Russel Metals Inc. (TSX: RUS) today announced improved first
quarter 2011 earnings of $33 million, or $0.55 per share on
revenues of $658 million. Our comparative first quarter 2010
results were earnings of $9 million or $0.15 per share on revenues
of $527 million.
Brian R. Hedges, President and CEO, stated "All of our
operations capitalized on favourable market conditions as volumes
increased and rising steel prices that began in the fourth quarter
of 2010 continued into 2011. Strong oil prices led to increased
drilling rig activity for oil in the energy sector and offset the
lower conventional gas-related drilling activities due to continued
low gas prices. We are focussed on keeping our inventory position
low and our on-order position as short as possible due to concerns
about price volatility."
Revenues in our metals service centers increased 30% to $364
million for the first quarter of 2011 compared to the first quarter
of 2010. Rising steel prices resulted in gross margins increasing
from 22.5% for the first quarter of 2010 to 25.0% for the first
quarter of 2011. Operating profits in our metals service centers of
$36 million were more than double our 2010 operating profits of $15
million.
Revenues in the energy tubular product segment increased 14% to
$224 million for the first quarter of 2011 compared to the 2010
first quarter. Margins improved to 15.1% from 12.4% for the
comparable first quarter of 2010. Stronger pricing was caused by
the correction of the elevated inventory levels in the sector,
tightening supply and higher raw material costs for the pipe mills
as the price of flat rolled steel used to produce oil country
tubular goods increased. This segment experienced strong operating
profits of $18 million for the first quarter of 2011 compared to
$11 million for the 2010 first quarter.
Our steel distributor segment had a 40% increase in revenues for
the first quarter of 2011 to $70 million. Operating profits doubled
to $9 million, for the first quarter of 2011 over the 2010 first
quarter, a result of stronger margins due to price and volume
increases. The purchasing patterns of our customers are now
balanced with their sales activity resulting in more demand.
Corporate expenses increased from $4 million for the first
quarter of 2010 to $7 million for the 2011 first quarter, a result
of the mark to market gains on certain stock-based compensation
reflecting the increase in our share price.
On January 1, 2011 we commenced reporting our results under
International Financial Reporting Standards ("IFRS"). On the
conversion to IFRS, Marion E. Britton, Vice President and CFO,
commented "Other than the effect of the cash conversion feature
prior to maturity of our convertible debentures, which we
proactively removed in December 2010, the move to IFRS did not have
a significant effect on our results for the first quarter. The 2010
IFRS first quarter earnings included a charge of $7 million from
the valuation change in our convertible debenture call option."
The Board of Directors approved a quarterly dividend of $0.275
per common share payable June 15, 2011 to shareholders of record as
of May 31, 2011.
The Company will be holding an Investor Conference Call on
Friday, May 13, 2011 at 9:00 a.m. ET to review its first quarter
2011 results. 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, May 27, 2011. You will be required to enter
pass code 5650285 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 have stabilized and these
conditions will continue to slowly improve in the foreseeable
future; and oil and gas prices, the price of steel and the value of
the Canadian dollar relative to the U.S. dollar will be at similar
levels with what we experienced in the first quarter of 2011.
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 STATEMENTS OF EARNINGS (UNAUDITED)
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Quarter ended March 31
(millions, except per share data) 2011 2010
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Revenues $ 657.7 $ 526.8
Cost of materials 519.3 430.6
Employee expense 54.6 42.9
Other operating expenses 29.6 27.4
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Earnings before the following 54.2 25.9
Interest expense 7.1 7.2
Interest income (0.6) (0.3)
Finance expense-convertible debentures - 6.9
Other finance expense, net 0.4 (1.5)
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Earnings before income taxes 47.3 13.6
Provision for income taxes (14.3) (4.5)
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Net earnings for the period $ 33.0 $ 9.1
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Basic earnings per common share $ 0.55 $ 0.15
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Diluted earnings per common share $ 0.53 $ 0.15
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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Quarter ended March 31
(millions) 2011 2010
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Net earnings for the period $ 33.0 $ 9.1
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Other comprehensive income (loss)
Unrealized foreign exchange losses on
translation of foreign operations (8.0) (10.2)
Unrealized gains on items designated as net
investment hedges 3.3 5.6
Unrealized losses on items designated as cash
flow hedges - (2.2)
Gains (losses) on derivatives designated as
cash flow hedges transferred to net income in
the current period 0.3 (1.0)
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Other comprehensive income (loss) (4.4) (7.8)
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Total comprehensive income $ 28.6 $ 1.3
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
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March 31 December 31 January 1
(millions) 2011 2010 2010
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ASSETS
Current
Cash and cash equivalents $ 286.1 $ 323.7 $ 359.6
Accounts receivable 381.2 301.4 217.8
Inventories 548.6 544.1 517.9
Prepaid expenses 5.0 3.0 4.9
Income taxes receivable 1.0 2.8 50.6
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1,221.9 1,175.0 1,150.8
Property, Plant and Equipment 202.4 205.2 221.9
Deferred Income Tax Assets 6.6 7.1 8.9
Pension and Benefits 0.7 0.7 -
Financial Assets - - 4.5
Other Assets 3.1 3.8 3.8
Goodwill and Intangibles 24.4 24.9 26.4
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$ 1,459.1 $ 1,416.7 $ 1,416.3
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Accounts payable and accrued
liabilities $ 315.3 $ 272.8 $ 245.4
Income taxes payable 9.5 14.4 -
Current portion long-term debt 1.2 1.2 1.3
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326.0 288.4 246.7
Derivatives - - 53.1
Long-Term Debt 314.9 318.5 333.1
Pensions and Benefits 17.4 17.9 20.8
Provision 5.5 5.6 5.5
Deferred Income Tax Liabilities 6.3 7.0 2.3
Other Non-Current Liabilities 2.2 6.5 3.9
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672.3 643.9 665.4
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Shareholders' Equity
Common shares 484.9 483.7 478.9
Retained earnings 274.0 257.5 259.9
Contributed surplus 14.6 13.9 13.2
Accumulated other comprehensive
income (loss) (15.4) (11.0) (1.1)
Equity component of convertible
debenture 28.7 28.7 -
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786.8 772.8 750.9
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$ 1,459.1 $ 1,416.7 $ 1,416.3
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CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
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Quarter ended March 31
(millions) 2011 2010
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Operating activities
Net earnings for the period $ 33.0 $ 9.1
Depreciation and amortization 6.0 6.3
Deferred income taxes (0.5) 1.8
Gain on sale of property, plant and equipment (0.1) -
Stock-based compensation 0.9 0.2
Unrealized gain on investment - (1.5)
Loss on derivatives - 6.9
Difference between pension expense and amount
funded (0.6) -
Debt accretion, amortization and other 1.3 0.7
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Cash from operating activities before non-cash
working capital 40.0 23.5
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Changes in non-cash working capital items
Accounts receivable (81.5) (75.7)
Inventories (8.2) 46.7
Accounts payable and accrued liabilities 35.3 9.0
Income tax receivable/payable (3.3) -
Other (2.0) 0.5
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Change in non-cash working capital (59.7) (19.5)
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Cash (used in) from operating activities (19.7) 4.0
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Financing activities
Issue of common shares 0.9 -
Dividends on common shares (16.5) (14.9)
Repayment of long-term debt (0.3) (0.4)
Swap termination - (35.2)
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Cash used in financing activities (15.9) (50.5)
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Investing activities
Purchase of property, plant and equipment (4.4) (1.3)
Proceeds on sale of property, plant and
equipment 0.7 -
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Cash used in investing activities (3.7) (1.3)
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Effect of change in exchange rates on cash and
cash equivalents 1.7 (0.7)
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Decrease in cash and cash equivalents (37.6) (48.5)
Cash and cash equivalents, beginning of the
period 323.7 359.6
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Cash and cash equivalents, end of the period $ 286.1 $ 311.1
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Supplemental cash flow information:
Income taxes paid $ 18.3 $ 2.7
Interest paid $ 12.2 $ 12.8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
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Common Contributed Retained
(millions) Shares Surplus Earnings
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Balance, January 1, 2011 $ 483.7 $ 13.9 $ 257.5
Payment of dividends - - (16.5)
Net earnings for the period - - 33.0
Other comprehensive income for
the period - - -
Recognition of stock-based
compensation - 0.7 -
Stock options exercised 1.2 - -
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Balance, March 31, 2011 $ 484.9 $ 14.6 $ 274.0
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Equity Accumulated
Component Other
of Convertible Comprehensive
(millions) Debentures Income Total
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Balance, January 1, 2011 $ 28.7 $ (11.0) $ 772.8
Payment of dividends - - (16.5)
Net earnings for the period - - 33.0
Other comprehensive income for
the period - (4.4) (4.4)
Recognition of stock-based
compensation - - 0.7
Stock options exercised - - 1.2
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Balance, March 31, 2011 $ 28.7 $ (15.4) $ 786.8
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Common Contributed Retained
(millions) Shares Surplus Earnings
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Balance, January 1, 2010 $ 478.9 $ 13.2 $ 259.9
Payment of dividends - - (14.9)
Net earnings for the period - - 9.1
Other comprehensive income for
the period - - -
Recognition of stock-based
compensation - 0.1 -
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Balance, March 31, 2010 $ 478.9 $ 13.3 $ 254.1
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Equity Accumulated
Component Other
of Convertible Comprehensive
(millions) Debentures Income Total
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Balance, January 1, 2010 $ - $ (1.1) $ 750.9
Payment of dividends - - (14.9)
Net earnings for the period - - 9.1
Other comprehensive income for
the period - (7.8) (7.8)
Recognition of stock-based
compensation - - 0.1
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Balance, March 31, 2010 $ - $ (8.9) $ 737.4
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Common Contributed Retained
(millions) Shares Surplus Earnings
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Balance, January 1, 2010 $ 478.9 $ 13.2 $ 259.9
Payment of dividends - - (59.7)
Net earnings for the period - - 57.3
Other comprehensive income for
the period - -
Recognition of stock-based
compensation - 0.7 -
Stock options exercised 4.8 - -
Equity component of convertible
debentures - - -
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Balance, December 31, 2010 $ 483.7 $ 13.9 $ 257.5
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Equity Accumulated
Component Other
of Convertible Comprehensive
(millions) Debentures Income Total
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Balance, January 1, 2010 $ - $ (1.1) $ 750.9
Payment of dividends - - (59.7)
Net earnings for the period - - 57.3
Other comprehensive income for
the period - (9.9) (9.9)
Recognition of stock-based
compensation - - 0.7
Stock options exercised - - 4.8
Equity component of convertible
debentures 28.7 - 28.7
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Balance, December 31, 2010 $ 28.7 $ (11.0) $ 772.8
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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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