Russel Metals Inc. (TSX: RUS) today announced second quarter
earnings of $19 million or $0.31 per share, an improvement from the
results reported for the first quarter of 2010 of $0.28 per share.
These results were stronger than both the comparable adjusted net
earnings for the second quarter of 2009 of $0.10 per share and the
reported loss of $0.41 per share.
Our strong results in the second quarter of 2010, resulted in
year to date earnings of $35 million or $0.59 per share. Revenues
for the six months to June 30, 2010 were $1.0 billion.
Consolidated revenues for the second quarter of 2010 were $506
million, up 9% from the second quarter of 2009. Our volumes
increased from both the first quarter of 2010 and the second
quarter of 2009. The improved operating results compared to the
first quarter of 2010 were primarily generated by stronger gross
margins on higher average selling prices.
Metals service centers volumes increased 14% from the comparable
quarter in 2009 and 4% from the first quarter of 2010 resulting in
revenues for the quarter of $312 million. Improved gross margin
dollars due to higher selling prices resulted in an operating
profit of $19 million for the second quarter of 2010 compared to $2
million in the second quarter of 2009 and $15 million in the first
quarter of 2010.
Energy tubular products revenues were $129 million in the second
quarter of 2010, a decline from the first quarter of 2010 due to
seasonality and consistent with the second quarter of 2009.
Operating profits were $11 million for the second quarter of 2010
and were consistent with the first quarter of 2010 due to improved
selling prices offsetting the lower volumes.
Revenues for our steel distributors operations increased to $61
million, the highest level in the past year. Demand from our
customers and rising selling prices contributed to the increased
revenue and operating profit. Operating profits for the second
quarter of 2010 were $7 million, up from $4 million in the first
quarter of 2010.
Brian R. Hedges, President and CEO, stated "Our second quarter
continued to improve from the first quarter. Improved volumes,
margins and higher selling prices all contributed to stronger
results. We will be challenged to maintain this momentum,
particularly in our service center operations in the summer months,
but anticipate an improvement in the fall. We continue to look at
potential acquisitions, green fields and operational savings."
The Board of Directors approved a quarterly dividend of $0.25
per common share payable September 15, 2010 to shareholders of
record as of August 30, 2010.
The Company will be holding an Investor Conference Call on
Thursday, August 12, 2010 at 9:00 a.m. ET to review its second
quarter results for 2010. The dial-in telephone numbers for the
call are 416-695-6617 (Toronto and International callers) and
1-800-355-4959 (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, August 26, 2010. You will be required to
enter pass code 8424727 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 and oil and gas prices have all
been significantly negatively impacted by the economic conditions
and these conditions will improve at a slow pace through out 2010;
the price of steel which saw improvement during the second quarter
of 2010 will decline due to lack of demand; and the value of the
Canadian dollar relative to the U.S. dollar will be range bound
consistent with the first half 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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December
June 30 31
(millions) 2010 2009
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ASSETS
Current
Cash and cash equivalents $ 283.8 $ 359.6
Accounts receivable 279.9 217.8
Inventories 538.3 517.9
Prepaid expenses and other assets 5.1 4.9
Income taxes 46.7 53.0
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1,153.8 1,153.2
Property, Plant and Equipment 224.1 231.9
Future Income Tax Assets 5.5 5.9
Pensions and Benefits 7.9 8.0
Other Assets 3.9 8.3
Goodwill and Intangibles 28.3 28.4
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$ 1,423.5 $ 1,435.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 268.3 $ 252.3
Income taxes payable 1.4 1.4
Current portion long-term debt 1.3 1.3
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271.0 255.0
Derivatives - 30.9
Long-Term Debt 335.7 340.8
Pensions and Benefits 6.0 5.9
Future Income Tax Liabilities 10.0 9.9
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622.7 642.5
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Shareholders' Equity
Common shares 478.9 478.9
Retained earnings 320.7 315.3
Contributed surplus 12.5 11.4
Accumulated other comprehensive income (loss) (22.9) (24.0)
Equity component of convertible debenture 11.6 11.6
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800.8 793.2
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$ 1,423.5 $ 1,435.7
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CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (UNAUDITED)
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Quarters ended June Six months ended June
(millions, except per share 30 30
data) 2010 2009 2010 2009
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Revenues $ 506.1 $ 462.5 $ 1,032.0 $ 1,104.8
Cost of sales 398.9 440.7 829.9 1,087.3
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Gross margin 107.2 21.8 202.1 17.5
Operating expenses 72.4 66.0 141.0 142.6
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Earnings (loss) before the
following 34.8 (44.2) 61.1 (125.1)
Other income (expense) (0.2) 4.3 1.3 4.3
Interest expense, net (6.5) (4.4) (13.2) (9.2)
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Earnings (loss) before income
taxes 28.1 (44.3) 49.2 (130.0)
(Provision for) recovery of
income taxes (9.4) 19.7 (14.0) 50.4
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Net earnings (loss) for the
period $ 18.7 $ (24.6) $ 35.2 $ (79.6)
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Basic earnings (loss) per common
share $ 0.31 $ (0.41) $ 0.59 $ (1.33)
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Diluted earnings (loss) per
common share $ 0.31 $ (0.41) $ 0.59 $ (1.33)
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
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Six months ended June
Quarters ended June 30 30
(millions) 2010 2009 2010 2009
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Retained earnings, beginning of
the period $ 316.9 $ 397.1 $ 315.3 $ 467.0
Net earnings (loss) for the
period 18.7 (24.6) 35.2 (79.6)
Dividends on common shares (14.9) (14.9) (29.8) (29.8)
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Retained earnings, end of the
period $ 320.7 $ 357.6 $ 320.7 $ 357.6
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
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Quarters Six months
Ended June 30 Ended June 30
(millions) 2010 2009 2010 2009
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Net earnings (loss) for the
period $ 18.7 $ (24.6) $ 35.2 $ (79.6)
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Other comprehensive income
(loss)
Unrealized foreign exchange
gains (losses) on translation
of self-sustaining U.S.
operations 15.0 (34.9) 4.8 (21.3)
Unrealized gains (losses) on
items designated as net
investment hedges (6.4) 5.3 (0.8) 3.4
Unrealized gains (losses) on
items designated as cash flow
hedges - 3.0 (2.5) 5.2
Losses (gains) on derivatives
designated as cash flow
hedges transferred to net
income in the current period 0.3 (1.7) (0.4) (4.7)
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Other comprehensive income
(loss) 8.9 (28.3) 1.1 (17.4)
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Comprehensive income (loss) $ 27.6 $ (52.9) $ 36.3 $ (97.0)
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CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
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Quarters Six months
Ended June 30 Ended June 30
(millions) 2010 2009 2010 2009
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Accumulated net unrealized
foreign currency translation
gains and losses
Balance, beginning of period $ (40.2) $ 50.5 $ (30.0) $ 36.9
Unrealized foreign exchange
gains (losses) on translation
of self-sustaining U.S.
operations 15.0 (34.9) 4.8 (21.3)
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Balance, end of period (25.2) 15.6 (25.2) 15.6
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Accumulated net unrealized gains
(losses) on cash flow and net
investment hedges
Balance, beginning of period 8.4 (9.3) 6.0 (12.0)
Transitional adjustment - - - 5.4
Unrealized gains (losses) on
items designated as net
investment hedges (6.4) 5.3 (0.8) 3.4
Unrealized gains (losses) on
items designated as cash flow
hedges - 3.0 (2.5) 5.2
Losses (gains) on derivatives
designated as cash flow
hedges transferred to net
income in the current period 0.3 (1.7) (0.4) (4.7)
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Balance, end of period 2.3 (2.7) 2.3 (2.7)
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Accumulated other comprehensive
income (loss) $ (22.9) $ 12.9 $ (22.9) $ 12.9
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CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
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Quarters ended June Six months ended June
30 30
(millions) 2010 2009 2010 2009
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Operating activities
Net earnings (loss) for the
period $ 18.7 $ (24.6) $ 35.2 $ (79.6)
Depreciation and amortization 6.2 6.5 12.5 13.0
Future income taxes 1.2 1.9 3.0 4.0
Gain on investment and sale of
long-lived assets - (4.3) (1.5) (4.5)
Stock-based compensation 0.7 0.5 1.1 0.9
Difference between pension
expense and amount funded - (0.2) 0.2 (0.3)
Other 0.9 0.1 1.3 0.4
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Cash from (used in) operating
activities before non-cash
working capital 27.7 (20.1) 51.8 (66.1)
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Changes in non-cash working
capital items
Accounts receivable 14.9 77.0 (60.8) 182.2
Inventories (65.4) 155.3 (18.7) 264.8
Accounts payable and accrued
liabilities 6.9 (115.4) 15.1 (172.2)
Current income taxes 4.7 (16.2) 11.2 (84.9)
Other (0.7) 0.8 (0.2) 1.9
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Change in non-cash working
capital (39.6) 101.5 (53.4) 191.8
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Cash (used in) from operating
activities (11.9) 81.4 (1.6) 125.7
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Financing activities
Increase (decrease) in bank
borrowings - 7.0 - (17.9)
Dividends on common shares (14.9) (14.9) (29.8) (29.8)
Repayment of long-term debt (8.1) (0.3) (8.5) (0.7)
Deferred financing (0.7) (2.3) (0.7) (2.3)
Swap termination - - (35.2) -
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Cash used in financing
activities (23.7) (10.5) (74.2) (50.7)
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Investing activities
Purchase of property, plant
and equipment (2.1) (2.9) (3.4) (6.7)
Proceeds on sale of property,
plant and equipment 0.3 5.0 0.3 5.6
Proceeds on sale of investment 6.0 - 6.0 -
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Cash from (used in) investing
activities 4.2 2.1 2.9 (1.1)
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Effect of exchange rates on cash
and cash equivalents 4.1 (6.4) (2.9) (5.1)
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(Decrease) increase in cash and
cash equivalents (27.3) 66.6 (75.8) 68.8
Cash and cash equivalents,
beginning of the period 311.1 47.1 359.6 44.9
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Cash and cash equivalents, end
of the period $ 283.8 $ 113.7 $ 283.8 $ 113.7
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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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