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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2021
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | Note 1. Summary of Significant Accounting Policie s ​ Principles of Consolidation ​ The accompanying consolidated financial statements include the accounts of Reliance Steel & Aluminum Co. and its subsidiaries (collectively referred to as “Reliance”, “the Company”, “we”, “our” or “us”). Our consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. The ownership of the other interest holders of consolidated subsidiaries is reflected as noncontrolling interests. Our investments in unconsolidated subsidiaries are recorded under the equity method of accounting. All significant intercompany accounts and transactions have been eliminated. ​ Business ​ As a global diversified metal solutions provider, we operate a network of approximately 315 locations in 40 states and in 13 other countries (Australia, Belgium, Canada, China, France, India, Malaysia, Mexico, Singapore, South Korea, Turkey, the United Arab Emirates and the United Kingdom) that provides value-added metals processing services and distributes a full line of more than 100,000 metal products. ​ Accounting Estimates ​ The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, such as allowances for credit losses, net realizable values of inventories, fair values and/or impairment of goodwill and other indefinite-lived intangible assets, long-lived assets, the amount of unrecognized tax benefits and other contingencies, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. ​ Accounts Receivable and Concentrations of Credit Risk ​ Trade receivables are typically non-interest bearing and are recorded at amortized cost. Sales to our recurring customers are generally made on open account terms while sales to occasional customers may be made on a collect on delivery basis. Past due status of customer accounts is determined based on how recently payments have been received in relation to payment terms granted. Credit is generally extended based upon an evaluation of each customer’s financial condition, with terms consistent in the industry and no collateral is required. The allowance for credit losses reflects the expected losses on our trade receivables and is determined based on customer-specific facts and the consideration of historical loss information, current conditions and reasonable and supportable forecasts using a loss-rate approach. Amounts are written-off against the allowance in the period we determine that the receivable is uncollectible. ​ Concentrations of credit risk with respect to trade receivables are limited due to the geographically diverse customer base, with limited exposure to any single customer account, and various industries into which our products are sold. We do not consider ourselves to have any significant concentrations of credit risk. ​ Inventories ​ The majority of our inventory is valued using the last-in, first-out (“LIFO”) method, which is not in excess of market. Under this method, older costs are included in inventory, which may be higher or lower than current costs. This method of valuation is subject to year-to-year fluctuations in cost of material sold, which is influenced by the inflation or deflation existing within the metals industry as well as fluctuations in our product mix and on-hand inventory levels. ​ Fair Values of Financial Instruments ​ Fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities, current maturities of operating lease liabilities approximate carrying values due to the short period of time to maturity. Fair values of long-term debt, which have been determined based on borrowing rates currently available to us or to other companies with comparable credit ratings, for loans with similar terms or maturity, approximate the carrying amounts in the consolidated financial statements, with the exception of our publicly traded senior unsecured notes with face values of $1.65 billion as of December 31, 2021 and 2020. The fair values of these senior unsecured notes based on quoted market prices were $1.75 billion and $1.80 billion at December 31, 2021 and 2020, respectively, compared to their carrying values of $1.64 billion. These estimated fair values are based on Level 2 inputs, including benchmark yields, reported trades and broker/dealer quotes. Fair values are generally based on quoted market prices for identical or similar instruments. ​ Cash Equivalents ​ We consider all highly liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash and cash equivalents with high credit quality financial institutions. The Company, by policy, limits the amount of credit exposure to any one financial institution. ​ Goodwill and Other Indefinite-Lived Intangible Assets ​ Goodwill is the excess of purchase price over the fair value of identified assets and liabilities of businesses acquired. Other indefinite-lived intangible assets include amounts allocated to the trade names of businesses acquired. Goodwill and other indefinite-lived intangible assets are not amortized but are tested for impairment at least annually. ​ We test for impairment of goodwill and intangible assets deemed to have indefinite lives annually and, between annual tests, whenever significant events or changes occur based on an assessment of qualitative factors to determine if it is more likely than not that the fair value is less than the carrying value. We have one operating segment and one reporting unit for goodwill impairment purposes. We calculate the fair value of the reporting unit using our market capitalization or the discounted cash flow method, as necessary, and compare the fair value to the carrying value of the reporting unit to determine if impairment exists. We perform our annual impairment evaluations of goodwill and other indefinite-lived intangible assets goodwill on November 1 of each year. No impairment of goodwill was determined to exist in any of the years presented. We recognized impairment losses of $4.7 million and $67.8 million related to our other intangible assets with indefinite lives in 2021 and 2020, respectively. See Note 19—“Impairment and Restructuring Charges” for further discussion of our impairment losses. ​ Long-Lived Assets ​ Property, plant and equipment is recorded at cost (or at fair value for assets acquired in connection with business combinations) and the provision for depreciation of these assets is generally computed on the straight-line method at rates designed to distribute the cost of assets over the useful lives, estimated as follows: buildings, including leasehold improvements, over five to 50 years and machinery and equipment over three to 20 years. ​ Intangible assets with finite useful lives are amortized over their useful lives. We periodically review the recoverability of our property, plant and equipment and intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We didn’t recognize any impairment losses for long-lived assets in 2021. We recognized $9.3 million and $1.2 million of impairment losses for property, plant and equipment in 2020 and 2019, respectively, and $30.7 million for intangible assets subject to amortization in 2020. See Note 19—“Impairment and Restructuring Charges” for further discussion of our impairment losses. ​ Leases ​ We determine if an arrangement is a lease at inception. Our lease agreements generally contain only lease components. Our lease payments are generally fixed with certain leases containing variable payments related to Consumer Price Index (CPI) annual adjustments. ​ Right-of-use assets and lease liabilities are recognized on the balance sheet at the present value of the future lease payments at the lease commencement date. Certain of our lease terms include periods under renewal options when it is reasonably certain that we will exercise that option. We generally include optional renewal periods when determining our lease terms and future lease payments. The interest rate used to determine the present value of future lease payments is our incremental borrowing rate that is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. ​ Operating lease cost is recognized on a straight-line basis over the lease term. ​ Revenue Recognition ​ We recognize revenue when control of metal products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. There are no significant judgments or estimates made to determine the amount or timing of our reported revenues. The amount of transaction price associated with unperformed performance obligations is not significant as of December 31, 2021 and 2020. ​ Metal Sales ​ We have minimal long-term contract sales with our customers as we primarily transact in the spot market under fixed price sales orders. The majority of our metal product sales orders generally have only one performance obligation: sale of processed or unprocessed metal product. Control of the metal products we sell transfers to our customers upon delivery for orders with FOB destination terms or upon shipment for orders with FOB shipping point terms. Shipping and handling charges to our customers are included in net sales. We account for all shipping and handling of our products as fulfillment activities and not as a promised good or service. Costs incurred in connection with the shipping and handling of our products are typically included in operating expenses whether we use a third-party carrier or our own trucks. In 2021, 2020 and 2019, shipping and handling costs included in Warehouse, delivery, selling, general and administrative expenses were $424.6 million, $357.4 million and $404.1 million, respectively. Shipment and delivery of our orders generally occur on the same day due to the close proximity of our customers and our metals service center locations. ​ Toll Processing and Logistics ​ Toll processing services relate to the processing of customer-owned metal. Logistics services primarily include transportation and storage services for metal we toll process. Revenue for these services is recognized over time as the toll processing or logistics services are performed. The toll processing services are generally short-term in nature with the service being performed in less than one day. ​ Seasonality ​ Some of our customers are in seasonal businesses, especially customers in the construction industry and related businesses. Our overall operations have not shown any material seasonal trends as a result of our geographic, product and customer diversity. Typically, revenues in the months of July, November and December have been lower than in other months because of a reduced number of working days for shipments of our products, resulting from holidays observed by the Company as well as vacation and extended holiday closures at some of our customers. The number of shipping days in each quarter also has an impact on our quarterly sales and profitability. Particularly in light of COVID-19, we cannot predict whether period-to-period fluctuations will be consistent with historical patterns. Results of any one or more quarters are therefore not necessarily indicative of annual results. ​ Stock-Based Compensation ​ All of our stock-based compensation plans are considered equity plans. The fair value of stock awards and restricted stock units is determined based on the fair value of our common stock on the grant date. The fair value of stock awards and restricted stock units is expensed on a straight-line basis over their respective vesting periods, net of forfeitures when they occur. Stock-based compensation expense was $70.8 million, $42.2 million and $51.2 million in 2021, 2020 and 2019, respectively, and is included in the Warehouse, delivery, selling, general and administrative expense caption of our consolidated statements of income. ​ Environmental Remediation Costs ​ We accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remediation feasibility study. Such accruals are adjusted as further information develops or circumstances change. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. We are not aware of any environmental remediation obligations that would materially affect our operations, financial position or cash flows. See Note 16—“Commitments and Contingencies” for further discussion on our environmental remediation matters. ​ Income Taxes ​ We file a consolidated U.S. federal income tax return with our wholly owned domestic subsidiaries. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax reporting bases of assets and liabilities using the enacted tax rates expected to be in effect when such differences are realized or settled. The effect on deferred taxes from a change in tax rates is recognized in income in the period that includes the enactment date of the change. The provision for income taxes reflects the taxes to be paid for the period and the change during the period in the deferred tax assets and liabilities. We evaluate on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized. ​ We make a comprehensive review of our uncertain tax positions on a quarterly basis. Tax benefits are recognized when it is more likely than not that a tax position will be sustained upon examination by the authorities. The benefit from a position that has surpassed the more-likely-than-not threshold is the largest amount of benefit that is more than 50% likely to be realized upon settlement. We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. ​ Foreign Currencies ​ The currency effects of translating the financial statements of our foreign subsidiaries, which operate in local currency environments, are included in other comprehensive income (loss). Losses resulting from foreign currency transactions are included in the results of operations in the Other expense (income), net caption and amounted to $4.0 million, $2.3 million and $4.1 million in 2021, 2020 and 2019, respectively. ​ Impact of Recently Issued Accounting Standards—Adopted ​ Business Combinations – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers—In October 2021, the Financial Accounting Standards Board (“FASB”) issued accounting guidance that requires companies to measure contract assets and contract liabilities from contracts with customers acquired in a business combination in accordance with revenue recognition accounting guidance, creating an exception to the fair value recognition and measurement principles in the business combinations accounting guidance. We adopted the accounting changes during the three months ended December 31, 2021 and utilized the guidance in the purchase price allocations for our 2021 acquisitions. The adoption of this accounting change did not have a material impact on our consolidated financial statements. ​ Income Taxes—In December 2019, the FASB issued accounting changes that simplify the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. We adopted the accounting changes on January 1, 2021. The adoption of these accounting changes did not have a material impact on our consolidated financial statements. ​ Impact of Recently Issued Accounting Standards—Not Yet Adopted ​ Reference Rate Reform—In March 2020, the FASB issued accounting changes that provide optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The accounting changes may be applied prospectively through December 31, 2022. We do not expect the transition from LIBOR to have a material impact on our consolidated financial statements. ​

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