Russel Metals Inc. (TSX: RUS) reports third quarter net earnings of
$92 million or $1.45 per share. Net earnings reported in the
comparative third quarter of 2007 were $28 million or $0.44 per
share. Consolidated revenues for the third quarter of 2008 were
$955 million, an increase of 53% from the third quarter of 2007
revenues of $624 million and an increase of 12% from $856 million
reported in the second quarter of 2008. Net earnings for the nine
months ended September 30, 2008 were $200 million or $3.16 per
share which compares to $86 million or $1.37 per share for the same
period in 2007.
Revenues for our energy tubular products segment were $325
million for the third quarter of 2008 compared to $175 million for
the third quarter of 2007. Steel price increases and increased
volumes in all our operations within this segment led to record
high revenues and earnings. Increased demand from our two units
servicing the oil and gas drilling activity in Western Canada as
well as continued high demand at our U.S. energy operations and our
operation servicing the oil sands of Northern Alberta, produced
operating profits of $60 million for the third quarter of 2008
compared to $16 million for the third quarter of 2007. The high
demand for pipe product resulted in increased margins of 29%
compared to 21% reported in the second quarter of 2008.
Revenues in our metals service centers segment increased 50% to
$509 million for the third quarter of 2008 compared to $339 million
for the third quarter of 2007. Operating profits for our metals
service centers for the third quarter of 2008 were $68 million, a
significant increase from $23 million reported in the third quarter
of 2007. Results at our metals service centers strengthened from
the third quarter of 2007 due to steel price increases initiated
earlier in 2008.
Our steel distributors segment produced operating profits of $21
million for the third quarter of 2008 compared to $10 million for
the third quarter of 2007. The increase was a result of higher
margins, which more than offset reduced volumes. Volumes in this
segment were lower compared to 2007 due to lower import levels as
strong worldwide steel demand and pricing resulted in product
flowing to areas outside North America.
Bud Siegel, President and Chief Executive Officer, commented,
"Our record earnings of $1.45 for the third quarter 2008 is in
contradiction to current overall economic conditions. The financial
crisis has impacted both demand and steel pricing in most of the
industries we service, although there remain positive pockets of
business in the customer base of Russel Metals. Uncertainty in the
markets has had an impact on both our suppliers and customers, but
I strongly believe that Russel Metals has the flexibility,
expertise and a strong balance sheet that will enable us to react
to the changing conditions as well as any company in our
sector."
The Board of Directors approved a quarterly dividend of $0.45
per common share payable December 15, 2008 to shareholders of
record as of November 24, 2008.
The Company will be holding an Investor Conference Call on
Friday, November 7, 2008 at 9:00 a.m. ET to review its third
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, Friday, November 14, 2008. You will be required to
enter pass code 3271882 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, oil and gas prices, the price of
steel, and the value of the Canadian dollar relative to the U.S.
dollar will be consistent with what we have experienced at the end
of October 2008. 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)
September 30, December 31,
(millions) 2008 2007
----------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 173.6 $ 181.8
Accounts receivable 542.0 341.8
Inventories 747.4 572.6
Prepaid expenses and other assets 4.5 8.5
Income taxes 0.1 3.9
----------------------------------------------------------------------------
1,467.6 1,108.6
Property, Plant and Equipment 231.5 227.9
Deferred Financing Charges 0.2 0.3
Future Income Tax Assets 1.0 1.0
Other Assets 6.7 12.1
Goodwill and Intangibles 56.2 53.4
----------------------------------------------------------------------------
$ 1,763.2 $ 1,403.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 7.3 $ -
Accounts payable and accrued liabilities 522.0 294.2
Income taxes payable 37.0 2.8
Current portion long-term debt 1.1 0.9
----------------------------------------------------------------------------
567.4 297.9
Derivatives 33.3 39.5
Long-Term Debt 187.8 174.9
Pensions and Benefits 1.1 1.4
Future Income Tax Liabilities 7.3 5.8
----------------------------------------------------------------------------
796.9 519.5
Shareholders' Equity
Common shares 491.7 504.2
Retained earnings 485.3 411.7
Contributed surplus 9.0 6.2
Accumulated other comprehensive loss (19.7) (38.3)
----------------------------------------------------------------------------
966.3 883.8
----------------------------------------------------------------------------
$ 1,763.2 $ 1,403.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Quarters ended Nine months ended
(millions, except September 30, September 30,
per share data) 2008 2007 2008 2007
----------------------------------------------------------------------------
Revenues $ 954.9 $ 624.3 $ 2,523.5 $ 1,960.8
Cost of sales and
operating expenses 810.0 577.5 2,205.1 1,819.1
----------------------------------------------------------------------------
Earnings before
the following 144.9 46.8 318.4 141.7
Other income (expense) (2.3) (1.6) (4.8) (1.6)
Interest expense, net (2.3) (1.5) (6.7) (4.9)
----------------------------------------------------------------------------
Earnings before
income taxes 140.3 43.7 306.9 135.2
Provision for income taxes (48.8) (15.8) (107.4) (49.3)
----------------------------------------------------------------------------
Net earnings for
the period $ 91.5 $ 27.9 $ 199.5 $ 85.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per
common share $ 1.45 $ 0.44 $ 3.16 $ 1.37
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings per
common share $ 1.44 $ 0.44 $ 3.15 $ 1.36
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Quarters ended Nine months ended
September 30, September 30,
(millions) 2008 2007 2008 2007
----------------------------------------------------------------------------
Retained earnings,
beginning of the period,
as previously reported $ 462.8 $ 415.3 $ 411.7 $ 411.1
Transitional adjustment
- financial instruments - - - (0.5)
----------------------------------------------------------------------------
Retained earnings,
beginning of the period,
as restated 462.8 415.3 411.7 410.6
Net earnings for
the period 91.5 27.9 199.5 85.9
Amount related to
common shares purchased
for cancellation (37.4) - (37.4) -
Dividends on common shares (31.6) (28.5) (88.5) (81.8)
----------------------------------------------------------------------------
Retained earnings,
end of the period $ 485.3 $ 414.7 $ 485.3 $ 414.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Quarters ended Nine months ended
September 30, September 30,
(millions) 2008 2007 2008 2007
----------------------------------------------------------------------------
Net earnings for the period $ 91.5 $ 27.9 $ 199.5 $ 85.9
----------------------------------------------------------------------------
Other comprehensive
income (loss)
Unrealized foreign
exchange gains (losses)
on translating financial
statements of self
sustaining foreign
operations
(U.S. subsidiaries) 14.7 (12.6) 24.3 (31.1)
Gains and (losses) on
derivatives designated
as net investment hedges (2.2) 4.3 (3.9) 10.7
Gains and (losses) on
derivatives designated
as cash flow hedges 0.8 0.7 (1.8) 3.0
----------------------------------------------------------------------------
Other comprehensive
income (loss) 13.3 (7.6) 18.6 (17.4)
----------------------------------------------------------------------------
Comprehensive income $ 104.8 $ 20.3 $ 218.1 $ 68.5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
(UNAUDITED)
Quarters ended Nine months ended
September 30, September 30,
(millions) 2008 2007 2008 2007
----------------------------------------------------------------------------
Accumulated net
unrealized foreign
currency translation
gains (losses)
Balance, beginning
of period $ (36.1) $ (29.7) $ (45.7) $ (11.2)
Net unrealized gain
(loss) on translation
of net investment
in foreign operations 14.7 (12.6) 24.3 (31.1)
----------------------------------------------------------------------------
Balance, end of period (21.4) (42.3) (21.4) (42.3)
----------------------------------------------------------------------------
Accumulated net unrealized
loss on cash flow and
net investment hedges
Balance, beginning
of period 3.1 (0.6) 7.4 -
Transitional adjustment - - - (9.3)
Unrealized gains (losses)
on items designated
as net investment hedges (2.2) 4.3 (3.9) 10.7
Unrealized gains (losses)
on items designated
as cash flow hedges 0.8 0.7 (1.8) 3.0
----------------------------------------------------------------------------
Balance, end of period 1.7 4.4 1.7 4.4
----------------------------------------------------------------------------
Total accumulated other
comprehensive loss $ (19.7) $ (37.9) $ (19.7) $ (37.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RUSSEL METALS INC.
CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)
Quarters ended Nine months ended
September 30, September 30,
(millions) 2008 2007 2008 2007
----------------------------------------------------------------------------
Operating activities
Net earnings $ 91.5 $ 27.9 $ 199.5 $ 85.9
Depreciation and
amortization 5.9 4.9 17.3 14.8
Future income taxes 0.1 0.5 1.4 2.4
Loss (gain) on sale
of fixed assets 0.2 - 0.3 (0.6)
Stock-based compensation 0.4 0.5 3.3 4.4
Pension expense (funding) (0.2) 0.1 (0.3) (1.2)
Other 2.6 1.7 5.3 2.0
----------------------------------------------------------------------------
Cash from operating
activities before
working capital 100.5 35.6 226.8 107.7
----------------------------------------------------------------------------
Changes in non-cash
working capital items
Accounts receivable (59.1) (30.3) (192.8) (68.9)
Inventories (115.7) 62.8 (158.3) 72.4
Accounts payable and
accrued liabilities 70.6 (19.1) 216.4 (0.3)
Current income taxes 18.5 0.7 40.4 (12.0)
Other 1.0 0.7 1.2 0.8
----------------------------------------------------------------------------
Change in non-cash
working capital (84.7) 14.8 (93.1) (8.0)
----------------------------------------------------------------------------
Cash from operating
activities 15.8 50.4 133.7 99.7
----------------------------------------------------------------------------
Financing activities
Issue of common shares
- options exercised 0.2 0.1 2.7 10.9
Purchase of common shares (48.7) - (48.7) -
Dividends on common shares (31.6) (28.5) (88.5) (81.8)
Repayment of long-term debt (0.3) - (0.7) -
Increase in bank borrowing 7.3 - 7.3 -
----------------------------------------------------------------------------
Cash used in financing
activities (73.1) (28.4) (127.9) (70.9)
----------------------------------------------------------------------------
Investing activities
Purchase of fixed assets (3.6) (4.4) (14.1) (13.0)
Proceeds on sale
of fixed assets - 0.1 0.1 1.4
Purchase of business - (109.0) - (109.0)
Reclassification of cash
equivalents to other assets - (11.0) - (11.0)
Other (1.5) 0.2 (1.7) 0.4
----------------------------------------------------------------------------
Cash used in investing
activities (5.1) (124.1) (15.7) (131.2)
----------------------------------------------------------------------------
Effect of exchange
rates on cash 0.5 (1.0) 1.7 (3.9)
----------------------------------------------------------------------------
Decrease in cash and
cash equivalents (61.9) (103.1) (8.2) (106.3)
Cash and cash equivalents,
beginning of the period 235.5 206.7 181.8 209.9
----------------------------------------------------------------------------
Cash and cash equivalents,
end of the period $ 173.6 $ 103.6 $ 173.6 $ 103.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental cash flow
information:
Income taxes paid $ 31.3 $ 15.8 $ 67.0 $ 60.7
Interest paid $ 7.5 $ 7.2 $ 14.9 $ 14.8
Contacts: 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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