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May 12, 2008
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Russel Metals Reports First Quarter 2008 Net Earnings of $0.46 per Share
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TORONTO, ONTARIO--(Marketwire - May 12, 2008) - Russel Metals Inc. (TSX:RUS) reported first quarter net earnings of $29 million or $0.46 per share. Consolidated revenues for the first quarter of 2008 were $712 million, an increase from the first quarter of 2007 revenues of $684 million and from $598 million reported in the fourth quarter of 2007. Operating profits were $52 million for the first quarter of 2008 compared to $46 million for the first quarter of 2007 and $38 million for the fourth quarter of 2007. Operating profits as a percentage of revenues improved in both metals service centers and steel distributors, which reflects the steel price increases announced by steel mills.
First quarter net earnings of $0.46 per share includes items totalling $0.10 per share which were not experienced in the first quarter of 2007. These items include $0.03 per share for stock-based compensation expense and $0.04 per share to write down our investment in asset-backed commercial paper to estimated fair value. In addition, the translation of earnings from our U.S. operations to Canadian dollars at lower exchange rates impacted earnings by $0.03 per share. The comparable reported earnings per share were $0.46 for the first quarter of 2007 and $0.38 for the fourth quarter of 2007.
Bud Siegel, President and Chief Executive Officer, commented, "Since January 2008 steel mills have increased the price of steel consistently month over month. The cost of metallic inputs, energy and transportation have all dramatically increased resulting in steel pricing reaching all time highs in the second quarter of 2008. Our metals service centers had progressively higher operating profits throughout the first quarter of 2008 as a result of increased pricing and we anticipate margins to be significantly higher during the second quarter of 2008 due to the on-going steel price increases.
In addition, the energy tubular products segment had continued strong volumes from sales to the oil sands of Northern Alberta and oil and gas drilling activity in the U.S. Rockies, resulting in higher operating profits despite tighter margins."
Revenues for our energy tubular products segment were up $35 million to $214 million for the first quarter of 2008 compared to $179 million for the first quarter of 2007.
Operating profits for our metals service centers for the first quarter of 2008 were $32 million, up $7 million from the first quarter of 2007. The metals service centers results strengthened from the first and fourth quarter of 2007 due to steel price increases initiated in the first quarter of 2008. Steel price increases improved margins and operating profits. Demand, excluding JMS Russel Metals, was consistent with the first quarter of 2007.
Revenues for our steel distributors segment were down by $44 million to $96 million, impacted by both lower imports and lower demand compared to the first quarter of 2007. The economics of importing steel into North America have weakened due to strong worldwide steel demand, higher steel prices outside of the region and the weak U.S. dollar, and thus our steel distributors segment reduced its activities accordingly. The decline in volumes was offset by higher selling prices and gross margins as a percentage of revenues resulting in operating profits declining only by $1 million to $11 million compared to $12 million in the first quarter 2007.
The Board of Directors approved a quarterly dividend of $0.45 per common share payable June 15, 2008 to shareholders of record as of June 2, 2008.
The Company will be holding an Investor Conference Call on Tuesday, May 13, 2008 at 9:00 a.m. ET to review its first quarter results for 2008. The dial-in telephone numbers for the call are 416-641-6130 (Toronto and International callers) and 1-866-226-1793 (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, Tuesday, May 20, 2008. You will be required to enter pass code 3256611 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 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 Industries, 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 will be consistent with what we experienced in the first quarter of 2008, oil and gas prices will not change materially, the recent stability in the price of steel will either remain constant or increase, and the Canadian dollar will maintain recent gains while not appreciating significantly. 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.
RUSSEL METALS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
(millions) 2008 2007
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ASSETS
Current
Cash and cash equivalents $ 199.6 $ 181.8
Accounts receivable 416.4 341.8
Inventories 566.5 572.6
Prepaid expenses and other assets 4.7 8.5
Income taxes 1.9 3.9
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1,189.1 1,108.6
Property, Plant and Equipment 231.8 227.9
Deferred Financing Charges 0.2 0.3
Future Income Tax Assets 1.0 1.0
Other Assets 9.0 12.1
Goodwill and Intangibles 55.1 53.4
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$ 1,486.2 $ 1,403.3
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 354.4 $ 294.2
Income taxes payable 7.1 2.8
Current portion long-term debt 1.1 0.9
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362.6 297.9
Derivatives 36.0 39.5
Long-Term Debt 182.3 174.9
Pensions and Benefits 1.3 1.4
Future Income Tax Liabilities 6.4 5.8
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588.6 519.5
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Shareholders' Equity 897.6 883.8
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$ 1,486.2 $ 1,403.3
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RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Quarters ended March 31,
(millions, except per share data) 2008 2007
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Revenues $ 712.3 $ 683.7
Cost of sales and operating expenses 660.2 637.7
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Earnings before the following 52.1 46.0
Other expense (3.2) -
Interest expense, net (2.1) (1.8)
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Earnings before income taxes 46.8 44.2
Provision for income taxes (17.6) (15.5)
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Net earnings for the period $ 29.2 $ 28.7
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Basic earnings per common share $ 0.46 $ 0.46
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Diluted earnings per common share $ 0.46 $ 0.46
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RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Quarters ended March 31,
(millions) 2008 2007
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Retained earnings, beginning of the period,
as previously reported $ 411.7 $ 411.1
Transitional adjustment - financial
instruments - (0.5)
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Retained earnings, beginning of the period,
as restated 411.7 410.6
Net earnings for the period 29.2 28.7
Dividends on common shares (28.4) (25.0)
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Retained earnings, end of the period $ 412.5 $ 414.3
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RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Quarters ended March 31,
(millions) 2008 2007
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Net earnings for the period $ 29.2 $ 28.7
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Other comprehensive income (loss)
Unrealized foreign exchange gains (losses)
on translating financial statements of
self sustaining foreign operations
(U.S. subsidiaries) 12.2 (2.3)
Gains and (losses) on items designated
as net investment hedges (net of tax of
$0.2 (2007: $0.1)) (2.1) 0.8
Gains and (losses) on derivatives
designated as cash flow hedges (net of
tax of $0.2 (2007: $0.4)) (0.5) 0.9
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Other comprehensive income (loss) 9.6 (0.6)
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Comprehensive income $ 38.8 $ 28.1
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RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
(UNAUDITED)
Quarters ended March 31,
(millions) 2008 2007
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Accumulated net unrealized foreign currency
translation gains (losses)
Balance, beginning of period $ (45.7) $ (11.2)
Net unrealized gain (loss) on translation
of net investment in foreign operations 12.2 (2.3)
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Balance, end of period (33.5) (13.5)
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Accumulated net unrealized loss on cash
flow and net investment hedges
Balance, beginning of period 7.4 -
Transitional adjustment - (9.3)
Unrealized gains (losses) on items
designated as net investment hedges
(net of tax of $0.2 (2007: $0.1)) (2.1) 0.8
Unrealized gains (losses) on items
designated as cash flow hedges
(net of tax of $0.2 (2007: $0.4)) (0.5) 0.9
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Balance, end of period 4.8 (7.6)
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Total accumulated other comprehensive loss $ (28.7) $ (21.1)
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RUSSEL METALS INC.
CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)
Quarters ended March 31,
(millions) 2008 2007
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Operating activities
Earnings from continuing operations $ 29.2 $ 28.7
Depreciation and amortization 5.7 4.9
Future income taxes 0.1 0.4
Gain on sale of fixed assets - (0.7)
Stock-based compensation 2.5 0.8
Pension expense (funding) (0.1) (1.6)
Other 3.4 0.2
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Cash from operating activities before
working capital 40.8 32.7
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Changes in non-cash working capital items
Accounts receivable (71.3) (57.0)
Inventories 12.7 22.3
Accounts payable and accrued liabilities 55.7 33.0
Current income taxes 8.8 (8.6)
Other 1.1 0.9
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Change in non-cash working capital 7.0 (9.4)
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Cash from operating activities 47.8 23.3
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Financing activities
Issue of common shares - options exercised 1.0 0.8
Dividends on common shares (28.4) (25.0)
Repayment of long-term debt (0.2) -
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Cash used in financing activities (27.6) (24.2)
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Investing activities
Purchase of fixed assets (4.3) (3.7)
Proceeds on sale of fixed assets - 1.3
Other 0.5 0.7
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Cash used in investing activities (3.8) (1.7)
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Effect of exchange rates on cash 1.4 (0.2)
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Increase (decrease) in cash and cash
equivalents 17.8 (2.8)
Cash and cash equivalents, beginning of
the period 181.8 209.9
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Cash and cash equivalents, end of the
period $ 199.6 $ 207.1
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Supplemental Cash flow information:
Income taxes paid $ 10.2 $ 23.3
Interest paid $ 7.5 $ 7.6
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CONTACT INFORMATION:
Russel Metals Inc.
Marion E. Britton, C.A.
Vice President and Chief Financial Officer
(905) 819-7407
Email: info@russelmetals.com
Website: www.russelmetals.com
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INDUSTRY: Manufacturing and Production - Mining and Metals
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