As filed with the Securities and Exchange Commission on July 17, 2008

Registration No. 333-          

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Form S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

RELIANCE STEEL & ALUMINUM CO.

(Exact Name of Registrant as Specified in Its Charter)

 

 

350 South Grand Avenue, Suite 5100

Los Angeles, California 90071

(213) 687-7700

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

 

David H. Hannah

Chairman and Chief Executive Officer

Reliance Steel & Aluminum Co.

350 South Grand Avenue, Suite 5100

Los Angeles, California 90071

(213) 687-7700

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

 

 

Copy to:

 

 

 

 

 

Approximate date of commencement of proposed sale to the public:  From time to time after the effective date of this Registration Statement.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  þ

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

SUBJECT TO COMPLETION, DATED JULY 17, 2008

PROSPECTUS

 

6,750,000 Shares

 

 

Reliance Steel & Aluminum Co.

 

Common Stock

 

 

We are offering 6,750,000 shares of our common stock.

 

Our common stock is traded on the New York Stock Exchange under the symbol “RS”. The last reported sale price of our common stock on the New York Stock Exchange on July 16, 2008 was $71.79 per share.

 

 

We have granted the underwriters an option for a period of 30 days to purchase up to 1,012,500 additional shares of common stock to cover over-allotments, if any.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 9.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

 

JPMorgan

UBS Investment Bank                                    

Banc of America Securities LLC

 

 

 

 

 

                                       , 2008

 

 

You should rely only on the information contained in, or incorporated by reference into, this prospectus. We have not authorized anyone to provide you with information different from that contained in, or incorporated by reference into, this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Unless otherwise indicated or required by the context, the terms “we,” “our,” and “us” refer to Reliance Steel & Aluminum Co. and all of its subsidiaries that are consolidated in conformity with U.S. generally accepted accounting principles and “Reliance” refers to Reliance Steel & Aluminum Co.

 

As used herein, references to the “PNA Transactions” include the acquisition of PNA Group Holding Corporation (“PNA”) and the related repayment or refinancing of PNA indebtedness, assuming that all PNA Notes (as defined below) are validly tendered and not validly withdrawn pursuant to the tender offers therefor described below, with (i) the net proceeds of this offering, (ii) borrowings under a planned new $250.0 million term loan facility for which we have received commitments from a syndicate of lenders and (iii) borrowings under our existing revolving credit facility. Unless otherwise indicated, we have assumed that the total consideration paid by us for the PNA Notes is paid, together with accrued and unpaid interest, on August 4, 2008.

 

PROSPECTUS SUMMARY

Sources						Uses
(In millions)
Revolving Credit Facility(1)		$	410.9			Consideration for PNA shares		$	315.0
New Term Loan Facility			250.0			Repurchase of PNA Notes(1)			474.8
Common Stock offered hereby(2)			464.0			Repayment of other PNA debt			330.0
						Estimated fees and expenses			5.1
Total		$	1,124.9			Total		$	1,124.9

(1)		Excludes accrued and unpaid interest. Assuming that the consideration for the PNA Notes is paid on August 4, 2008, an aggregate of $15.2 million of accrued and unpaid interest will also be payable to holders of the PNA Notes. Such amount is expected to be borrowed under the revolving credit facility, but is not reflected in the table.
(2)		Based upon the sale of 6,750,000 shares of our common stock offered hereby at an assumed public offering price of $71.79 per share (the last reported sales price for our common stock on the New York Stock Exchange on July 16, 2008), less underwriting discounts and commissions, but before other offering expenses. Assumes no exercise of the underwriters’ over-allotment option.

Common Stock Offered		6,750,000 shares
Common Stock to be Outstanding After this Offering		79,980,947 shares
Over-allotment Option Granted to the Underwriters		We have granted the underwriters a 30-day option to purchase a maximum of 1,012,500 shares of our common stock at the price to the public set forth on the cover page of this prospectus, less underwriting discounts and commissions, to cover over-allotments, if any.
Use of Proceeds		We intend to use all of the net proceeds from this offering to fund a portion of the consideration for the proposed PNA Transactions. See “Use of Proceeds.”
Dividend Policy		We currently expect to pay a quarterly cash dividend of $0.10 per share.
Risk Factors		You should carefully read and consider the information set forth under “Risk Factors” together with all the information set forth and incorporated by reference in this prospectus before deciding to invest in our common stock.
Trading Symbol		Our common stock is listed on the New York Stock Exchange and trades under the symbol “RS”.

	•	1,012,500 shares issuable upon exercise of the underwriters’ over-allotment option;
	•	3,512,539 shares subject to outstanding options at a weighted average exercise price of $40.84 per share; and
	•	6,381,433 additional shares reserved as of June 30, 2008 for future issuance under our equity incentive plans.

	•	no exercise of the underwriters’ over-allotment option; and
	•	a two-for-one stock split effected in July 2006 in the form of a stock dividend.

		Year Ended December 31,																Three Months Ended March 31,
		Pro																Pro
		Forma																Forma
		2007				2007				2006				2005				2008				2008				2007
		(In thousands, except share and per share data)
Income Statement Data:
Net sales		$	8,888,148			$	7,255,679			$	5,742,608			$	3,367,051			$	2,382,207			$	1,908,170			$	1,841,890
Cost of sales			6,772,004				5,418,161				4,231,386				2,449,000				1,799,972				1,415,891				1,369,438
Gross profit			2,116,144				1,837,518				1,511,222				918,051				582,235				492,279				472,452
Operating expenses(1)			1,294,020				1,102,005				876,977				550,411				353,038				299,784				271,609
Operating profit			822,124				735,513				634,245				367,640				229,197				192,495				200,843
Other income (expense):
Interest expense			(101,590	)			(78,710	)			(61,692	)			(25,222	)			(22,333	)			(16,613	)			(20,110	)
Other income (expense), net			12,489				9,931				5,768				3,671				271				(387	)			374
Amortization expense			(23,284	)			(12,007	)			(6,883	)			(4,125	)			(6,029	)			(3,209	)			(2,304	)
Minority interest(2)			(2,708	)			(334	)			(306	)			(8,752	)			(838	)			(64	)			(90	)
Income before income taxes			707,031				654,393				571,132				333,212				200,268				172,222				178,713
Provision for income taxes			(266,261	)			(246,438	)			(216,625	)			(127,775	)			(75,406	)			(64,827	)			(67,017	)
Net income		$	440,770			$	407,955			$	354,507			$	205,437			$	124,862			$	107,395			$	111,696
Earnings per share:
Income from continuing operations — diluted(3)		$	5.32			$	5.36			$	4.82			$	3.10			$	1.55			$	1.46			$	1.46
Weighted average shares outstanding — diluted(3)			82,814,616				76,064,616				73,599,681				66,194,724				80,298,014				73,548,014				76,452,752
Income from continuing operations — basic(3)		$	5.35			$	5.39			$	4.85			$	3.12			$	1.57			$	1.47			$	1.47
Weighted average shares outstanding — basic(3)			82,372,799				75,622,799				73,134,102				65,870,068				79,607,477				72,857,477				75,862,219

														Three Months Ended March 31,
														Pro
		Year Ended December 31,												Forma
		2007				2006				2005				2008				2008				2007
		(In thousands, except share and per share data)
Other Data:
EBITDA(4)		$	812,976			$	695,298			$	405,065							$	210,200			$	217,274
Cash flow from operations			638,964				190,964				272,219								107,196				70,769
Capital expenditures			124,127				108,742				53,740								35,973				24,730
Balance Sheet Data:
Working capital		$	1,121,539			$	1,124,650			$	513,529			$	1,678,847			$	1,168,458			$	1,255,382
Total assets			3,983,477				3,614,173				1,769,070				5,560,860				4,165,271				4,075,325
Long-term debt(5)			1,013,260				1,088,051				306,790				1,740,583				1,079,696				1,271,810
Shareholders’ equity			2,106,249				1,746,398				1,029,865				2,557,156				2,093,168				1,864,258
Reconciliation of EBITDA:
Net cash provided by operating activities		$	638,964			$	190,964			$	272,219							$	107,196			$	70,769
Provision for income taxes			246,438				216,625				127,775								64,827				67,017
Interest expense			78,710				61,692				25,222								16,613				20,110
Other non-cash adjustments(6)			(12,035	)			(4,497	)			(11,169	)							(23	)			1,435
Changes in operating assets and liabilities (excluding effect of businesses acquired)			(139,101	)			230,514				(8,982	)							21,587				57,943
EBITDA(4)		$	812,976			$	695,298			$	405,065							$	210,200			$	217,274

(1)		Operating expenses include warehouse, delivery, selling, general and administrative expenses and depreciation expense.
(2)		The portion of earnings of American Steel, L.L.C. attributable to our 49.5% partner is included in minority interest through December 31, 2005. On January 3, 2006, we acquired our partner’s interest, increasing our ownership to 100%.
(3)		All share and per share information has been retrospectively adjusted to reflect the two-for-one stock split effected in the form of a 100% stock dividend that was effective July 19, 2006. Pro forma amounts reflect the sale of 6,750,000 shares of our common stock in this offering.
(4)		EBITDA is defined as the sum of income before interest expense, income taxes, depreciation expense and amortization of intangibles. We use EBITDA as a liquidity performance measure and believe EBITDA is useful in evaluating our liquidity because the calculation generally eliminates the effects of financing costs and income taxes and the accounting effects of capital spending and acquisitions, which are assessed and evaluated through other operating performance measures. EBITDA is also commonly used as a measure of operating and liquidity performance for companies in our industry and is frequently used by analysts, investors, lenders, rating agencies and other interested parties to evaluate a company’s financial performance and its ability to incur and service debt. EBITDA is not a recognized measurement under U.S. generally accepted accounting principles and, therefore, represents a non-GAAP financial measure. EBITDA should not be considered in isolation or as a substitute for consolidated statements of income and cash flows data prepared in accordance with U.S. generally accepted accounting principles as it excludes components that are significant in understanding and assessing our results of operations and cash flows. EBITDA as presented is not necessarily comparable with similarly titled measures for other companies.
(5)		Includes the long-term portion of capital lease obligations.
(6)		Other non-cash adjustments include all adjustments to reconcile net income to net cash provided by operating activities except depreciation and amortization and changes in operating assets and liabilities.

 

The purchase of our common stock involves risks. You should carefully consider the following risks before making a decision to invest in our common stock. If any of the events or circumstances described below actually occur, our business, financial condition and results of operations could suffer, the trading price of our common stock could decline and you may lose part or all of your investment.

 

Risks Related to the PNA Transactions

 

If we fail to consummate the proposed acquisition of PNA, our reputation and earnings per share could be negatively affected and the trading price of our common stock could also be adversely affected.

 

We expect that this offering, the net proceeds of which we intend to use to fund a portion of the cost of the PNA Transactions, will be consummated prior to the completion of the proposed acquisition of PNA. The consummation of the proposed acquisition of PNA is subject to closing conditions and performance of each party’s obligations under the Stock Purchase Agreement. We expect to complete the proposed acquisition of PNA in early August 2008, but we cannot assure you that the transaction will be completed on the anticipated schedule or at all. In particular, there are a number of conditions to our closing the acquisition of PNA, such as the satisfaction of regulatory requirements, including expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

In the event that we complete this offering but fail to complete the proposed acquisition of PNA, we will have issued a substantial number of additional shares of common stock, but we will not realize the anticipated benefits of the proposed acquisition of PNA. As a result, our earnings per share would likely decline because we would not have acquired any incremental sources of earnings to offset the increase in the number of our outstanding shares. If the proposed acquisition of PNA is not completed, we would have an estimated $464.0 million of net proceeds from this offering, after deducting underwriting discounts and commissions but before other offering expenses, that we would expect to use to repay a portion of our outstanding indebtedness, as described under “Use of Proceeds,” and for general corporate purposes, including future acquisitions.

 

We may not realize the anticipated benefits of the proposed acquisition of PNA.

 

Whether we will be able to achieve the anticipated benefits of the proposed acquisition of PNA is subject to many uncertainties typically associated with any acquisition we undertake, including those described elsewhere in this prospectus, and general competitive factors in our business. If we fail to achieve such anticipated benefits, we would be likely to miss other market opportunities, and management’s attention would be distracted, all of which could negatively affect our business and our financial results.

 

The closing of the acquisition of PNA is not conditioned on our ability to secure adequate financing to fund the purchase price and repayment or refinancing of PNA debt.

 

The Stock Purchase Agreement relating to the acquisition of PNA does not contain a financing condition. After the application of the net proceeds from this offering, we will require substantial additional funds to consummate the acquisition of PNA and related repayment or refinancing of PNA debt. Although we have commitments in place, these commitments contain conditions that, if not satisfied, would permit the providers of such financing to decline to deliver their funds. If we are unable to close the acquisition of PNA due to any breach on our part, including failure to obtain financing, we may be exposed to material contractual and other claims for failure to close as a result of a breach by us. A payment related to a claim for breach could have a material adverse effect on our financial condition and results of operations. For a more detailed discussion of the proposed acquisition of PNA, please see “Prospectus Summary — Recent Developments.” For a more detailed description of the Stock Purchase Agreement, please see “The PNA Transactions — PNA Acquisition Agreement.”

We may not obtain the proposed $250.0 million senior term loan facility, borrowings from which we intend to use to fund a portion of the purchase price of PNA and related repayment or refinancing of PNA debt.

 

Although we have received written commitments from a syndicate of lenders to enter into a credit agreement for a $250.0 million unsecured senior term loan facility, those commitments contain conditions that, if not satisfied, would permit the providers of such financing to decline to deliver their funds. Such conditions include confirmation that there shall have occurred no material adverse effect to our business since December 31, 2007, that all representations and warranties contained in the credit agreement shall be true and correct in all material respects at the time of the closing and that no event of default or incipient event of default shall have occurred and be continuing or would result from the making of the term loan. If we do not receive the expected funds under the term loan, we expect to draw additional amounts under our revolving credit facility in order to replace such funds as required to consummate the acquisition of PNA and related repayment or refinancing of PNA debt. In such event, we will have reduced liquidity and may be required to forego certain opportunities, including acquisitions, that we might have otherwise pursued.

 

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 if we cannot pass on higher metal prices to our customers.

 

We purchase large quantities of carbon, alloy and stainless steel, aluminum and other metals, which we sell to a variety of end-users. The costs to us for these metals and the prices that we charge customers for our products may change depending on many factors outside of our control, including general economic conditions (both domestic and international), competition, production levels, customer demand levels, import duties and other trade restrictions, currency fluctuations and surcharges imposed by our suppliers. We attempt to pass cost increases on to our customers with higher selling prices but we may not always be able to do so. In particular, in recent periods we have experienced increased metal costs, particularly for carbon steel products, which we have been able to pass on to our customers in the form of increased prices. However, there can be no assurance that we will be able to do so in future periods.

 

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 prices for metal, we may be negatively impacted by delays between the time of increases in the cost of metals to us and increases in the prices that we charge for our products if we are unable to pass these increased costs on to our customers immediately. In addition, when metal prices decline, customer demand for lower prices could result in lower sale prices for our products and, as we use existing inventory that we purchased at higher metal prices, lower margins. Consequently, during periods in which we use this existing inventory, the effects of changing metal prices could adversely affect our operating results.

 

The prices of metals are subject to fluctuations in the supply and demand for metals worldwide and changes in the worldwide balance of supply and demand could negatively impact our revenues, gross profit and net income.

 

Metal prices are volatile due to, among other things, fluctuations in foreign and domestic production capacity, raw material availability, metals consumption and foreign currency rates. For example, in the past few years, China has significantly increased both its consumption and production of metals and metal products. Initially, China’s large and growing demand for metals significantly affected the metals industry by diverting supply to China and contributing to the global increases in metal prices. With China’s increased production of metals, it has become a net exporter of certain metals. While this development can affect global pricing, it has yet to have a significant impact

on U.S. pricing or the pricing for our products. Any future downturn in China’s general economic condition or increases in its export of metals could cause a reduction in metal prices globally, which could adversely affect our revenues, gross profit and net income. Additionally, significant currency fluctuations in the United States or abroad could negatively impact our cost of metals and the pricing of our products. The decline in the value of the U.S. dollar relative to foreign currencies in recent years has resulted in increased prices for metals and metal products in the United States as imported metals have become relatively more expensive. In addition, when prices for metal products in the United States are lower than in foreign markets, or when the U.S. dollar has weakened such as we are currently experiencing, metals may be sold in foreign markets rather than in the United States, reducing the availability of metal products in the United States which has permitted domestic mills to increase their prices. If, in the future, the U.S. dollar increases in value relative to foreign currencies, the U.S. market may be more attractive to foreign producers, resulting in increased supply that could cause decreased metal prices and adversely affect our revenues, gross profit and net income.

 

We operate in an industry that is cyclical and any downturn in general economic conditions or in our customers’ specific industries could negatively impact our revenues, gross profit and net income.

 

The metals service center industry is cyclical and impacted by both market demand and metals supply. Periods of economic slowdown or recession in the United States or other countries, or the public perception that these may occur, could decrease the demand for our products and adversely affect our pricing. For example, the general slowing of the economy in 2001, 2002 and 2003 adversely impacted our sales volume and pricing. While we have been experiencing significantly improved pricing and healthy demand levels since 2004, this trend may not continue. Public perception currently reflects pessimistic economic expectations in the United States and the economy has experienced weakness in certain segments. Changing economic conditions could depress or delay demand for our products, which could adversely affect our revenues, gross profit and net income.

 

We sell many products to industries that are cyclical, such as the non-residential construction, semiconductor, energy and transportation industries, including aerospace. The demand for our products is directly related to, and quickly impacted by, demand for the finished goods manufactured by our customers in these industries, which may change as a result of changes in the general United States or worldwide economy, domestic exchange rates, raw material prices, energy prices or other factors beyond our control. If we are unable to accurately project the product needs of our customers over varying lead times or if there is a limited availability of products through allocation by the mills or otherwise, we may not have sufficient inventory to be able to provide products desired by our customers on a timely basis. In addition, if we are not able to diversify our customer base and/or increase sales of products to customers in other industries when one or more of the cyclical industries that we serve are experiencing a decline, our revenues, gross profit and net income may be adversely affected.

 

We compete with a large number of companies in the metals service center industry, and, if we are unable to compete effectively, our revenues, gross profit and net income may decline.

 

We compete with a large number of other general-line distributors 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. Accordingly, these competitors may be better able to withstand adverse changes in conditions within our customers’ industries and may have greater operating and financial flexibility than we have. To compete for customer sales, we may lower prices or offer increased services at a higher cost, which could reduce our revenues, gross profit and net income.

 

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 carbon steel, alloy steel, stainless steel, aluminum 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 from our suppliers. If our suppliers experience production problems, lack of capacity or transportation disruptions, the lead times for receiving our supply of metal 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 traditional 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 sales, gross profit and net income. In addition, if a significant domestic supply source is discontinued and we cannot find acceptable domestic alternatives, we may need to find a foreign source of supply. Dependence on foreign sources of supply could lead to 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 divert their business to our competitors or to file claims against us. There has been significant consolidation at the metal producer level both globally and within the United States. This consolidation has reduced the number of suppliers available to us, which could result in increased metals costs to us that we may not be able to pass on to our customers and may limit our ability to obtain the necessary metals to service our customers.

 

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, do not undertake independent testing of such metals. Unless otherwise specifically notified by our customers, we rely on our customers to notify us of any metal that does not conform to the specifications certified by the supplying mill. A subsidiary of PNA is currently in a dispute with certain steel traders regarding the quality of specific orders of steel purchased from certain foreign mills and may have unknowingly received non-conforming products. 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 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 sub-standard 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 delivered from foreign suppliers that does not meet the specifications set forth in the mill certifications. In these circumstances, we may be at greater risk of loss for claims for which we do not carry, or do not carry sufficient, insurance.

 

If we do not successfully implement our acquisition 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 are unlikely to sustain our historical growth rates, and, if we cannot successfully integrate these 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.

 

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

 

Historically, we have expanded both through acquisitions and internal growth. Since our initial public offering in September 1994, we have purchased and successfully integrated more than 40 businesses. We continue to evaluate acquisition opportunities and expect to continue to grow our business through acquisitions, such as the proposed acquisition of PNA Group Holding Corporation. Risks we may encounter in acquisitions include:

 

 

 

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 a number of acquisitions.

 

Our indebtedness could impair our financial condition 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 March 31, 2008, we had aggregate outstanding indebtedness of approximately $1.1 billion. After giving effect to the PNA Transactions (including the completion of the cash tender offers as described under “Prospectus Summary — Recent Developments”), we would have had pro forma indebtedness of approximately $1.8 billion as of March 31, 2008. This indebtedness could adversely affect us in the following ways:

 

 

 

Our existing debt agreements contain, and our future debt agreements may contain, financial and restrictive covenants that limit our ability to incur additional debt, including to finance future operations or other capital needs, and to engage in other activities that we may believe are in our long-term best interests, including the disposal or acquisition of assets or other companies or to pay dividends to our shareholders. 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 funds otherwise available under our revolving credit facility. If 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.

 

We may not be able to generate sufficient cash flow to meet our existing debt service obligations.

 

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. For example, we may not generate sufficient cash flow from our operations or new acquisitions to repay amounts drawn under our revolving credit facility or the proposed term loan facility when they mature in 2011 and our private notes when they mature on various dates between 2008 and 2013 or our debt securities when they mature in 2016 and 2036. If we do not generate sufficient cash flow from operations to satisfy our debt obligations, we expect to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We may not be able to consummate any such transactions at all or on a timely basis or on terms, and for proceeds, that are acceptable to us. These transactions may not be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to timely refinance our obligations on acceptable terms, could adversely affect our ability to serve our customers and could cause us to reduce or discontinue our planned operations.

 

As a decentralized business, we depend on both senior management and our key operating employees. If we are unable to attract and retain these individuals, our ability to operate and grow our business may be adversely affected.

 

Because of our decentralized operating style, we depend on the efforts of our senior management, including our chairman and chief executive officer, David H. Hannah, our president and chief operating officer, Gregg J. Mollins, and our executive vice president and chief financial officer, Karla Lewis, as well as our key operating employees. We may not be able to retain these individuals or attract and retain additional qualified personnel when needed. We do not have employment agreements with any of our officers or employees, so they may have less of an incentive to stay with us when presented with alternative employment opportunities. In addition, our senior management and key operating employees hold stock options that have vested and may also hold common stock in our employee stock ownership plan. These individuals may, therefore, be more likely to leave us if the shares of our common stock significantly appreciate in value. The loss of any key officer or employee would require remaining officers and employees to assume additional responsibilities and to direct immediate and substantial attention to seeking a replacement. Our inability to retain members of our senior management or key operating employees or to find adequate replacements for any departing key officer or employee on a timely basis could adversely affect our ability to operate effectively and grow our business.

 

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 various 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 and complex and change frequently. Some of these laws and regulations are subject to varying and conflicting interpretations. We may be 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 metals service center 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 investigating and remediating contamination in connection with certain properties we have acquired. As our business has become more international, the risk of incurring liabilities or fines resulting from non-compliance with customs or export laws has increased. 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.

 

Our operating results have fluctuated, and are expected to continue fluctuating, depending on the season.

 

Many of our customers are in seasonal businesses, including customers in the non-residential construction and related industries. While the non-residential construction industry in the United States has remained generally strong, it may not continue to do so, particularly as non-residential construction projects are often indirectly adversely affected by slowdowns in residential construction. In addition, our revenues in the months of July, November and December traditionally have been lower than in other months because of increased vacation days and holiday closures for various customers. Consequently, you should not rely on our results of operations during any particular quarter as an indication of our results for a full year or any other quarter.

 

Ongoing tax audits may result in additional taxes.

 

Reliance and our subsidiaries are undergoing various tax audits. These tax audits could result in additional taxes, plus interest and penalties being assessed against Reliance or any of our subsidiaries and the amounts assessed could be material.

 

Damage to our computer infrastructure and software systems could harm our business.

 

The unavailability of any of our primary information management systems for any significant period of time could have an adverse effect on our operations. In particular, our ability to deliver products to our customers when needed, collect our receivables and manage inventory levels successfully largely depends on the efficient operation of our computer hardware and software systems. Through information management systems, we provide inventory availability to our sales and operating personnel, improve customer service through better order and product reference data and monitor operating results. Difficulties associated with upgrades, installations of major software or hardware, and integration with new systems could lead to business interruptions that could harm our reputation, increase our operating costs and decrease our profitability. In addition, these systems are vulnerable to, among other things, damage or interruption from power loss, computer system and network failures, loss of telecommunications services, operator negligence, physical and electronic loss of data, security breaches and computer viruses.

 

We have contracted with a third-party service provider that provides us with backup systems in the event that our information management systems are damaged. The backup facilities and other protective measures we take could prove to be inadequate.

Risks Related to this Offering and our Common Stock

 

The value of your investment may be subject to sudden decreases due to the potential volatility of the price of our common stock.

 

The market price of our common stock may be highly volatile and subject to wide fluctuations in response to various factors, including variations in our quarterly results of operations. Other factors may include matters discussed in other risk factors and the following factors:

 

 

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance. In addition, stock markets from time to time experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. In the past, some shareholders have brought securities class action lawsuits against companies following periods of volatility in the market price of their securities. We may in the future be the target of similar litigation. Securities litigation, regardless of whether our defense is ultimately successful, could result in substantial costs and divert management’s attention and resources.

 

Principal shareholders who own a significant number of shares may have interests that conflict with yours.

 

Florence Neilan, our largest shareholder, through a revocable trust, owns 11.6% of the outstanding shares of our common stock as of March 31, 2008. Thomas W. Gimbel, one of our directors who is trustee of her trust, and together with his other holdings, controls 12.5% of the outstanding shares of our common stock. Together, they may have the ability to significantly influence matters requiring shareholder approval. In deciding how to vote on such matters, these shareholders may be influenced by interests that conflict with yours.

 

We have implemented anti-takeover provisions that may adversely impact your rights as a holder of Reliance common stock.

 

Certain provisions in our restated articles of incorporation and our restated and amended bylaws could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock and the rights of our shareholders. We are authorized to issue

5,000,000 shares of preferred stock with the rights, preferences, privileges and restrictions of such stock to be determined by our board of directors, without a vote of the holders of common stock. Our board of directors could grant rights to holders of preferred stock to reduce the attractiveness of Reliance as a potential takeover target or make the removal of management more difficult. In addition, our restated articles of incorporation and restated and amended bylaws (1) impose advance notice requirements for shareholder proposals and nominations of directors to be considered at shareholder meetings and (2) establish a staggered or classified board of directors. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors other than the candidates nominated by our board of directors. In addition, our revolving credit facility and new proposed term loan facility and the provisions of our senior private notes and debt securities contain limitations on our ability to enter into change of control transactions.

 

This prospectus includes or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements include discussions of our business strategies and our expectations concerning future operations, margins, profitability, liquidity and capital resources. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “expects,” “predicts,” “potential” and similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this prospectus and the documents incorporated by reference. Those factors, among others, could cause our actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this prospectus and the documents incorporated by reference, you should carefully understand that the forward-looking statements are not guarantees of performance or results.

 

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and we cannot predict those events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this prospectus as a result of new information, future events or developments, except as required by the federal securities laws.

 

Forward-looking statements involve known and unknown risks and uncertainties. Various factors, such as the factors listed below and further discussed in detail in “Risk Factors” may cause our actual results, performance, or achievements to be materially different from those expressed or implied by any forward-looking statements. Among the factors that could cause our results to differ are the following:

 

 

 

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements and review carefully the section of this prospectus captioned “Risk Factors” for a more complete discussion of the risks of an investment in our common stock.

 

We estimate that the net proceeds from this offering, after deducting underwriting discounts and commissions, but before other offering expenses, will be approximately $464.0 million, or up to approximately $533.6 million if the underwriters exercise their over-allotment option, at an assumed public offering price of $71.79 per share, which was the last reported sale price for our common stock on the New York Stock Exchange on July 16, 2008.

 

We intend to use all of the net proceeds from this offering to fund a portion of the amounts to be paid in connection with the PNA Transactions, including the repayment pursuant to the tender offers and consent solicitations of $250.0 million aggregate principal amount of the Fixed Rate Notes due 2016 bearing interest at a rate of 10.75% and $170.0 million aggregate principal amount of the Floating Rate Notes due 2013 bearing interest, as of March 31, 2008, at a rate of 10.07%, plus premium and accrued and unpaid interest. For more information regarding the PNA Transactions, see “Prospectus Summary — Recent Developments.” We expect to draw under our revolving credit facility, and to use the borrowings under our proposed $250.0 million unsecured senior term loan facility with Bank of America, N.A., as sole arranger, an affiliate of one of the underwriters of this offering, to fund the balance of the amounts to be paid in connection with the proposed PNA Transactions, including the related repayment or refinancing of indebtedness of PNA.

 

If we do not consummate the proposed acquisition of PNA for any reason, we intend to use a portion of the net proceeds of the offering and the proceeds of the proposed unsecured senior term loan facility to repay amounts outstanding under our revolving line of credit, which was $262.0 million as of March 31, 2008. We do not have specific plans for the balance of the net proceeds if we do not consummate the proposed acquisition of PNA, but we expect to use such net proceeds for general corporate purposes, including future acquisitions. The maturity date of the revolving credit facility is November 9, 2011 and interest accrues at variable rates based on LIBOR plus a margin (currently 0.55%) or the bank prime rate, at our election. Weighted average rates on borrowings outstanding on our revolving credit facility were 3.32% and 5.46% at March 31, 2008 and December 31, 2007, respectively.

 

Pending such uses, we intend to invest the net proceeds of this offering in short-term, marketable securities.

 

 

Our common stock is listed on the New York Stock Exchange under the symbol “RS” and was first traded on the NYSE on September 16, 1994. The following table sets forth the high and low last reported sale prices of the common stock on the NYSE Composite Tape for the stated calendar quarters from January 1, 2006 through July 16, 2008.

 

 

On July 16, 2008, the last reported sale price for our common stock on the New York Stock Exchange was $71.79 per share.

 

Dividends will be paid when, as and if declared by our board of directors. We have paid quarterly cash dividends on our common stock for 48 years. In July 2006, we effected a two-for-one stock split in the form of a stock dividend (all share and per share information has been adjusted to reflect this two-for-one stock split). In February 2008, the board increased the quarterly dividend amount 25% from $0.08 to $0.10 per share of common stock. The board may reconsider or revise this policy from time to time based on conditions then existing, including our earnings, cash flows, financial condition and capital requirements, or other factors the board may deem relevant. We expect to continue to declare and pay dividends in the future, if earnings are available to pay dividends, but we also intend to continue to retain a portion of earnings for reinvestment in our operations and expansion of our business, including through acquisitions. We cannot assure you that either cash or stock dividends will be paid in the future or that, if paid, the dividends will be at the same amount or frequency as paid in the past.

 

In August and September 2007, we repurchased approximately 1.7 million shares of our common stock at an average cost of $49.10 per share under our Stock Repurchase Plan. In early 2008, we repurchased approximately an additional 2.4 million shares at an average cost per share of $46.97. As of March 31, 2008, we had repurchased a total of 15,193,517 shares of our common stock at an average cost of $18.41 per share, since the Stock Repurchase Plan was first adopted in December 1994. The Stock Repurchase Plan was amended and restated in May 2005. At March 31, 2008, there were 7,883,033 shares of our common stock authorized for repurchase under the Stock Repurchase Plan. Repurchased shares are treated as authorized but unissued shares.

 

The agreements governing our senior notes and our syndicated credit facility contain covenants which, among other things, require us to maintain a minimum net worth, which may restrict our ability to pay dividends, and to repurchase shares of our common stock. In 2007, our dividend payments represented 6% of our earnings.

 

The following table contains certain information with respect to our cash dividends declared during the past two years and the first half of 2008:

 

 

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2008:

 

 

You should read this table along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds,” “Unaudited Pro Forma Financial Information,” and our financial statements and related notes thereto appearing elsewhere or incorporated by reference in this prospectus.

 

 

 

The number of shares of our common stock outstanding as of March 31, 2008 in the table above does not reflect:

 

 

A change of $0.01 in the price per share of Reliance common stock would result in a change of 940 shares of Reliance common stock being issued in the offering in order for Reliance to receive net proceeds (after underwriting discounts and commissions but before other offering expenses) of $464.0 million.

 

This offering of our common stock is not conditioned upon the consummation of the acquisition of PNA. In the event that the acquisition of PNA is not consummated, we intend to use a portion of the net proceeds of the offering and the proceeds of the proposed unsecured senior term loan facility to repay amounts outstanding under our revolving credit facility. We do not have specific plans for the balance of the net proceeds if we do not consummate the proposed acquisition of PNA, but we expect to use such net proceeds for general corporate purposes, including future acquisitions.

 

The following unaudited pro forma combined financial statements combine the historical consolidated balance sheets and statements of income of Reliance and PNA, giving effect to the acquisition of PNA using the purchase method of accounting. Certain historical balance sheet and income statement amounts of PNA have been reclassified to conform to the financial statement presentation of Reliance. The pro forma financial information also gives effect to the exclusion of the results of operations of Travel Main Corporation (which will not be acquired by us as part of our acquisition of PNA, and which owns certain real property that is leased to the PNA operating subsidiaries). The pro forma financial information does not give effect, however, to the results of operations of Precision Flamecutting & Steel, L.P. (“Precision”) and Sugar Steel Corporation (“Sugar”) (and its affiliate), businesses which PNA acquired in December 2007 and March 2008, respectively, for periods prior to the acquisition of such businesses. Information supplied by PNA indicates that Precision and Sugar had net sales of approximately $54.5 million and $104.7 million, respectively, for the year ended December 31, 2007. Furthermore, no effect has been given in the unaudited pro forma combined statements of income for (i) operating benefits that may be realized through the combination of the entities and (ii) the elimination of certain non-recurring expenses related to a compensation plan that is being terminated as part of the acquisition, management fees paid to Platinum Equity, an affiliate of PNA, and certain other non-recurring executive compensation and other corporate costs that Reliance does not expect to incur after taking control of PNA of approximately $2.8 million and $15.9 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively.

 

The unaudited pro forma combined balance sheet as of March 31, 2008 gives effect to the PNA Transactions as if they had occurred on March 31, 2008. The unaudited pro forma combined statements of income for the three months ended March 31, 2008 and the year ended December 31, 2007 assume the PNA Transactions were effected on January 1, 2008 and January 1, 2007, respectively.

 

The unaudited pro forma financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations of Reliance that would have been reported had the acquisition occurred on the dates indicated, nor do they represent a forecast of the consolidated financial position of Reliance at any future date or the consolidated results of operations of Reliance for any future period.

 

The acquisition of PNA will be accounted for using the purchase method of accounting. The pro forma information presented, including allocation of purchase price, is based on preliminary estimates of the fair values of assets acquired and liabilities assumed, currently available information and assumptions and will be revised as additional information becomes available. The actual adjustments to our consolidated financial statements as a result of the completion of the PNA Transactions will depend on a number of factors, including additional information that will become available on or after the closing date of the acquisition of PNA. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.

 

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the historical consolidated financial statements, including the notes thereto, and other information of Reliance included in its Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the three months ended March 31, 2008, and of PNA included in Reliance’s Current Report on Form 8-K filed with the SEC on July 17, 2008 and incorporated herein by reference.

Reliance Steel & Aluminum Co.

Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2008
(In thousands)

 

Reliance Steel & Aluminum Co.

 

Notes to Unaudited Pro Forma Combined Balance Sheet

 

 

These pro forma adjustments are to adjust the historical PNA financial statements for the distribution of Travel Main Corporation (“Travel Main”), an entity not being purchased by Reliance as part of the acquisition of PNA. Travel Main owns certain real property that is leased to various PNA subsidiaries and is controlled by PNA. The operating leases between the PNA entities and Travel Main will remain in place after the acquisition of PNA. Reliance has eliminated Travel Main’s assets, liabilities and Travel Main’s results of operations and Reliance has included the income statement effects of the operating leases in the pro forma financial statements.

 

 

Represents the pro forma adjustments for the proposed equity offering of 6,750,000 shares of common stock at an assumed public offering price of $71.79 (the last reported sales price of Reliance’s common stock on the New York Stock Exchange on July 16, 2008) for net proceeds of approximately $464.0 million (after deducting underwriting discounts and commissions but before other offering expenses), borrowings of $250.0 million under a proposed term loan facility, and borrowings of $410.9 million under our revolving credit facility. Also, represents the pro forma adjustments to reflect the purchase of the outstanding common stock of PNA for $315.0 million, direct acquisition costs of approximately $4.1 million and the repayment or refinancing of PNA’s outstanding debt of approximately $750.0 million and related tender offer and consent solicitation premium payments of approximately $54.8 million for a total transaction value of approximately $1.12 billion. In addition, assuming that the consideration for the PNA Notes is paid on August 4, 2008, an aggregate of $15.2 million of accrued and unpaid interest will also be payable to holders of the PNA Notes. This amount is expected to be borrowed under Reliance’s revolving credit facility. Amounts borrowed under Reliance’s revolving credit facility do not reflect amounts expected to be borrowed to pay accrued and unpaid interest in connection with the repurchase of the PNA Notes.

 

 

 

Represents the pro forma adjustment to record the estimated fair values of PNA’s real and personal property based upon preliminary estimates. The values of these assets are subject to adjustment upon completion of our valuations.

 

 

The estimated total purchase price of the acquisition is based on a price of $315.0 million for all of the outstanding shares of PNA and the repayment or refinancing by Reliance of PNA’s outstanding debt of approximately $750.0 million, as well as related tender offer and consent solicitation premium payments. The total transaction value of approximately $1.12 billion, which includes the purchase price for the outstanding PNA shares, the repayment or refinancing of PNA’s outstanding debt inclusive of tender offer and consent solicitation premium payments and acquisition costs, was allocated to PNA’s assets and liabilities on a fair value basis and resulted in estimated goodwill of approximately $393.7 million.

 

 

Represents the pro forma adjustments to record the estimated fair values of PNA’s identifiable intangible assets relating to tradenames, certain customer relationships or other intangible assets from the acquisition based upon preliminary estimates. The fair values of these assets are subject to adjustments upon completion of our valuations.

 

 

Represents the pro forma adjustments to write off PNA’s unamortized deferred financing costs of $15.2 million.

 

The pro forma adjustment to income taxes payable is related to the planned transfer of the Travel Main entity prior to the acquisition of PNA by way of a distribution to a newly created entity by PNA, in a taxable transaction that will give rise to a tax liability estimated at approximately $7.9 million.

 

 

Represents the pro forma adjustment to bring total outstanding PNA borrowings to a maximum allowed amount pursuant to the terms of the Stock Purchase Agreement pursuant to which we agreed to acquire PNA, as well as adjustments to the outstanding PNA Notes to reflect their estimated repurchase value under the tender offers.

 

 

The deferred tax liability represents the pro forma adjustment for the additional book/tax differences created from the allocation of purchase price to the fair values of the PNA acquired assets and liabilities assumed. These estimates are based on the estimated prospective statutory tax rate of approximately 38% for the combined company and could change based on changes in the applicable tax rates and finalization of the combined company’s tax position as well as based on changes in the allocation of the purchase price among the acquired assets and liabilities assumed.

 

 

Represents the pro forma adjustments to reflect the excess of Reliance’s purchase price for PNA’s outstanding common stock over the historical stockholders’ equity of PNA.

Reliance Steel & Aluminum Co.

Unaudited Pro Forma Combined Statement of Income
For the Three Months Ended March 31, 2008
(In thousands, except share and per share amounts)

 

Reliance Steel & Aluminum Co.

Unaudited Pro Forma Combined Statement of Income
For the Year Ended December 31, 2007
(In thousands, except share and per share amounts)

 

Reliance Steel & Aluminum Co.

 

Notes to Unaudited Pro Forma Combined Statements of Income

 

 

These pro forma adjustments are to adjust the PNA financial statements for the distribution of Travel Main, which is not being purchased by Reliance as part of the acquisition of PNA. Travel Main owns certain real property that is leased to various PNA subsidiaries and is controlled by PNA. The operating leases between the PNA entities and Travel Main will remain in place after the acquisition of PNA. Reliance has eliminated Travel Main’s assets, liabilities and Travel Main’s results of operations and Reliance has included the income statement effects of the operating leases in the pro forma financial statements.

 

 

 

To reflect the pro forma effect on depreciation and amortization expense of the write-up of PNA’s property, plant and equipment and identifiable intangible assets to their estimated fair market values at the date of the acquisition. The amount of this adjustment may change as the values of the underlying asset valuations are finalized.

 

 

Represents the pro forma adjustment for the elimination of interest expense related to all of the approximately $750.0 million of outstanding PNA debt and the addition of the interest expense related to $660.9 million of new debt expected to be incurred by Reliance in connection with the acquisition of PNA and the related repayment or refinancing of all of PNA’s debt, comprised of a proposed $250.0 million term loan and $410.9 million of borrowings under our existing revolving credit facility. In addition, assuming that the consideration for the PNA Notes is paid on August 4, 2008, an aggregate of $15.2 million of accrued and unpaid interest will also be payable to holders of the PNA Notes. This amount is expected to be borrowed under Reliance’s revolving credit facility. Amounts borrowed under Reliance’s revolving credit facility do not reflect amounts expected to be borrowed to pay accrued and unpaid interest in connection with the repurchase of the PNA Notes. For the purposes of the pro forma statements of income, we have assumed an interest rate of 4.21%, based on LIBOR plus 1.75%, in respect of the new term loan, and an interest rate of 3.01%, based on LIBOR plus 0.55%, in respect of the existing revolving credit facility. A change of 0.125% in the applicable interest rates on the borrowings under the term loan and the revolving credit facility would result in a change of $0.8 million in our interest expense on an annual basis. These pro forma adjustments reflect a reduction in interest expense of approximately $10.9 million and $36.9 million for the three months ended March 31, 2008 and the year ended December 31, 2007, respectively primarily due to Reliance’s overall lower cost of borrowing and a portion of the PNA debt being repaid with proceeds from this proposed common stock offering and the other PNA Transactions.

 

 

To reflect the pro forma effect on consolidated income tax expense of the above adjustments, determined based on an estimated prospective effective tax rate of 37.7% for the combined company. This estimate could change based on changes in the applicable tax rates and finalization of the combined company’s tax position.

 

 

The pro forma weighted average number of basic and diluted shares outstanding is calculated by adding Reliance’s weighted average number of basic and diluted shares of common stock outstanding for the respective periods presented in the unaudited pro forma combined statements of income and adding the additional shares to be issued in connection with the proposed common stock offering by Reliance. Using an assumed public offering price of $71.79 per share (the last reported sale price for Reliance’s common stock on the New York Stock Exchange on July 16, 2008) and estimated net proceeds from the proposed common stock offering (after deducting underwriting discounts and commissions but before other offering expenses) of $464.0 million, 6,750,000 shares are estimated to be issued for the purpose of the calculation of the pro forma weighted average shares outstanding and earnings per share. A change of $0.01 in the price per share of Reliance common stock would result in a change of 940 shares of Reliance common stock being issued in the offering in order for Reliance to receive net proceeds (after underwriting discounts and commissions but before other offering expenses) of $464.0 million.

 

PNA Acquisition Agreement

 

On June 16, 2008, RSAC Management Corp., a California corporation that is a wholly owned subsidiary of Reliance (“RSAC”), entered into an agreement (the “Stock Purchase Agreement”) with PNA and its stockholders, Platinum Equity Capital Partners, L.P., Platinum Equity Capital Partners — A, L.P., Platinum Equity Capital Partners — PF, L.P., and Platinum Travel Principals, LLC (collectively, the “Stockholders”), to acquire the outstanding capital stock of PNA. RSAC agreed to pay to the Stockholders cash consideration of $315.0 million, subject to certain adjustments. For further discussion of the proposed acquisition of PNA, please see “Prospectus Summary — Recent Developments.”

 

RSAC and PNA and the Stockholders have made customary representations, warranties and covenants to one another in the Stock Purchase Agreement, including, among other things, covenants that, prior to the closing of the acquisition, PNA (i) will operate its business in the ordinary course consistent with past practice and (ii) will not engage in certain kinds of transactions.

 

The obligation of the parties to consummate the acquisition is subject to a number of conditions, including, (i) the expiration or earlier termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (ii) that no governmental authority shall have enacted, issued or effected any law or order making the acquisition illegal or otherwise prohibiting the consummation of the acquisition. Further, the obligation of the Stockholders to consummate the acquisition is subject to a number of conditions, including (i) that the representations and warranties of RSAC contained in the Stock Purchase Agreement shall be true and correct (without giving effect to materiality qualifiers) on and as of the closing date with the same force and effect as though such representations and warranties had been made on and as of the closing date (other than those representations and warranties that are made as of another date, in which case such representations and warranties shall be true and correct as of such other date), except to the extent such failure to be true and correct does not, individually or in the aggregate, adversely affect the ability of RSAC to carry out its obligations under, and to consummate the transactions contemplated by, the Stock Purchase Agreement, (ii) that RSAC shall have duly performed and complied with, in all material respects, the covenants and agreements contained in the Stock Purchase Agreement to be performed or complied with by it prior to or at the closing date, and (iii) that PNA shall have obtained the requisite consent of Bank of America, N.A. In addition, the obligation of RSAC to consummate the acquisition is subject to a number of conditions, including (i) that the representations and warranties of the Stockholders and PNA contained in the Stock Purchase Agreement shall be true and correct (without giving effect to materiality or materially adverse effect qualifiers) on and as of the closing date with the same force and effect as though such representations and warranties had been made on and as of the closing date (other than those representations and warranties that are made as of another date, in which case such representations and warranties shall be true and correct as of such other date), except to the extent such failure to be true and correct does not, individually or in the aggregate, result in a material adverse change in respect of the business of PNA, (ii) that PNA and the Stockholders shall have duly performed and complied with, in all material respects, the covenants and agreements contained in the Stock Purchase Agreement to be performed or complied with by it prior to or at the closing date and (iii) that there shall have been no material adverse change in respect of the business of PNA. The closing of the acquisition of PNA is not subject to any financing condition.

 

The Stock Purchase Agreement may be terminated at any time prior to the closing of the acquisition by either RSAC or PNA if (i) the closing has not occurred before October 2, 2008, (ii) a governmental order prohibiting the transactions contemplated by the Stock Purchase Agreement has become final and nonappealable or (iii) both parties have mutually consented to the termination in writing.

 

The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 10.1 to the registration statement of which this prospectus forms a part. The Stock Purchase Agreement is not intended to provide any factual information about PNA or Reliance; the representations and warranties in the Stock Purchase Agreement are made only to the other parties of the agreement and are qualified or modified by information contained in certain

confidential disclosure schedules that have been provided. Accordingly, no person should rely on the representations and warranties as characterizing the actual state of facts at any time.

 

Tender Offers and Consent Solicitations for PNA Notes

 

On July 1, 2008, we launched cash tender offers to purchase any and all of the $250.0 million aggregate principal amount of the Fixed Rate Notes and any and all of the $170.0 million aggregate principal amount of the Floating Rate Notes.

 

Concurrently with the tender offers, we solicited consents from holders of the PNA Notes to certain proposed amendments (the “Amendments”) to each of the indentures pursuant to which the PNA Notes were issued and the PNA Notes themselves. The Amendments would eliminate substantially all of the restrictive covenants contained in the PNA Note indentures and the PNA Notes (other than the covenants related to change of control offers), as well as certain events of default.

 

As of July 15, 2008, all of the $250.0 million aggregate outstanding principal amount of the Fixed Rate Notes had been validly tendered and not withdrawn and all of the $170.0 million aggregate outstanding principal amount of the Floating Rate Notes had been validly tendered and not withdrawn and withdrawal rights in the tender offers had expired. Accordingly, in the event that the acquisition of PNA is consummated and we accept the PNA Notes for payment pursuant to the tender offers, we will not effect the Amendments, but instead will surrender the PNA Notes to the trustee for retirement. The total consideration for each $1,000 principal amount of Fixed Rate Notes will be $1,205.75 and the total consideration for each $1,000 principal amount of Floating Rate Notes will be $1,020.00, in each case plus accrued and unpaid interest from the last interest payment date to, but not including, the settlement date for the tender offers.

 

The tender offers are conditioned on the closing of our acquisition of PNA and are subject to certain other customary conditions.

 

New Term Loan Facility

 

We plan to enter into a credit agreement for a $250.0 million unsecured senior term loan facility for which we have received commitments from a syndicate of lenders. The term loan is expected to mature on November 9, 2011 and be subject to quarterly amortization of principal in equal installments. The term loan is expected to bear interest at a variable rate equal to, at our option, (i) LIBOR plus an applicable margin ranging from 1.25% to 2.25% (which margin is to be determined based upon our total leverage ratio) or (ii) the base rate (defined as the higher of (a) the bank prime rate and (b) the federal funds rate plus 0.50%). The term loan is expected to be repayable at our option in whole or in part at any time without penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The term loan is expected to close prior to our acquisition of PNA and be subject to customary closing conditions, which do not include the consummation of the acquisition of PNA.

 

The following description summarizes the material terms of our capital stock. It is qualified in its entirety by reference to the applicable provisions of California law, our restated articles of incorporation and our restated and amended bylaws, in each case, as in effect on the date of this prospectus.

 

Common Stock

 

We are authorized to issue 100,000,000 shares of common stock, no par value per share. As of June 30, 2008, there were 73,230,947 shares of common stock outstanding. All of the issued and outstanding shares are fully paid and nonassessable.

 

Dividend Rights

 

We currently pay a quarterly cash dividend on our common stock and have paid dividends on our common stock for the past 48 years. The current quarterly dividend is $0.10 per share. See “Dividend Policy.”

 

Voting Rights

 

Holders of common stock are entitled to one vote per share on each matter submitted to a vote of shareholders with the exception of elections for directors for which shareholders have cumulative voting rights. Each shareholder entitled to vote at any election of directors has the right to cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder’s votes are entitled, or to distribute such votes among as many candidates as such shareholder sees fit.

 

Board of Directors

 

Our restated and amended bylaws provide for a classified board consisting of two classes as nearly equal in number as possible. The members of each class are elected for a period of two years and the term of one class will expire each year.

 

Liquidation Rights

 

In the event of liquidation, holders of common stock would be entitled to receive proportionately any assets legally available for distribution to our shareholders with respect to shares held by them, subject to any prior rights of the holders of any preferred stock then outstanding. No preferred stock is currently outstanding.

 

Preemptive or Other Subscription Rights

 

Holders of common stock do not have any preemptive rights to subscribe for any of our securities.

 

Conversion and Other Rights

 

No conversion, redemption or sinking fund provisions apply to the common stock, and the holders of common stock are not liable to further calls or assessments by us.

 

Preferred Stock

 

Under our restated articles of incorporation, we are authorized to issue 5,000,000 shares of preferred stock, no par value per share. As of June 30, 2008, there were no shares of preferred stock issued and outstanding. Our restated articles of incorporation provide that shares of preferred stock may be issued from time to time in one or more series by the board of directors. The board can fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption granted to or imposed upon any wholly unissued series and, within the limits and restrictions stated in any resolution or resolutions of the board originally fixing the number of shares constituting any series, to increase or decrease the number of shares of any series subsequent to the issue of shares of that series. The rights of preferred shareholders may supersede the rights of common shareholders.

Anti-Takeover Measures

 

Certain provisions in our restated articles of incorporation and our restated and amended bylaws could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock and the rights of our shareholders. We are authorized to issue 5,000,000 shares of preferred stock, no par value, with the rights, preferences, privileges and restrictions of such stock to be determined by our board of directors, without a vote of the holders of common stock. Our board of directors could grant rights to holders of preferred stock to reduce the attractiveness of Reliance as a potential takeover target or make the removal of management more difficult. In addition, our restated articles of incorporation and restated and amended bylaws (1) impose advance notice requirements for shareholder proposals and nominations of directors to be considered at shareholder meetings and (2) establish a staggered or classified board of directors. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors other than the candidates nominated by our board of directors. In addition, our credit facility and the provisions of our senior private notes and debt securities contain limitations on our ability to enter into change of control transactions.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for the shares of our common stock is American Stock Transfer & Trust Company.

 

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a beneficial owner that is a “non-U.S. holder,” other than a non-U.S. holder that owns, or has owned, actually or constructively, more than 5% of our common stock. As used herein, the term “non-U.S. holder” means a beneficial owner of our common stock that holds the common stock as a capital asset and that is, for U.S. federal income tax purposes:

 

 

A “non-U.S. holder” does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition of our common stock and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.

 

This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein (possibly on a retroactive basis). This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to non-U.S. holders that are subject to special treatment under the U.S. federal income tax laws (including U.S. expatriates). Prospective holders are urged to consult their tax advisors with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

 

If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Non-U.S. holders that are partners of a partnership holding our common stock should consult their own tax advisors.

 

Dividends

 

Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide a properly executed Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty. A non-U.S. holder of our common stock eligible for a reduced rate of withholding may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service.

 

The withholding tax does not apply to dividends paid to a non-U.S. holder who provides a properly executed Internal Revenue Service Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States. Effectively connected dividends received by a non-U.S. holder will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. person, subject to an applicable income tax treaty providing otherwise. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).

 

Gain on Disposition of Common Stock

 

Subject to the discussion below concerning backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income tax on gain recognized on a sale or other disposition of our common stock, unless:

 

 

 

Reliance believes that it is not, and does not anticipate becoming, a U.S. real property holding corporation.

 

If a non-U.S. holder is engaged in a trade or business in the United States and gain recognized by the non-U.S. holder on a sale or other disposition of our common stock is effectively connected with the conduct of such trade or business, the non-U.S. holder will generally be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. person, subject to an applicable income tax treaty providing otherwise. Non-U.S. holders whose gain from dispositions of our common stock may be effectively connected with the conduct of a trade or business in the United States are urged to consult their own tax advisors with respect to the U.S. tax consequences of the ownership and disposition of our common stock, including the possible imposition of a branch profits tax.

 

Information Reporting Requirements and Backup Withholding

 

Information returns will be filed with the Internal Revenue Service in connection with payments of dividends on our common stock. Unless the non-U.S. holder complies with certification procedures to establish that it is not a U.S. person, information returns may be filed with the Internal Revenue Service in connection with the proceeds from a sale or other disposition of our common stock and the non-U.S. holder may be subject to U.S. backup withholding on payments on our common stock or on the proceeds from a sale or other disposition of our common stock. The certification procedures required to claim a reduced rate of withholding under an income tax treaty will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to a non-U.S. holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

 

Federal Estate Tax

 

Individual non-U.S. holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, our common stock will be treated as U.S. situs property subject to U.S. federal estate tax.

 

We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities Inc., UBS Securities LLC and Banc of America Securities LLC are acting as joint book-running managers of the offering and as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

 

 

The underwriters are committed to purchase all the shares of common stock offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

 

The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $      per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $      per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

 

The underwriters have an option to buy up to 1,012,500 additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

 

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $      per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

 

 

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $1,000,000.

 

A prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders.

Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

 

We have agreed that we will not, subject to customary exceptions, (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into a swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock, or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities Inc., UBS Securities LLC and Banc of America Securities LLC for a period of 90 days after the date of this prospectus; provided, however, that we may enter into (but not consummate during such 90-day period), or announce our intention to enter into, one or more agreements to acquire assets or businesses, the consideration for which may include shares of our common stock with a value as of the respective dates of such agreements of up to $250.0 million.

 

Our directors and executive officers and our largest shareholder have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which, subject to customary exceptions, each of these persons for a period of 90 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities Inc., UBS Securities LLC and Banc of America Securities LLC, (1) offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by such directors, executive officers, or shareholder in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise; provided, however, that the foregoing agreement will terminate with respect to our largest shareholder in the event of the death or incapacity of the grantor of the trust holding such shareholder’s shares.

 

We have agreed to indemnify the underwriters and their affiliates, directors and officers against certain liabilities, including liabilities under the Securities Act.

 

Our common stock is listed on the New York Stock Exchange under the symbol “RS”.

 

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of our common stock in the open market for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. These stabilizing transactions may include making short sales of our common stock, which involves the sale by the underwriters of a greater number of shares of our common stock than they are required to purchase in this offering, and purchasing shares of our common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

 

The underwriters have advised us that, pursuant to Regulation M, they may also engage in other activities that stabilize, maintain or otherwise affect the price of our common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

 

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates, as well as to PNA and its affiliates, and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and our affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. This offering is being conducted pursuant to Conduct Rule 2710(h) of the Financial Industry Regulatory Authority. In addition, JPMorgan Chase Bank, N.A., an affiliate of J.P. Morgan Securities Inc., serves as documentation agent and a lender under our existing revolving credit facility and is expected to be a lender under our new term loan facility. In addition, an affiliate of UBS Securities LLC is a lender under our existing revolving credit facility and is expected to be a lender under our new term loan facility. UBS Securities LLC is also acting as financial advisor to PNA in connection with its sale to us. Bank of America, N.A., an affiliate of Banc of America Securities LLC, serves as an administrative agent and lender under our existing revolving credit facility and is expected to be the administrative agent and a lender under our new term loan facility. Citigroup Global Markets Inc. is acting as the sole dealer manager for the tender offers and consent solicitations relating to the PNA Notes and is acting as financial advisor to PNA in connection with its sale to us, and an affiliate of Citigroup Global Markets Inc. is a lender under our existing revolving credit facility. An affiliate of KeyBanc Capital Markets Inc. is a lender under our existing revolving credit facility and is expected to be a lender under our new term loan facility. An affiliate of Wachovia Capital Markets, LLC is a lender under our existing revolving credit facility and is expected to be a lender under our new term loan facility. An affiliate of Wachovia Capital Markets, LLC also owns PNA Notes, which will be repurchased in connection with the PNA Transactions. An affiliate of Wells Fargo Securities LLC is a lender under our existing revolving credit facility and is expected to be a lender under our new term loan facility. An affiliate of Wells Fargo Securities LLC is also a lender under PNA’s revolving credit facility, which we expect to repay in connection with the PNA Transactions.

 

European Economic Area

 

In relation to each Member State of the European Economic Area, or EEA, which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from, and including, the date on which the Prospectus Directive is implemented in that Relevant Member State, or the Relevant Implementation Date, an offer to the public of our securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State, except that, with effect from, and including, the Relevant Implementation Date, an offer to the public in that Relevant Member State of our securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

(a) to legal entities which are authorized or regulated to operate in the financial markets, or, if not so authorized or regulated, whose corporate purpose is solely to invest in our securities;

 

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

 

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or

 

(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive;

 

provided that no such offer of our securities shall result in a requirement for the publication by us or any underwriter or agent of a prospectus pursuant to Article 3 of the Prospectus Directive.

As used above, the expression “offered to the public” in relation to any of our securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our securities to be offered so as to enable an investor to decide to purchase or subscribe for our securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

 

The EEA selling restriction is in addition to any other selling restrictions set out in this prospectus.

 

United Kingdom

 

This prospectus is only being distributed to and is only directed at (1) persons who are outside the United Kingdom, (2) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or Order; or (3) high net worth companies, and other persons to who it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order, all such persons together being referred to as “relevant persons.” The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

 

In addition:

 

 

France

 

No prospectus (including any amendment, supplement or replacement thereto) has been prepared in connection with the offering of the Securities that has been approved by the Autorité des marchés financiers or by the competent authority of another State that is a contracting party to the Agreement on the European Economic Area and notified to the Autorité des marchés financiers; no Securities have been offered or sold and will be offered or sold, directly or indirectly, to the public in France except to permitted investors (“Permitted Investors”) consisting of persons licensed to provide the investment service of portfolio management for the account of third parties, qualified investors (investisseurs qualifiés) acting for their own account and/or investors belonging to a limited circle of investors (cercle restreint d’investisseurs) acting for their own account, with “qualified investors” and “limited circle of investors” having the meaning ascribed to them in Articles L. 411-2, D. 411-1, D. 411-2, D. 411-4, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code Monétaire et Financier and applicable regulations thereunder; none of this prospectus or any other materials related to the offering or information contained therein relating to the Securities has been released, issued or distributed to the public in France except to Permitted Investors; and the direct or indirect resale to the public in France of any Securities acquired by any Permitted Investors may be made only as provided by Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code Monétaire et Financier and applicable regulations thereunder.

 

Italy

 

The offering of the shares of common stock has not been cleared by the Italian Securities Exchange Commission (Commissione Nazionale per le Società e la Borsa, the “CONSOB”) pursuant to Italian securities legislation and, accordingly, the shares of common stock may not and will not be offered, sold or delivered, nor may or will copies of the prospectus or any other documents relating to the shares of common stock be distributed in Italy, except (i) to professional investors (operatori qualificati), as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of July 1, 1998, as amended, (the “Regulation No. 11522”), or (ii) in other circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of

Legislative Decree No. 58 of February 24, 1998 (the “Financial Service Act”) and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended.

 

Any offer, sale or delivery of the shares of common stock or distribution of copies of the prospectus or any other document relating to the shares of common stock in Italy may and will be effected in accordance with all Italian securities, tax, exchange control and other applicable laws and regulations, and, in particular, will be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy in accordance with the Financial Services Act, Legislative Decree No. 385 of September 1, 1993, as amended (the “Italian Banking Law”), Regulation No. 11522, and any other applicable laws and regulations; (ii) in compliance with Article 129 of the Italian Banking Law and the implementing guidelines of the Bank of Italy; and (iii) in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or the Bank of Italy.

 

Any investor purchasing the shares of common stock in the offering is solely responsible for ensuring that any offer or resale of the shares of common stock it purchased in the offering occurs in compliance with applicable laws and regulations.

 

The prospectus and the information contained therein are intended only for the use of its recipient and, unless in circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of the “Financial Service Act” and Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended, is not to be distributed, for any reason, to any third party resident or located in Italy. No person resident or located in Italy other than the original recipients of this document may rely on it or its content.

 

Italy has only partially implemented the Prospectus Directive; the provisions under the heading “European Economic Area” above shall apply with respect to Italy only to the extent that the relevant provisions of the Prospectus Directive have already been implemented in Italy.

 

Insofar as the requirements above are based on laws which are superseded at any time pursuant to the implementation of the Prospectus Directive, such requirements shall be replaced by the applicable requirements under the Prospectus Directive.

 

Switzerland

 

Our securities may not and will not be publicly offered, distributed or re-distributed on a professional basis in or from Switzerland only on the basis of a non-public offering, and neither this prospectus nor any other solicitation for investments in our securities may be communicated or distributed in Switzerland in any way that could constitute a public offering within the meaning of articles 652a or 1156 of the Swiss Federal Code of Obligations or of Article 2 of the Federal Act on Investment Funds of March 18, 1994. This prospectus may not be copied, reproduced, distributed or passed on to others without the underwriters’ and agents’ prior written consent. This prospectus is not a prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations or a listing prospectus according to article 32 of the Listing Rules of the Swiss exchange and may not comply with the information standards required thereunder. We will not apply for a listing of our securities on any Swiss stock exchange or other Swiss regulated market and this prospectus may not comply with the information required under the relevant listing rules. The securities have not been and will not be approved by any Swiss regulatory authority. The securities have not been and will not be registered with or supervised by the Swiss Federal Banking Commission, and have not been and will not be authorized under the Federal Act on Investment Funds of March 18, 1994. The investor protection afforded to acquirers of investment fund certificates by the Federal Act on Investment Funds of March 18, 1994 does not extend to acquirers of our securities.

 

Hong Kong

 

Our securities may not be offered or sold in Hong Kong, by means of this prospectus or any document other than to persons whose ordinary business is to buy or sell shares, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong). No advertisement, invitation or document relating to our securities may be issued or may be in the possession of any person other than with respect to the securities which are or are intended to be disposed of only to

persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

 

Singapore

 

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

 

Where our securities are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor; shares of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 of the SFA, except: (1) to an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or any person pursuant to an offer that is made on terms that such shares of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) where the transfer is by operation of law.

 

Japan

 

Our securities have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and our securities will not be offered or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

 

Australia

 

This prospectus is not a formal disclosure document and has not been lodged with the Australian Securities and Investments Commission. It does not purport to contain all information that an investor or their professional advisers would expect to find in a product disclosure statement for the purposes of Part 7.9 of the Corporations Act 2001 (Australia) in relation to the securities.

 

The securities are not being offered in Australia to “retail clients” as defined in section 761G of the Corporations Act 2001 (Australia). This offering is being made in Australia solely to “wholesale clients” as defined in section 761G of the Corporations Act 2001 (Australia) and as such no product disclosure statement in relation to the securities has been prepared.

 

This prospectus does not constitute an offer in Australia other than to wholesale clients. By submitting an application for our securities, you represent and warrant to us that you are a wholesale client. If any recipient is not a wholesale client, no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any agreement arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities you undertake to us that, for a period of 12 months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than a wholesale client.

 

The consolidated financial statements and schedules of Reliance appearing in Reliance’s Annual Report on Form 10-K for the year ended December 31, 2007 (including schedules appearing therein) and the effectiveness of Reliance’s internal control over financial reporting as of December 31, 2007, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

The consolidated financial statements of PNA Group Holding Corporation (Successor) as of December 31, 2007 and 2006, for the year ended December 31, 2007 and for the period from May 10, 2006 to December 31, 2006 and the consolidated financial statements of PNA Group, Inc. (Predecessor) for the period from January 1, 2006 to May 9, 2006 and for the year ended December 31, 2005 incorporated in this prospectus by reference to Reliance Steel & Aluminum Co.’s Current Report on Form 8-K dated July 17, 2008, have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

On January 16, 2008, the Audit Committee of our Board of Directors replaced our independent registered accountant and external auditor, Ernst & Young LLP, with KPMG LLP for the year ending December 31, 2008. Ernst & Young LLP continued as Reliance’s independent registered accountant for the year ended December 31, 2007 and will continue to provide tax and other services to Reliance as may be requested by Reliance from time to time. The Board of Directors ratified and approved this change.

 

The reports of Ernst & Young LLP on Reliance’s consolidated financial statements as of and for the years ended December 31, 2007, 2006 and 2005 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 31, 2007, 2006 and 2005, there have been no disagreements between Reliance and Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference to the subject matter of the disagreement(s) in connection with its report. None of the “reportable events” described in Item 304(a)(1)(v) of the Regulation S-K promulgated by the SEC under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, has occurred during the years ended December 31, 2007, 2006 or 2005.

 

The validity of the common stock offered hereby will be passed upon for us by Davis Polk & Wardwell, Menlo Park, California. Simpson Thacher & Bartlett LLP, New York, New York will pass upon certain legal matters in connection with this offering for the underwriters.

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we file at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room in Washington D.C. and in other locations. Our SEC filings are also available to the public from commercial document retrieval services and at the Internet website maintained by the SEC at http://www.sec.gov. Copies of documents we file with the SEC are also available at the offices of the New York Stock Exchange, 20 Broad Street, New York, NY 10005.

 

We have filed a registration statement on Form S-3 under the Securities Act with the SEC to register the shares of common stock offered by this prospectus. This prospectus does not contain all the information contained in the registration statement because certain parts of the registration statement are omitted in accordance with the rules

and regulations of the SEC. The registration statement and the documents filed as exhibits to the registration statement are available for inspection and copying as described above.

 

We will furnish without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request, a copy of the information that has been incorporated by reference in this prospectus (except exhibits, unless they are specifically incorporated by reference in this prospectus). You should direct any requests for copies to:

 

Reliance Steel & Aluminum Co.

350 South Grand Avenue, Suite 5100

Los Angeles, California 90071

Attention: Investor Relations

Telephone: (213) 687-7700

 

 

The SEC allows us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to another document separately filed with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. This prospectus incorporates by reference the documents set forth below that Reliance has previously filed with the SEC: