Russel Metals Inc. (TSX:RUS) today announced second quarter 2013
earnings of $20 million, or $0.33 per share on revenues of $758
million. These results compare to earnings of $23 million or $0.37
per share on revenues of $719 million in the same quarter last year
and the first quarter 2013 earnings of $0.36 per share.
Revenues in our metals service center segment slipped 13% to
$378 million in the second quarter of 2013 compared to the 2012
second quarter due to a combination of lower demand levels and
pricing. Gross margins at metals service centers in the 2013 second
quarter were consistent with the same quarter last year and were
slightly lower than the 2013 first quarter reflecting modestly
lower steel prices. Operating expenses as a percentage of revenues
improved to 14.9% from 15.8% from the first quarter of 2013 mainly
due to reduced variable compensation. The 2013 second quarter
metals service center operating profits were $10 million lower than
the 2012 second quarter, but improved by $3 million from the 2013
first quarter.
Revenues in our energy products segment for the second quarter
of 2013 increased 63% or $121 million to $313 million compared to
the 2012 second quarter, primarily due to the acquisition of Apex
Distribution. Operating profit improved by $6 million to $17
million in the 2013 second quarter versus the same quarter last
year due to our acquisition and a strong 2013 second quarter from
our Comco Pipe and Supply operation servicing the Canadian oil
sands. The weakness that our energy products group traditionally
experiences in the second quarter was muted by the Apex
Distribution acquisition.
Revenues in our steel distributors segment decreased by 29% to
$65 million in the 2013 second quarter compared to the 2012 second
quarter due to lower demand and pricing levels. Operating profits
for the second quarter of 2013 decreased to $5 million from $8
million for the 2012 second quarter. Industry wide demand declines
and pricing pressures resulted in customers delaying their
purchases which adversely affected this segment.
Brian R. Hedges, President and CEO, commented "The weakness in
demand levels experienced since the start of 2013 continued in the
second quarter. We expect volumes to continue at current levels in
our metals service center and steel distributor segments in the
second half of 2013. We also believe that we are at or near the
bottom of the pricing curve and expect some price improvements in
the upcoming quarters. The typical seasonality experienced in our
Western Canadian energy products operations in second quarter was
extended by the flooding in Western Canada and the year over year
drop in North American rig counts. Our energy products segment,
however, experienced a strong second quarter with the addition of
Apex Distribution and the continued strong performance of Comco
Pipe and Supply."
Mr. Hedges further commented, "We continue to focus on cost
reductions and managing inventory levels in all of our segments to
generate stronger results as we do not anticipate any meaningful
improvement in shipments."
The Board of Directors approved a quarterly dividend of $0.35
per common share payable September 16, 2013 to shareholders of
record as of August 28, 2013.
The Company will be holding an Investor Conference Call on
Thursday August 8, 2013 at 10:00 a.m. ET to review its 2013 second
quarter results. The dial-in telephone numbers for the call are
416-340-2216 (Toronto and International callers) and 1-866-226-1792
(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 22, 2013. You will be required to
enter pass code 7908038 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 products and
steel distributors, under various names including Russel Metals,
A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Alberta
Industrial Metals, Apex Distribution, Apex Remington, 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, Siemens
Laserworks, Spartan Energy Tubulars, Sunbelt Group, Triumph Tubular
& Supply, Wirth Steel and York-Ennis.
Cautionary Statement on Forward-Looking Information
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 remains at current levels and
these conditions will continue 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 stable and at similar
levels with what we experienced at the end of the 2013 second
quarter. 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 June 30 Six months ended June 30
(in millions of Canadian
dollars, except per 2013 2012 2013 2012
share data) (restated) (restated)
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Revenues $ 758.1 $ 718.7 $ 1,579.9 $ 1,521.6
Cost of materials 620.8 588.2 1,298.7 1,247.2
Employee expenses 58.3 51.3 120.8 109.5
Other operating expenses 38.8 33.2 78.7 66.1
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Earnings before
interest, finance
expense and provision
for income taxes 40.2 46.0 81.7 98.8
Interest expense 9.2 9.4 18.0 16.1
Interest income - (0.6) (0.1) (1.0)
Other finance expense 1.5 4.4 3.1 4.8
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Earnings before
provision for income
taxes 29.5 32.8 60.7 78.9
Provision for income
taxes 9.6 10.3 19.1 23.5
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Net earnings for the
period $ 19.9 $ 22.5 $ 41.6 $ 55.4
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Net earnings attributed
to:
Equity holders $ 19.9 $ 22.5 $ 41.5 $ 55.4
Non-controlling
interest - - 0.1 -
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$ 19.9 $ 22.5 $ 41.6 $ 55.4
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Basic earnings per
common share $ 0.33 $ 0.37 $ 0.69 $ 0.92
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Diluted earnings per
common share $ 0.33 $ 0.37 $ 0.68 $ 0.91
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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Quarters ended June 30 Six months ended June 30
(in millions of Canadian 2013 2012 2013 2012
dollars) (restated) (restated)
----------------------------------------------------------------------------
Net earnings for the
period $ 19.9 $ 22.5 $ 41.6 $ 55.4
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Other comprehensive
income (loss), net of
tax
Items that may be
reclassified to
earnings
Unrealized foreign
exchange gains on
translation of
foreign operations 12.1 8.1 19.0 1.4
Unrealized losses on
items designated as
net investment hedges - (3.0) - (0.9)
Losses on derivatives
designated as cash
flow hedges
transferred to net
earnings in the
current period - 2.0 - 2.3
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Total items that may be
reclassified to
earnings 12.1 7.1 19.0 2.8
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Items that may not be
reclassified to
earnings
Actuarial gains
(losses) on pension
and similar
obligations 4.9 (0.7) 5.4 (2.7)
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Other comprehensive
income 17.0 6.4 24.4 0.1
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Total comprehensive
income $ 36.9 $ 28.9 $ 66.0 $ 55.5
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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
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(in millions of Canadian dollars) June 30 December 31
2013 2012
(restated)
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ASSETS
Current
Cash $ 160.6 $ 115.1
Accounts receivable 417.9 456.2
Inventories 770.5 764.0
Prepaid expenses 10.3 7.1
Income taxes receivable 6.7 7.7
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1,366.0 1,350.1
Property, Plant and Equipment 242.3 241.8
Deferred Income Tax Assets 3.5 4.6
Financial and Other Assets 6.4 6.5
Goodwill and Intangibles 190.9 192.1
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$ 1,809.1 $ 1,795.1
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 21.8 $ 14.3
Accounts payable and accrued
liabilities 366.5 396.5
Income taxes payable 1.3 -
Current portion long-term debt 1.7 2.2
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391.3 413.0
Long-Term Debt 455.2 453.6
Pensions and Benefits 31.9 38.7
Deferred Income Tax Liabilities 20.7 20.5
Provisions and Other Non-Current
Liabilities 39.4 39.9
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938.5 965.7
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Shareholders' Equity
Common shares 507.7 487.9
Retained earnings 309.7 305.3
Contributed surplus 15.3 17.3
Accumulated other comprehensive income
(loss) 7.8 (11.2)
Equity component of convertible
debenture 28.7 28.7
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Total Shareholders' Equity Attributable
to Equity Holders 869.2 828.0
Non-controlling interest 1.4 1.4
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Total Shareholders' Equity 870.6 829.4
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Total Liabilities and Shareholders'
Equity $ 1,809.1 $ 1,795.1
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CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED)
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Quarters ended June 30 Six months ended June 30
(in millions of Canadian 2013 2012 2013 2012
dollars) (restated) (restated)
----------------------------------------------------------------------------
Operating activities
Net earnings for the
period $ 19.9 $ 22.5 $ 41.6 $ 55.4
Depreciation and
amortization 8.2 6.1 16.4 11.8
Deferred income taxes - (0.3) (0.6) 0.3
Gain on sale of
property, plant and
equipment (0.4) - (0.6) -
Stock-based
compensation 0.6 0.5 1.2 1.0
Difference between
pension expense and
amount funded 0.5 (0.5) 0.6 (0.5)
Debt accretion,
amortization and
other 2.6 5.5 5.2 6.9
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Cash from operating
activities before non-
cash working capital 31.4 33.8 63.8 74.9
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Changes in non-cash
working capital items
Accounts receivable 58.1 69.6 44.0 (1.4)
Inventories 9.8 (19.6) 6.0 (69.3)
Accounts payable and
accrued liabilities (45.3) (33.9) (34.2) (20.4)
Income tax
receivable/payable 2.2 (5.0) 2.5 (16.5)
Other (1.3) (0.8) (2.4) (0.7)
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Change in non-cash
working capital 23.5 10.3 15.9 (108.3)
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Cash from (used in)
operating activities 54.9 44.1 79.7 (33.4)
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Financing activities
Increase (decrease) in
bank borrowings (3.6) - 6.4 -
Issue of common shares 1.0 0.4 16.5 0.9
Dividends on common
shares (21.3) (21.0) (42.6) (39.0)
Issuance of long-term
debt (net) - 293.1 - 293.1
Repayment of long-term
debt (0.9) (141.5) (1.2) (141.8)
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Cash from (used in)
financing activities (24.8) 131.0 (20.9) 113.2
-
----------------------------------------------------------------------------
Investing activities
Purchase of property,
plant and equipment (7.4) (8.8) (14.0) (20.7)
Proceeds on sale of
property, plant and
equipment 1.9 - 2.3 -
Purchase of business - (54.8) - (54.8)
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Cash used in investing
activities (5.5) (63.6) (11.7) (75.5)
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Effect of exchange rates
on cash and cash
equivalents (1.8) 0.3 (1.6) (2.9)
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Increase in cash and
cash equivalents 22.8 111.8 45.5 1.4
Cash and cash
equivalents, beginning
of the period 137.8 160.3 115.1 270.7
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Cash and cash
equivalents, end of the
period $ 160.6 $ 272.1 $ 160.6 $ 272.1
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Supplemental cash flow
information:
Income taxes paid $ 7.5 $ 15.5 $ 18.0 $ 41.9
Interest paid (net) $ 17.4 $ 9.1 $ 18.5 $ 14.1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
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Accumulated
Other
(in millions of Canadian Common Retained Contributed Comprehensive
dollars) Shares Earnings Surplus Income (Loss)
----------------------------------------------------------------------------
Balance, January 1, 2013 $ 487.9 $ 305.3 $ 17.3 $ (11.2)
Payment of dividends - (42.6) - -
Net earnings for the
period - 41.6 - -
Other comprehensive
income (loss) for the
period - - - 24.4
Recognition of stock-
based compensation - - (2.0) -
Stock options exercised 19.7 - - -
Conversion of debentures 0.1 - - -
Transfer of net actuarial
gains on defined benefit
plans - 5.4 - (5.4)
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Balance, June 30, 2013 $ 507.7 $ 309.7 $ 15.3 $ 7.8
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Equity
Component Non-
(in millions of Canadian of Convertible Controlling
dollars) Debentures Interest Total
----------------------------------------------------------------------------
Balance, January 1, 2013 $ 28.7 $ 1.4 $ 829.4
Payment of dividends - - (42.6)
Net earnings for the
period - - 41.6
Other comprehensive
income (loss) for the
period - - 24.4
Recognition of stock-
based compensation - - (2.0)
Stock options exercised - - 19.7
Conversion of debentures - - 0.1
Transfer of net actuarial
gains on defined benefit
plans - - -
----------------------------------------------------------------------------
Balance, June 30, 2013 $ 28.7 $ 1.4 $ 870.6
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Accumulated
Other
Retained Comprehensive
(in millions of Canadian Common Earnings Contributed Income (Loss)
dollars) Shares (restated) Surplus (restated)
----------------------------------------------------------------------------
Balance, January 1, 2012 $ 485.4 $ 306.7 $ 15.7 $ (17.1)
Payment of dividends - (39.0) - -
Net earnings for the
period - 55.4 - -
Other comprehensive
income (loss) for the
period - - - 0.1
Recognition of stock-
based compensation - - 0.8 -
Stock options exercised 1.2 - - -
Transfer of net actuarial
losses on defined
benefit plans - (2.7) - 2.7
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Balance, June 30, 2012 $ 486.6 $ 320.4 $ 16.5 $ (14.3)
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Equity
Component Non-
(in millions of Canadian of Convertible Controlling Total
dollars) Debentures Interest (restated)
----------------------------------------------------------------------------
Balance, January 1, 2012 $ 28.7 $ - $ 819.4
Payment of dividends - - (39.0)
Net earnings for the
period - - 55.4
Other comprehensive
income (loss) for the
period - - 0.1
Recognition of stock-
based compensation - - 0.8
Stock options exercised - - 1.2
Transfer of net actuarial
losses on defined
benefit plans - - -
----------------------------------------------------------------------------
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Balance, June 30, 2012 $ 28.7 $ - $ 837.9
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Accumulated
Other
Retained Comprehensive
(in millions of Canadian Common Earnings Contributed Income (Loss)
dollars) Shares (restated) Surplus (restated)
----------------------------------------------------------------------------
Balance, January 1, 2012 $ 485.4 $ 306.7 $ 15.7 $ (17.1)
Acquired during the
period - - - -
Payment of dividends - (81.2) - -
Net earnings for the
period - 97.9 - -
Other comprehensive
income (loss) for the
period - - - (12.2)
Recognition of stock-
based compensation - - 1.6 -
Stock options exercised 2.5 - - -
Transfer of net actuarial
losses on defined
benefit plans - (18.1) - 18.1
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Balance, December 31,
2012 $ 487.9 $ 305.3 $ 17.3 $ (11.2)
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Equity
Component Non-
(in millions of Canadian of Convertible Controlling Total
dollars) Debentures Interest (restated)
----------------------------------------------------------------------------
Balance, January 1, 2012 $ 28.7 $ - $ 819.4
Acquired during the
period - 1.4 1.4
Payment of dividends - - (81.2)
Net earnings for the
period - - 97.9
Other comprehensive
income (loss) for the
period - - (12.2)
Recognition of stock-
based compensation - - 1.6
Stock options exercised - - 2.5
Transfer of net actuarial
losses on defined
benefit plans - - -
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Balance, December 31,
2012 $ 28.7 $ 1.4 $ 829.4
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Contacts: Marion E. Britton, C.P.A., C.A. Executive Vice
President and Chief Financial Officer Russel Metals Inc. (905)
819-7407info@russelmetals.com www.russelmetals.com
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