Russel Metals Inc. (TSX: RUS) today announced improved third
quarter earnings of $13 million or $0.21 per share, an increase
from the results reported for the first two quarters of 2009.
Excluding inventory write-downs quarterly earnings were $0.24 per
share. Net earnings reported in the comparative third quarter of
2008 were $92 million or $1.45 per share.
Year to date net earnings, excluding inventory write-downs and a
gain on sale of a property, were $0.44 per share. The inclusion of
these items results in a loss of $67 million or $1.12 per share for
the nine months ended September 30, 2009. The comparable results
for 2008 were net earnings of $200 million or $3.16 per share for
the nine months. Lower demand and steel pricing has significantly
reduced our revenues and operating profits in all three segments
compared to 2008.
Consolidated revenues for the third quarter of 2009 were $434
million, a decrease of 55% from the third quarter of 2008 revenues
of $955 million and a decrease of 6% from $463 million reported in
the second quarter of 2009.
Revenues in our metals service centers segment decreased 49% to
$259 million for the third quarter of 2009 compared to the third
quarter of 2008. Operating profits for our metals service centers
for the third quarter of 2009 were $13 million, compared to $68
million in the third quarter of 2008.
Revenues for our energy tubular products segment dropped 64% to
$116 million for the third quarter of 2009 compared to $325 million
for the third quarter of 2008. Low natural gas drilling activity
continued into the third quarter of 2009. Operating profits of $7
million for the third quarter of 2009 excludes an inventory
write-down of $3 million and compares to operating profits of $60
million for the third quarter of 2008.
Our steel distributors segment produced operating profits of $8
million for the third quarter of 2009 on revenues of $57 million.
For the third quarter of 2008 steel distributors reported operating
profits of $21 million on revenues of $117 million.
Marion E. Britton, Vice President and CFO, stated "Our service
center gross margins per ton in dollars improved and were much
closer to historical levels. Earnings before interest and taxes as
a percentage of revenues increased to 5% due to more stable pricing
during this quarter. Operating and corporate expenses have been
reduced by $107 million in the first nine months due to pro-active
expense reductions and highly variable compensation plans based on
performance."
Brian R. Hedges, President and CEO, stated, "Demand remains a
challenge in all three segments but the fact that all three
segments were profitable is very encouraging. The issuance of the
convertible debentures in October 2009 provides liquidity to grow
the balance sheet whether it is additional working capital as
demand improves or acquisitions as opportunities arise. We believe
many of our competitors will be unable to find sufficient funding
to allow them to grow their working capital to support improved
levels of business or to make opportunistic acquisitions. We
believe that if a liquidity crunch was to occur it would be a
catalyst for further consolidation in the service center
industry."
The Board of Directors approved a quarterly dividend of $0.25
per common share payable December 15, 2009 to shareholders of
record as of November 23, 2009.
The Company will be holding an Investor Conference Call on
Wednesday, November 4, 2009 at 9:00 a.m. ET to review its third
quarter results for 2009. The dial-in telephone numbers for the
call are 416-340-8018 (Toronto and International callers) and
1-866-223-7781 (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, Wednesday, November 18, 2009. You will be required
to enter pass code 7138076 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, 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, oil and gas prices and the price
of steel have all been significantly negatively impacted by the
economic conditions and these conditions will impact these factors
for the foreseeable future. The value of the Canadian dollar
relative to the U.S. dollar will be consistent with what we
experienced at the end of the third quarter of 2009. 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.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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September 30 December 31
(millions) 2009 2008
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ASSETS
Current
Cash and cash equivalents $ 120.2 $ 44.9
Accounts receivable 237.7 429.3
Inventories 557.6 925.1
Prepaid expenses and other assets 4.5 8.1
Income taxes 56.3 7.1
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976.3 1,414.5
Property, Plant and Equipment 236.6 249.9
Future Income Tax Assets 1.0 1.0
Pensions and Benefits 7.0 6.5
Other Assets 8.1 7.0
Goodwill and Intangibles 63.7 71.8
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$ 1,292.7 $ 1,750.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ - $ 64.9
Accounts payable and accrued liabilities 220.2 420.7
Income taxes payable 2.9 30.3
Current portion long-term debt 1.3 1.4
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224.4 517.3
Derivatives 28.2 22.1
Long-Term Debt 189.4 217.5
Pensions and Benefits 6.0 5.8
Future Income Tax Liabilities 13.5 7.9
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461.5 770.6
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Shareholders' Equity
Common shares 478.8 478.8
Retained earnings 355.4 467.0
Contributed surplus 11.0 9.4
Accumulated other comprehensive (loss) income (14.0) 24.9
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831.2 980.1
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$ 1,292.7 $ 1,750.7
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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
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Quarters ended Nine months ended
September 30 September 30
(millions, except per share data) 2009 2008 2009 2008
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Revenues $ 434.3 $ 954.9 $ 1,539.1 $ 2,523.5
Cost of sales and operating expenses 411.7 810.0 1,641.6 2,205.1
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Earnings (loss) before the following 22.6 144.9 (102.5) 318.4
Other income (expense) - (2.3) 4.3 (4.8)
Interest expense, net (4.0) (2.3) (13.2) (6.7)
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Earnings (loss) before income taxes 18.6 140.3 (111.4) 306.9
(Provision for) recovery of
income taxes (5.8) (48.8) 44.6 (107.4)
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Net earnings (loss) for the period $ 12.8 $ 91.5 $ (66.8) $ 199.5
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Basic earnings (loss) per
common share $ 0.21 $ 1.45 $ (1.12) $ 3.16
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Diluted earnings (loss) per
common share $ 0.21 $ 1.44 $ (1.12) $ 3.15
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
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Quarters ended Nine months ended
September 30 September 30
(millions) 2009 2008 2009 2008
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Retained earnings, beginning of
the period $ 357.6 $ 462.8 $ 467.0 $ 411.7
Net earnings (loss) for the period 12.8 91.5 (66.8) 199.5
Amount related to common shares
purchased for cancellation - (37.4) - (37.4)
Dividends on common shares (15.0) (31.6) (44.8) (88.5)
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Retained earnings, end of
the period $ 355.4 $ 485.3 $ 355.4 $ 485.3
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
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Quarters ended Nine months ended
September 30 September 30
(millions) 2009 2008 2009 2008
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Net earnings (loss) for the period $ 12.8 $ 91.5 $ (66.8) $ 199.5
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Other comprehensive (loss) income
Unrealized foreign exchange (losses)
gains on translation of
self-sustaining foreign operations
(U.S. subsidiaries) (34.1) 14.7 (55.4) 24.3
Unrealized gains (losses) on items
designated as net investment hedges 4.8 (2.2) 8.2 (3.9)
Unrealized gains (losses) on items
designated as cash flow hedges 2.4 0.8 2.9 (1.8)
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Other comprehensive (loss) income (26.9) 13.3 (44.3) 18.6
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Comprehensive (loss) income $ (14.1) $ 104.8 $ (111.1) $ 218.1
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CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
(UNAUDITED)
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Quarters ended Nine months ended
September 30 September 30
(millions) 2009 2008 2009 2008
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Accumulated net unrealized foreign currency translation gains and losses
Balance, beginning of period $ 15.6 $ (36.1) $ 36.9 $ (45.7)
Unrealized foreign exchange (losses)
gains on translation of
self-sustaining foreign operations (34.1) 14.7 (55.4) 24.3
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Balance, end of period (18.5) (21.4) (18.5) (21.4)
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Accumulated net unrealized (loss) gain on cash flow and net investment
hedges
Balance, beginning of period (2.7) 3.1 (12.0) 7.4
Transitional adjustment (net of
income tax of $2.0) - - 5.4 -
Unrealized gains (losses) on items
designated as net investment hedges 4.8 (2.2) 8.2 (3.9)
Unrealized gains (losses) on items
designated as cash flow hedges 2.4 0.8 2.9 (1.8)
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Balance, end of period 4.5 1.7 4.5 1.7
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Accumulated other comprehensive
loss $ (14.0) $ (19.7) $ (14.0) $ (19.7)
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CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
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Quarters ended Nine months ended
September 30 September 30
(millions) 2009 2008 2009 2008
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Operating activities
Net earnings (loss) for the period $ 12.8 $ 91.5 $ (66.8) $ 199.5
Depreciation and amortization 6.6 5.9 19.6 17.3
Future income taxes 2.4 0.1 6.4 1.4
(Gain) loss on sale of fixed assets - 0.2 (4.5) 0.3
Stock-based compensation 0.7 0.4 1.6 3.3
Pension expense (funding), net - (0.2) (0.3) (0.3)
Other 0.1 2.6 0.5 5.3
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Cash (used in) from operating
activities before non-cash
working capital 22.6 100.5 (43.5) 226.8
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Changes in non-cash working capital items
Accounts receivable 0.4 (59.1) 182.6 (192.8)
Inventories - net increase in NRV
reserve 2.6 - 153.3 -
Inventories 56.2 (115.7) 170.3 (158.3)
Accounts payable and accrued
liabilities (19.7) 70.6 (191.9) 216.4
Current income taxes 7.9 18.5 (77.0) 40.4
Other 1.7 1.0 3.6 1.2
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Change in non-cash working capital 49.1 (84.7) 240.9 (93.1)
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Cash from operating activities 71.7 15.8 197.4 133.7
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Financing activities
(Decrease) increase in bank
borrowing (47.0) 7.3 (64.9) 7.3
Issue of common shares - 0.2 - 2.7
Purchase of common shares - (48.7) - (48.7)
Dividends on common shares (15.0) (31.6) (44.8) (88.5)
Repayment of long-term debt (0.4) (0.3) (1.1) (0.7)
Deferred financing (0.2) - (2.5) -
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Cash used in financing activities (62.6) (73.1) (113.3) (127.9)
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Investing activities
Purchase of fixed assets (7.8) (3.6) (14.5) (14.1)
Proceeds on sale of fixed assets - - 5.6 0.1
Other 5.2 (1.5) 0.4 (1.7)
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Cash used in investing activities (2.6) (5.1) (8.5) (15.7)
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Effect of exchange rate changes on
cash and cash equivalents - 0.5 (0.3) 1.7
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Increase (decrease) in cash and
cash equivalents 6.5 (61.9) 75.3 (8.2)
Cash and cash equivalents, beginning
of the period 113.7 235.5 44.9 181.8
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Cash and cash equivalents, end of
the period $ 120.2 $ 173.6 $ 120.2 $ 173.6
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Contacts: Russel Metals Inc. Marion E. Britton, C.A. Vice
President and Chief Financial Officer (905) 819-7407
info@russelmetals.com www.russelmetals.com
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