Russel Metals Inc. (TSX: RUS) today announced fourth quarter 2010
earnings of $18 million, or $0.30 per share on revenues of $562
million. These results reflect a significant turnaround from the
fourth quarter 2009 loss per share of $0.42 and compare favourably
to the 2010 third quarter earnings of $17 million or $0.28 per
share.
For the year, we reported earnings of $70 million or $1.17 per
share on revenues of $2.2 billion. This compares to a loss of $92
million or $1.54 per share reported for 2009.
Revenues in our metals service centers increased 29% to $304
million in the fourth quarter of 2010 compared to the fourth
quarter of 2009. The fourth quarter is seasonally slower than the
third quarter, however, in 2010 the fourth quarter revenues were
down only slightly from the third quarter. This reflects improved
volumes and the start of steel price increases, which has continued
into the 2011 first quarter. Operating profits in our metals
service centers of $13 million were almost double our 2009
operating profits of $7 million.
Revenues in the energy tubular product segment increased 31% to
$193 million in the fourth quarter of 2010 compared to the 2009
fourth quarter and increased 3% over the 2010 third quarter. Strong
operating profits continued in the 2010 fourth quarter increasing
to $17 million from the $15 million profit in the third quarter and
$1 million reported in the 2009 fourth quarter. For energy tubular
products the fourth quarter is a historically stronger quarter as
the winter drilling season opens in Canada and continues into the
first quarter.
Our steel distributor segment had a 31% increase in 2010 fourth
quarter revenues to $61 million from the 2009 fourth quarter. In
the fourth quarter of 2010 operating profits doubled over the 2009
fourth quarter to $5 million. Volumes were down from the 2010 third
quarter but stronger margins provided operating profits consistent
with the third quarter.
Brian R. Hedges, President and CEO, stated "I am pleased with
the results in our operations for the fourth quarter, which is
traditionally a slower quarter. Our energy tubular products
operations in particular had strong results as improved rig counts
and advances in horizontal drilling technology resulted in
increased activity in the energy sector. The increases in steel
flat rolled prices are starting to be reflected in other steel
prices and we remain cautiously optimistic that we will see
continued improved results during the first half of 2011 from all
three of our business segments."
The Board of Directors approved an increase in our quarterly
dividend of 10% to $0.275 per common share payable March 15, 2011
to shareholders of record as of February 28, 2011.
The Company will be holding an Investor Conference Call on
Friday, February 18, 2011 at 9:00 a.m. ET to review its fourth
quarter and annual results for 2010. The dial-in telephone numbers
for the call are 416-340-8530 (Toronto and International callers)
and 1-877-240-9772 (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 4, 2011. You will be required to
enter pass code 4501206 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 metals
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 slowly improved from 2009 and these conditions
will continue to slowly improve 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 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 and does not intend to update any
forward-looking statement other than required by law.
CONSOLIDATED BALANCE SHEETS
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At December 31 (millions) 2010 2009
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ASSETS
Current
Cash and cash equivalents $ 323.7 $ 359.6
Accounts receivable 301.4 217.8
Inventories 544.1 517.9
Prepaid expenses and other assets 3.0 4.9
Income taxes 4.8 53.0
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1,177.0 1,153.2
Property, Plant and Equipment 215.7 231.9
Future Income Tax Assets 3.8 5.9
Pensions and Benefits 9.9 8.0
Other Assets 3.8 8.3
Goodwill and Intangibles 26.9 28.4
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$ 1,437.1 $ 1,435.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 281.3 $ 252.3
Income taxes payable 15.4 1.4
Current portion long-term debt 1.2 1.3
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297.9 255.0
Derivatives - 30.9
Long-Term Debt 325.5 340.8
Pensions and Benefits 5.9 5.9
Future Income Tax Liabilities 9.7 9.9
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639.0 642.5
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Shareholders' Equity
Common shares 483.7 478.9
Retained earnings 325.3 315.3
Contributed surplus 12.5 11.4
Accumulated other comprehensive income (loss) (35.0) (24.0)
Equity component of convertible debenture 11.6 11.6
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798.1 793.2
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$ 1,437.1 $ 1,435.7
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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) 2010 2009 2010 2009
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Revenues $ 561.5 $ 432.7 $ 2,175.4 $ 1,971.8
Cost of sales 458.9 369.2 1,764.9 1,807.6
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Gross margin 102.6 63.5 410.5 164.2
Operating expenses 70.7 61.1 287.0 264.3
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Earnings (loss) before the following 31.9 2.4 123.5 (100.1)
Other income (expense) (1.8) 1.0 (0.9) 5.3
Impairment of goodwill and
intangibles - (33.8) - (33.8)
Impairment of property, plant and
equipment - (1.6) - (1.6)
Interest expense, net (6.3) (7.0) (26.7) (20.2)
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Earnings (loss) before income taxes 23.8 (39.0) 95.9 (150.4)
(Provision for) recovery of income
taxes (5.9) 13.8 (26.2) 58.4
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Net earnings (loss) $ 17.9 $ (25.2) $ 69.7 $ (92.0)
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Basic earnings (loss) per common
share $ 0.30 $ (0.42) $ 1.17 $ (1.54)
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Diluted earnings (loss) per common
share $ 0.29 $ (0.42) $ 1.16 $ (1.54)
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
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Quarters Ended Years Ended
December 31 December 31
(millions) 2010 2009 2010 2009
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Retained earnings, beginning of
the period $ 322.3 $ 355.4 $ 315.3 $ 467.0
Net earnings (loss) for the year 17.9 (25.2) 69.7 (92.0)
Dividends on common shares (14.9) (14.9) (59.7) (59.7)
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Retained earnings, end of the
year $ 325.3 $ 315.3 $ 325.3 $ 315.3
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
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Quarters Ended Years Ended
December 31 December 31
(millions) 2010 2009 2010 2009
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Net earnings (loss) $ 17.9 $ (25.2) $ 69.7 $ (92.0)
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Other comprehensive income
(loss)
Unrealized foreign exchange
gains (losses) on translation
of self sustaining U.S.
operations (11.9) (12.0) (17.5) (67.4)
Reclassification adjustment
for realized foreign exchange
gain included in net income 0.1 0.5 0.1 0.5
Unrealized gains (losses) on
items designated as net
investment hedges 5.2 1.3 8.8 9.5
Unrealized gains (losses) on
items designated as cash flow
hedges - (2.2) (2.5) (12.1)
Gains (losses) on derivatives
designated as cash flow
hedges transferred to net
income in the current period 0.2 2.4 0.1 15.2
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Other comprehensive income
(loss) (6.4) (10.0) (11.0) (54.3)
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Comprehensive income (loss) $ 11.5 $ (35.2) $ 58.7 $ (146.3)
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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) 2010 2009 2010 2009
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Accumulated net unrealized foreign currency translation gains and losses
Balance, beginning of period $ (35.6) $ (18.5) $ (30.0) $ 36.9
Unrealized foreign exchange
gains (losses) on translation
of self sustaining U.S.
operations (11.9) (12.0) (17.5) (67.4)
Reclassification adjustment
for realized foreign exchange
gain included in net income 0.1 0.5 0.1 0.5
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Balance, end of the year (47.4) (30.0) (47.4) (30.0)
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Accumulated net unrealized gain (loss) on cash flow and net investment
hedges
Balance, beginning of period 7.0 4.5 6.0 (12.0)
Transitional adjustment (net
of income tax of $2.0) - - - 5.4
Unrealized gains (losses) on
items designated as net
investment hedges 5.2 1.3 8.8 9.5
Unrealized gains (losses) on
items designated as cash flow
hedges - (2.2) (2.5) (12.1)
Gains (losses) on derivatives
designated as cash flow
hedges transferred to net
income in the current period 0.2 2.4 0.1 15.2
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Balance, end of the year 12.4 6.0 12.4 6.0
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Accumulated other comprehensive
income (loss) $ (35.0) $ (24.0) $ (35.0) $ (24.0)
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CONSOLIDATED STATEMENTS OF CASH FLOW
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Quarters Ended Years Ended
December 31 December 31
(millions) 2010 2009 2010 2009
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Operating activities
Net earnings (loss) for the
year $ 17.9 $ (25.2) $ 69.7 $ (92.0)
Depreciation and amortization 6.2 6.1 25.0 25.7
Future income taxes (1.5) (16.5) 0.6 (10.1)
Loss (gain) on sale of
property, plant and equipment 1.0 0.2 0.7 (4.3)
Stock-based compensation 0.4 0.5 1.9 2.1
Difference between pension
expense and funded amount
funded (2.2) (1.1) (1.9) (1.4)
Asset impairment - 35.4 - 35.4
Debt accretion, amortization
and other (0.1) (0.3) 2.7 0.2
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Cash from (used in) operating
activities before non-cash
working capital 21.7 (0.9) 98.7 (44.4)
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Changes in non-cash working
capital items
Accounts receivable 12.2 17.5 (86.3) 200.1
Inventories (3.8) 32.9 (34.8) 356.5
Accounts payable and accrued
liabilities (16.6) 35.2 31.8 (156.7)
Current income taxes 10.7 9.4 69.2 (67.6)
Other 1.3 (0.4) 2.1 3.2
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Change in non-cash working
capital 3.8 94.6 (18.0) 335.5
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Cash from operating activities 25.5 93.7 80.7 291.1
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Financing activities
Decrease in bank borrowing - - - (64.9)
Issue of common shares 3.9 - 4.0 -
Swap termination - - (35.2) -
Issuance of long-term debt - 167.1 - 167.1
Dividends on common shares (14.9) (14.9) (59.7) (59.7)
Repayment of long-term debt (0.4) (0.4) (9.2) (1.5)
Deferred financing - - (0.7) (2.5)
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Cash (used in) from financing
activities (11.4) 151.8 (100.8) 38.5
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Investing activities
Purchase of property, plant
and equipment (3.7) (6.4) (11.8) (18.6)
Proceeds on sale of property,
plant and equipment 1.0 - 1.5 5.6
Proceeds on sale of investment - - 6.0 -
Other (0.5) - (0.5) -
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Cash used in investing
activities (3.2) (6.4) (4.8) (13.0)
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Effect of exchange rate changes
on cash and cash equivalents (5.0) 0.3 (11.0) (1.9)
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(Decrease) increase in cash and
cash equivalents 5.9 239.4 (35.9) 314.7
Cash and cash equivalents,
beginning of the period 317.8 120.2 359.6 44.9
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Cash and cash equivalents, end
of the year $ 323.7 $ 359.6 $ 323.7 $ 359.6
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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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