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Acquisitions

12 Months Ended

Dec. 31, 2021

Note 2. Acquisitions

2021 Acquisitions

On October 1, 2021, we acquired Merfish United, Inc. (“Merfish United”), a leading master distributor of tubular building products that are distributed to its independent wholesale distributor customers across a variety of end markets in the United States. Merfish United, headquartered in Ipswich, Massachusetts, serves 47 U.S. states through its twelve strategically located distribution centers.

On December 10, 2021, we acquired Admiral Metals Servicenter Company, Inc. (“Admiral Metals”), a leading distributor of non-ferrous metals products in the Northeastern U.S. Admiral Metals, headquartered in Woburn, Massachusetts, serves a variety of end markets, including semiconductor, automotive, medical, infrastructure, aerospace and industrial markets through its eight strategically located service centers.

On December 10, 2021, we acquired Nu-Tech Precision Metals Inc. (“Nu-Tech Precision Metals”), a custom manufacturer of specialty extruded metals, fabricated parts and welded components. Nu-Tech Precision Metals, services the nuclear energy, aerospace and defense end markets from its location near Ottawa, Ontario, Canada.

On December 17, 2021, we acquired Rotax Metals, Inc. (“Rotax Metals”), a metals service center specializing in copper, bronze and brass alloys. Located in Brooklyn, New York, Rotax Metals will operate as a subsidiary of Yarde Metals, Inc., a wholly owned subsidiary of Reliance.

We funded our 2021 acquisitions with cash on hand. Included in our net sales for the year ended December 31, 2021 were combined net sales of $171.0 million from each company’s acquisition date.

The preliminary allocations of the total purchase price for our 2021 acquisitions to the fair values of the assets acquired and liabilities assumed were as follows:


	(in millions)
Cash	$	1.0
Accounts receivable		107.2
Inventories		134.4
Property, plant and equipment		32.6
Operating lease right-of-use assets		29.8
Goodwill		172.0
Intangible assets subject to amortization		105.6
Intangible assets not subject to amortization		68.1
Other current and long-term assets		4.0
Total assets acquired		654.7
Deferred taxes		50.6
Operating lease liabilities		24.6
Other current and long-term liabilities		139.2
Total liabilities assumed		214.4
Net assets acquired	$	440.3

The purchase price allocations for our 2021 acquisitions are pending the completion of purchase price adjustments, based on tangible asset and intangible asset valuations, and the completion of pre-acquisition period tax returns.

2019 Acquisition

On December 31, 2019, we acquired Fry Steel Company (“Fry Steel”). Fry Steel is a general line and long bar distributor located in Santa Fe Springs, California. Fry Steel performs cutting services on its diverse product assortment and provides “in-stock” next day delivery of its products. Fry Steel’s net sales in 2021 were $92.1 million.

We funded our acquisition of Fry Steel with borrowings on our revolving credit facility and cash on hand.

The allocation of the total purchase price for our 2019 acquisition of Fry Steel to the fair values of the assets acquired and liabilities assumed was as follows:


	(in millions)
Cash	$	17.1
Accounts receivable		5.7
Inventories		39.3
Property, plant and equipment		29.9
Goodwill		60.5
Intangible assets subject to amortization		26.0
Intangible assets not subject to amortization		30.3
Other current and long-term assets		0.3
Total assets acquired		209.1
Other current and long-term liabilities		8.3
Total liabilities assumed		8.3
Net assets acquired	$	200.8

Summary purchase price allocation information for all acquisitions

All of the acquisitions discussed in this note have been accounted for under the acquisition method of accounting and, accordingly, each purchase price has been allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of each acquisition. The accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date. The consolidated balance sheets reflect the allocations of each acquisition’s purchase price as of December 31, 2021 or 2020, as applicable. The measurement periods for purchase price allocations do not exceed 12 months from the acquisition date.

In 2021 and 2020, as part of the purchase price allocations for the 2021 and 2019 acquisitions, we allocated $68.1 million and $30.3 million, respectively, to the trade names acquired. We determined that all of the trade names acquired in connection with these acquisitions had indefinite lives since their economic lives are expected to approximate the life of each company acquired. In 2021 and 2020, we recorded other identifiable intangible assets related to customer relationships for the 2021 and 2019 acquisitions of $89.6 million and $26.0 million, respectively, with weighted average lives of 10.0 years, and an identifiable other intangible asset related to production backlog for the 2021 acquisitions of $15.8 million with an average life of 8.0 years. The goodwill arising from our 2021 and 2019 acquisitions consists largely of expected strategic benefits, including enhanced financial and operational scale, as well as expansion of acquired product and processing know-how across our enterprise. Goodwill of $104.5 million and $60.8 million from our 2021 and 2019 acquisitions is deductible for tax purposes. Total goodwill deductible for tax purposes was $852.6 million as of December 31, 2021.

Unaudited Pro forma financial information for all acquisitions

The following unaudited pro forma summary financial results present the consolidated results of operations as if our 2021 acquisitions had occurred as of January 1, 2020, after the effect of certain adjustments, including non-recurring acquisition-related costs, amortization of inventory step-up to fair value included in cost of sales, depreciation and amortization of certain identifiable property, plant and equipment and intangible assets, and lease cost fair value adjustments. The pro forma summary financial results for the year ended December 31, 2021 excluded $7.7 million of acquisition-related costs.

The pro forma results have been presented for comparative purposes only and are not indicative of what would have

occurred had the 2021 acquisitions been made as of January 1, 2020, or of any potential results which may occur in the future.


	Year Ended December 31,
	2021		2020

	(in millions, except per share amounts)
Pro forma:
Net sales	$	14,820.5	$	9,345.4
Net income attributable to Reliance	$	1,519.1	$	357.7
Earnings per share attributable to Reliance stockholders:
Diluted	$	23.62	$	5.48
Basic	$	24.03	$	5.56

The pro forma amounts presented for the year ended December 31, 2020 include $21.8 million of non-recurring inventory step-up amortization, $7.8 million of non-recurring excess renumeration paid to former owners and employees, and $7.7 million of non-recurring acquisition-related costs. As adjusted for these non-recurring items, pro forma net income attributable to Reliance was $387.7 million and pro forma diluted earnings per share were $5.91 for the year ended December 31, 2020.