Russel Metals Inc. (TSX: RUS) today announced improved second
quarter 2011 earnings of $31 million, or $0.52 per share on
revenues of $619 million. Our comparative second quarter 2010
results were earnings of $25 million or $0.41 per share on revenues
of $507 million. Net earnings for the six months ended June 30,
2011 improved by 89% to $64 million, or $1.07 per share on revenues
of $1.3 billion compared to net earnings of $34 million or $0.57
per share on revenues of $1.0 billion for the same period in 2010.
Brian R. Hedges, President and CEO, stated, "In light of some
softness in steel pricing, we are very pleased with the second
quarter results. Margins in the quarter held up very well in the
metals service centers and steel distributors. Results in our
energy segment were lower than expected due to the extremely wet
conditions in Western Canada, which restricted drilling activities.
We expect this segment to have a pick up in the third quarter."
Revenues in our metals service centers increased 24% to $388
million for the second quarter of 2011 compared to the second
quarter of 2010. Operating profits in our metals service centers of
$33 million significantly exceeded our 2010 operating profits of
$19 million. Operating profits were down slightly from the 2011
first quarter, however, due to declining steel prices and lower
margins.
Revenues in the energy tubular product segment increased 12% to
$145 million for the second quarter of 2011 compared to the 2010
second quarter. This segment reported operating profits of $11
million for the second quarter of 2011, equalling those of 2010. An
unusually wet spring in the Canadian oil country delayed the start
of the spring drilling season adversely affecting our operations
servicing this sector. Our other operating units in this segment
experienced improved volumes.
Our steel distributor segment had a 35% increase in revenues for
the second quarter of 2011 to $83 million. Operating profits
increased 55% to $10 million, for the second quarter of 2011 over
the 2010 second quarter, a result of stronger margins due to rising
prices and volume increases.
"During the quarter, we renewed and extended our syndicated bank
facility to 2014 at favourable rates. The extension of our bank
facility to a three-year term, positions us to continue to
capitalize on growth opportunities during that period," commented
Marion Britton, Vice President and CFO.
The Board of Directors approved a 9% increase in our quarterly
dividend to $0.30 per common share payable September 15, 2011 to
shareholders of record as of August 29, 2011.
The Company will be holding an Investor Conference Call on
Thursday August 4, 2011 at 9:00 a.m. ET to review its second
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 905-694-9451 (Toronto
and International callers) and 1-800-408-3053 (U.S. and Canada)
until midnight, Thursday August 18, 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 at the end of the second 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.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS(UNAUDITED)
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Quarters ended Six months ended
June 30 June 30
(in millions of Canadian dollars,
except per share data) 2011 2010 2011 2010
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Revenues $ 618.6 $ 506.6 $1,276.3 $1,033.4
Cost of materials 484.9 398.7 1,004.2 829.3
Employee expenses 48.4 43.9 103.0 86.8
Other operating expenses 33.2 28.9 62.8 56.3
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Earnings before the following 52.1 35.1 106.3 61.0
Interest expense 6.9 7.0 14.0 14.2
Interest income (0.5) (0.3) (1.1) (0.6)
Finance expense (income) convertible - (5.8) - 1.1
Other finance expense (income), net 0.9 - 1.3 (1.5)
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Earnings before income taxes 44.8 34.2 92.1 47.8
Provision for income taxes (13.7) (9.4) (28.0) (13.9)
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Net earnings for the period $ 31.1 $ 24.8 $ 64.1 $ 33.9
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Basic earnings per common share $ 0.52 $ 0.41 $ 1.07 $ 0.57
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Diluted earnings per common share $ 0.50 $ 0.41 $ 1.03 $ 0.57
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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Quarters ended Six months ended
June 30 June 30
(in millions of Canadian dollars) 2011 2010 2011 2010
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Net earnings for the period $ 31.1 $ 24.8 $ 64.1 $ 33.9
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Other comprehensive income (loss)
Unrealized foreign exchange (losses)
gains on translation of foreign
operations (2.4) 15.0 (10.4) 4.8
Unrealized gains (losses) on items
designated as net investment hedges 1.0 (6.4) 4.3 (0.8)
Unrealized losses on items
designated as cash flow hedges - - - (2.5)
Gains (losses) on derivatives
designated as cash flow hedges
transferred to net income in the
period 0.3 0.3 0.6 (0.4)
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Other comprehensive (loss) income (1.1) 8.9 (5.5) 1.1
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Total comprehensive income $ 30.0 $ 33.7 $ 58.6 $ 35.0
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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
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June 30 December 31
(in millions of Canadian dollars) 2011 2010
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ASSETS
Current
Cash and cash equivalents $ 224.7 $ 323.7
Accounts receivable 347.7 301.4
Inventories 632.4 544.1
Prepaid expenses 5.4 3.0
Income taxes receivable 0.8 2.8
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1,211.0 1,175.0
Property, Plant and Equipment 201.7 205.2
Deferred Income Tax Assets 7.4 7.1
Pensions and Benefits 0.7 0.7
Other Assets 3.9 3.8
Goodwill and Intangibles 24.1 24.9
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$ 1,448.8 $ 1,416.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 306.0 $ 272.8
Income taxes payable 12.4 14.4
Current portion long-term debt 1.2 1.2
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319.6 288.4
Long-Term Debt 298.7 318.5
Pensions and Benefits 17.0 17.9
Provision 5.4 5.6
Deferred Income Tax Liabilities 5.0 7.0
Other Non-Current Liabilities 2.1 6.5
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647.8 643.9
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Shareholders' Equity
Common shares 485.2 483.7
Retained earnings 288.6 257.5
Contributed surplus 15.0 13.9
Accumulated other comprehensive (loss) income (16.5) (11.0)
Equity component of convertible debenture 28.7 28.7
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801.0 772.8
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$ 1,448.8 $ 1,416.7
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CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED)
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Quarters ended Six months ended
June 30 June 30
(in millions of Canadian dollars) 2011 2010 2011 2010
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Operating activities
Net earnings for the period $ 31.1 $ 24.8 $ 64.1 $ 33.9
Depreciation and amortization 5.9 6.3 11.9 12.6
Deferred income taxes (0.7) - (1.2) 1.8
Gain on investment and sale of
property, and equipment - - (0.1) (1.5)
Stock-based compensation 0.4 0.5 1.3 0.7
(Gain) loss on derivatives - (5.5) - 1.4
Difference between pension expense
and amount funded (0.4) (0.2) (1.0) (0.2)
Debt accretion, amortization and
other 2.1 0.8 3.4 1.5
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Cash from operating activities before
non-cash working capital 38.4 26.7 78.4 50.2
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Changes in non-cash working capital
items
Accounts receivable 33.1 14.9 (48.4) (60.8)
Inventories (85.1) (65.4) (93.3) (18.7)
Accounts payable and accrued
liabilities (9.1) 6.7 26.2 15.7
Current income taxes receivable/
payable 2.3 3.6 (1.0) 3.6
Other (0.5) (0.7) (2.5) (0.2)
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Change in non-cash working capital (59.3) (40.9) (119.0) (60.4)
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Cash used in operating activities (20.9) (14.2) (40.6) (10.2)
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Financing activities
Issue of common shares 0.3 - 1.2 -
Dividends on common shares (16.5) (14.9) (33.0) (29.8)
Repayment of long-term debt (16.8) (8.1) (17.1) (8.5)
Deferred financing (0.5) (0.7) (0.5) (0.7)
Swap termination - - - (35.2)
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Cash used in financing activities (33.5) (23.7) (49.4) (74.2)
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Investing activities
Purchase of property, plant and
equipment (5.2) (2.1) (9.6) (3.4)
Proceeds on sale of property, plant
and equipment - 0.3 0.7 0.3
Proceeds on sale of investment - 6.0 - 6.0
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Cash (used in) from investing
activities (5.2) 4.2 (8.9) 2.9
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Effect of exchange rates on cash and
cash equivalents (1.8) 6.4 (0.1) 5.7
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Decrease in cash and cash equivalents (61.4) (27.3) (99.0) (75.8)
Cash and cash equivalents, beginning
of the period 286.1 311.1 323.7 359.6
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Cash and cash equivalents, end of the
period $ 224.7 $ 283.8 $ 224.7 $ 283.8
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Supplemental cash flow information:
Income taxes paid $ 12.9 $ 2.3 $ 31.2 $ 5.0
Interest paid $ 0.5 $ 0.7 $ 12.7 $ 13.5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
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Common Contributed Retained
(in millions of Canadian dollars) Shares Surplus Earnings
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Balance, January 1, 2011 $ 483.7 $ 13.9 $ 257.5
Payment of dividends - - (33.0)
Net earnings for the period - - 64.1
Other comprehensive income for
the period - - -
Recognition of stock-based
compensation - 1.1 -
Stock options exercised 1.5 - -
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Balance, June 30, 2011 $ 485.2 $ 15.0 $ 288.6
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Equity Component Accumulated Other
of Convertible Comprehensive
(in millions of Canadian dollars) Debentures Income Total
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Balance, January 1, 2011 $ 28.7 $ (11.0) $772.8
Payment of dividends - - (33.0)
Net earnings for the period - - 64.1
Other comprehensive income for
the period - (5.5) (5.5)
Recognition of stock-based
compensation - - 1.1
Stock options exercised - - 1.5
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Balance, June 30, 2011 $ 28.7 $ (16.5) $801.0
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Common Contributed Retained
(in millions of Canadian dollars) Shares Surplus Earnings
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Balance, January 1, 2010 $ 478.9 $ 13.2 $ 259.9
Payment of dividends - - (29.8)
Net earnings for the period - - 33.9
Other comprehensive income for
the period - - -
Recognition of stock-based
compensation - 0.8 -
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Balance, June 30, 2010 $ 478.9 $ 14.0 $ 264.0
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Equity Component Accumulated Other
of Convertible Comprehensive
(in millions of Canadian dollars) Debentures Income Total
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Balance, January 1, 2010 $ - $ (1.1) $750.9
Payment of dividends - - (29.8)
Net earnings for the period - - 33.9
Other comprehensive income for
the period - 1.1 1.1
Recognition of stock-based
compensation - - 0.8
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Balance, June 30, 2010 $ - $ - $756.9
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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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