TORONTO,
Feb. 19, 2014 /PRNewswire/ - Russel
Metals Inc. (TSX: RUS) today announced fourth quarter 2013 earnings
of $23 million, or $0.37 per share on revenues of $811 million. These results compare to
earnings of $20 million or
$0.34 per share on revenues of
$766 million in the same quarter last
year and the third quarter 2013 earnings of $0.31 per share.
Revenues of $352
million in our metals service center segment were 4% higher
than the 2012 fourth quarter due to increased demand offset by
lower selling prices. Demand at the metals service centers
increased by 9% over the 2012 fourth quarter. Gross margins
at our metals service centers in the 2013 fourth quarter were
$3 million higher than the same
quarter last year reflecting stronger demand. The 2013 fourth
quarter metals service center operating profits were $13 million compared to $17 million in the 2012 fourth quarter due to
higher pension, delivery and other operating expenses.
Revenues in our energy products segment for the
fourth quarter of 2013 increased 12% or $43
million to $387 million
compared to the 2012 fourth quarter due to the inclusion of a full
quarter of operating income of Apex Distribution compared to the
2012 fourth quarter when Apex Distribution was included only from
the date of acquisition on November 8,
2012. On a same store basis, revenues in our energy products
segment increased 10% over the comparable fourth quarter of
2012. Operating profit increased 19% in the 2013 fourth
quarter versus the same quarter last year due to this increase in
revenues. We continued to evaluate and reduce our slow moving
inventory created by a fundamental change in string design from
vertical drilling to horizontal drilling. We have aligned our
energy products inventory and emphasis on supplying the horizontal
drilling market going forward.
Revenues in our steel distributors segment
decreased by 13% to $70 million in
the 2013 fourth quarter compared to the 2012 fourth quarter. The
availability of domestic product and low pricing differential for
imported products did not generate the desired returns leading the
management of our steel distributors operations to decrease
activity.
We recorded finance income of $5 million in the 2013 fourth quarter and the
2013 year related to a reduction of the expected earnout payment
associated with the Apex Distribution offset by an imputed interest
charge on the expected future payments.
For the year, our net earnings were $83 million or $1.37 per share on revenues of $3.2 billion compared to $98 million or $1.63 per share on revenues of $3.0 billion in 2012.
Brian R. Hedges,
President and CEO, commented "Subsequent to the recession in 2009
we were cautious as the economy remained fragile, however in 2012
and 2013, it was time to proactively look to the future as we grew
our footprint with a focus on our energy products segment. In
2013 we fully integrated Apex Distribution into Russel
Metals. We continued to invest and build this part of our
energy products segment by making three acquisitions in this area,
the largest of which was Monarch
in Drayton Valley, Alberta.
In the U.S., Apex Remington made greenfield investments in the west
Texas shale play by opening new
field stores. The pipe distribution market in general
continued to undergo significant change in the year with the
consolidation of distributors, the purchase of distributors by pipe
manufacturers and the spin out of distribution arms of competitors
into separate companies."
Mr. Hedges continued "Our energy products
segment will continue to be an area of focus in 2014 as new
domestic capacity comes online and the consolidation of the
distribution channel continues. We do not anticipate a
sustained appreciation in natural gas prices and therefore the
vertical gas drilling rig counts will remain low as will demand for
that type of product. We believe that rig counts associated with
horizontal drilling will remain strong and continue to drive our
pipe sales for the foreseeable future."
In respect to the metals service centers
segment, Mr. Hedges stated "We accelerated our capital investment
in equipment in our service centers and in 2014 we will acquire
land for a new consolidated distribution facility in Edmonton, Alberta. We are looking at
greenfield sites for new service centers in the southern U.S.
Also, the selection process and initial testing of our new computer
system is well underway and we expect to invest approximately
$50 million on systems upgrades over
the next three to five years."
The Board of Directors approved a quarterly
dividend of $0.35 per common share
payable March 17, 2014 to
shareholders of record as of March 5,
2014.
The Company will be holding an Investor
Conference Call on Thursday February 20,
2014 at 9:00 a.m. ET to review
its 2013 fourth quarter results. The dial-in telephone
numbers for the call are 416-764-8688 (Toronto and International callers) and
1-888-390-0546 (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
416-764-8677 (Toronto and
International callers) and 1-888-390-0541 (U.S. and Canada) until midnight, Thursday March 6, 2014. You will be
required to enter pass code 207889 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, Alberta Industrial Metals, Apex Distribution, Apex
Monarch, Apex Remington, Arrow Steel Processors, B&T Steel,
Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS
Russel Metals, Leroux Steel,
McCabe Steel, Mégantic Métal, Métaux
Russel, Métaux Russel Produits Spécialisés, 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
Certain statements contained in this press
release constitute forward-looking statements or information within
the meaning of applicable securities laws, including statements as
to our outlook, future events or our future performance. All
statements, other than statements of historical fact, are
forward-looking statements. Forward-looking statements are
often, but not always, identified by the use of words such as
"seek", "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "predict", "potential", "targeting",
"intend", "could", "might", "should", "believe" and similar
expressions. Forward-looking statements are necessarily based
on estimates and assumptions that, while considered reasonable by
us, inherently involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements, including the factors described below.
We are subject to a number of risks and
uncertainties which could have a material adverse effect on our
future profitability and financial position, including the risks
and uncertainties listed below, which are important factors in our
business and the metals distribution industry. Such risks and
uncertainties include, but are not limited to: the current economic
climate; volatility in metal prices; volatility in oil and natural
gas prices; cyclicality of the metals industry and the industries
that purchase our products; lack of credit availability that may
limit the ability of our customers to obtain credit or expand their
businesses; significant competition that could reduce our market
share; any interruption in sources of metals supply; the
integration of future acquisitions, including successfully adapting
to a public company control environment and retaining key
acquisition management personnel; failure to renegotiate any of our
collective agreements and work stoppages; disruption in our
customer or suppliers' operations due to labour disruptions or the
existence of events or circumstances that cause a force majeure;
environmental liabilities; environmental concerns or changes in
government regulations in general, and those related to oil sands
production, shale fracking or oil distribution in particular;
changes in government regulations relating to workplace safety and
worker health; currency exchange risk, particularly between the
Canadian and U.S. dollar; the failure of our key computer-based
systems, including our enterprise resource and planning systems;
the failure to implement new technologies; the loss of key
individuals; the inability to access affordable financing, capital
or insurance; interest rate risk; dilution; and change of
control.
While we believe that the expectations reflected
in our forward-looking statements are reasonable, no assurance can
be given that these expectations will prove to be correct, and our
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of
the date of this press release and, except as required by law, we
do not assume any obligation to update our forward-looking
statements. Our actual results could differ materially from
those anticipated in our forward-looking statements including as a
result of the risk factors described above and under the heading
"Risk" in our MD&A and in our filings with securities
regulatory authorities which are available on SEDAR at
www.sedar.com. Specific reference is made to our most recent
Annual Information Form for a further discussion of some of the
factors underlying our forward-looking statements.
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
ended |
Years ended |
|
December 31 |
December 31 |
|
2013 |
2012 |
2013 |
2012 |
(in millions of Canadian dollars,
except per share data) |
|
|
(restated) |
|
|
(restated) |
Revenues |
$ |
811.1 |
$ |
765.9 |
$ |
3,187.8 |
$ |
3,000.1 |
Cost of materials |
|
669.4 |
|
640.1 |
|
2,624.6 |
|
2,476.8 |
Employee expenses |
|
64.8 |
|
56.0 |
|
248.8 |
|
216.5 |
Other operating expenses |
|
43.9 |
|
33.8 |
|
163.2 |
|
131.8 |
Asset impairment |
|
- |
|
- |
|
5.2 |
|
- |
Earnings before interest, finance
expense |
|
|
|
|
|
|
|
|
|
and provision for income taxes |
|
33.0 |
|
36.0 |
|
146.0 |
|
175.0 |
Interest expense |
|
8.9 |
|
9.1 |
|
36.0 |
|
34.2 |
Interest income |
|
- |
|
(0.2) |
|
(0.4) |
|
(1.7) |
Other finance (income) expense |
|
(5.0) |
|
0.8 |
|
(4.7) |
|
5.6 |
Earnings before provision for
income taxes |
|
29.1 |
|
26.3 |
|
115.1 |
|
136.9 |
Provision for income taxes |
|
6.3 |
|
6.2 |
|
31.8 |
|
39.0 |
Net earnings for the
period |
$ |
22.8 |
$ |
20.1 |
$ |
83.3 |
$ |
97.9 |
Net earnings attributed
to: |
|
|
|
|
|
|
|
|
|
Equity holders |
$ |
22.8 |
$ |
20.1 |
$ |
83.2 |
$ |
97.9 |
|
Non-controlling interest |
|
- |
|
- |
|
0.1 |
|
- |
|
$ |
22.8 |
$ |
20.1 |
$ |
83.3 |
$ |
97.9 |
Basic earnings per common
share |
$ |
0.37 |
$ |
0.34 |
$ |
1.37 |
$ |
1.63 |
Diluted earnings per common
share |
$ |
0.37 |
$ |
0.34 |
$ |
1.37 |
$ |
1.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|
|
Quarters ended |
Years ended |
|
December 31 |
December 31 |
|
2013 |
2012 |
2013 |
2012 |
(in millions of Canadian
dollars) |
|
(restated) |
|
(restated) |
|
|
|
|
|
|
|
Net earnings for the
period |
$ |
22.8 |
$ |
20.1 |
$ |
83.3 |
$ |
97.9 |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) net
of tax |
|
|
|
|
|
|
|
|
Items that may be reclassified to
earnings |
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange gains
(losses) on |
|
|
|
|
|
|
|
|
|
|
translation of foreign operations |
|
12.1 |
|
4.1 |
|
23.2 |
|
(8.5) |
|
Unrealized losses on items designated
as |
|
|
|
|
|
|
|
|
|
|
net investment hedges |
|
- |
|
- |
|
- |
|
(0.9) |
|
Losses on derivatives designated as
cash flow |
|
|
|
|
|
|
|
|
|
|
hedges transferred to net earnings during the
year |
|
- |
|
- |
|
- |
|
2.3 |
|
|
|
|
|
|
|
|
|
Total items that
may be reclassified to earnings |
|
12.1 |
|
4.1 |
|
23.2 |
|
(7.1) |
|
|
|
|
|
|
|
|
|
Items that may not be reclassified
to earnings |
|
|
|
|
|
|
|
|
|
Actuarial gains (losses) on pension
and similar |
|
|
|
|
|
|
|
|
|
|
obligations |
|
4.5 |
|
3.4 |
|
11.3 |
|
(5.1) |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
16.6 |
|
7.5 |
|
34.5 |
|
(12.2) |
|
|
|
|
|
|
|
|
|
Total comprehensive income |
$ |
39.4 |
$ |
27.6 |
$ |
117.8 |
$ |
85.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION |
|
|
|
|
|
|
|
|
|
(in millions of Canadian dollars) |
December 31
2013
|
|
December 31
2012
(restated) |
ASSETS |
|
|
|
|
|
Current |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
116.2 |
|
$ |
115.1 |
|
Accounts receivable |
|
456.2 |
|
|
456.2 |
|
Inventories |
|
766.3 |
|
|
764.0 |
|
Prepaid expenses |
|
5.9 |
|
|
7.1 |
|
Income taxes receivable |
|
6.3 |
|
|
7.7 |
|
|
1,350.9 |
|
|
1,350.1 |
|
|
|
|
|
|
Property, Plant and
Equipment |
|
238.9 |
|
|
241.8 |
Deferred Income Tax Assets |
|
3.0 |
|
|
4.6 |
Pension and Benefits
Assets |
|
0.2 |
|
|
- |
Financial and Other Assets |
|
6.1 |
|
|
6.5 |
Goodwill and Intangibles |
|
218.7 |
|
|
192.1 |
|
$ |
1,817.8 |
|
$ |
1,795.1 |
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
|
|
Current |
|
|
|
|
|
|
Bank indebtedness |
$ |
- |
|
$ |
14.3 |
|
Accounts payable and accrued liabilities |
|
384.1 |
|
|
396.5 |
|
Income taxes payable |
|
0.2 |
|
|
- |
|
Current portion long-term debt |
|
1.2 |
|
|
2.2 |
|
|
385.5 |
|
|
413.0 |
|
|
|
|
|
|
Long-Term Debt |
|
457.2 |
|
|
453.6 |
Pensions and Benefits |
|
23.3 |
|
|
38.7 |
Deferred Income Tax
Liabilities |
|
20.5 |
|
|
20.5 |
Provisions and Other Non-Current
Liabilities |
|
48.9 |
|
|
39.9 |
|
|
935.4 |
|
|
965.7 |
Shareholders' Equity |
|
|
|
|
|
|
Common shares |
|
509.5 |
|
|
487.9 |
|
Retained earnings |
|
314.6 |
|
|
305.3 |
|
Contributed surplus |
|
16.2 |
|
|
17.3 |
|
Accumulated other comprehensive loss |
|
12.0 |
|
|
(11.2) |
|
Equity component of convertible debenture |
|
28.7 |
|
|
28.7 |
Total Shareholders' Equity
Attributable to Equity Holders |
|
881.0 |
|
|
828.0 |
|
Non-controlling interest |
|
1.4 |
|
|
1.4 |
Total Shareholders' Equity |
|
882.4 |
|
|
829.4 |
Total Liabilities and Shareholders'
Equity |
$ |
1,817.8 |
|
$ |
1,795.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASHFLOW |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters ended |
Years
ended |
|
December 31 |
December
31 |
|
2013 |
2012 |
2013 |
2012 |
(in millions of Canadian dollars) |
|
(restated) |
|
(restated) |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
Net earnings for the period |
$ |
22.8 |
$ |
20.1 |
$ |
83.3 |
$ |
97.9 |
Depreciation and amortization |
|
8.4 |
|
7.4 |
|
33.6 |
|
25.5 |
Deferred income taxes |
|
(0.3) |
|
0.3 |
|
(4.4) |
|
1.3 |
Gain on sale of property, plant and
equipment |
|
0.1 |
|
(1.2) |
|
(0.4) |
|
(1.2) |
Stock-based compensation |
|
0.5 |
|
0.6 |
|
2.4 |
|
2.1 |
Difference between pension expense and |
|
|
|
|
|
|
|
|
amount funded |
|
(0.9) |
|
(1.1) |
|
(0.1) |
|
(2.2) |
Asset impairment |
|
- |
|
- |
|
5.2 |
|
- |
Debt accretion, amortization and other |
|
1.2 |
|
1.2 |
|
4.3 |
|
9.2 |
Change in fair value of contingent
consideration |
|
(5.0) |
|
0.5 |
|
(4.7) |
|
0.5 |
Cash from operating activities |
|
|
|
|
|
|
|
|
before non-cash working capital |
|
26.8 |
|
27.8 |
|
119.2 |
|
133.1 |
Changes in non-cash working capital items |
|
|
|
|
|
|
|
|
Accounts receivable |
|
17.1 |
|
46.8 |
|
18.7 |
|
25.4 |
Inventories |
|
(19.4) |
|
48.4 |
|
22.3 |
|
(28.5) |
Accounts payable and accrued
liabilities |
|
13.1 |
|
(17.4) |
|
(21.9) |
|
(34.3) |
Income taxes receivable/ payable |
|
2.2 |
|
0.1 |
|
2.2 |
|
(19.6) |
Other |
|
2.4 |
|
(0.6) |
|
1.2 |
|
(0.1) |
Change in non-cash working capital |
|
15.4 |
|
77.3 |
|
22.5 |
|
(57.1) |
Cash from operating activities |
|
42.2 |
|
105.1 |
|
141.7 |
|
76.0 |
Financing activities |
|
|
|
|
|
|
|
|
Increase in bank borrowings |
|
(14.0) |
|
14.6 |
|
(14.3) |
|
14.6 |
Issue of common shares |
|
1.2 |
|
0.6 |
|
18.0 |
|
2.0 |
Dividends on common shares |
|
(21.3) |
|
(21.1) |
|
(85.2) |
|
(81.2) |
Issuance of long-term debt |
|
0.2 |
|
- |
|
1.0 |
|
300.0 |
Repayment of long-term debt |
|
(0.8) |
|
(0.3) |
|
(2.8) |
|
(142.4) |
Deferred financing |
|
- |
|
- |
|
(1.3) |
|
(7.0) |
Cash (used in) from financing
activities |
|
(34.7) |
|
(6.2) |
|
(84.6) |
|
86.0 |
Investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant and
equipment |
|
(7.6) |
|
(7.3) |
|
(27.2) |
|
(33.7) |
Proceeds on sale of property, plant and
equipment |
|
0.3 |
|
1.8 |
|
2.6 |
|
1.8 |
Purchase of business |
|
(32.1) |
|
(226.4) |
|
(42.6) |
|
(281.3) |
Cash used in investing activities |
|
(39.4) |
|
(231.9) |
|
(67.2) |
|
(313.2) |
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
and cash equivalents |
|
9.0 |
|
1.0 |
|
11.2 |
|
(4.4) |
Increase (decrease) in cash and cash
equivalents |
|
(22.9) |
|
(132.0) |
|
1.1 |
|
(155.6) |
Cash and cash equivalents, beginning of the
period |
|
139.1 |
|
247.1 |
|
115.1 |
|
270.7 |
Cash and cash equivalents, end of the
year |
$ |
116.2 |
$ |
115.1 |
$ |
116.2 |
$ |
115.1 |
|
Supplemental cash flow
information: |
Income taxes paid |
$ |
4.3 |
$ |
5.6 |
$ |
34.7 |
$ |
60.0 |
Interest paid (net) |
$ |
10.1 |
$ |
16.1 |
$ |
36.0 |
$ |
31.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Canadian dollars) |
|
Common
Shares |
Retained
Earnings |
Contributed
Surplus |
Accumulated
Other
Comprehensive
Income (Loss) |
Equity
Component
of Convertible
Debentures |
Non
Controlling
Interest |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2013 |
|
$ |
487.9 |
$ |
305.3 |
$ |
17.3 |
$ |
(11.2) |
$ |
28.7 |
$ |
1.4 |
$ |
829.4 |
Changed during the year |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
(0.1) |
|
(0.1) |
Payment of dividends |
|
|
- |
|
(85.2) |
|
- |
|
- |
|
- |
|
- |
|
(85.2) |
Net earnings for the year |
|
|
- |
|
83.2 |
|
- |
|
- |
|
- |
|
0.1 |
|
83.3 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for the year |
|
|
- |
|
- |
|
- |
|
34.5 |
|
- |
|
- |
|
34.5 |
Recognition of stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation |
|
|
- |
|
- |
|
(1.1) |
|
- |
|
- |
|
- |
|
(1.1) |
Stock options exercised |
|
|
21.5 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
21.5 |
Conversion of debenture |
|
|
0.1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
0.1 |
Transfer of net actuarial gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on defined benefit plans |
|
|
- |
|
11.3 |
|
- |
|
(11.3) |
|
- |
|
- |
|
- |
Balance, December 31, 2013 |
|
$ |
509.5 |
$ |
314.6 |
$ |
16.2 |
$ |
12.0 |
$ |
28.7 |
$ |
1.4 |
$ |
882.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars) |
|
Common
Shares |
Retained
Earnings
(restated) |
Contributed
Surplus |
Accumulated
Other
Comprehensive
Loss
(restated) |
Equity
Component
of Convertible
Debentures |
Non
Controlling
Interest |
Total
(restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1,
2012 |
|
$ |
485.4 |
$ |
293.7 |
$ |
15.7 |
$ |
(4.1) |
$ |
28.7 |
$ |
- |
$ |
819.4 |
Acquired during the
year |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
1.4 |
|
1.4 |
Payment of
dividends |
|
|
- |
|
(81.2) |
|
- |
|
- |
|
- |
|
- |
|
(81.2) |
Net earnings for the
year |
|
|
- |
|
97.9 |
|
- |
|
- |
|
- |
|
- |
|
97.9 |
Other
comprehensive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
loss for the year |
|
|
- |
|
- |
|
- |
|
(12.2) |
|
- |
|
- |
|
(12.2) |
Recognition of
stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation |
|
|
- |
|
- |
|
1.6 |
|
- |
|
- |
|
- |
|
1.6 |
Stock options
exercised |
|
|
2.5 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2.5 |
Transfer of net
actuarial losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on defined benefit plans |
|
|
- |
|
(5.1) |
|
- |
|
5.1 |
|
- |
|
- |
|
- |
Balance, December
31, 2012 |
|
$ |
487.9 |
$ |
305.3 |
|
17.3 |
$ |
(11.2) |
$ |
28.7 |
$ |
1.4 |
$ |
829.4 |
SOURCE Russel Metals Inc.