Russel Metals Inc. (TSX: RUS) today announced a fourth quarter loss
of $25 million, or $0.42 per share. These results include a pre-tax
net inventory write-down of $5 million and an asset impairment
charge of $35 million. Excluding these items adjusted quarterly
earnings were $0.05 per share. Net earnings reported in the fourth
quarter of 2008 were $29 million or $0.48 per share. The 2008
results include a pre-tax inventory write-down of $36 million.
For the year we reported a loss of $92 million or $1.54 per
share. Excluding inventory write-downs, the asset impairment charge
and a gain on the sale of a property, our net earnings were $0.49
per share. The comparable results for 2008 were net earnings of
$229 million or $3.67 per share. Lower demand and steel pricing
have significantly reduced our revenues and operating profits for
2009 in all three of our business segments compared to 2008.
The asset impairment charge of $35 million relates to goodwill,
intangibles and buildings of businesses acquired in the U.S. in
2007 and 2008. This charge taken in the fourth quarter of 2009,
resulted from significant volume and price declines in the U.S.
service center industry in 2009 and lowered expectations for future
earnings potential at these operations.
Consolidated revenues for the fourth quarter of 2009 were $433
million, a decrease of 49% from the fourth quarter of 2008 revenues
of $843 million, and were approximately the same as the third
quarter of 2009.
Revenues in our metals service centers segment decreased 44% to
$236 million for the fourth quarter of 2009 compared to the fourth
quarter of 2008 and decreased 9% compared to the third quarter of
2009. Operating profits for our metals service centers for the
fourth quarter of 2009 were $7 million, compared to $19 million
excluding inventory write-downs in the fourth quarter of 2008. We
reported operating profits of $13 million for the third quarter of
2009.
Revenues for our energy tubular products segment dropped 50% to
$147 million for the fourth quarter of 2009 compared to $297
million for the fourth quarter of 2008. Revenues increased 27%
compared to the third quarter 2009 due to a few large low margin
orders. Low natural gas drilling activity continued into the fourth
quarter of 2009. Operating profits excluding inventory write-downs
were $1 million for the fourth quarter of 2009 compared to
operating profits of $41 million for the fourth quarter of 2008 and
$6 million for the third quarter of 2009.
Our steel distributors segment had a decline in revenues of 61%
to $47 million for the fourth quarter of 2009 compared to the
fourth quarter of 2008 and 18% compared to the third quarter of
2009. Operating profits excluding inventory write-downs were $2
million for the fourth quarter of 2009 compared to $20 million for
2008 and $8 million for the third quarter of 2009.
Brian R. Hedges, President and CEO, stated "I am glad 2009 is
behind us. Early 2010 activity levels have increased for both our
metals service center and energy tubular products operations
compared to the end of 2009. The mill price increases announced for
the first quarter of 2010 have firmed pricing in the market. Our
capital structure is well positioned to support growth during
2010."
The Board of Directors approved a quarterly dividend of $0.25
per common share payable March 15, 2010 to shareholders of record
as of March 2, 2010.
The Company will be holding an Investor Conference Call on
Friday, February 19, 2010 at 9:00 a.m. ET to review its fourth
quarter and annual 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, Friday, March 5, 2010. You will be required to
enter pass code 7257554 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, 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 improve slowly in the
foreseeable future; and the value of the Canadian dollar relative
to the U.S. dollar will be consistent with what we experienced at
the end 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
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At December 31 (millions) 2009 2008
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ASSETS
Current
Cash and cash equivalents $ 359.6 $ 44.9
Accounts receivable 217.8 429.3
Inventories 517.9 925.1
Prepaid expenses and other assets 4.9 8.1
Income taxes 53.0 7.1
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1,153.2 1,414.5
Property, Plant and Equipment 231.9 249.9
Future Income Tax Assets 5.9 1.0
Pensions and Benefits 8.0 6.5
Other Assets 8.3 7.0
Goodwill and Intangibles 28.4 71.8
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$ 1,435.7 $ 1,750.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ - $ 64.9
Accounts payable and accrued liabilities 252.3 420.7
Income taxes payable 1.4 30.3
Current portion long-term debt 1.3 1.4
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255.0 517.3
Derivatives 30.9 22.1
Long-Term Debt 340.8 217.5
Pensions and Benefits 5.9 5.8
Future Income Tax Liabilities 9.9 7.9
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642.5 770.6
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Shareholders' Equity
Common shares 478.9 478.8
Retained earnings 315.3 467.0
Contributed surplus 11.4 9.4
Accumulated other comprehensive income (loss) (24.0) 24.9
Equity component of convertible debenture 11.6 -
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793.2 980.1
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$ 1,435.7 $ 1,750.7
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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
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Quarters Ended Years Ended
December 31, December 31,
(millions, except per share data) 2009 2008 2009 2008
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Revenues $ 432.7 $ 842.7 $ 1,971.8 $ 3,366.2
Cost of sales 369.2 707.6 1,807.6 2,614.7
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Gross margin 63.5 135.1 164.2 751.5
Operating expenses 61.1 93.1 264.3 391.1
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Earnings (loss) before the following 2.4 42.0 (100.1) 360.4
Other income (expense) 1.0 (0.4) 5.3 (5.2)
Impairment of goodwill and
intangibles (33.8) - (33.8) -
Impairment of property, plant and
equipment (1.6) - (1.6) -
Interest expense, net (7.0) (3.9) (20.2) (10.6)
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Earnings (loss) before income taxes (39.0) 37.7 (150.4) 344.6
(Provision for) recovery of income
taxes 13.8 (8.7) 58.4 (116.1)
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Net earnings (loss) $ (25.2) $ 29.0 $ (92.0) $ 228.5
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Basic earnings (loss) per common
share $ (0.42) $ 0.48 $ (1.54) $ 3.67
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
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Quarters Ended Years Ended
December 31, December 31,
(millions) 2009 2008 2009 2008
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Retained earnings, beginning of the
period, $ 355.4 $ 485.3 $ 467.0 $ 411.7
Net earnings (loss) for the period (25.2) 29.0 (92.0) 228.5
Amount related to common shares
purchased for cancellation - (20.4) - (57.8)
Dividends on common shares (14.9) (26.9) (59.7) (115.4)
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Retained earnings, end of the period $ 315.3 $ 467.0 $ 315.3 $ 467.0
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
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Quarters Ended Years Ended
December 31, December 31,
(millions) 2009 2008 2009 2008
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Net earnings (loss) $ (25.2) $ 29.0 $ (92.0) $ 228.5
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Other comprehensive income (loss)
Unrealized foreign exchange gains
(losses) on translation of self
sustaining U.S. subsidiaries (11.5) 58.3 (66.9) 82.6
Unrealized gains (losses) on
items designated as net
investment hedges 1.3 (8.1) 9.5 (12.0)
Unrealized gains (losses) on
items designated as cash flow
hedges 0.2 (5.6) 3.1 (7.4)
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Other comprehensive income (loss) (10.0) 44.6 (54.3) 63.2
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Comprehensive income (loss) $ (35.2) $ 73.6 $ (146.3) $ 291.7
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CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
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Quarters Ended Years Ended
December 31, December 31,
(millions) 2009 2008 2009 2008
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Accumulated net unrealized foreign
currency translation gains and
losses
Balance, beginning of period $ (18.5) $ (21.4) $ 36.9 $ (45.7)
Unrealized foreign exchange gains
(losses) on translation of
self sustaining U.S. operations (11.5) 58.3 (66.9) 82.6
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Balance, end of the period (30.0) 36.9 (30.0) 36.9
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Accumulated net unrealized gain
(loss) on cash flow and net
investment hedges
Balance, beginning of period 4.5 1.7 (12.0) 7.4
Transitional adjustment (net of
income tax $2.0) - - 5.4 -
Unrealized gains (losses) on
items designated as net
investment hedges 1.3 (8.1) 9.5 (12.0)
Unrealized gains (losses) on
items designated as cash
flow hedges 0.2 (5.6) 3.1 (7.4)
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Balance, end of the period 6.0 (12.0) 6.0 (12.0)
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Accumulated other comprehensive
income (loss) $ (24.0) $ 24.9 $ (24.0) $ 24.9
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CONSOLIDATED STATEMENTS OF CASH FLOW
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Quarters Ended Years Ended
December 31, December 31,
(millions) 2009 2008 2009 2008
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Operating activities
Net earnings (loss) for the period $ (25.2) $ 29.0 $ (92.0) $ 228.5
Depreciation and amortization 6.1 6.1 25.7 23.4
Future income taxes (16.5) (3.2) (10.1) (1.8)
(Gain) loss on sale of property,
plant and equipment 0.2 0.2 (4.3) 0.5
Stock-based compensation 0.5 0.4 2.1 3.7
Difference between pension expense
and amount funded (1.1) (1.8) (1.4) (2.1)
Asset impairment 35.4 - 35.4 -
Other (0.3) 0.6 0.2 5.9
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Cash (used in) from operating
activities before non-cash working
capital (0.9) 31.3 (44.4) 258.1
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Changes in non-cash working capital
items
Accounts receivable 17.5 129.9 200.1 (62.9)
Inventories - net increase in NRV
reserve 5.4 35.6 158.7 37.7
Inventories 27.5 (143.3) 197.8 (303.7)
Accounts payable and accrued
liabilities 35.2 (116.8) (156.7) 99.6
Current income taxes 9.4 (10.3) (67.6) 30.1
Other (0.4) (3.5) 3.2 (2.3)
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Change in non-cash working capital 94.6 (108.4) 335.5 (201.5)
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Cash from operating activities 93.7 (77.1) 291.1 56.6
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Financing activities
(Decrease) increase in bank
borrowing - 57.6 (64.9) 64.9
Issue of common shares - 0.1 - 2.8
Purchase of common shares - (37.7) - (86.4)
Issuance of long-term debt 167.1 - 167.1 -
Dividends on common shares (14.9) (26.9) (59.7) (115.4)
Repayment of long-term debt (0.4) (1.6) (1.5) (2.3)
Deferred financing - (0.1) (2.5) (0.1)
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Cash from (used in) financing
activities 151.8 (8.6) 38.5 (136.5)
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Investing activities
Purchase of property, plant and
equipment (6.4) (8.1) (18.6) (22.2)
Proceeds on sale of property,
plant and equipment - 0.1 5.6 0.2
Purchase of business - (30.9) - (30.9)
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Cash used in investing activities (6.4) (38.9) (13.0) (52.9)
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Effect of exchange rate changes
on cash and cash equivalents 0.3 (4.1) (1.9) (4.1)
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Increase (decrease) in cash and
cash equivalents 239.4 (128.7) 314.7 (136.9)
Cash and cash equivalents,
beginning of the period 120.2 173.6 44.9 181.8
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Cash and cash equivalents, end
of the period $ 359.6 $ 44.9 $ 359.6 $ 44.9
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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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