Moving Metal

the aluminum industry had changed. High energy prices had driven up costs and helped put several American mills into bankruptcy. At the same time, European producers who had supplied the American market were sending more and more of their supplies to the burgeoning continental aerospace firm Airbus. As supply dwindled, aluminum prices rose eighteen percent. Simultaneously, new demands for quality and on-time delivery also worked in Reliance’s favor. U.S. aviation giant Boeing was increasingly incorporating heat-treated, machined aluminum plate into its aircraft rather than forged aluminum and, like every other manufacturer, was determined not to take delivery of materials until abso- lutely necessary. As a result, Reliance, which had long ago established a strong presence in the Pacific Northwest, was there when a manufacturer like Boeing needed aluminum products and could set prices accordingly. “A very high per- centage of what we sell is to customers who come to us that have orders today that they need filled tomorrow,” said Bill Sales, Reliance’s Senior Vice President, Operations. “It’s very localized.” The year 2004 then, presented a great opportunity to strengthen the company’s financial position. That March, Dave Hannah announced that he was putting acquisitions on the back burner so that Reliance could fully absorb the $246 million Precision Strip acquisition, reduce its debt, and increase its cash reserves for the next big deal. Accordingly, Reliance top management spent much of the next year in the company of bankers. On June 13, 2005, the company signed a new syndicated credit agreement with fifteen banks to nearly double its five-year unsecured revolving credit line from $335 million to $600 million.

During those tough years Reliance had made import- ant acquisitions, set its balance sheet in order, and kept its focus. Then, again for reasons beyond Reliance’s control, the pendulum swung the other way. In mid-2003, world steel prices were at a post-recession lull, but then they began rising, and kept on rising. There were many causes—mill consolidation, high coke prices, and booming consumption in China—but the price hike seemed beyond the boundary of reason. By the next spring the price of a hot-rolled coil was up sixty-six percent to $482 per ton. “The world’s gonemad. I’ve never seen anything like this,” said one industry analyst. Skyrocketing steel prices took Reliance’s revenues with it—net sales reached $2.95 billion. Net income, meanwhile, rose five hundred percent over the previous year to $170 million. Thanks to its aggres- sive acquisition strategy, Reliance was by then one of the five largest metals service center companies in the United States, with twenty-four divisions, nineteen subsidiaries, and more than one hundred locations in thirty states, as well as facili- ties in Belgium, France, and South Korea. Reliance now took the opportunity to reduce its debt from forty-three percent of capital to thirty-four percent, and to increase its dividend by eight percent. It was neither the first nor the last time that Reliance reaped the benefits of doing things the right way. STRENGTHEN AND BUILD The tremendous advance in steel prices was not the only external factor behind the Reliance resurgence. By 2004, the aerospace industry was beginning to recover from the post- 9/11 slump, with makers competing to supply hundreds of aircraft for emerging new markets, especially in Asia. By the time aircraft manufacturers began placing orders, however,

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