Reliance, Inc.: Form 10-K for the period ended Dec 31, 2024

Reliance operates a network of companies providing diversified metal solutions and is the largest metals service center company in North America (U.S. and Canada) based on revenues, with 2024 net sales of $13.84 billion.

This is our 85th anniversary as a business since our original organization on February 3, 1939, operating a single metals service center in Los Angeles, California fabricating steel reinforcing bar. In February 2024, we changed our corporate name to Reliance, Inc. from Reliance Steel & Aluminum Co. Our common stock has traded on the New York Stock Exchange (“NYSE”) for 30 years under the symbol “RS” since our September 16, 1994 initial public offering.

We believe we have a unique and sustainable business model predicated on the following key attributes:

• Diversity of Products, Customers and Services

As of December 31, 2024, we operated through a network of 320 locations in 41 U.S. states and 10 foreign countries. We distribute a full line of over 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and other specialty steel products.

We service more than 125,000 customers in a variety of industries, including consumer products, general manufacturing, non-residential construction (including infrastructure and renewable energy), transportation (rail, truck trailer and shipbuilding), aerospace (commercial, military, defense and space), energy (oil and natural gas), electronics and semiconductor fabrication, industrial machinery and heavy industry (agricultural, construction and mining equipment). We also service the auto industry, primarily through our toll processing operations where we process customer-owned metal for a fee.

We believe that our diversification by product, end market and geography help mitigate volatility in metals pricing and changing end market conditions. We are not dependent on any particular customer or industry because we process and distribute a broad variety of metals. This diversity of product type and material reduces our exposure to fluctuations or other weaknesses in the financial stability of particular customers or industries. We are also less dependent on any particular suppliers as a result of our product diversification. We believe our diversification strategy has contributed to our ability to remain profitable in every year since our initial public offering in 1994, even during recessions and a global pandemic. In 2024, we grew our total and same-store tons sold, outperforming the decline in metals service center industry shipments as reported by the Metals Service Center Institute (“MSCI”). We believe this performance was supported in part by our diversification strategy.

• Customer Relationships

We believe that our focus on small order sizes and customer service, including inventory availability and quick turnaround, earns customer loyalty, and, along with our growth and diversification strategy, has been instrumental in our ability to produce industry-leading operating results. During the past five years, we delivered approximately 40% of our orders within 24 hours and had a high level of customer retention with over 95% of our sales orders received from repeat customers.

• Value-Added Solutions Provider

We provide a wide variety of processing services to meet our customers’ specifications and deliver products to fabricators, manufacturers and other end users. We believe that few other metals service centers offer the breadth of processing services and metals that we provide. Our primary processing services range from cutting, leveling or sawing to more complex processes such as machining or electropolishing. We typically stock standard size and grade metal products that can be processed into many different sizes to meet the needs of many different customers, and we generally only process specific metals to non-standard sizes pursuant to customer purchase order specifications.

Over the past several years, we have increased the amount of value-added processing services we provide through acquisitions and significant investments in new equipment. We believe expanding our value-added capabilities (including toll processing) and increasing the percentage of our total sales represented by the higher margin orders generated from those expanded capabilities helps reduce volatility in our profitability during periods of unfavorable metals demand and/or pricing.

• Industry Leader

According to the MSCI reporting of industry tons sold in the U.S., our 2024 tons sold from our U.S. locations represented approximately 15% of the total tons sold by the U.S. metals service center industry compared to approximately 14% for 2023. We believe our relatively low market share in the highly fragmented metals service center industry leaves significant opportunity for further strategic growth.

• Pricing Power

We primarily operate in the spot market for both the purchase and sale of our products. We believe we have the ability to quickly adjust our selling prices in response to increases in our raw material costs in order to maintain consistency in our gross profit margin as only a small portion of our business is subject to long-term contractual pricing arrangements.

• Purchasing Power

We strategically source the vast majority of our metal purchases from domestic producers and believe we are one of the largest customers of the North American primary metals producers (“mills”). We believe that our significant scale and long-standing relationships with our mill suppliers enable significant purchasing power and product availability in all market conditions and promote effective management of our inventories.

• Collaboration

We promote collaboration across our operations and encourage our businesses to work together to leverage the larger Reliance resources and capabilities to pursue and grow commercial and sales opportunities, better manage inventories, provide career advancement opportunities for our employees, and share best practices.

Our business is relationship-based, and we operate under the following trade names:

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We have one operating and reportable segment—metals service centers. Further information about our reportable segment, including geographic information, appears in Note 19—“Segment Information” to our consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data.”

Industry Overview

Metals service centers acquire carbon steel, aluminum, stainless and alloy steel and other metal products from mills and then process and distribute these materials to meet customer specifications.

Customers purchase metal products from metals service centers for a variety of reasons, including the ability to obtain value-added metals processing services, readily available inventory, reliable and timely delivery, flexible minimum order size, and quality control. Many customers deal exclusively with service centers because the quantities of metal products that they purchase are smaller than the minimum order sizes specified by mills or because those customers require intermittent deliveries over long or irregular periods. Metals service centers respond to a niche market created because of the focus on as-needed inventory management and materials management outsourcing in the capital goods and related industries. In general, metals service center customers have placed increased emphasis on carrying lower amounts of inventory, especially during declining price environments.

The processing services we provide save our customers time, labor, and expense, reducing their overall manufacturing costs. Specialized metals processing equipment requires high utilization to be cost effective. We believe many manufacturers and their suppliers are not able or willing to invest in the necessary technology, equipment, and warehousing of inventory to perform efficient and effective metal processing at their own operations. Accordingly, we believe industry dynamics have created a niche in the market for metals service centers. We believe that metals service centers purchase, process and deliver metals to end-users in a more efficient and cost-effective manner than the end-user could achieve by dealing directly with the mill.

The measurement of our market share based on the shipment levels of the metals service center industry published by the MSCI, which does not also publish estimated industry revenues, was about 15% in 2024. We believe our relatively low market share, based on the reported shipment levels for the metals service center industry, provides us significant opportunity for growth.

We believe that metals service centers are generally less susceptible to market cycles than metals producers because service centers are generally able to pass on all or a portion of increases in metal costs to their customers. As we have limited long-term contractual business and focus on rapid inventory turnover, we believe that we are generally less vulnerable to changing metals prices than metals producers. However, fluctuations in metals pricing have a significant impact on our revenue and profit.

Operational Strategy

Our primary business strategy is to provide the highest levels of quality and service to our customers in the safest, most efficient operational manner, allowing us to maximize our financial results. The core tenets of our differentiated approach include:

• Our commitment to safety which is our top priority and an important element of our culture and day-to-day operational focus. Our executive team supports a safety management system that includes policies, standard practices and goals at our facilities. In addition, our safety professionals monitor compliance with regulatory requirements and conduct safety assessments and training to promote and improve safety practices.
• Organic growth and innovation through industry-leading investments in state-of-the-art value-added processing equipment to better service our customers. We have made significant investments in our businesses in recent years, including investments in advanced, state-of-the-art value-added processing equipment that concurrently expand our metals processing capabilities and promote increased efficiencies.
• We believe our diversification by product, end market and geography reduce volatility in our profitability. We maintain a wide variety of products in inventory and believe this differentiates us from all other North American service center companies. Our product mix has become more diverse mainly as a result of our targeted growth strategy that includes acquiring companies that focus on distribution of specialty products and provide increased levels of value-added processing services.
• Our decentralized operating structure keeps decision making and resources close to the customer. Due to our focus on small orders, our decentralized operating structure and the diversity of the markets we serve, customer concentrations are not significant.
• A focus on as-needed inventory management and small orders with quick turnaround and increasing levels and types of value-added processing generates higher gross profit margins compared to servicing large orders with volume pricing. We support our customers’ as-needed logistics with our customer service, operational efficiencies, innovation and inventory management. In 2024, our average order size was $2,980 and we delivered approximately 40% of orders within 24 hours.
• Strong pricing discipline by our managers in the field allows us to appropriately price the value we provide to our customers. We believe our focus on maintaining pricing discipline related to our processing services, coupled with our investments in state-of-the-art equipment and advanced technology, contribute to higher sustainable gross profit margin levels.
• We have minimal contractual sales as we primarily sell via customer purchase order, which we believe supports efficient management of our inventories. We believe our ability to pass mill replacement cost increases on to our customers, when they occur, results in higher gross profit realization than if we priced our products under long-term contractual pricing arrangements, which tend to have a trailing effect.

Growth Strategy

Our growth strategy is based on increasing our operating results through organic growth activities and strategic acquisitions that enhance our product, customer and geographic diversification. We believe our focused growth strategy and high level of value-added services we provide our customers makes us less vulnerable to regional or industry-specific economic volatility and somewhat lessens the negative impact of volatility experienced in commodity pricing and market cyclicality, and general economic trends.

We expect to continue growing our business through acquisitions and internal growth initiatives, particularly those that diversify our product mix, customer base and geographic locations and increase our sales of high-margin specialty products and value-added processing services.

Sales and Marketing

Sales personnel are organized by division or subsidiary and are divided into two groups. Outside sales personnel travel throughout a specified geographic territory and maintain relationships with our existing customers and develop new customers. Inside sales personnel remain at the facilities to price and write orders. Outside sales personnel generally receive incentive compensation based on the gross profit from their particular geographic territories. Inside sales personnel generally receive incentive compensation based on the gross profit and/or pretax income of their particular location.

We endeavor to acquire well-run businesses with strong customer relationships and solid reputations within the marketplace. Because of this, we often find value in acquired trade names and generally continue to go to market under the acquired businesses’ names and maintain their customer relationships.

Customers

Although we have many large original equipment manufacturer customers, most of our sales are to small machine shops and fabricators, in small quantities with frequent and often just-in-time deliveries, ensuring as-needed logistics and helping them manage their working capital and credit needs more efficiently. Our metals service centers wrote and delivered over 4.6 million orders during 2024 or an average of 18,370 per day, with an average price of approximately $2,980 per order. Most of our metals service center customers are located within 200 miles of the Reliance location supporting them. The proximity of our service centers to our customers helps reduce total road miles and carbon emissions and promote efficient routing and quick delivery. Our fleet of approximately 1,800 trucks (some of which are leased) delivered the majority of our 2024 sales orders. We believe that our fleet enhances our ability to service many smaller customers and provide quick turnaround deliveries with approximately 40% of our orders delivered within 24 hours. We believe that maintaining our own fleet of trucks and drivers provides a competitive advantage as there has been a shortage of qualified drivers and third-party freight costs have been at elevated levels in recent years. Moreover, our order entry systems and flexible production scheduling enable us to meet customer requirements for short lead times and quick delivery. We believe providing high levels of customer service and maintaining long-term relationships with our customers significantly contributes to our success. In the past five years, over 95% of the sales orders we serviced were from repeat customers, which we believe demonstrates the high level of customer satisfaction and loyalty our businesses earn. Our provision of reliable, prompt and efficient services and quality products at reasonable prices are important factors in maintaining and expanding these relationships.

We have built and opened international locations to service specific industries, typically making limited investments to support existing key U.S. customers that also operate in those international markets. Accordingly, our exposure to risks associated with such investments is minimal. Sales from our foreign operations were approximately seven percent of our net sales for the year ended December 31, 2024, or $901.1 million. However, sales to international customers (based on the shipping destination) were approximately nine percent of our consolidated 2024 net sales, or $1.25 billion, with approximately 25%, or $312.8 million of such international sales, to Canadian customers.

Customer demand changes from time to time based on, among other things, general economic conditions and industry capacity. Many of the industries in which our customers operate are cyclical in nature. Because we sell to a wide variety of customers in a wide variety of industries, we believe that we are able to somewhat mitigate earnings volatility. In addition, many of our customers are small job shops and fabricators who also have a diverse customer base and the versatility to service different end markets when an existing market slows.

Due to our focus on small orders, decentralized operating structure and the diversity of the markets we serve, customer concentrations are not significant. Our largest customer represented 0.7% of our net sales in 2024. In 2024, we generated sales greater than $30 million from only 22 customers.

Suppliers

We strategically purchase most of our inventory from the major domestic mills. Our U.S. operations do, however, also purchase minimal amounts of certain products from foreign mills. We have multiple suppliers for all of our products.

Because of our total volume of purchases and our long-term relationships, we believe that we are generally able to purchase inventory at the most competitive prices offered by our suppliers. We believe that our relationships provide us with an advantage in sourcing product in accelerated timeframes when needed and also allow us to more efficiently manage our inventory. We believe both our size and our long-term relationships with our suppliers continue to be important because mill consolidation has reduced the number of suppliers.

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 because 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. Results of any one or more quarters are therefore not necessarily indicative of annual results.

Competition

The metals service center industry is highly fragmented and competitive within localized areas or regions. Many of our competitors operate single, stand-alone service centers. According to IBISWorld Inc.’s October 2024 report, there were approximately 10,700 metal wholesaling locations operated by approximately 8,400 companies in the U.S. in 2024. According to the MSCI reporting of U.S. metals service center industry shipments, our 2024 tons sold from our U.S. locations represented approximately 15% of the industry total, an increase of nearly 100 basis points from 2023. The significant number of metals service centers that exist in this fragmented market creates opportunities for us to expand through acquisitions.

We have numerous competitors in each of our product lines and geographic locations, and competition is most frequently local or regional. Our domestic service center competitors are generally smaller than we are, but we also face strong competition from national, regional and local independent metals distributors and the mills themselves, some of which have greater resources than we do.

We compete with other companies on price, service, quality, processing capability and availability of products and services. We maintain relationships with our major suppliers at the executive and local levels. We believe that this division of responsibility has increased our ability to obtain competitive prices for metals by leveraging our total size and to provide more responsive service to our customers by allowing our local management teams to make purchasing decisions. In addition, we believe that the size of our inventory, the diversity of metals products we have available, and the wide variety of processing services we provide distinguish us from our competition. We believe our competitors are generally unable to offer the same high-quality products and services we provide using state-of-the-art equipment and advanced technology as they do not have the financial ability or risk tolerance to grow their businesses at the same rate as Reliance. We believe our industry-leading financial results in recent years are attributable to our strong financial condition, the high quality of products and services we are able to offer as a result of our significant investments in the facilities and equipment of our existing and acquired businesses, as well as our continued focus on small order sizes with quick turnaround.

Human Capital

As of December 31, 2024, we employed approximately 15,900 persons worldwide, of which approximately 14,200 were employed in the U.S. Our total workforce of approximately 16,200 persons as of December 31, 2024 includes approximately 300 contract and temporary workers. Our management strategy is to align our workforce levels with the pace of business and management believes it has sufficient human capital to operate our business successfully.

As of December 31, 2024, approximately 12% of our employees were represented by unions under collective bargaining agreements. Approximately four percent of our employees are covered by 21 different collective bargaining agreements that expire in 2025 unless renewed. We have entered into collective bargaining agreements with 40 union locals at 48 of our locations. These collective bargaining agreements have not had a material impact on our revenues or profitability. From time to time, our collective bargaining agreements expire and come up for renegotiation.

We seek to create an environment that values the health, safety and wellbeing of our employees, their families and the communities in which we operate and live. We strive to equip our employees with the knowledge, skills and resources to maintain or improve their personal health, develop professionally and operate safely within our businesses. A highlight of our commitment to our employees is the inclusion of “Relational” as one of our five core values that represent key areas of focus for our company. For more information on Reliance’s core values, see https://reliance.com/our-culture.

Among the critical elements included in the Relational category are the following:

• Focus on Safety

The health and safety of our employees, customers, suppliers and communities is our most important core value. Our safety programs are designed around recognized standards with appropriate variations addressing the multiple jurisdictions and regulations, specific hazards and unique working environments of our operations. Our SMART Safety program focuses on embedding our culture of safety across all of our operations. We strive to have zero fatalities and no life-threatening or life-altering injuries and illnesses from working at our facilities.

Our executive team supports a safety management system that includes policies, standard practices and goals at our facilities, including:

• conducting regular safety assessments;
• monitoring best practices and compliance with regulatory requirements;
• training our employees to improve safety practices;
• integrating video-based technology and safety programs into substantially all Company-operated trucks; and
• maintaining emergency preparedness and response plans.

We utilize a mixture of indicators to assess the health and safety performance of our domestic operations. Lagging indicators include the Occupational Safety & Health Administration (“OSHA”) Total Recordable Incident Rate (“TRIR”) and average Department of Transportation Recordable Accident Rate per million miles (“DOT Rate”).

Our focus on safety is evident in our 2024 TRIR, which is lower than the MSCI average of 3.5 as reported in their most recent survey conducted in 2020. A lower TRIR means that fewer people are injured on the job, and fewer lives are negatively impacted. We have not identified a universally accepted and annually updated benchmarking standard for DOT Rate.

• Employee Health, Wellness and Wellbeing

The health, wellness and wellbeing of our employees is critical to our success. We are committed to providing our employees with resources to help them achieve their personal health, wellness, and wellbeing goals. As part of our comprehensive benefits offering, we provide employees and their covered spouses/domestic partners with a robust employee assistance program, individualized assessments, access to lab or on-site health screenings and personalized wellness coaching.

• Compensation and Benefits

To help attract and retain the best employees, we strive to offer competitive compensation and best-in-class benefits. In addition to base salaries, our compensation programs can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare insurance and welfare benefits, and health savings and flexible spending accounts. We believe that we provide industry-leading healthcare benefits to our employees and funded approximately 85% of the costs associated with our domestic employees’ health insurance coverage in 2024.

• Employee Development

We believe employees should have an opportunity for ongoing development through challenging daily contributions and structured development programs. We maintain an evolving leaders program focused on the continued training of selected employees, encouraging development in several areas of our business, leadership and communication, along with opportunities for enterprise-wide collaboration to drive an approach to innovative problem solving and solutions. Our success is dependent on the knowledge, skills and abilities of our current and future leaders and we continue to invest in talent management initiatives to pursue the significant long-term potential for our continued success.

• Equal Opportunity

We believe that superior Company performance requires contributions from a workforce that includes a variety of employee experiences, backgrounds, and characteristics. We are committed to providing fair and unbiased opportunities and hiring, developing and supporting a diverse and inclusive workplace. Our Company values are demonstrated by our Code of Conduct, which prohibits employment discrimination or harassment based on race, color, sex (including pregnancy, childbirth and related medical conditions), national origin, religion, age, disability, genetic information, veteran status, sexual orientation, marital status, or any other characteristic protected by applicable law. Our Code of Conduct is available at https://investor.reliance.com.

Quality Control

Procuring high-quality metal from suppliers on a consistent basis is critical to our business. We maintain strict quality control measures to assure that the quality of purchased raw materials will enable us to meet our customers’ specifications and to reduce the costs of production interruptions. In certain instances, including at a customer’s request, we perform physical and chemical analyses on selected raw materials, typically through a third-party testing lab, to verify that mechanical and dimensional properties, cleanliness and surface characteristics meet our requirements and our customers’ specifications. We also conduct certain analyses of surface characteristics on selected processed metal before delivery to the customer. We believe that maintaining high standards for accepting metals ultimately results in reduced return rates from our customers.

We maintain various quality certifications throughout our operations. Approximately 55% of our operating locations have earned International Organization for Standardization (ISO 9001:2015) certifications. Many of our locations maintain additional certifications specific to the industries they serve, such as aerospace, auto, nuclear, and others, including certain international certifications.

Government Regulation

Beyond our compliance requirements with environmental regulations, compliance with government regulations has not had and, based on laws and regulations currently in effect, is not expected to have a material effect on the Company’s capital expenditures, earnings or competitive position.

Our operations are also subject to laws and regulations relating to workplace safety and worker health, principally OSHA and related regulations, which, among other requirements, establish noise, dust and safety standards. We maintain comprehensive health and safety policies and train employees to follow established safety practices.

We are subject to the conflict mineral provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. We are required to undertake due diligence, disclose and report whether the products we sell originate from the Democratic Republic of Congo and adjoining countries. We verify with our suppliers the origins of all metals used in our products.

Our domestic locations sell to international customers and we operate metals service centers in 10 foreign countries, which subjects us to various countries’ trade regulations concerning the import and export of materials and finished products. Our operations are subject to the laws and regulations of the jurisdictions in which we conduct our business that seek to prevent corruption and bribery in the marketplace, including the U.S. Foreign Corrupt Practices Act (the “FCPA”) and the United Kingdom’s Bribery Act 2010. We have developed and implemented company-wide export and anti-corruption policies designed to provide our employees clear statements of our compliance requirements and ensure compliance with applicable export and anti-corruption regulations. For information about risks related to government regulation, please see the risk factors set forth under the caption Item 1A. “Risk Factors” including the Risk Factors captioned “We are subject to various environmental, employee safety and health, and customs and export laws and regulations, which could subject us to significant liabilities and compliance expenditures;” and “We operate internationally and are subject to changes in tax rates, exchange rate fluctuations, exchange controls, political risks and other risks relating to international operations.”

Environmental

We are not a metals producer or mill – we operate metals service centers that process and distribute metal products. We believe that circularity and low emissions are key attributes of our business model.

The overwhelming majority of our operations involve the processing and distribution of inherently sustainable aluminum and steel products that we believe (i) are some of the most commonly-recycled materials on the planet—more than plastic, paper, and glass combined each year and (ii) can be 100% recycled without loss of quality. We reintroduced approximately 226,000 tons of recycled scrap material into the manufacturing life cycle in 2024. As a distributor and “first-stage” processor of metal products, our operations, by their nature, have a limited environmental impact as we do not emit significant amounts of carbon dioxide or other greenhouse gases.

We continue to evaluate and implement energy conservation and other initiatives to reduce the environmental impact of our business. However, enactment of more stringent environmental regulations could have an adverse impact on our financial results. In addition, the manufacture and production of the materials we source from mills can be a carbon-intensive activity, and adoption of more stringent carbon regulations or policies may increase the prices of these materials.

As a processor and distributor of metals, and not a producer, we acknowledge and embrace our role in protecting the environment and continue to assess our impacts. Our strong desire is to identify and prioritize areas of improvement. In order to align our environmental initiatives with our broader strategy, we completed a materiality assessment to determine the environmental matters that are most critical to our business and our stakeholders. As a result of the materiality assessment, we determined that the most material environmental issues to our business are: (i) emissions from company-owned trucks that deliver our products; and (ii) our overall energy usage (e.g. fuel and electricity). We expect to update this materiality assessment on a periodic basis to ensure it reflects changes in our business and the external environment.

In addition, prolonged disruption in the supply and/or distribution of metals due to weather, climate change or, natural disasters connected to climate change could increase costs, limit the availability of materials critical to our operations and have a significant impact on operating results.

Available Information

We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC maintains a website that contains reports, proxy statements and other information regarding issuers, including our Company, that file reports electronically with the SEC. The public can obtain any reports that we file with the SEC at https://sec.gov.

Our Investor Relations website is located at https://investor.reliance.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available, free of charge, through our website as soon as reasonably practical after we electronically file or furnish the reports to the SEC. Information about Reliance’s ESG-related programs and initiatives is available under the “ESG” section of the Company’s website. Additional corporate governance information, including our restated certificate of incorporation, amended and restated bylaws, principles of corporate governance, Board committee charters, code of conduct and anti-bribery and anti-corruption policy, is available under Corporate Governance in the “Investors” section of the Company’s website. We encourage investors to visit our website.

Website addresses referred to in this Annual Report on Form 10-K are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing.

Set forth below are the risks that we believe are material to our investors. Our business, results of operations and financial condition may be materially adversely affected due to any of the following risks. The risks described below are not the only ones we face. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business.

Risks Related to Our Business and Industry

The costs that we pay for metals fluctuate due to a number of factors beyond our control, and such fluctuations could adversely affect our operating results, particularly decreases in metals prices.

We purchase large quantities of aluminum, carbon, stainless and alloy steel and other metals, which we sell to a variety of customers. Our profitability is largely dependent upon the prices of the steel, aluminum and other metals we sell our customers. The price of metals we purchase and the price we charge our customers for the products we sell fluctuate based on many factors outside of our control, including general economic conditions (both domestic and international), competition, production levels, raw material costs, customer demand levels, governmental policies, import duties and other trade restrictions, currency fluctuations and surcharges imposed by our suppliers.

Pricing for our products generally has a much more significant impact on our results of operations than customer demand levels. If pricing declines, we will typically generate lower levels of gross profit and pretax income dollars. In addition, changes in metals prices that lower our gross profit margin can adversely affect our operating results. When metals prices decrease, we often cannot replace our higher cost inventory with the lower cost metal at a rate that would allow us to maintain a consistent gross profit margin, which would reduce our profitability during that interim period.

Metals prices are volatile due to, among other things, fluctuations in foreign and domestic production capacity, raw material availability and related pricing, metals consumption, customer demand levels, tariffs, import levels into the U.S., governmental regulations, and the strength of the U.S. dollar relative to other currencies. Future changes in global general economic conditions or in production, consumption or export of metals, including as a result of economic slowdown or trade policies, could cause fluctuations in metal prices globally, which could adversely affect our profitability and cash flows. We generally do not enter into long-term agreements with our suppliers or hedging arrangements that could lessen the impact of metal price fluctuations.

We maintain substantial inventories of metal to accommodate the short lead times and delivery requirements of our customers. Our customers typically purchase products from us pursuant to purchase orders and typically do not enter into long-term purchase agreements or arrangements with us. Accordingly, we purchase metal in quantities we believe to be appropriate to satisfy the anticipated needs of our customers based on information derived from customers, market conditions, historic usage and industry research. Commitments for metal purchases are generally at prevailing market prices in effect at the time orders are placed or at the time of shipment. During periods of rising metal costs, our results may be negatively impacted by increases in the costs of the metals we purchase if we are unable to make equivalent increases in the selling prices of the products we sell. In addition, when metal prices decline, our selling prices generally decline and, as we sell inventory purchased at higher costs, results in lower gross profit margins and gross profit. Consequently, during periods in which we sell this existing inventory, the effects of changing metal prices could adversely affect our operating results.

Global economic conditions, including inflation, elevated interest rates, infectious disease and supply chain disruptions, have adversely affected, and could continue to adversely affect, our operations.

Our financial condition and results of operations are impacted by global markets and economic conditions over which we do not have control. A general global economic downturn or other adverse macroeconomic trends, including heightened inflation, capital markets volatility, currency rate fluctuations, trade policies, economic uncertainties, an economic slowdown or recession, or a slowing or stalled recovery therefrom, have in the past resulted in and may in the future result in unfavorable conditions that negatively affect demand and selling prices for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.

In addition, the Federal Reserve in the U.S. and other central banks in various countries have raised interest rates in response to concerns about inflation, which, coupled with volatility in financial markets and the possibility that such rates may remain elevated for longer than expected, has had and may continue to have the effect of further increasing economic uncertainty and heightening these risks. Interest rate increases or other government actions taken to reduce inflation have resulted in recessionary pressures in many parts of the world.

We believe recent inflationary pressures have increased the costs of labor, energy and raw materials and have adversely affected consumer spending, economic growth and our operations. If such pressures increase our operating costs and we are unable to increase our gross profit at a similar rate due to decreases in demand, lack of mill price increases, our inability to pass any increases in metals replacement costs to our customers, or otherwise, our operating income margins would decline and our business, financial condition and results of operations could be adversely affected.

The war in Ukraine has led, is currently leading, and for an unknown period of time will continue to lead to disruptions in local, regional, national, and global markets and economies affected thereby, including in the global steel market. These disruptions caused by the war included, and may continue to include, political, social, and economic disruptions and uncertainties and material increases in certain commodity prices that may affect our business operations. In addition, the duration and impact of conflicts in the Middle East are unknown but could have global economic and political ramifications.

Our operations were adversely affected by the impacts of the COVID-19 pandemic and related macroeconomic effects. Other outbreaks of contagious diseases, or other adverse public health developments in countries where we operate or our customers are located, could similarly adversely affect our business, results of operations and financial condition in the future.

Excess capacity and over-production by foreign metal producers or decreases in tariffs could increase the level of metal imports into the U.S., resulting in lower domestic prices, which would adversely affect our sales, margins and profitability.

Global metal-making capacity exceeds demand for metal products in some regions around the world. Rather than reducing employment by rationalizing capacity with consumption, we believe metal manufacturers in many countries (often with government assistance or subsidies in various forms) have periodically exported metal at prices which may not reflect their costs of production or capital. Excessive imports of metal into the U.S. have exerted, and may continue to exert, downward pressure on U.S. metal prices.

On March 1, 2018, the U.S. announced a plan to indefinitely impose a 25% tariff on certain imported steel products and a 10% tariff on certain imported aluminum products under Section 232 of the Trade Expansion Act of 1962 (the “Section 232”) tariffs. These Section 232 tariffs were imposed on national security grounds and addressed imported steel that was being unfairly traded by certain foreign competitors at artificially low prices. In retaliation against the Section 232 tariffs, the European Union subsequently imposed its own tariffs against certain steel products and other goods imported from the U.S. In recent years, negotiations between the U.S. government and other governments have resulted in revisions to these measures. In recent years, the U.S. government had agreed to modified tariff rate quota systems with each of the European Union, Japan and the United Kingdom that allow more imports from those trading partners to enter the U.S. market free of Section 232 tariffs.

On February 1, 2025, the White House issued executive orders directing increased tariffs on imports from Canada, Mexico and China with a threat of further increases for any country that retaliates. The proposed tariffs on Canada and Mexico were deferred for 30 days. The 10% additional tariff on imports from China was effected and China retaliated with tariffs on certain products it imports from the US. On February 10, 2025, the White House issued executive orders reinstating a 25% tariff on all steel imports and an increase in aluminum tariffs from 10% to 25% effective on and after March 12, 2025. This expansion of 232 tariffs revokes previously negotiated country-specific exemptions and quota arrangements, and does not allow product exclusions at this time, established under the original Section 232 tariffs in 2018. The status of any such tariffs is fluid and the ultimate impact on our revenues, financial results and cash flows will be based on a number of variables that are not known at this time. The impact on our business will be based on the final tariffs imposed, which we are not able to predict at this time. The extent to which effected/deferred tariffs or other trade actions, or the threat of tariffs result in a decrease in international demand for steel and aluminum produced in the U.S., disruptions in customer buying patterns or otherwise negatively impact demand for our products, our business may be adversely impacted.

We expect that these tariffs, while in effect, will discourage metal imports from non-exempt countries. These tariffs have had a favorable impact on the prices of the products we sell and our results of operations. If these or other tariffs or duties expire or if others are relaxed or repealed, or if relatively higher U.S. metal prices make it attractive for foreign metal producers to export their products to the U.S., despite the presence of duties or tariffs, the resurgence of substantial imports of foreign metal could create downward pressure on U.S. metal prices. If the Section 232 measures are removed or substantially lessened, whether through legal challenge, legislation, executive action or otherwise, imports of foreign metals would likely increase and metal prices in the U.S. would likely fall, which could materially adversely affect our revenues, financial results and cash flows.

We operate in an industry that is subject to cyclical fluctuations and any downturn in general economic conditions or in our customers’ specific industries could negatively impact our profitability and cash flows.

The metals service center industry is cyclical and impacted by both market demand and metals supply. Periods of economic slowdown (such as global or regional recessions) decrease the demand for our products and adversely affect our pricing. If either demand or pricing were to decline from the current levels, this could reduce our profitability and cash flows.

We sell many products to industries that are cyclical, such as the non-residential construction, semiconductor, energy, automotive, aerospace and heavy equipment industries. Although many of our direct sales are to sub-contractors or job shops that may serve many customers and industries, the demand for our products is directly related to, and quickly impacted by, demand for the finished goods manufactured by customers in these industries, which may change as a result of changes in the general U.S. or worldwide economy, inflation, domestic exchange rates, energy prices or other factors beyond our control.

We compete with a large number of companies in the metals service center industry, and, if we are unable to compete effectively, our profitability and cash flows may decline.

We compete with a large number of other general-line distributors and processors, and specialty distributors in the metals service center industry. Competition is based principally on price, inventory availability, timely delivery, customer service, quality and processing capabilities. Competition in the various markets in which we participate comes from companies of various sizes, some of which have more established brand names in the local markets that we serve. To compete for customer sales, we may lower prices or offer increased services at a higher cost, which could reduce our profitability and cash flows. Rapidly declining prices and/or demand levels may escalate competitive pressures, with service centers selling at substantially reduced prices, and sometimes at a loss, in an effort to reduce their high-cost inventory and generate cash. Any increased and/or sustained competitive pressure could cause our share of industry sales to decline along with our profitability and cash flows.

If we were to lose any of our primary suppliers or otherwise be unable to obtain sufficient amounts of necessary metals on a timely basis, we may not be able to meet our customers’ needs and may suffer reduced sales.

We have few long-term contracts to purchase metals. Therefore, our primary suppliers of aluminum, carbon, stainless and alloy steel or other metals could curtail or discontinue their delivery of these metals to us in the quantities we need with little or no notice. Our ability to meet our customers’ needs and provide value-added inventory management services depends on our ability to maintain an uninterrupted supply of high-quality metal products from our suppliers. If our suppliers experience production problems, lack of capacity or transportation disruptions, the lead times for receiving our supply of metal products could be extended and the cost of our inventory may increase. If, in the future, we are unable to obtain sufficient amounts of the necessary metals at competitive prices and on a timely basis from our customary suppliers, we may not be able to obtain these metals from acceptable alternative sources at competitive prices to meet our delivery schedules. Even if we do find acceptable alternative suppliers, the process of locating and securing these alternatives may be disruptive to our business, which could have an adverse impact on our ability to meet our customers’ needs and reduce our profitability and cash flows. In addition, if a significant domestic supply source is discontinued and we cannot find acceptable domestic alternatives, we may need to find foreign sources of supply. Using foreign sources of supply could result in longer lead times, increased price volatility, less favorable payment terms, increased exposure to foreign currency movements and certain tariffs and duties and require greater levels of working capital. Alternative sources of supply may not maintain the quality standards that are in place with our current suppliers that could impact our ability to provide the same quality of products to our customers that we have provided in the past, which could cause our customers to move their business to our competitors or to file claims against us, and such claims may be more difficult to pass through to foreign suppliers.

There has been significant consolidation at the metal producer level both globally and within the U.S. This consolidation has reduced the number of suppliers available to us, which may limit our ability to obtain the necessary metals to service our customers. The number of available suppliers may be further reduced if the general economy enters into another recession.

We rely upon our suppliers as to the specifications of the metals we purchase from them.

We rely on mill certifications that attest to the physical and chemical specifications of the metal received from our suppliers for resale and generally, consistent with industry practice, we do not undertake independent testing of such metals unless independent tests are required by customers. We rely on customers to notify us of any metal that does not conform to the specifications certified by the supplying mill. Although our primary sources of products have been domestic mills, we have and will continue to purchase product from foreign suppliers when we believe it is appropriate. In the event that metal purchased from domestic suppliers is deemed to not meet quality specifications as set forth in the mill certifications or customer specifications, we generally have recourse against these suppliers for both the cost of the products purchased and possible claims from our customers. However, such recourse will not compensate us for the damage to our reputation that may arise from substandard products and possible losses of customers. Moreover, there is a greater level of risk that similar recourse will not be available to us in the event of claims by our customers related to products from foreign suppliers that do not meet the specifications set forth in the mill certifications. In such circumstances, we may be at greater risk of loss for claims for which we do not carry, or carry insufficient, insurance.

Climate change might adversely impact our supply chain or our operations.

Concern about climate change might result in new legal and regulatory requirements to reduce or mitigate the effects of climate change. While we believe our operations do not emit significant amounts of carbon dioxide or other greenhouse gases, legal or regulatory changes related to climate change may result in higher prices for metals, higher prices for utilities required to run our facilities, higher fuel costs for us and our suppliers, increased compliance costs and other adverse impacts. To the extent that new legislation or regulations increase our costs, we may not be able to fully pass these costs on to our customers without a resulting decline in sales and adverse impact to our profits.

Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt our business, the business of our third-party suppliers, and the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.

There is also increased focus by governmental and non-governmental entities on sustainability matters. Any perception that we have failed to act responsibly regarding climate change could result in negative publicity and adversely affect our business and reputation.

There also has been increased stakeholder focus, including by U.S. and foreign governmental authorities, investors, customers, media and nongovernmental organizations, on environmental sustainability matters, such as climate change, the reduction of greenhouse gases and water consumption. Legislative, regulatory or other efforts to combat climate change or other environmental concerns could result in future increases in taxes, restrictions on or increases in the costs of supplies, transportation and utilities, any of which could increase our operating costs, and necessitate future investments in facilities and equipment. Further, our customers may impose emissions reduction or other environmental standards and requirements. As a result, we may experience increased compliance burdens, and the sourcing of our products may be adversely affected. These risks also include the increased pressure to make commitments, set targets, or establish additional goals to take actions to meet them, which could expose us to market, operational, execution and reputational costs or risks.

Developing and acting on initiatives within the scope of social and environmental sustainability, and collecting, measuring and reporting environmental sustainability-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards. Further, statements about our social and environmental sustainability-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. If our social and environmental sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of social and environmental sustainability on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

We face increased competition and pricing pressures from alternative materials and risks concerning innovation, new technologies, products and increasing customer requirements.

As a result of increasingly stringent regulatory requirements, designers, engineers and industrial manufacturers, especially those in the automotive industry, may be increasing their use of lighter weight and alternative materials, such as composites, plastics, glass and carbon fiber. In addition, higher sustained market prices of metal products could cause new alternative material producers to enter the market. Prices of all of these materials fluctuate widely, and differences between the prices of these materials and the price of metal products may adversely affect demand for our products and/or encourage material substitution, which could adversely affect the prices of and demand for metal products. If metals prices increase compared to certain substitute materials, the demand for our products could be negatively impacted, which could have an adverse effect on our financial results.

Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks or our insurers may deny coverage of or be unable to pay for material losses we incur, which could adversely affect our profitability and overall financial position.

We strive to obtain insurance agreements from financially solid, highly rated counterparties in established markets to cover significant risks and liabilities. Not every risk or liability can be insured, and for risks that are insurable, the policy limits and terms of coverage reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. Even if insurance coverage is available, we may not be able to obtain it at a price or on terms acceptable to us. Disputes with insurance carriers, including over policy terms, reservation of rights, the applicability of coverage (including exclusions), compliance with provisions (including notice) and/or the insolvency of one or more of our insurers may significantly affect the amount or timing of recovery.

In some circumstances we may be entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws, regulations or otherwise. However, these protections are not always available, are typically subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover all losses or liabilities incurred.

If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover our risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows.

If we do not successfully implement our growth strategy, our ability to grow our business could be impaired.

We may not be able to identify suitable acquisition candidates or successfully complete any acquisitions or integrate any other businesses into our operations. If we cannot identify suitable acquisition candidates or are otherwise unable to complete acquisitions, we may not be able to continue to grow our business as expected and, if we cannot successfully integrate recently acquired businesses, we may incur increased or redundant expenses. Moreover, any additional indebtedness we incur to pay for these acquisitions could adversely affect our liquidity and financial condition.

We have invested a significant amount of capital in new locations and new processing capabilities. We may not be able to identify sufficient opportunities for internal growth to be able to sustain growth at similar levels. In addition, we may not realize the expected returns from these investments.

We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and might experience business disruptions associated with restructuring, realignment and cost reduction activities.

Portions of our business have been, and may in the future be, the subject of restructuring, realignment and cost reduction initiatives. While we may undertake these initiatives with the goal of realizing potential efficiencies, we may not be successful in achieving efficiencies and cost reduction benefits we expect in full or at all. Further, such benefits might be realized later than expected, and the ongoing costs of implementing these measures might be greater than anticipated. If these measures are not successful or sustainable, we might undertake additional realignment and cost reduction efforts, which could result in future charges. Moreover, our ability to achieve our other strategic goals and business plans might be adversely affected, and we could experience business disruptions, if our restructuring and realignment efforts and our cost reduction activities prove ineffective.

Acquisitions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of each transaction.

Since our initial public offering in September 1994, we have successfully purchased 76 businesses. We continue to evaluate acquisition opportunities and expect to continue to grow our business through acquisitions in the future. Risks we may encounter in acquisitions include:

• the acquired company may not perform as anticipated or expected strategic benefits may not be realized, which could result in an impairment charge or otherwise impact our results of operations;
• we may not realize the anticipated increase in our revenues if a larger than predicted number of customers decline to continue purchasing products from us;
• we may have to delay or not proceed with a substantial acquisition if we cannot obtain the necessary regulatory approval or funding to complete the acquisition in a timely manner;
• we may significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition or assume existing debt of an acquired company, which, among other things, may result in a downgrade of our credit ratings;
• we may have increased inventory exposure for a short time period if the acquired company has significant amounts of material on order;
• our relationship with current and new employees, customers and suppliers could be impaired;
• our safety performance may decline, and our incidence rates increase;
• our due diligence process may fail to identify risks that could negatively impact our financial condition;
• we may lose anticipated tax benefits or have additional legal or tax exposures if we have prematurely or improperly combined entities;
• we may face contingencies related to product liability, intellectual property, financial disclosures, environmental issues, violations of regulations/policies, tax positions and accounting practices or internal controls;
• the acquisition may result in litigation from terminated employees or third parties;
• our management’s attention may be diverted by transition or integration issues;
• costs and investments in excess of our expectations may be required to implement necessary compliance processes and related systems, including IT systems, accounting systems and internal controls over financial reporting;
• we may pay more than the acquired company is worth;
• we may assume substantial additional environmental exposures, commitments, contingencies and remediation and reclamation projects; and
• we may undertake acquisitions financed in part through public offerings or private placements of debt or equity securities, or other arrangements. Such acquisition financing could result in a decrease in our earnings and adversely affect other leverage measures. If we issue equity securities or equity-linked securities, the issued securities may have a dilutive effect on the interests of the holders of our common stock. In addition, limitations on our access to external financing sources, whether due to tightened capital markets, available capital with unfavorable interest rates or otherwise, could impair our ability to execute our growth strategy.

These factors could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or the completion of a number of acquisitions in any short period of time.

In addition, most of the acquisition agreements we have entered into require the former owners to indemnify us against certain liabilities related to the operation of those companies before we acquired them. In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities. Similarly, the purchasers of our non-core businesses may from time to time agree to indemnify us for operations of such businesses after the closing. We cannot be assured that any of these indemnification provisions will fully protect us, and as a result we may face unexpected liabilities that adversely affect our consolidated results of operations, financial condition and cash flows.

We are a decentralized company, which presents certain risks.

With a diverse geographic footprint in both North America and internationally, we believe our decentralized structure has catalyzed our growth and enabled us to remain responsive to opportunities and to our customers’ needs by leaving significant control and decision-making authority and accountability in the hands of local management. Because we are decentralized, we may be slower to detect compliance-related problems (e.g., a rogue employee undertaking activities that are prohibited by applicable law or by our internal policies) and “company-wide” business initiatives, such as the integration of disparate information technology systems, are often more challenging and costly to implement than they would be in a more centralized environment. Depending on the nature of the problem or initiative in question, such failure could materially adversely affect our business, financial condition or results of operations.

We are subject to various environmental, employee safety and health, and customs and export laws and regulations, which could subject us to significant liabilities and compliance expenditures.

We are subject to foreign, federal, state and local environmental laws and regulations concerning air emissions, wastewater discharges, underground storage tanks and solid and hazardous waste disposal at or from our facilities. Our operations are also subject to various employee safety and health laws and regulations, including those concerning occupational injury and illness, employee exposure to hazardous materials and employee complaints. We are also subject to customs and export laws and regulations for international shipment of our products. Environmental, employee safety and health, and customs and export laws and regulations are comprehensive, complex and frequently changing. Some of these laws and regulations are subject to varying and conflicting interpretations. We are subject from time to time to administrative and/or judicial proceedings or investigations brought by private parties or governmental agencies with respect to environmental matters, employee safety and health issues or customs and export issues. Proceedings and investigations with respect to environmental matters, any employee safety and health issues or customs and export issues could result in substantial costs to us, divert our management’s attention and result in significant liabilities, fines or the suspension or interruption of our operating activities. Some of our current properties are located in industrial areas with histories of heavy industrial use. The location of these properties may require us to incur environmental expenditures and to establish accruals for environmental liabilities that arise from causes other than our operations. In addition, we are currently remediating contamination in connection with a certain property related to activities at former manufacturing operations of a subsidiary we acquired. Future events, such as changes in existing laws and regulations or their enforcement, new laws and regulations or the discovery of conditions not currently known to us, could result in material environmental or export compliance or remedial liabilities and costs, constrain our operations or make such operations more costly.

We operate internationally and are subject to changes in tax rates, exchange rate fluctuations, exchange controls, political risks and other risks relating to international operations.

Approximately seven percent of our 2024 consolidated net sales were from operations outside the U.S., subjecting us to the risks of doing business on a global level. These risks include changes in tax rates, fluctuations in currency exchange rates, economic instability and disruptions, restrictions on the transfer of funds and the imposition of duties and tariffs. Additional risks from our multinational business include transportation delays and interruptions, war, terrorist activities, epidemics, pandemics, political instability, import and export controls, local regulation, changes in governmental policies, inflation, labor unrest and current and changing regulatory environments. International political and military conflict, such as the war in Ukraine, increasing tensions between Taiwan and China, or evolving conflicts in the Middle East could materially adversely affect the global economy. In addition, government policies on international trade and investment such as import quotas, tariffs, and capital controls, whether adopted by individual governments or addressed by regional trade blocs, can affect the demand for our customers’ products and services. The implementation of more restrictive trade policies, such as higher tariffs or new barriers to entry, in countries in which our customers sell large quantities of products and services could negatively impact our business, results of operations and financial condition. The Organization for Economic Cooperation and Development (“OECD”) has created a framework among 140 countries with the objective of implementing a global minimum effective tax rate of 15%. While we do not anticipate a material impact to our effective income tax rate under these changes, as additional jurisdictions adopt this legislation and the rules continue to evolve, our effective income tax rate and income taxes paid could increase in future years.

Our operating results could be negatively affected by the global laws, rules and regulations, as well as political environments in the jurisdictions in which we operate. For example, we are subject to the FCPA, and similar worldwide anti-bribery laws in non-U.S. jurisdictions such as the United Kingdom’s Bribery Act 2010, which generally prohibit companies and their intermediaries from corruptly paying, offering to pay, or authorizing the payment of money, a gift, or anything of value, to a foreign official or foreign political party, for purposes of obtaining or retaining business. A company can be held liable under these anti-bribery laws not just for its own direct actions, but also for the actions of its foreign subsidiaries or other third parties, such as agents or distributors. In addition, we could be held liable for actions taken by employees or third parties on behalf of a company that we acquire. If we fail to comply with the requirements under these laws and regulations, we may face possible civil and/or criminal penalties, which could have a material adverse effect on our business or financial results.

We rely on information management systems and any damage, interruption or compromise of our information technology management systems, networks or data could disrupt and harm our business.

We rely upon information technology systems and networks in connection with the operation of our business, some of which are managed by third parties, to process, transmit and store electronic information. These systems and networks may include operational technology systems that we use to operate and manage our equipment and inventory. Additionally, we collect and store data that is sensitive to our company, including proprietary business information and the personal information of our employees, customers or others. Operating these information technology systems and networks and processing and maintaining this data, in a secure manner, is critical to our business operations and strategy. Our information management systems and the data contained therein are vulnerable to threats and disruption, including interruption due to power loss, system and network failures, operator negligence and similar causes.

In addition, our systems and data are susceptible to cybersecurity incidents, such as viruses, malware, ransomware and other cybersecurity attacks. Cybersecurity attacks are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced threats. These threats pose a risk to the security of our information technology systems and networks and the confidentiality, availability and integrity of our data. The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate. We have experienced cybersecurity events such as viruses and attacks on our IT systems. To date, none of these events has had a material impact on our operations or financial results.

Despite our efforts to protect our systems, networks and data, we cannot guarantee protection from all cybersecurity incidents, including theft, misplaced or lost data, programming errors, or employee errors that could potentially lead to the compromise of such data, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions. Furthermore, data protection laws and regulations around the world often require “reasonable,” “appropriate” or “adequate” technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving; there can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to protect the information we maintain.

Given the unpredictability of the timing, nature and scope of security incidents such as cybersecurity attacks or potential disruptions, we are subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising, misappropriation, destruction or corruption of data, unauthorized access to or acquisition of data, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Any significant compromise of our information management systems and networks or data could impede or interrupt our business operations and may result in negative consequences including loss of revenue, fines, penalties, litigation, reputational damage, regulatory actions or increased regulatory scrutiny, inability to accurately and/or timely complete required filings with government entities including the SEC and the Internal Revenue Service, unavailability or disclosure of confidential information (including personal data), negative impact on our stock price, environmental damage, and personal injury or death. Furthermore, we may be required to expend significant attention and financial resources to protect against physical or security incidents that could result in the misappropriation of our information or the information of our employees and customers.

While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyber-attacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.

Our enterprise data practices, including the collection, use, sharing, and security of the personal identifiable information of our customers, employees, or suppliers are subject to increasingly complex, restrictive, and punitive regulations in all key market regions.

Various federal, state, and foreign laws and regulations as well as industry standards and contractual obligations govern the collection, use, retention, protection, disclosure, cross-border transfer, localization, sharing, and security of the data we receive from and about our customers, employees, suppliers, and other individuals. The regulatory environment for the collection and use of personal information for companies is evolving in the U.S. and internationally.

Under global data privacy and data protection regulations, the failure to maintain compliant data practices could result in consumer complaints, regulatory inquiry, civil or criminal penalties, litigation, legal liability, as well as brand impact or other harm to our business. In addition, increased consumer sensitivity to real or perceived failures in maintaining acceptable data practices could damage our reputation and deter current and potential users or customers from using our products and services. Because many of these laws are new, there is little clarity as to their interpretation, as well as a lack of precedent for the scope of enforcement. Other foreign, state and local jurisdictions have adopted and are considering adopting, laws and regulations imposing obligations regarding personal data. In some cases, these laws provide a private right of action that would allow customers to bring suit directly against us for mishandling their data or security incidents involving their personal information. The cost of compliance with these laws and regulations will be high and is likely to increase in the future.

Our financial results may be affected by various legal and regulatory proceedings, including those involving antitrust, tax, environmental, or other matters.

We are subject to a variety of litigation and legal compliance risks. These risks include, among other things, possible liability relating to product liability, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, environmental matters and compliance with U.S. and foreign laws, including competition laws and laws governing improper business practices. We or one of our subsidiaries could be charged with wrongdoing as a result of such matters. If convicted or found liable, we could be subject to significant fines, penalties, repayments, or other damages (in certain cases, treble damages). As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time and so may their related interpretations. Changes in laws or regulations could result in higher expenses and payments, and uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights.

The volatility of the stock market could result in a material impairment of goodwill or indefinite-lived intangible assets.

We review the recoverability of goodwill and indefinite-lived intangible assets annually or whenever significant events or changes in circumstances occur that might impair the recovery of recorded costs. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill or indefinite-lived intangible assets may not be recoverable, include a decline in stock price and market capitalization, declines in the market conditions for our products, viability of end markets, loss of customers, reduced future cash flow estimates, and slower growth rates in our industry. If prices for the products our customers sell fall substantially or remain low for a sustained period, we may be (i) unable to realize a profit from businesses that service such customers, (ii) required to record additional impairments, or (iii) required to suspend or reorganize operations that service such customers. An impairment charge, if incurred, could be material.

Our business operations and financial performance could be adversely affected by changes in our relationship with our employees or changes to U.S. or foreign employment regulations.

We had approximately 15,900 employees worldwide as of December 31, 2024. This means we have a significant exposure to changes in domestic and foreign laws governing our relationships with our employees, including wage and hour laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, workers’ compensation rates, citizenship requirements and payroll taxes, which likely would have a direct impact on our operating costs. A significant increase in minimum wage or overtime rates in jurisdictions where we have employees could have a significant impact on our operating costs and may require that we relocate those operations or take other steps to mitigate such increases, all of which may cause us to incur additional costs, expend resources responding to such increases and lower our profitability.

We face certain risks associated with potential labor disruptions.

Approximately 12% of our employees are covered by collective bargaining agreements and/or are represented by unions or workers’ councils with 4% of our employees covered by 21 different collective bargaining agreements that expire in 2025 unless renewed. While we believe that our relations with our employees are generally good, we cannot provide assurances that we will be completely free of labor disruptions such as work stoppages, work slowdowns, union organizing campaigns, strikes, lockouts or that any existing labor disruption will be favorably resolved. We could incur additional costs and/or experience work stoppages that could adversely affect our business operations through a loss of revenue and strained relationships with customers. In addition, work stoppages or similar actions at our suppliers also can adversely affect us. Any delays or work stoppages could adversely affect our ability to fulfill customer orders, which could negatively impact our financial condition and results of operations.

If we are unable to attract, retain and develop key personnel, our business could be materially adversely affected.

Our business substantially depends on the continued service of key members of our management and other key employees. The loss of the services of a significant number of members of our management or other key employees could have a material adverse effect on our business. Our future success also will depend on our ability to attract, retain and develop highly skilled personnel and skilled labor. Competition for these types of employees is intense and has increased recently, and we could experience difficulty from time to time in hiring, developing and retaining the personnel necessary to support our business. If we do not succeed in retaining and developing our current employees and attracting new high-quality employees, our business could be materially adversely affected.

Risks Related to our Indebtedness

Our indebtedness could impair our financial condition or cause a downgrade of our credit rating and reduce the funds available to us for other purposes and our failure to comply with the covenants contained in our debt instruments could result in an event of default that could adversely affect our operating results.

We have substantial debt service obligations. As of December 31, 2024, we had aggregate outstanding indebtedness of approximately $1.15 billion. This indebtedness could adversely affect us in the following ways:

• additional financing may not be available to us in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes and, if available, may be considerably more costly than our current debt service costs;
• a significant portion of our cash flow from operations must be dedicated to the payment of interest and principal on our debt, which reduces the funds available to us for our operations, dividends and share repurchases or other purposes;
• our leverage may increase our vulnerability to economic downturns and limit our ability to withstand adverse events in our business by limiting our financial alternatives; and
• our ability to capitalize on significant business opportunities, including potential acquisitions, and to plan for, or respond to, competition and changes in our business may be limited due to our indebtedness.

Our existing debt agreements contain financial and restrictive covenants that limit the total amount of debt that we may incur and may limit our ability to engage in other activities that we may believe are in our long-term best interests. Our failure to comply with these covenants may result in an event of default, which, if not cured or waived, could accelerate the maturity of our indebtedness or prevent us from accessing additional funds under our revolving credit facility. If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. See discussion regarding our financial covenants in the

“Liquidity and Capital Resources” section of Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Because all of our available borrowing capacity on our revolving credit facility bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, if we increase our leverage in the future, we are vulnerable to increases in interest rates.

As of December 31, 2024, we had an insignificant amount of variable interest rate debt outstanding. However, as of December 31, 2024, we had approximately $1.5 billion available for borrowing on our revolving credit facility at variable interest rates. We currently do not use derivative financial instruments to manage the potential impact of interest rate risk. Accordingly, if we borrow on our revolving credit facility, our interest expense will fluctuate based on the Secured Overnight Financing Rate and other variable interest rates.

Risk Management and Strategy

Reliance has implemented processes for assessing, identifying and managing material risks from cybersecurity threats, which are integrated into the Company’s overall enterprise risk management systems and processes. The Company’s cybersecurity risk program is largely based on the U.S. National Institute for Standards and Technology (“NIST”) cybersecurity framework and other applicable industry frameworks. The Company regularly assesses the threat landscape and takes a holistic view of cybersecurity risks, with a layered cybersecurity strategy based on prevention, detection and containment. The Company has also engaged third parties in connection with the assessment and advancement of its cybersecurity risk management processes. We undertake regular vulnerability scanning, periodic penetration testing and maturity assessments with the support of third parties; vulnerabilities are subsequently addressed based on risk/benefit analyses.

To support our preparedness, we have constituted a Cybersecurity Review Committee (“CRC”) and adopted a written incident response plan (“IRP”). The CRC is comprised of cross-functional personnel including Reliance’s Chief Information Officer (“CIO”), Chief Financial Officer (“CFO”), General Counsel and Vice President, Enterprise Risk. In the event of a cybersecurity incident, our CRC refers to our IRP and existing management internal controls processes. Pursuant to these prescribed processes, designated personnel are responsible for assessing the severity of the incident and any associated threats, containing and resolving the incident as quickly as possible, managing any damage to the Company’s systems and networks, minimizing the impact on the Company’s stakeholders, analyzing and executing upon reporting obligations, escalating information about the incident to senior management and potentially representatives from the Board, as appropriate, and performing post-incident analysis and program enhancements, as needed. We perform tabletop exercises to test our incident response procedures, identify cybersecurity gaps and vulnerabilities and improvement opportunities and exercise team preparedness.

Reliance mandates regular cybersecurity training for employees and applicable contractors designed to provide employees and contractors with a baseline understanding of cybersecurity fundamentals to prevent security breaches and safely identify potential threats. The training covers various cyberattack methodologies, including insider attacks, phishing and other forms of social engineering, and other email attacks, malware attacks, data protection, data handling, password protections, cloud and internet security and cybersecurity fundamentals for mobile devices. We take a risk-based approach with respect to our use and oversight of third-party service providers, using a number of means to assess cyber risks related to our third-party service providers, including vendor questionnaires, conducting due diligence in connection with onboarding new vendors, and negotiating for cybersecurity-related terms in vendor agreements as appropriate. We also seek to collect and assess cybersecurity audit reports and other supporting documentation when available.

Cybersecurity Risks

Like other complex corporations, Reliance is the target of cyber-attacks from time to time, which have to date been immaterial individually and in the aggregate to our business strategy, results of operations or financial condition. There can be no assurance that any future cybersecurity incidents will not be material to our business. For additional information about risks related to cybersecurity, please see the risk factor set forth under the caption Item 1A. “Risk Factors" the Risk Factor captioned “We rely on information management systems and any damage, interruption or compromise of our information technology management systems, networks or data could disrupt and harm our business.”

Governance

Roles and Responsibilities

Cybersecurity is an important element of our risk management processes and an area of particular focus for Reliance’s Board of Directors and management. The Company’s CIO serves as single point of communication and coordination for protecting the Company and its digital information. The CIO performs an initial assessment of each reported cyber incident and escalates all non-trivial cybersecurity incidents and risks to the CRC. The CRC is primarily responsible for assessing and managing material risks from cybersecurity threats and is comprised of a cross-functional team including the CIO, as well as senior representatives from the Company’s risk management, finance and legal functions. The CIO has 15 years of experience in managing of cybersecurity.

The Board, acting through its committee structure, is responsible for overseeing management’s implementation and execution of the enterprise risk management processes and for coordinating the outcome of reviews by Committees in their respective risk areas. Although each Committee is responsible for overseeing the management of certain risks, the Board is regularly informed by the Committees about these risks. This helps enable the Board and the Committees to coordinate risk oversight and the relationships among the various risks faced by the Company, including cybersecurity risk. Directors with experience overseeing and managing risk management processes play a critical role in the Board’s oversight of our enterprise risk management processes.

The Board has designated the Audit Committee to be responsible for oversight of cybersecurity risk. The Audit Committee receives regular reports from the CRC and the CIO that may discuss topics such as prior assessments, cybersecurity trends, prior cybersecurity events, and planned enhancements. In addition, the Audit Committee also receives regular periodic reports regarding information technology general controls in connection with its oversight of internal control over financial reporting. The Chair of the Audit Committee regularly briefs the Board on these matters.

As of December 31, 2024, we operated a network of 320 locations in 41 U.S. states and 10 foreign countries. In the opinion of management, all of our facilities are in good condition and are adequate for our existing operations. These facilities currently operate at about 50-60% of capacity based upon a 24-hour seven-day week, with each location averaging approximately two shifts operating at full capacity for a five-day work week. We have the ability to increase our operating capacity significantly without further investment in facilities or equipment if demand levels increase.

We leased 81 of our metals service center facilities as of December 31, 2024. In addition, we have ground leases and other leased spaces, such as depots, sales offices and storage, totaling 6.0 million square feet. Total square footage on all company-owned properties is approximately 32.6 million and represents approximately 84% of the aggregate square footage of our operating facilities. Our leases of facilities and other spaces expire at various times through 2045, and our ground leases expire at various times through 2068.

The information contained under the captions “Legal Matters” and “Environmental Contingencies” in Note 17—“Commitments and Contingencies” to our consolidated financial statements in Part II, Item 8 “Financial Statements and Supplementary Data” is incorporated herein by reference.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, and the discussion of cautionary statements and significant risks to the Company’s business under Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

Overview

In 2024, demand was relatively healthy in the majority of our end markets, supported by same-store growth in tons sold compared to 2023. Despite growing our tons sold, our operating results declined mainly due to lower metals prices and our net sales of $13.84 billion declined 6.6% compared to $14.81 billion in 2023.

Our same-store and total tons sold increases of 1.0% and 4.0%, respectively, in 2024 compared to 2023 benefited from one additional shipping day and outperformed the 2.0% decline in industry shipments reported by the Metals Service Center Institute (“MSCI”). We believe our outperformance of industry peers is supported by our organic growth activities along with our customer service.

Gross profit margin was 29.7% in 2024 compared to 30.7% in 2023. Our gross profit margin remained strong but was impacted by declines in metals pricing. However, we believe the impact from the decline in metals pricing was mitigated by effective inventory management, our focus on small orders with quick turnaround and value-added processing services.

Earnings per diluted share of $15.56 in 2024 declined 31.3% compared to $22.64 in 2023. Despite increases in our same-store tons sold and total tons sold, our earnings per share declined mainly due to lower metals prices.

Although cash flow from operations of $1.43 billion in 2024 was the third highest in our history, it decreased $241.5 million, or 14.4%, from $1.67 billion in 2023, the second highest in our history, mainly due to lower net income partially offset by lower working capital investment.

Returns to stockholders in 2024 totaled $1.34 billion, comprised of a record $1.09 billion of share repurchases which reduced our outstanding common shares by six percent year-over-year, and $249.7 million of cash dividends, which reflected a 10.0% increase in our regular quarterly dividend rate.

Organic growth activities were substantially comprised of capital expenditures of $430.6 million in 2024 compared to $468.8 million in 2023. We also invested $364.6 million in four acquisitions in 2024.

Effect of Demand and Pricing Changes on our Operating Results

Customer demand has a significant impact on our results of operations. When volume increases, our revenue dollars generally increase, which contributes to increased gross profit dollars. Conversely, when volume declines, we typically produce fewer revenue dollars, which can reduce our gross profit dollars. Variable costs such as certain warehouse, delivery and selling, general and administrative expenses also increase with volume. While we can and do reduce certain variable expenses when volumes decline, we cannot easily reduce our fixed costs.

Pricing for our products generally has a much more significant impact on our results of operations than customer demand. Our revenues generally increase as a result of pricing increases as overall customer demand is not usually impacted by typical mill pricing increases, although customer buying patterns may change. Our selling prices generally increase when the cost of the metals we purchase increase as we are typically able to pass higher metals costs on to our customers. If prices increase and we maintain the same gross profit percentage, we generate higher levels of gross profit and pretax income dollars for the same operational efforts. Conversely, if pricing declines, we will typically generate lower levels of gross profit and pretax income dollars. For more information, see Item 1A. “Risk Factors”.

In addition, when volume or pricing increases, our working capital requirements typically increase which decreases operating cash flow. Conversely, when customer demand or pricing falls, our investment in working capital typically decreases which improves operating cash flow.

Acquisitions

2024 Acquisitions

To further our growth strategy, we completed four acquisitions in 2024. The consideration of each acquisition in 2024 was funded with cash on hand. Our acquisition strategy enhances our product breadth and value-added processing capabilities, with a continued focus on the diversification of our products, end markets and geographies. Our 2024 acquisitions broaden our geographic base and processing capabilities in new and existing markets.

• On February 1, 2024, we acquired Cooksey Iron & Metal Company (“Cooksey Steel”), a metals service center that processes and distributes finished steel products, including tubing, beams, plates and bars. Headquartered in Tifton, Georgia, Cooksey Steel operates three locations, servicing a diverse range of customers.
• On April 1, 2024, we acquired American Alloy Steel, Inc. (“American Alloy”), a distributor of specialty carbon and alloy steel plate and round bar, including pressure vessel quality (PVQ) material. Headquartered in Houston, Texas, American Alloy operates five domestic metals service centers and a plate fabrication business.
• On April 1, 2024, we acquired Mid-West Materials, Inc. (“MidWest Materials”), a flat-rolled steel service center that primarily services North American original equipment manufacturers. Located in Perry, Ohio, MidWest Materials provides steel products including hot-rolled, high strength hot-rolled, coated, and cold-rolled products that are sold into the trailer manufacturing, agriculture, metal fabrication, and building products markets.
• On August 16, 2024, we acquired certain assets of the FerrouSouth division of Ferragon Corporation (“FerrouSouth”). Headquartered in Iuka, Mississippi, FerrouSouth is a toll processing operation providing flat-roll steel processing, logistical and warehousing services.

Our 2024 acquisitions contributed $286.2 million to our 2024 net sales.

2023 Acquisition

On May 1, 2023, with cash on hand, we acquired Southern Steel Supply, LLC (“Southern Steel”). Headquartered in Memphis, Tennessee, Southern Steel distributes and processes merchant and structural steel, pipe and tube, steel plate, ornamental products and laser cut and fabricated parts. Southern Steel contributed $36.1 million to our 2024 net sales.

Internal Growth Activities

In 2024, we continued to maintain our focus on internal growth by building new facilities, expanding existing facilities, relocating leased facilities to facilities we own, expanding our processing capabilities and capacity, upgrading processing equipment to increase efficiency, improving the safety and energy efficiency of our operations and enhancing the working environments of our employees. Our capital expenditure budgets have been at historically high levels in recent years and, we believe, significantly contribute to our industry leading financial results. During 2024 and 2023, we spent $430.6 million and $468.8 million on capital expenditures.

We believe the increase in our level of orders that include value-added processing over time has provided stability to our gross profit margin during periods of declining metals prices and contributed to a higher sustainable gross profit margin level. We have made significant investments in capital expenditures in recent years that have expanded our value-added processing capabilities and increased the level of our sales orders that include value-added processing to at least 50%, which we believe has been supportive to increases in our sustainable gross profit margin, which is currently estimated at 29%-31%. Our current processing and estimated sustainable gross profit margin level is significantly higher than what we believe to be our historical levels from approximately a decade ago in which our orders that included value-added processing ranged from 40%-45% and our gross profit margins were approximately 25%-27%.

We believe that our ability to make significant investments in processing equipment and facilities is a competitive advantage, as we can expand our services and provide higher quality product to our customers. We believe many metals service center company competitors do not have the ability to expand their processing services in response to their customers’ needs as quickly and at the same scale as Reliance.

Results of Operations

The following sets forth certain income statement data for each of the last three fiscal years (dollars are shown in millions, except per share amounts, and certain percentages may not calculate due to rounding):

(1) Cost of sales included $3.6 million of credits for the amortization of inventory step-down to fair value adjustments in 2024 and charges of $8.1 million for the amortization of inventory step-up to fair value adjustments in 2022, relating to acquisitions. Cost of sales in 2024 and 2023 included $10.2 million and $0.2 million, respectively, of restructuring charges relating to operational changes at certain operations.

(2) Gross profit, calculated as net sales less cost of sales, and gross profit margin, calculated as gross profit divided by net sales, are non-GAAP financial measures as they exclude depreciation and amortization expense associated with the corresponding sales. About half of our orders are basic distribution with no processing services performed. For the remainder of our sales orders, we perform “first-stage” processing, which is generally not labor intensive as we are simply cutting the metal to size. Because of this, the amount of related labor and overhead, including depreciation and amortization, is not significant and is excluded from cost of sales. Therefore, our cost of sales is substantially comprised of the cost of the material we sell. We use gross profit and gross profit margin as shown above as measures of operating performance. Gross profit and gross profit margin are important operating and financial measures as their fluctuations can have a significant impact on our earnings. Gross profit and gross profit margin, as presented, are not necessarily comparable with similarly titled measures for other companies.

(3) SG&A expense in 2024 included $4.1 million of non-recurring net settlement charges, mainly related to our withdrawal from certain multiemployer pension plans, and 2023 included $3.8 million of nonrecurring gains related to the sale of non-core property, plant and equipment.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Sales

(dollars in millions)

Our tons sold and average selling price per ton sold exclude our toll processed tons. Our average selling price per ton sold includes intercompany transactions that are eliminated from our consolidated net sales. Same-store amounts exclude the contributions from our 2024 and 2023 acquisitions.

Our same-store net sales declined from 2023 mainly due to declines in carbon steel pricing that lowered our average selling price per ton sold despite an increase in tons sold. Demand remained relatively healthy in the majority of the end markets we serve, supported by same-store growth in tons sold.

Since we primarily purchase and sell our inventories in the spot market, our average selling prices generally fluctuate with changes in replacement costs of the various metals we purchase. The mix of products sold can also have an impact on our overall average selling price per ton sold. As carbon steel sales represented 53% of our gross sales in 2024, changes in carbon steel prices have the most significant impact on changes in our overall average selling price per ton sold.

The mix of our total sales by major commodity products and year-over-year changes in selling prices are presented below:

Our 2024 acquisitions did not significantly impact the selling prices of our major commodity products.

Cost of Sales and Gross Profit

(dollars in millions)

The decrease in cost of sales was attributable to lower average costs per ton sold, mainly due to declines in replacement costs for carbon steel products, partially offset by an increase in tons sold.

Gross profit decreased despite contributions from four acquisitions and an increase in same-store tons sold mainly due to lower net sales as a result of a decrease in average selling price per ton sold.

Our gross profit margin remained strong, but was pressured by lower metals pricing which we believe was mitigated by effective inventory management, our focus on small orders with quick turnaround and value-added processing services.

In addition, we record in cost of sales non-cash adjustments to our LIFO method inventory valuation reserve that, in effect, reflects cost of sales at current replacement costs. The inventory caption of our consolidated balance sheet includes a LIFO method inventory valuation reserve of $434.9 million at December 31, 2024.

See “Net Sales” above for trends in both demand and costs of our products, and product pricing.

Expenses

(dollars in millions)

Our SG&A expense is made up largely of compensation costs (approximately 60-65% historically), which fluctuate based on changes in our headcount levels in response to demand and general inflation, and incentive-based compensation.

Same-store SG&A expense increased mainly due to higher costs associated with wage inflation and increased headcount related to our organic growth activities offset by lower incentive-based compensation resulting from lower profitability. Our SG&A expense as a percentage of sales increased mainly due to lower sales levels.

In addition, same-store SG&A expense in 2024 included non-recurring net settlement charges of $4.1 million, mainly related to our withdrawal from certain multiemployer pension plans, and 2023 included $3.8 million of nonrecurring gains related to the sale of non-core property, plant and equipment.

The increase in same-store depreciation and amortization expense is mainly due to significant increases in capital expenditures in 2023.

Included in Expenses are $11.7 million of impairment losses in 2024, which included $11.2 million related to the discontinued use of a trade name intangible asset in connection with an operational restructuring.

Operating Income

(dollars in millions)

Operating income declined mainly as a result of lower metals pricing that decreased gross profit along with a moderate increase in same-store SG&A expense, partially offset by operating income contributions from acquisitions. Our operating income margin was lower mainly due to decreased operating leverage of our SG&A expense due to lower net sales and a lower gross profit margin.

See “Net Sales” above for discussion of trends in demand and product costs and “Expenses” for trends in our operating expenses.

Other (Income) Expense, Net

(dollars in millions)

The change in other income, net was mainly due to a decrease in interest income as a result of lower cash and cash equivalent balances and interest earned thereon. See Note 16—“Other (Income) Expense, Net” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on other (income) expense, net.

Income Tax Rate

Our effective income tax rate was 23.0% in 2024 and 2023. The difference between our effective income tax rate and the U.S. federal statutory rate of 21.0% was mainly due to state income taxes partially offset by the net effects of company-owned life insurance policies. See Note 12—“Income Taxes” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on the differences between our effective income tax rates and the U.S. federal statutory rate.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

See discussion in the “Results of Operations” and “Liquidity and Capital Resources” section of Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Financial Condition

Operating Activities

Net cash provided by operations of $1.43 billion in 2024 decreased $241.5 million from $1.67 billion in 2023. The decrease was mainly due to a $462.1 million decline in net income partially offset by lower working capital investment. To manage our working capital, we focus on our days sales outstanding and inventory turnover rate as receivables and inventory are the two most significant elements of our working capital. Our average days sales outstanding rates were 41.5 days and 40.5 days in 2024 and 2023, respectively. Our inventory turnover rate (based on tons) during 2024 was 4.6 times (or 2.6 months on hand) compared to 4.7 times (or 2.6 months on hand) in 2023.

Income taxes paid of $244.9 million in 2024 decreased from $386.3 million in 2023, mainly due to our lower pretax income.

Investing Activities

Net cash used in investing activities of $803.7 million in 2024 increased $319.8 million compared to $483.9 million in 2023. The significant increase was mainly due to $364.6 million spent on acquisitions in 2024 compared to $24.0 million in 2023, partially offset by a $38.2 million decrease in capital expenditures. The majority of our capital expenditures in 2024 and 2023 were related to growth initiatives.

Financing Activities

Net cash used in financing activities of $1.38 billion in 2024 increased $94.1 million from $1.28 billion in 2023. The increase was mainly the result of increased share repurchases partially offset by decreased net debt repayments. Net debt repayments were $0.3 million in 2024 compared to $508.3 million in 2023, which included the redemption of $500.0 million of senior notes. In 2024, we repurchased a record $1.09 billion of our common stock compared to $479.5 million in 2023. Our returns to stockholders also included a 10% increase in our quarterly dividend rate in February 2024 with total dividend payments of $249.7 million in 2024 compared to $238.1 million in 2023.

We have paid regular quarterly dividends to our stockholders for 65 consecutive years and increased the quarterly dividend on our common stock 32 times since our 1994 IPO, with the most recent increase of 9.1% from $1.10 per share to $1.20 per share effective in the first quarter of 2025. We have never reduced or suspended our regular quarterly dividend.

Share Repurchase Plan

See Note 15—“Equity” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information on our share repurchases.

On October 22, 2024, our Board of Directors amended our share repurchase program to replenish the repurchase authorization to $1.5 billion. As of February 25, 2025, we had remaining authorization under the plan to repurchase $1.15 billion of our common stock. The share repurchase program does not obligate us to repurchase any specific number of shares in any prescribed period, does not have a specific expiration date and may be suspended or discontinued at any time.

Purchase Obligations

We had $275.6 million of operating lease obligations as of December 31, 2024, for processing and distribution facilities, equipment, automobiles, trucks and trailers, ground leases and other leased spaces, such as depots, sales offices, storage and data centers. Our expected payments over the next 12 months under these operating leases are $72.5 million. See Note 11—“Leases” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding the maturities of our operating lease obligations.

We have obligations pursuant to pension and postretirement benefit plans. A total of $10.7 million of net liabilities was recognized on the balance sheet at December 31, 2024 and the Company expects to make plan contributions of $0.8 million during 2025. See Note 14—“Employee Benefits” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for information regarding our expected payments under these plans.

As of December 31, 2024, we had entered into contracts related to capital expenditures in the amount of $97.7 million, of which $91.4 million is expected to be paid over the next 12 months. Our actual capital expenditure spending over the next 12 months is ultimately dependent on market conditions, lead times and availability of property, plant and equipment when the capital project is initiated.

We primarily purchase and sell in the spot market and consequently our purchase orders are based on our current needs and are typically fulfilled by our vendors within short time periods (lead times). In addition, some of our purchase orders represent authorizations to purchase rather than binding agreements. We do not have significant agreements for the purchase of goods specifying minimum quantities and set prices that exceed our expected requirements for three months. The total amount of commitments under long-term inventory purchase agreements is estimated at approximately $276.2 million, with amounts in 2025, 2026 and thereafter being $193.4 million, $57.2 million and $25.6 million, respectively.

We have other contractual commitments under long-term service agreements, totaling $74.6 million at December 31, 2024, with amounts in 2025, 2026 and thereafter being $25.8 million, $22.1 million and $26.7 million, respectively.

Debt

On September 10, 2024, we entered into a $1.5 billion unsecured five-year Second Amended and Restated Credit Agreement (“Credit Agreement”) that amended and restated our then-existing $1.5 billion unsecured revolving credit facility. There was no outstanding balance under our revolving credit facility at December 31, 2024 and 2023. We also had an aggregate of $1.15 billion principal amount of senior unsecured note obligations with various maturities through 2036 issued under indentures as of December 31, 2024.

See Note 10—“Debt” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data" for further information on our amended credit agreement, debt maturities and indentures governing our debt securities.

Liquidity and Capital Resources

We believe our primary sources of liquidity, including funds generated from operations, cash and cash equivalents and our $1.5 billion revolving credit facility, will be sufficient to satisfy our cash requirements and stockholder return activities over the next 12 months and beyond. As of December 31, 2024, we had $318.1 million in cash and cash equivalents and our net debt-to-total capital ratio (net debt-to-total capital is calculated as carrying amount of debt, net of cash, divided by total Reliance stockholders’ equity plus carrying amount of debt, net of cash) was 10.2%.

As of December 31, 2024, we had $401.1 million of debt obligations coming due before our $1.5 billion unsecured revolving credit facility matures on September 10, 2029, including $400.0 million of senior notes due in August 2025.

We believe that we will continue to have sufficient liquidity to fund our future operating needs and to repay our debt obligations as they become due. In addition to funds generated from operations and approximately $1.5 billion available under our unsecured revolving credit facility, we expect to continue to be able to access the capital markets to raise funds, if desired. We believe our investment grade credit ratings enhance our ability to effectively raise capital. We believe our sources of liquidity will continue to be adequate to maintain operations, make necessary capital expenditures, finance strategic growth through acquisitions and internal initiatives, pay dividends and repurchase our common stock.

Covenants

The Credit Agreement and indentures governing our debt securities include customary representations, warranties, covenants and events of default provisions. The covenants under the Credit Agreement include, among other things, a financial maintenance covenant that requires us to comply with a maximum total net leverage ratio. As of December 31, 2024, our total net leverage ratio, calculated in accordance with the Credit Agreement, was 13% compared to the debt covenant maximum of 60%.

We were in compliance with the financial maintenance covenant under our Credit Agreement at December 31, 2024.

Goodwill and Other Intangible Assets

We have one operating segment and also one reporting unit for goodwill impairment purposes. There have been no changes in our reportable segments; we have one reportable segment – metals service centers.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $2.16 billion at December 31, 2024, or approximately 22% of total assets and 30% of total equity. Additionally, other intangible assets, net amounted to $1.01 billion at December 31, 2024, or approximately 10% of total assets and 14% of total equity. Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests and further evaluation when certain events occur. Other intangible assets with finite useful lives are amortized over their useful lives. We review the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Refer to Critical Accounting Estimates for further information regarding judgments involved in testing for recoverability of our goodwill and other intangible assets.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The Company’s significant accounting policies, including recently issued accounting pronouncements, are fully described in Note 1—“Summary of Significant Accounting Policies” to our consolidated financial statements in Part II, Item 8 "Financial Statements and Supplementary Data.” When we prepare these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies are critical due to the fact that they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our most critical accounting estimates include those related to the recoverability of goodwill and other indefinite-lived intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates, as discussed with our Audit Committee, affect our more significant judgments and estimates used in preparing our consolidated financial statements. There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangible Assets

We annually test for impairment of goodwill and intangible assets deemed to have indefinite lives and, between annual tests, whenever significant events or changes occur based on an assessment of qualitative factors to determine if it is more likely than not that the fair value is less than the carrying value. The qualitative factors we review include a decline in our stock price and market capitalization, a decline in the market conditions of our products and viability of end markets, and developments in our business and the overall economy. We make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets, including calculating the fair value of a reporting unit using the discounted cash flow method, as necessary. We perform the required annual goodwill and indefinite-lived intangible asset impairment test as of November 1 of each year. No impairment of goodwill was determined to exist during the periods presented in the consolidated financial statements. In 2024, we recorded an $11.2 million impairment loss on a trade name intangible asset with an indefinite life. No impairment of intangible assets with indefinite lives was recognized in 2023 and 2022. See Note 8—“Intangible Assets, Net” of Part II, Item 8 “Financial Statements and Supplementary Data” for further details of our impairment loss.

Long-Lived Assets

We periodically review the recoverability of our other long-lived assets, primarily property, plant and equipment and intangible assets subject to amortization. The evaluation is performed at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other assets. An impairment loss may be recognized if the estimated undiscounted cash flows are less than the carrying amount of the assets. We must make assumptions regarding estimated future cash flows and other factors to estimate the fair value of the respective assets to determine the amount of the impairment loss. If these estimates or their related assumptions change in the future, we may be required to record impairment charges. We recorded $0.5 million of impairment losses on property, plant and equipment in 2024. No impairment of long-lived assets was recognized in 2023 and 2022.

Impairment tests inherently involve judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Additionally, considerable declines in the market conditions for our products from current levels as well as in the price of our common stock could also significantly impact our impairment analyses. An impairment charge, if incurred, could be material.

In the ordinary course of business, we are exposed to various market risk factors, including changes in general economic conditions, domestic and foreign competition, foreign currency exchange rates, and metals pricing, demand and availability.

Commodity price risk

Metals prices are volatile due to, among other things, fluctuations in foreign and domestic production capacity, raw material availability, metals consumption, import levels into the U.S., trade policy, global economic factors and foreign currency exchange rates. We do not currently use financial derivatives to hedge our exposure to metal price volatility. Decreases in metal prices could adversely affect our revenues, gross profit and net income. We primarily purchase and sell in the spot market and consequently are generally able to react quickly to changes in metals pricing. This strategy also limits our exposure to commodity prices to our inventories on hand. In an environment of increasing material costs, our selling prices usually increase, and we typically generate higher levels of gross profit and pretax income dollars for the same operational efforts. Conversely, if metals pricing declines, we will typically generate lower levels of gross profit and pretax income dollars. In periods where demand deteriorates rapidly and metal prices are declining significantly in a compressed period of time, a portion of our inventory on hand may be at higher costs than our selling prices, causing a significant adverse effect on our gross profit and pretax income margins. However, when prices stabilize and our inventories on hand reflect more current prices, our gross profit margins tend to return to more normalized levels.

Foreign exchange rate risk

Some of our sales transactions with international customers are denominated in foreign currencies that are different than the primary economic environment of the Reliance metals service center serving them, which exposes our operations to foreign currency transaction gains and losses. The currency effects of translating the financial statements of our foreign subsidiaries, which operate in local currency environments, are included in accumulated other comprehensive loss and do not impact earnings unless there is a liquidation or sale of those foreign subsidiaries. We do not currently hedge our net investments in foreign subsidiaries due to the long-term nature of the investments.

Total foreign currency transaction gains and losses included in our earnings were gains of $1.9 million in 2024 and losses of $1.3 million and $6.2 million in 2023 and 2022, respectively.

Interest rate risk

We are exposed to market risk related to our fixed-rate and variable-rate long-term debt. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. Changes in interest rates may affect the market value of our fixed-rate debt. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes and we do not currently anticipate repayment of our fixed-rate long-term debt prior to scheduled maturities.

Market risk related to our variable-rate debt is estimated as the potential decrease in pretax earnings resulting from an increase in interest rates. As of December 31, 2024, we had an insignificant amount of variable interest rate debt outstanding. However, as of December 31, 2024, we had approximately $1.5 billion available for borrowing on our revolving credit facility at variable interest rates. Consequently, any future borrowings on our revolving credit facility will increase market risk resulting from potential interest rate volatility.

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 (“CEO”), and chief financial officer (“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 the Company’s disclosure controls and procedures pursuant to and as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our management, including the CEO and the CFO, concluded, as of the end of the period covered in this report, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) that it is accumulated and communicated to our management, including the CEO and our CFO, as appropriate, to allow timely decisions regarding required disclosure.

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, 2024.

The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their audit report, which is included in Item 9A.

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, 2024, 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, 2024, 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, 2024 and 2023, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedule II of valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 27, 2025 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.

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.

Los Angeles, California

February 27, 2025