Russel Metals Inc. (TSX: RUS) today announced first quarter
earnings of $17 million or $0.28 per share, an improvement from the
results reported for the first and fourth quarters of 2009.
Comparable net earnings reported in the first quarter of 2009 were
$0.10 per share, excluding inventory write-downs. Our reported
results for the first quarter 2009 were a loss of $0.92 per share
due to inventory write-downs.
Consolidated revenues for the first quarter of 2010 were $526
million, up from the fourth quarter of 2009. In the first quarter
of 2009 revenues were $642 million. Our volumes increased from the
first and fourth quarters of 2009. Average selling price for the
first quarter of 2010, while lower than the first quarter of 2009,
generated stronger gross margins per ton.
We are encouraged by the improvement in our metals service
centers results, despite a drop in revenue to $280 million for the
first quarter of 2010. Volumes increased 14% from the comparable
quarter in 2009 and gross margins per ton have improved. Operating
profits for our metals service centers for the first quarter of
2010 were $15 million, compared to an operating loss of $7 million
in the first quarter of 2009, excluding inventory write-downs.
Operating profit was $7 million in the fourth quarter of 2009.
Energy tubular products revenues were up 32% to $195 million in
the first quarter of 2010 from the fourth quarter of 2009. The
first quarter of 2009 was a strong quarter for this segment and we
had revenues of $231 million in that quarter. Excess inventory
levels in the industry that led to the price declines and margin
pressures have improved. Operating profits were $11 million for the
first quarter of 2010 compared to $21 million, excluding inventory
write-downs, for the first quarter of 2009.
Our steel distributors operations have continued to be very
cautious with their inventory purchases as the current North
American steel environment consists of strong product availability,
lower steel prices and uncertainty of future pricing. Due to this,
our steel distributors segment had revenues of $50 million, a
decline of 41% from the comparable quarter in 2009. Operating
profits for the first quarter of 2010 were $4 million, up from $3
million in the first quarter of 2009 excluding inventory
write-downs, due to increased selling prices for inventory on
hand.
Brian R. Hedges, President and CEO, stated "Increasing steel
prices have had a positive effect on our first quarter results. Our
volumes are up 14% in our service center operations compared to the
first quarter of 2009 and 17% compared to the fourth quarter of
2009. We are optimistic based on the current price of steel and the
improving environment. Our balance sheet strength positions us to
aggressively grow the business."
The Board of Directors approved a quarterly dividend of $0.25
per common share payable June 15, 2010 to shareholders of record as
of June 1, 2010.
The Company will be holding an Investor Conference Call on
Thursday, May 13, 2010 at 9:00 a.m. ET to review its first quarter
results for 2010. 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, Thursday, May 27, 2010. You will be required to
enter pass code 8563364 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 at a slow
pace through out 2010; and the value of the Canadian dollar
relative to the U.S. dollar will be close to par during the
remainder of 2010. 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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March 31 December 31
(millions) 2010 2009
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ASSETS
Current
Cash and cash equivalents $ 311.1 $ 359.6
Accounts receivable 291.7 217.8
Inventories 466.5 517.9
Prepaid expenses and other assets 10.5 4.9
Income taxes 50.7 53.0
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1,130.5 1,153.2
Property, Plant and Equipment 225.9 231.9
Future Income Tax Assets 5.7 5.9
Pensions and Benefits 7.9 8.0
Other Assets 3.6 8.3
Goodwill and Intangibles 27.7 28.4
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$ 1,401.3 $ 1,435.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 259.2 $ 252.3
Income taxes payable 1.3 1.4
Current portion long-term debt 1.3 1.3
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261.8 255.0
Derivatives - 30.9
Long-Term Debt 335.5 340.8
Pensions and Benefits 6.0 5.9
Future Income Tax Liabilities 10.6 9.9
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613.9 642.5
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Shareholders' Equity
Common shares 478.9 478.9
Retained earnings 316.9 315.3
Contributed surplus 11.8 11.4
Accumulated other comprehensive income (loss) (31.8) (24.0)
Equity component of convertible debenture 11.6 11.6
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787.4 793.2
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$ 1,401.3 $ 1,435.7
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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
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Quarters ended March 31
(millions, except per share data) 2010 2009
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Revenues $ 525.9 $ 642.3
Cost of sales 431.0 646.6
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Gross margin 94.9 (4.3)
Operating expenses 68.6 76.6
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Earnings (loss) before the following 26.3 (80.9)
Other income (expense) 1.5 -
Interest expense, net (6.7) (4.8)
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Earnings (loss) before income taxes 21.1 (85.7)
(Provision for) recovery of income taxes (4.6) 30.7
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Net earnings (loss) for the period $ 16.5 $ (55.0)
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Basic earnings (loss) per common share $ 0.28 $ (0.92)
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Diluted earnings (loss) per common share $ 0.28 $ (0.92)
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
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Quarters ended March 31
(millions) 2010 2009
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Retained earnings, beginning of the period $ 315.3 $ 467.0
Net earnings (loss) for the period 16.5 (55.0)
Dividends on common shares (14.9) (14.9)
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Retained earnings, end of the period $ 316.9 $ 397.1
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
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Quarters ended March 31
(millions) 2010 2009
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Net earnings (loss) for the period $ 16.5 $ (55.0)
Other comprehensive income (loss)
Unrealized foreign exchange gains (losses) on (10.2) 13.6
translation of self-sustaining U.S. operations
Unrealized gains (losses) on items designated as 5.6 (1.9)
net investment hedges
Unrealized gains (losses) on items designated as (2.2) 2.2
cash flow hedges
Losses on derivatives designated as cash flow (1.0) (3.0)
hedges transferred to net income in the current
period
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Other comprehensive income (loss) (7.8) 10.9
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Comprehensive income (loss) $ 8.7 $ (44.1)
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CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
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Quarters ended March
31
(millions) 2010 2009
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Accumulated net unrealized foreign currency
translation gains and losses
Balance, beginning of period $ (30.0) $ 36.9
Unrealized foreign exchange gains (losses) on (10.2) 13.6
translation of self-sustaining U.S. operations
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Balance, end of period (40.2) 50.5
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Accumulated net unrealized gains (losses) on cash flow
and net investment hedges
Balance, beginning of period 6.0 (12.0)
Transitional adjustment - 5.4
Unrealized gains (losses) on items designated as net 5.6 (1.9)
investment hedges
Unrealized gains (losses) on items designated as cash (2.2) 2.2
flow hedges
Losses on derivatives designated as cash flow hedges (1.0) (3.0)
transferred to net income in the current period
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Balance, end of period 8.4 (9.3)
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Accumulated other comprehensive income (loss) $ (31.8) $ 41.2
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CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
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Quarters ended March 31
(millions) 2010 2009
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Operating activities
Net earnings (loss) for the period $ 16.5 $ (55.0)
Depreciation and amortization 6.3 6.5
Future income taxes 1.8 2.1
Unrealized gain on investment (1.5) -
Stock-based compensation 0.4 0.4
Difference between pension expense and amount 0.2 (0.1)
funded
Other 0.4 0.1
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Cash from (used in) operating activities before 24.1 (46.0)
non-cash working capital
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Changes in non-cash working capital items
Accounts receivable (75.7) 105.2
Inventories 46.7 15.0
Inventories - net increase in NRV reserve - 94.5
Accounts payable and accrued liabilities 8.2 (56.8)
Current income taxes 6.5 (68.7)
Other 0.5 1.1
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Change in non-cash working capital (13.8) 90.3
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Cash from operating activities 10.3 44.3
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Financing activities
Decrease in bank borrowing - (24.9)
Dividends on common shares (14.9) (14.9)
Repayment of long-term debt (0.4) (0.4)
Swap termination (35.2) -
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Cash used in financing activities (50.5) (40.2)
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Investing activities
Purchase of property, plant and equipment (1.3) (3.8)
Proceeds on sale of property, plant and equipment - 0.6
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Cash used in investing activities (1.3) (3.2)
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Effect of exchange rates on cash and cash (7.0) 1.3
equivalents
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(Decrease) increase in cash and cash equivalents (48.5) 2.2
Cash and cash equivalents, beginning of the period 359.6 44.9
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Cash and cash equivalents, end of the period $ 311.1 $ 47.1
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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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