pacific NW
6%
Mid-Atlantic
Southeast
6%
19%
Mountain
3%
Midwest
25% West/SW
17%
9
18. BROAD GEOGRAPHIC COVERAGE
Belgium South Korea
China United Kingdom
International Network
More than 200 locations in 39 states and Belgium,
Canada, China, Mexico, South Korea and United Kingdom
0
19. Leading Market Position in a Highly
Fragmented Industry
Competitive Landscape โ Service Center Sales
Size Provides Advantages
(2007)
โข
Total industry revenue 2007 โ $143bn Consolidation among North American
10,000
steel producers has increased the
(1,200 companies)
8,890
9,000
importance of scale for metals service
centers
8,000
1,630
7,000
6,000
โข
6,000
Reliance is one of the largest metal
($mm)
purchasers in North America
5,000
โ Provides highly favorable pricing
3,950
4,000
3,200 3,150
โ Ensures availability in times of tight
3,000 7,260
2,500 2,400
supply
1,900 1,850
2,000 1,630
1,000
โข Ability to leverage corporate
0
McJunkin
O'Neal
Metals USA
PNA
Reliance
Ryerson
ThyssenKrupp
Samuel
MacSteel
Russel
infrastructure, financial management
expertise and experience
Source: Purchasing Magazine
Top 10 service center companies represent less than 25% of
โข Facilitates servicing multi-region
the market
accounts and allows us to more easily
follow customers internationally
21
20. MARKET CONDITIONS
โข Proven ability to perform in all types of
operating environments
โข All sectors performing reasonably well
โข Healthy metals pricing
โข Oil, gas and energy end markets strongest
โข Geographic regions remain healthy
โข Favorable industry consolidation and acquisition
opportunities
2
24. Stock Price Performance
$ 600
Reliance Steel &
500 Aluminum Co.
S & P 500
400
Russell 2000
300
New Peer Group
200
Old Peer Group
100
0
12/02 12/03 12/04 12/05 12/06 12/07
* $100 Invested on December 31, 2002 in stock or index โ including
reinvestment of dividends. Fiscal Year ending December 31.
26
25. SHAREHOLDER VALUE
โข 48 years of consecutive quarterly cash dividends
โข 25% dividend rate increase effective 2008 1Q to $.10 per share
โข Increased regular dividend 15 times (since 1994 IPO)
โข Committed to shareholder value - 2007 ROE of 23%
โข Dividend payments increased 1,700% (since 1994 IPO)
โข Stock value compound annual growth rate of 25% through
December 31, 2007 (since 1994 IPO)
โข Named to the 2008 and 2007 Fortune 500 list
7
26. INVESTMENT HIGHLIGHTS
โข Market leader within the metals service center industry in terms of
size and performance
โข Highly diversified in terms of products, end markets, customers and
geography
โข Favorable industry dynamics supported by strong metal pricing
environment and healthy end use markets
โข Unique, decentralized operating structure focused on profitability and
working capital management
โข Established track record of growth through accretive acquisitions and
organic expansion
โข Experienced management team with solid track record
โข Strong financial position provides ability to act opportunistically
8
