| þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
| 1 | ||||
Financial Statements |
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| 2 | ||||
| 3 | ||||
| 4-13 | ||||
| 14-15 | ||||
| 16 | ||||
| 17 | ||||
Exhibit 23.1 - Consent of Independent Registered Public Accounting Firm |
18 |
| Note: | All schedules other than that listed above have been omitted because they are applicable or not required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, as amended. |
1
| December 31, | 2007 | 2006 | ||||||
Assets |
||||||||
Investments, at fair value: |
||||||||
Interest bearing cash |
$ | 106,287 | $ | — | ||||
Money market fund |
641,736 | — | ||||||
Mutual funds |
96,375,743 | 87,165,808 | ||||||
Common collective trust |
8,525,283 | 7,891,943 | ||||||
Reliance Steel & Aluminum Co. common stock |
2,204,748 | 842,236 | ||||||
Participant loans |
3,457,678 | 3,264,761 | ||||||
Total investments |
111,311,475 | 99,164,748 | ||||||
Receivables: |
||||||||
Other receivables |
26,649 | — | ||||||
Total receivables |
26,649 | — | ||||||
Total Assets |
111,338,124 | 99,164,748 | ||||||
Liabilities |
||||||||
Other accruals |
17,579 | — | ||||||
Net assets available for benefits at fair value |
111,320,545 | 99,164,748 | ||||||
Adjustment from fair value to contract value
for the fully benefit-responsive investment
contracts (common collective trust) |
92,648 | 79,319 | ||||||
Net assets available for benefits |
$ | 111,413,193 | $ | 99,244,067 | ||||
2
| Year ended December 31, | 2007 | |||
Additions |
||||
Investment income: |
||||
Interest and dividends |
$ | 5,752,214 | ||
Net appreciation in fair value of investments |
2,083,587 | |||
Total investment income |
7,835,801 | |||
Contributions: |
||||
Employer, net of forfeitures |
4,846,207 | |||
Participant |
3,447,704 | |||
Total contributions, net |
8,293,911 | |||
Total additions |
16,129,712 | |||
Deductions |
||||
Benefits paid to participants and beneficiaries |
3,939,627 | |||
Administrative fees |
20,959 | |||
Total deductions |
3,960,586 | |||
Net increase |
12,169,126 | |||
Net assets available for benefits, beginning of year |
99,244,067 | |||
Net assets available for benefits, end of year |
$ | 111,413,193 | ||
3
1.
|
Description of the Plan | The following brief description of the Precision Strip, Inc. (the “Company”) Retirement and Savings Plan (the “Plan”) provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions. | ||
| General | ||||
| The Plan is a defined contribution plan providing retirement benefits covering substantially all employees who meet certain eligibility requirements of Precision Strip, Inc., a wholly-owned subsidiary of Reliance Steel & Aluminum Co., and Precision Strip Transport, Inc., a wholly-owned subsidiary of Precision Strip, Inc. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Plan is administered by the Precision Strip Retirement and Savings Plan Administrative Committee (“Plan Administrator”). | ||||
| Participation | ||||
| Each employee is eligible to participate on the first entry date (first day of each Plan calendar quarter) after the completion of three months of service. | ||||
| Contributions | ||||
| For the year ended December 31, 2007, participants had the opportunity to contribute up to 50% of their annual compensation to the Plan, subject to federal limitations. Company profit sharing contributions are discretionary. The Plan requires employees to complete a year of service before being eligible to receive the employer contribution. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans. |
4
1.
|
Description of the Plan (Continued) | Participant Accounts Each participant’s account is credited with the participant’s contributions, employer contributions and allocation of investment earnings. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account. Participants may direct the investment of their account balances into various investment funds offered by the Plan. |
||
| Vesting | ||||
| Participants are immediately vested in all employee contributions plus actual earnings thereon. | ||||
| Employer profit sharing contributions and any earnings thereon will be vested in accordance with the following schedule: |
| Years of Service | Percentage | |||
Less than 3 |
— | |||
3 |
30 | % | ||
4 |
40 | % | ||
5 |
60 | % | ||
6 |
80 | % | ||
7 |
100 | % | ||
| In accordance with the Pension Protection Act of 2006, the vesting schedule changed effective January 1, 2007, as follows: |
| Years of Service | Percentage | |||
Less than 2 |
— | |||
2 |
20 | % | ||
3 |
40 | % | ||
4 |
60 | % | ||
5 |
80 | % | ||
6 or more |
100 | % | ||
5
1.
|
Description of the Plan (Continued) | Payment of Benefits On termination of service, a participant receives a lump sum amount equal to the vested value of his or her account, or upon death, disability or retirement, may elect to receive a lump sum amount or monthly installments. Other withdrawals from participants’ account balances may be made under certain circumstances, as defined in the Plan document. |
||
| Forfeitures | ||||
| Forfeitures from nonvested participant accounts are generally used to reduce future Company contributions. During the year ended December 31, 2007, forfeitures of approximately $90,550 were used to reduce the Company’s contributions. Forfeited non-vested accounts totaled $3,359 and $7,435 at December 31, 2007 and 2006, respectively. | ||||
| Participant Loans | ||||
| Participants may borrow from their accounts up to the lesser of $50,000 or 50% of their vested account balance. Loans to participants are secured by the respective participant’s vested account balance and are subject to interest charges. Interest rates applicable to participant loans are determined by the Plan Administrator on the first day of each calendar quarter based on prevailing market rates. Loans are repayable ratably through periodic payroll deductions over a term not exceeding five years, or ten years for loans used for the purchase of a primary residence. Interest rates on outstanding loans as of December 31, 2007 ranged from 5.25% to 9.50%. Principal and interest is paid ratably through payroll deductions. | ||||
| Administrative Expenses | ||||
| Non-investment costs and administrative expenses of the Plan are paid by the Company which is a party-in-interest. These expenses, which are not reflected in the accompanying financial statements, constitute exempt party-in-interest transactions under ERISA. |
6
1.
|
Description of the Plan (Continued) | Loan establishment, loan maintenance and short-term trading fees are paid by the Plan and all other investment expenses are offset against the related investment income. Fees paid by the Plan to the custodian for administrative expenses amounted to $20,959 for the year ended December 31, 2007. | ||
2.
|
Summary of Significant Accounting Policies | Basis of Presentation The accompanying financial statements of the Plan are prepared under the accrual method of accounting in accordance with U.S. generally accepted accounting principles. |
||
| As described in Financial Accounting Standards Board Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans, investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for plan benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. | ||||
| The Plan invests in the Fidelity Managed Income Portfolio which is a common collective trust. It invests in fully benefit-responsive investment contracts issued by insurance companies and other financial institutions, and in fixed income securities (see Investment Valuation and Income Recognition). The Plan’s Statements of Net Assets Available for Benefits present the fair value of these investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Plan Benefits is prepared on a contract value basis. | ||||
| New Accounting Pronouncements | ||||
| In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157 (SFAS No. 157), Fair Value Measurements. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Plan management is currently evaluating the effect that the provisions of SFAS No. 157 will have on the Plan’s financial statements. |
7
2.
|
Summary of Significant Accounting Policies (Continued) | Investment Valuation and Income Recognition The Plan’s investments in registered investment companies (mutual funds) and in common stock are stated at fair value based on the quoted market price of the funds and common stock, which represents the net asset value of the shares held by the Plan at year end. The common collective trust is stated at fair value based upon the value of the underlying investments and then adjusted to contract value as described below. Participant loans are stated at cost, which approximates fair value because the loans bear interest at rates commensurate with loans of similar credit quality and duration as of year-end. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on ex-dividend date. |
||
| In determining the net assets available for benefits, the Fidelity Managed Income Portfolio is included in the Plan’s financial statements at contract value, which represents contributions made under the contracts, plus earnings, less withdrawals and administrative expenses. In accordance with U.S. generally accepted accounting principles, an investment contract is generally valued at contract value, rather than fair value, to the extent it is fully benefit-responsive. | ||||
| Net Appreciation (Depreciation) in Fair Value of Investments | ||||
| Realized and unrealized appreciation (depreciation) in the fair value of investments is based on the difference between the fair value of the assets at the beginning of the year, or at the time of purchase for assets purchased during the year, and the related fair value on the day investments are sold with respect to realized appreciation (depreciation), or on the last day of the year for unrealized appreciation (depreciation). | ||||
| Realized and unrealized appreciation (depreciation) is recorded in the accompanying Statement of Changes in Net Assets Available for Benefits as net appreciation in fair value of investments. |
8
2.
|
Summary of Significant Accounting Policies (Continued) | Risks and Uncertainties The Plan provides various funds that hold investment securities. Investment securities are exposed to various risks such as interest rate, market volatility, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risk in the near term would materially affect participants’ account balances and the amounts reported in the financial statements. |
||
| The Plan provides investment options that hold securities of foreign companies, which may involve special risks and considerations not typically associated with investing in U.S. companies. These risks include devaluation of currencies, less reliable information about issuers, different securities transaction clearance and settlement practices, and possible adverse political and economic developments. Moreover, securities of many foreign companies and their markets may be less liquid and their prices more volatile than securities of comparable U.S. companies. | ||||
| Use of Estimates | ||||
| The preparation of the financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the financial statements and accompanying notes. Actual results could materially differ from those estimates. | ||||
| Payment of Benefits | ||||
| Benefits are recorded when paid. |
9
3.
|
Investments | Participants may invest in certain investments offered by Fidelity Management Trust Company, the custodian of the Plan, including a unitized common stock fund containing common stock of Reliance Steel & Aluminum Co. and interest bearing cash. At December 31, 2007 and 2006, the Plan held 174,369 and 87,278 unitized shares of Reliance Steel & Aluminum Co. stock fund with fair values of $2,297,108 and $842,236, respectively. As of December 31, 2007 and 2006, the Reliance Steel & Aluminum Co. stock fund consisted of 40,678 and 21,387 shares, respectively, of Reliance Steel & Aluminum Co. common shares valued at $2,204,748 and $842,236, respectively. Also, at December 31, 2007 the fund contained interest bearing cash of approximately $106,287, other receivables of approximately $3,652 and liabilities of $17,579. | ||
| For risks and uncertainties regarding investment in Reliance Steel & Aluminum Co. common stock, participants should refer to the Reliance Steel & Aluminum Co. Annual Report on Form 10-K for the year ended December 31, 2007. | ||||
| The fair values of individual investments that represent 5% or more of the Plan’s net assets as of December 31, 2007, are as follows: |
| December 31, | 2007 | 2006 | ||||||
Mutual Funds: |
||||||||
Fidelity Dividend Growth Fund |
$ | 20,735,614 | $ | 22,939,499 | ||||
Spartan U.S. Equity Index Fund |
19,804,113 | 20,487,126 | ||||||
Baron Asset Fund |
14,122,312 | 13,622,682 | ||||||
Fidelity Diversified International |
10,779,825 | 8,938,279 | ||||||
Fidelity Puritan Fund |
6,920,152 | 7,489,136 | ||||||
Janus Twenty Fund |
5,723,499 | 5,004,361 | ||||||
Common Collective Trust: |
||||||||
Fidelity Managed Income Portfolio |
8,525,283 | 7,891,943 | ||||||
10
3.
|
Investments (Continued) |
During the year ended December 31, 2007, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $2,083,587 as follows: |
| Amount | ||||
Mutual funds |
$ | 1,734,255 | ||
Reliance Steel & Aluminum Co. common stock |
349,332 | |||
Total |
$ | 2,083,587 | ||
4.
|
Related Party Transactions | Certain Plan investments are shares of mutual funds and a common collective trust managed by Fidelity Management Trust Company. Fidelity Management Trust Company is the trustee and custodian as defined by the Plan and, therefore, these transactions qualify as exempt party-in-interest transactions. | ||
5.
|
Income Tax Status |
The underlying non-standardized prototype plan has received an opinion letter from the Internal Revenue Service (IRS) dated October 9, 2003 stating that the form of the plan is qualified under Section 401 of the Internal Revenue Code, and therefore, the related trust is tax exempt. In accordance with Revenue Procedure 2002-6 and Announcement 2001-77, the Plan Sponsor has determined that it is eligible to and has chosen to rely on the current IRS prototype plan opinion letter. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. Although the Plan has been amended since receipt of the IRS opinion letter, the plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. | ||
6.
|
Plan Termination | Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. |
11
7.
|
Reconciliation of Financial Statements to Form 5500 | The following is a reconciliation of net assets available for benefits as reported on Form 5500 with that reported in the accompanying financial statements: |
| December 31, | 2007 | 2006 | ||||||
Net assets available for
benefits as reported on Form 5500 |
$ | 111,320,545 | $ | 99,164,748 | ||||
Adjustments from fair value to contract
value for the fully benefit-responsive
investment contracts (common collective
trust) |
92,648 | 79,319 | ||||||
Net assets available for benefits as
reported on
accompanying financial statements |
$ | 111,413,193 | $ | 99,244,067 | ||||
| The following is a reconciliation of the changes in net assets available for benefits as reported on Form 5500 with that reported in the accompanying financial statements: |
| Year ended December 31, | 2007 | |||
Total investment income
as reported on Form 5500 |
$ | 7,822,472 | ||
Investments: |
||||
Adjustment from fair value to contract value for
the fully benefit-responsive investment contracts
(common collective trust): |
||||
Beginning of period |
(79,319 | ) | ||
End of period |
92,648 | |||
Total investment income as reported on
the accompanying financial statements |
$ | 7,835,801 | ||
12
8.
|
Nonexempt Transactions | As reported on the Form 5500, Schedule H, Line 4a — Schedule of Delinquent Participant Contributions, certain participant contributions were not remitted to the Plan within the time frame specified by the U.S. Department of Labor (DOL) Regulation 29 CFR 2510.3-102, thus constituting nonexempt transactions between the Plan and the Company during the 2007 and 2006 Plan years. Late remittances amounted to $6,474,725 and the lost earnings amounted to $22,997, as calculated in accordance with the DOL’s Voluntary Fiduciary Corrective Program. The Company will be remitting the lost earnings to the participant accounts in July 2008. |
13
| (c) | ||||||||||
| Description of Investment, including | ||||||||||
| (b) | Maturity Date, | (e) | ||||||||
| Identity of Issue, Borrower, | Rate of Interest, Collateral, | (d) | Current | |||||||
| (a) | Lessor or Similar Party | Par or Maturity Value | Cost | Value | ||||||
| Mutual Funds: | ||||||||||
*
|
Fidelity Investments | Fidelity Dividend Growth Fund | a | $ | 20,735,614 | |||||
*
|
Fidelity Investments | Spartan U.S. Equity Index Fund | a | 19,804,113 | ||||||
| Baron Funds | Baron Asset Fund | a | 14,122,312 | |||||||
*
|
Fidelity Investments | Fidelity Diversified International Fund | a | 10,779,825 | ||||||
*
|
Fidelity Investments | Fidelity Puritan Fund | a | 6,920,152 | ||||||
| Janus Funds | Janus Twenty Fund | a | 5,723,499 | |||||||
| PIMCO | PIMCO Total Return Fund | a | 3,881,910 | |||||||
*
|
Fidelity Investments | Fidelity Equity Income Fund | a | 2,963,818 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2030 Fund | a | 1,356,506 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2035 Fund | a | 1,214,196 | ||||||
| American Funds | American Funds Growth Fund of America R4 | a | 1,168,732 | |||||||
*
|
Fidelity Investments | Fidelity Freedom 2025 Fund | a | 1,083,316 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2040 Fund | a | 891,654 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2020 Fund | a | 771,228 | ||||||
| American Beacon | American Beacon Large Cap Value Fund | a | 758,201 | |||||||
*
|
Fidelity Investments | Fidelity Value Fund | a | 751,553 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2050 Fund | a | 553,813 | ||||||
| Neuberger Berman | Neuberger & Berman Genesis Trust Fund | a | 516,408 | |||||||
*
|
Fidelity Investments | Fidelity Freedom 2010 Fund | a | 440,250 | ||||||
| The Harford Mutual Funds | The Hartford International Small Company Fund | a | 323,482 | |||||||
| Morgan Stanley | MAS Mid-Cap Growth Portfolio Fund | a | 316,673 | |||||||
*
|
Fidelity Investments | Fidelity Freedom 2045 Fund | a | 304,789 | ||||||
*
|
Fidelity Investments | Fidelity Mid Cap Stock Fund | a | 249,696 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2015 Fund | a | 238,047 | ||||||
| The Royce Funds | Royce Opportunity Fund | a | 186,496 | |||||||
*
|
Fidelity Investments | Fidelity Fund | a | 163,354 | ||||||
*
|
Fidelity Investments | Spartan Total Market Index Fund | a | 89,441 | ||||||
*
|
Fidelity Investments | Fidelity Freedom Income Fund | a | 32,806 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2000 Fund | a | 22,067 | ||||||
*
|
Fidelity Investments | Fidelity Freedom 2005 Fund | a | 11,792 | ||||||
| Total mutual funds | $ | 96,375,743 | ||||||||
14
| (c) | ||||||||||
| Description of Investment, | ||||||||||
| (b) | including Maturity Date, | (e) | ||||||||
| Identity of Issue, Borrower, | Rate of Interest, Collateral, | (d) | Current | |||||||
| (a) | Lessor or Similar Party | Par or Maturity Value | Cost | Value | ||||||
| Common Collective Trust: | ||||||||||
*
|
Fidelity Investments | Fidelity Managed Income Portfolio | a | $ | 8,525,283 | |||||
| Interest bearing cash | ||||||||||
*
|
Fidelity Investments | Cash | a | 106,287 | ||||||
| Money market fund | ||||||||||
*
|
Fidelity Investments | Fidelity Retirement Money Market Portfolio Fund | a | 641,736 | ||||||
| Common Stock: | ||||||||||
*
|
Reliance Steel & Aluminum Co. | Common stock | a | 2,204,748 | ||||||
| Loans: | ||||||||||
*
|
Participant loans | Loans to participants, secured by participant balances, with interest rates ranging from 5.25% to 9.50%, maturities from 2008 to 2016 | — | 3,457,678 | ||||||
| Total Investments | $ | 111,311,475 | ||||||||
15
| Total that Constitute | ||||
| Participant Contributions | Nonexempt Prohibited | |||
| Transferred Late to Plan | Transactions | |||
$6,474,725 |
$ | 6,474,725 | ||
16
| PRECISION STRIP, INC. RETIREMENT AND SAVINGS PLAN |
||||
| Dated: June 30, 2008 | By: | /s/ Karla Lewis | ||
| Karla Lewis | ||||
| Member of the Precision Strip, Inc. Retirement and Savings Plan Committee |
||||
17