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Russel Metals
Inc. (TSX:RUS) today announced improved first quarter 2011 earnings of $33
million, or $0.55 per share on revenues of $658 million. Our comparative
first quarter 2010 results were earnings of $9 million or $0.15 per share
on revenues of $527 million.
Brian R. Hedges, President and CEO, stated "All of our operations
capitalized on favourable market conditions as
volumes increased and rising steel prices that began in the fourth quarter
of 2010 continued into 2011. Strong oil prices led to increased drilling
rig activity for oil in the energy sector and offset the lower conventional
gas-related drilling activities due to continued low gas prices. We are focussed on keeping our inventory position low and our
on-order position as short as possible due to concerns about price
volatility."
Revenues in our metals service centers increased 30% to $364 million for
the first quarter of 2011 compared to the first quarter of 2010. Rising
steel prices resulted in gross margins increasing from 22.5% for the first
quarter of 2010 to 25.0% for the first quarter of 2011. Operating profits
in our metals service centers of $36 million were more than double our 2010
operating profits of $15 million.
Revenues in the energy tubular product segment increased 14% to $224
million for the first quarter of 2011 compared to the 2010 first quarter.
Margins improved to 15.1% from 12.4% for the comparable first quarter of
2010. Stronger pricing was caused by the correction of the elevated
inventory levels in the sector, tightening supply and higher raw material
costs for the pipe mills as the price of flat rolled steel used to produce
oil country tubular goods increased. This segment experienced strong
operating profits of $18 million for the first quarter of 2011 compared to
$11 million for the 2010 first quarter.
Our steel distributor segment had a 40% increase in revenues for the first
quarter of 2011 to $70 million. Operating profits doubled to $9 million,
for the first quarter of 2011 over the 2010 first quarter, a result of
stronger margins due to price and volume increases. The purchasing patterns
of our customers are now balanced with their sales activity resulting in
more demand.
Corporate expenses increased from $4 million for the first quarter of 2010
to $7 million for the 2011 first quarter, a result of the mark to market
gains on certain stock-based compensation reflecting the increase in our
share price.
On January 1, 2011 we commenced reporting our results under International
Financial Reporting Standards ("IFRS"). On the conversion to
IFRS, Marion E. Britton, Vice President and CFO, commented "Other than
the effect of the cash conversion feature prior to maturity of our
convertible debentures, which we proactively removed in December 2010, the
move to IFRS did not have a significant effect on our results for the first
quarter. The 2010 IFRS first quarter earnings included a charge of $7
million from the valuation change in our convertible debenture call
option."
The Board of Directors approved a quarterly dividend of $0.275 per common
share payable June 15, 2011 to shareholders of record as of May 31, 2011.
The Company will be holding an Investor Conference Call on Friday, May 13,
2011 at 9:00 a.m. ET to review its first quarter 2011 results. The dial-in
telephone numbers for the call are 416-340-8530 (Toronto and International
callers) and 1-877-240-9772 (U.S. and Canada). Please dial in 10 minutes
prior to the call to ensure that you get a line.
A replay of the call will be available at 416-695-5800 (Toronto and
International callers) and 1-800-408-3053 (U.S. and Canada) until midnight,
Friday, May 27, 2011. You will be required to enter pass code 5650285 in
order to access the call.
Additional supplemental financial information is available in our investor
conference call package located on our website at www.russelmetals.com.
Russel Metals is one of the largest metals
distribution companies in North America. It carries on business in three
metals distribution segments: metals service centers, energy tubular
products and steel distributors, under various names including Russel Metals, A.J. Forsyth, Acier
Leroux, Acier Loubier, Acier Richler, Arrow
Steel Processors, B&T Steel, Baldwin International, Comco
Pipe and Supply, Fedmet Tubulars,
JMS Russel Metals, Leroux
Steel, McCabe Steel, Megantic Metal, Metaux Russel, Metaux Russel Produits Specialises, Milspec, Norton Metals, Pioneer Pipe, Russel Metals Specialty Products, Russel
Metals Williams Bahcall, Spartan Steel Products,
Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis.
Statements contained in this press release or on the related conference
call that relate to Russel Metals' beliefs or
expectations as to certain future events are not statements of historical
fact and are forward-looking statements. Russel
Metals cautions readers that there are important factors, risks and
uncertainties, including but not limited to economic, competitive and
governmental factors affecting Russel Metals'
operations, markets, products, services and prices that could cause its
actual results, performance or achievements to be materially different from
those forecasted or anticipated in such forward-looking statements.
The forward-looking statements in this document reflect management's
current beliefs and are based on information currently available to
management. The material assumptions applied in making the forward-looking
statements in this document include the following: demand from the
manufacturing, resource and construction segments of the Canadian economy
have stabilized and these conditions will continue to slowly improve in the
foreseeable future; and oil and gas prices, the price of steel and the
value of the Canadian dollar relative to the U.S. dollar will be at similar
levels with what we experienced in the first quarter of 2011. Although the
forward-looking statements contained in this document are based upon what
management believes to be reasonable estimates and assumptions, Russel Metals cannot ensure that actual results will
not be materially different from those expressed or implied by these
forward-looking statements and does not intend to update any
forward-looking statement other than required by law.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Quarter ended March 31 (millions, except per share data) 2011 2010 ---------------------------------------------------------------------------- Revenues $ 657.7 $ 526.8 Cost of materials 519.3 430.6 Employee expense 54.6 42.9 Other operating expenses 29.6 27.4 ---------------------------------------------------------------------------- Earnings before the following 54.2 25.9 Interest expense 7.1 7.2 Interest income (0.6) (0.3) Finance expense-convertible debentures - 6.9 Other finance expense, net 0.4 (1.5) ---------------------------------------------------------------------------- Earnings before income taxes 47.3 13.6 Provision for income taxes (14.3) (4.5) ---------------------------------------------------------------------------- Net earnings for the period $ 33.0 $ 9.1 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Basic earnings per common share $ 0.55 $ 0.15 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Diluted earnings per common share $ 0.53 $ 0.15 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarter ended March 31 (millions) 2011 2010 ---------------------------------------------------------------------------- Net earnings for the period $ 33.0 $ 9.1 ---------------------------------------------------------------------------- Other comprehensive income (loss) Unrealized foreign exchange losses on translation of foreign operations (8.0) (10.2) Unrealized gains on items designated as net investment hedges 3.3 5.6 Unrealized losses on items designated as cash flow hedges - (2.2) Gains (losses) on derivatives designated as cash flow hedges transferred to net income in the current period 0.3 (1.0) ---------------------------------------------------------------------------- Other comprehensive income (loss) (4.4) (7.8) ---------------------------------------------------------------------------- Total comprehensive income $ 28.6 $ 1.3 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- March 31 December 31 January 1 (millions) 2011 2010 2010 ---------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents $ 286.1 $ 323.7 $ 359.6 Accounts receivable 381.2 301.4 217.8 Inventories 548.6 544.1 517.9 Prepaid expenses 5.0 3.0 4.9 Income taxes receivable 1.0 2.8 50.6 ---------------------------------------------------------------------------- 1,221.9 1,175.0 1,150.8 Property, Plant and Equipment 202.4 205.2 221.9 Deferred Income Tax Assets 6.6 7.1 8.9 Pension and Benefits 0.7 0.7 - Financial Assets - - 4.5 Other Assets 3.1 3.8 3.8 Goodwill and Intangibles 24.4 24.9 26.4 ---------------------------------------------------------------------------- $ 1,459.1 $ 1,416.7 $ 1,416.3 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities $ 315.3 $ 272.8 $ 245.4 Income taxes payable 9.5 14.4 - Current portion long-term debt 1.2 1.2 1.3 ---------------------------------------------------------------------------- 326.0 288.4 246.7 Derivatives - - 53.1 Long-Term Debt 314.9 318.5 333.1 Pensions and Benefits 17.4 17.9 20.8 Provision 5.5 5.6 5.5 Deferred Income Tax Liabilities 6.3 7.0 2.3 Other Non-Current Liabilities 2.2 6.5 3.9 ---------------------------------------------------------------------------- 672.3 643.9 665.4 ---------------------------------------------------------------------------- Shareholders' Equity Common shares 484.9 483.7 478.9 Retained earnings 274.0 257.5 259.9 Contributed surplus 14.6 13.9 13.2 Accumulated other comprehensive income (loss) (15.4) (11.0) (1.1) Equity component of convertible debenture 28.7 28.7 - ---------------------------------------------------------------------------- 786.8 772.8 750.9 ---------------------------------------------------------------------------- $ 1,459.1 $ 1,416.7 $ 1,416.3 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarter ended March 31 (millions) 2011 2010 ---------------------------------------------------------------------------- Operating activities Net earnings for the period $ 33.0 $ 9.1 Depreciation and amortization 6.0 6.3 Deferred income taxes (0.5) 1.8 Gain on sale of property, plant and equipment (0.1) - Stock-based compensation 0.9 0.2 Unrealized gain on investment - (1.5) Loss on derivatives - 6.9 Difference between pension expense and amount funded (0.6) - Debt accretion, amortization and other 1.3 0.7 ---------------------------------------------------------------------------- Cash from operating activities before non-cash working capital 40.0 23.5 ---------------------------------------------------------------------------- Changes in non-cash working capital items Accounts receivable (81.5) (75.7) Inventories (8.2) 46.7 Accounts payable and accrued liabilities 35.3 9.0 Income tax receivable/payable (3.3) - Other (2.0) 0.5 ---------------------------------------------------------------------------- Change in non-cash working capital (59.7) (19.5) ---------------------------------------------------------------------------- Cash (used in) from operating activities (19.7) 4.0 ---------------------------------------------------------------------------- Financing activities Issue of common shares 0.9 - Dividends on common shares (16.5) (14.9) Repayment of long-term debt (0.3) (0.4) Swap termination - (35.2) ---------------------------------------------------------------------------- Cash used in financing activities (15.9) (50.5) ---------------------------------------------------------------------------- Investing activities Purchase of property, plant and equipment (4.4) (1.3) Proceeds on sale of property, plant and equipment 0.7 - ---------------------------------------------------------------------------- Cash used in investing activities (3.7) (1.3) ---------------------------------------------------------------------------- Effect of change in exchange rates on cash and cash equivalents 1.7 (0.7) ---------------------------------------------------------------------------- Decrease in cash and cash equivalents (37.6) (48.5) Cash and cash equivalents, beginning of the period 323.7 359.6 ---------------------------------------------------------------------------- Cash and cash equivalents, end of the period $ 286.1 $ 311.1 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Supplemental cash flow information: Income taxes paid $ 18.3 $ 2.7 Interest paid $ 12.2 $ 12.8 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Common Contributed Retained (millions) Shares Surplus Earnings --------------------------------------------------------------------------- Balance, January 1, 2011 $ 483.7 $ 13.9 $ 257.5 Payment of dividends - - (16.5) Net earnings for the period - - 33.0 Other comprehensive income for the period - - - Recognition of stock-based compensation - 0.7 - Stock options exercised 1.2 - - --------------------------------------------------------------------------- Balance, March 31, 2011 $ 484.9 $ 14.6 $ 274.0 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Equity Accumulated Component Other of Convertible Comprehensive (millions) Debentures Income Total ---------------------------------------------------------------------------- Balance, January 1, 2011 $ 28.7 $ (11.0) $ 772.8 Payment of dividends - - (16.5) Net earnings for the period - - 33.0 Other comprehensive income for the period - (4.4) (4.4) Recognition of stock-based compensation - - 0.7 Stock options exercised - - 1.2 ---------------------------------------------------------------------------- Balance, March 31, 2011 $ 28.7 $ (15.4) $ 786.8 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Common Contributed Retained (millions) Shares Surplus Earnings --------------------------------------------------------------------------- Balance, January 1, 2010 $ 478.9 $ 13.2 $ 259.9 Payment of dividends - - (14.9) Net earnings for the period - - 9.1 Other comprehensive income for the period - - - Recognition of stock-based compensation - 0.1 - --------------------------------------------------------------------------- Balance, March 31, 2010 $ 478.9 $ 13.3 $ 254.1 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Equity Accumulated Component Other of Convertible Comprehensive (millions) Debentures Income Total ---------------------------------------------------------------------------- Balance, January 1, 2010 $ - $ (1.1) $ 750.9 Payment of dividends - - (14.9) Net earnings for the period - - 9.1 Other comprehensive income for the period - (7.8) (7.8) Recognition of stock-based compensation - - 0.1 ---------------------------------------------------------------------------- Balance, March 31, 2010 $ - $ (8.9) $ 737.4 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Common Contributed Retained (millions) Shares Surplus Earnings --------------------------------------------------------------------------- Balance, January 1, 2010 $ 478.9 $ 13.2 $ 259.9 Payment of dividends - - (59.7) Net earnings for the period - - 57.3 Other comprehensive income for the period - - Recognition of stock-based compensation - 0.7 - Stock options exercised 4.8 - - Equity component of convertible debentures - - - --------------------------------------------------------------------------- Balance, December 31, 2010 $ 483.7 $ 13.9 $ 257.5 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Equity Accumulated Component Other of Convertible Comprehensive (millions) Debentures Income Total ---------------------------------------------------------------------------- Balance, January 1, 2010 $ - $ (1.1) $ 750.9 Payment of dividends - - (59.7) Net earnings for the period - - 57.3 Other comprehensive income for the period - (9.9) (9.9) Recognition of stock-based compensation - - 0.7 Stock options exercised - - 4.8 Equity component of convertible debentures 28.7 - 28.7 ---------------------------------------------------------------------------- Balance, December 31, 2010 $ 28.7 $ (11.0) $ 772.8 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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