TORONTO,
Aug. 12, 2014 /PRNewswire/ - Russel
Metals Inc. (RUS - TSX) today announced second quarter 2014
earnings of $31 million or
$0.50 per share on revenues of
$893 million reflecting strong
operating margins in all segments. These results compare to
earnings of $20 million or
$0.33 per share on revenues of
$758 million in the same quarter last
year and first quarter earnings of $29
million or $0.47 per share on
revenues of $924 million.
Revenues in our metals service center segment
increased 11% to $419 million in the
second quarter of 2014 compared to the 2013 second quarter due to
stronger demand and higher steel prices. Gross margins at
metals service centers improved to 20.9% from 20.4% in the same
quarter last year reflecting increased steel prices.
Operating profit as a percentage of revenues at 6.1% was up from
5.4% in the same quarter last year reflecting the improved volumes
and prices in the quarter.
Revenues in our energy products segment for the
second quarter of 2014 increased 17% to $366
million compared to the 2013 second quarter led by
significant increases in our operations servicing oil and gas
drilling in Western Canada.
Gross margins in our energy products segment improved from both the
2014 first quarter and the 2013 second quarter to 18.6% from 17.0%
and 15.9% respectively primarily due to product mix.
Operating profit as a percentage of revenues was 7.4% compared to
5.4% in the same quarter of 2013. Strong oil and gas prices
have led to increased drilling activity in the energy products
segment during 2014.
Apex Distribution and Apex Monarch, our recent
acquisitions in the energy products segment, both experienced
stronger than expected results in the 2014 first half and we
expensed an additional $2 million to
provide for an increase in the potential future payments for these
acquisitions under our contractual earnout obligations.
Revenues in our steel distributors segment
increased by 63% to $106 million in
the 2014 second quarter compared to the 2013 second quarter due to
stronger demand and higher pricing. Operating profits for the
second quarter of 2014 increased to $9.0
million from $5.0 million for
the 2013 second quarter.
Brian R. Hedges,
President and CEO, commented "Our revenues, gross margins and
operating profits improved in all three of our business segments
versus last year. We have benefited from the strengthening
economy in the United States and
Western Canada. Our
investments over the last three years in acquisitions, process
improvements, new facilities and processing equipment have allowed
us to strengthen and grow our market share. Both our return
on net assets and return on equity have improved validating our
internally focused business model. This quarter we were able
to increase our dividend 9% to $0.38
per share and distribute a larger portion of the earnings we have
achieved to our shareholders."
Mr. Hedges further commented, "In addition,
during the quarter we continued our evaluation of an ERP software
solution, a project that was previously announced in February this
year. The analysis we are undertaking has been very valuable
and has resulted in a detailed definition of our needs and ERP
system requirements. We have expensed our total costs to date
of $2 million on the project and
expect to complete the evaluation during the second half of
2014."
The Board of Directors approved a quarterly
dividend of $0.38 per common share
payable September 15, 2014 to
shareholders of record as of August 26,
2014.
The Company will be holding an Investor
Conference Call on Wednesday, August 13,
2014 at 9:00 a.m. ET to review
its 2014 second 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, Monday September 1, 2014. You will be
required to enter pass code 307355 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.
If you would like to unsubscribe from
receiving Press Releases, you may do so by emailing
info@russelmetals.com; or by calling our Investor Relations Line:
905-816-5178.
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (UNAUDITED) |
|
Quarters ended June
30 |
Six months ended June
30 |
(in millions of Canadian dollars,
except per share data) |
2014 |
2013 |
2014 |
2013 |
|
Revenues |
$ |
893.3 |
$ |
758.1 |
$ |
1,817.3 |
$ |
1,579.9 |
Cost of materials |
721.1 |
620.8 |
1,472.8 |
1,298.7 |
Employee expenses |
70.4 |
58.3 |
141.9 |
120.8 |
Other operating expenses |
45.4 |
38.8 |
92.7 |
78.7 |
|
Earnings before interest, finance
expense and |
|
|
provision for income taxes |
56.4 |
40.2 |
109.9 |
81.7 |
Interest expense |
9.1 |
9.2 |
18.1 |
18.0 |
Interest income |
- |
- |
- |
(0.1) |
Other finance expense |
3.0 |
1.5 |
4.8 |
3.1 |
|
Earnings before provision for
income taxes |
44.3 |
29.5 |
87.0 |
60.7 |
Provision for income taxes |
13.8 |
9.6 |
27.5 |
19.1 |
|
Net earnings for the
period |
$ |
30.5 |
$ |
19.9 |
$ |
59.5 |
$ |
41.6 |
|
Net earnings attributed
to: |
|
|
Equity holders |
$ |
30.5 |
$ |
19.9 |
$ |
59.5 |
$ |
41.5 |
|
Non-controlling interest |
- |
- |
- |
0.1 |
|
|
$ |
30.5 |
$ |
19.9 |
$ |
59.5 |
$ |
41.6 |
|
Basic earnings per common
share |
$ |
0.50 |
$ |
0.33 |
$ |
0.97 |
$ |
0.69 |
|
Diluted earnings per common
share |
$ |
0.48 |
$ |
0.33 |
$ |
0.95 |
$ |
0.68 |
|
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
|
Quarters ended June
30 |
Six months ended June
30 |
(in millions of Canadian
dollars) |
2014 |
2013 |
2014 |
2013 |
|
Net earnings for the
period |
$ |
30.5 |
$ |
19.9 |
$ |
59.5 |
$ |
41.6 |
|
Other comprehensive income (loss), net
of tax |
|
Items that may be reclassified to
earnings |
|
|
Unrealized foreign exchange
(losses) gains on translation foreign operations |
(13.5) |
12.1 |
1.0 |
19.0 |
Items that may not be reclassified
to earnings |
|
|
Actuarial gains (losses) on
pension and similar obligations, net of taxes |
1.4 |
4.9 |
(2.7) |
5.4 |
|
Other comprehensive (loss) income |
(12.1) |
17.0 |
(1.7) |
24.4 |
|
Total comprehensive income |
$ |
18.4 |
$ |
36.9 |
$ |
57.8 |
$ |
66.0 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED) |
|
June 30 |
December 31 |
(in millions of Canadian
dollars) |
2014 |
2013 |
|
ASSETS |
|
Current |
|
|
Cash and cash equivalents |
$ |
52.2 |
$ |
116.2 |
|
Accounts receivable |
511.5 |
456.2 |
|
Inventories |
861.5 |
766.3 |
|
Prepaid expenses |
10.3 |
5.9 |
|
Income taxes receivable |
1.4 |
6.3 |
|
|
1,436.9 |
1,350.9 |
|
|
Property, Plant and
Equipment |
239.2 |
238.9 |
Deferred Income Tax Assets |
2.3 |
3.0 |
Pension and Benefits |
0.3 |
0.2 |
Financial and Other Assets |
6.0 |
6.1 |
Goodwill and Intangibles |
215.4 |
218.7 |
|
|
$ |
1,900.1 |
$ |
1,817.8 |
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
Current |
|
|
Accounts payable and accrued liabilities |
$ |
444.8 |
$ |
384.1 |
|
Income taxes payable |
0.9 |
0.2 |
|
Current portion long-term debt |
1.0 |
1.2 |
|
|
446.7 |
385.5 |
|
|
Long-Term Debt |
459.3 |
457.2 |
Pensions and Benefits |
26.7 |
23.3 |
Deferred Income Tax
Liabilities |
19.3 |
20.5 |
Provisions and Other Non-Current
Liabilities |
38.7 |
48.9 |
|
|
990.7 |
935.4 |
|
Shareholders' Equity |
|
|
Common shares |
523.1 |
509.5 |
|
Retained earnings |
328.6 |
314.6 |
|
Contributed surplus |
14.7 |
16.2 |
|
Accumulated other comprehensive income |
13.0 |
12.0 |
|
Equity component of convertible debentures |
28.7 |
28.7 |
|
Total Shareholders' Equity
Attributable to Equity Holders |
908.1 |
881.0 |
|
Non-controlling interest |
1.3 |
1.4 |
|
Total Shareholders' Equity |
909.4 |
882.4 |
|
Total Liabilities and Shareholders'
Equity |
$ |
1,900.1 |
$ |
1,817.8 |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
CASHFLOW (UNAUDITED) |
|
Quarters ended June 30 |
Six months ended June
30 |
(in millions of Canadian
dollars) |
2014 |
2013 |
2014 |
2013 |
|
Operating activities |
|
|
Net earnings for the period |
$ |
30.5 |
$ |
19.9 |
$ |
59.5 |
$ |
41.6 |
|
Depreciation and amortization |
8.6 |
8.2 |
17.2 |
16.4 |
|
Deferred income taxes |
(1.3) |
- |
(0.5) |
(0.6) |
|
Loss (gain) on sale of property, plant and
equipment |
- |
(0.4) |
1.0 |
(0.6) |
|
Stock-based compensation |
0.4 |
0.6 |
0.8 |
1.2 |
|
Difference between pension expense
and amount funded |
(0.4) |
0.5 |
(0.4) |
0.6 |
|
Debt accretion, amortization and other |
1.2 |
1.1 |
2.4 |
2.1 |
|
Change in fair value of contingent
consideration |
3.0 |
1.5 |
4.8 |
3.1 |
|
Cash from operating
activities before non-cash working capital |
42.0 |
31.4 |
84.8 |
63.8 |
|
Changes in non-cash working capital
items |
|
|
Accounts receivable |
34.7 |
58.1 |
(55.2) |
44.0 |
|
Inventories |
(95.6) |
9.8 |
(94.4) |
6.0 |
|
Accounts payable and accrued liabilities |
6.8 |
(45.3) |
54.7 |
(34.2) |
|
Income tax receivable/payable |
(2.9) |
2.2 |
6.7 |
2.5 |
|
Other |
(1.2) |
(1.3) |
(4.4) |
(2.4) |
|
Change in non-cash working
capital |
(58.2) |
23.5 |
(92.6) |
15.9 |
|
Cash (used in) from operating
activities |
(16.2) |
54.9 |
(7.8) |
79.7 |
|
Financing activities |
|
|
Increase in bank borrowings |
- |
(3.6) |
- |
6.4 |
|
Issue of common shares |
9.6 |
1.0 |
11.3 |
16.5 |
|
Dividends on common shares |
(21.5) |
(21.3) |
(42.8) |
(42.6) |
|
Repayment of long-term debt |
(0.2) |
(0.9) |
(0.5) |
(1.2) |
|
Cash used in financing
activities |
(12.1) |
(24.8) |
(32.0) |
(20.9) |
|
Investing activities |
|
|
Purchase of property, plant and equipment |
(10.6) |
(7.4) |
(15.5) |
(14.0) |
|
Proceeds on sale of property, plant and
equipment |
0.4 |
1.9 |
0.6 |
2.3 |
|
Payment of contingent consideration |
- |
- |
(4.1) |
- |
|
Cash used in investing
activities |
(10.2) |
(5.5) |
(19.0) |
(11.7) |
|
Effect of exchange rates |
4.4 |
(1.8) |
(5.2) |
(1.6) |
|
(Decrease) increase in cash and
cash equivalents |
(34.1) |
22.8 |
(64.0) |
45.5 |
Cash and cash equivalents, beginning
of the period |
86.3 |
137.8 |
116.2 |
115.1 |
|
Cash and cash equivalents, end of
the period |
$ |
52.2 |
$ |
160.6 |
$ |
52.2 |
$ |
160.6 |
|
Supplemental cash flow
information: |
|
Income taxes paid |
$ |
17.7 |
$ |
7.5 |
$ |
21.0 |
$ |
18.0 |
Interest paid (net) |
$ |
9.9 |
$ |
17.4 |
$ |
18.0 |
$ |
18.5 |
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY (UNAUDITED) |
|
|
|
|
Accumulated |
Equity |
|
|
|
|
|
|
Other |
Component |
Non- |
|
|
Common |
Retained |
Contributed |
Comprehensive |
of Convertible |
Controlling |
|
(in millions of Canadian
dollars) |
Shares |
Earnings |
Surplus |
Income (Loss) |
Debentures |
Interest |
Total |
|
Balance, January 1, 2014 |
$ |
509.5 |
$ |
314.6 |
$ |
16.2 |
$ |
12.0 |
$ |
28.7 |
$ |
1.4 |
$ |
882.4 |
Payment of dividends |
- |
(42.8) |
- |
- |
- |
- |
(42.8) |
Net earnings for the period |
- |
59.5 |
- |
- |
- |
- |
59.5 |
Other comprehensive loss |
|
|
for the period |
- |
- |
- |
(1.7) |
- |
- |
(1.7) |
Recognition of stock-based |
|
|
compensation |
- |
- |
0.8 |
- |
- |
- |
0.8 |
Stock options exercised |
13.6 |
- |
(2.3) |
- |
- |
- |
11.3 |
Transfer of net actuarial losses |
|
|
on defined benefit plans |
- |
(2.7) |
- |
2.7 |
- |
- |
- |
Change in non-controlling
interest |
- |
- |
- |
- |
- |
(0.1) |
(0.1) |
|
Balance, June 30, 2014 |
$ |
523.1 |
$ |
328.6 |
$ |
14.7 |
$ |
13.0 |
$ |
28.7 |
$ |
1.3 |
$ |
909.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
Equity |
|
|
|
|
|
|
Other |
Component |
Non- |
|
|
Common |
Retained |
Contributed |
Comprehensive |
of Convertible |
Controlling |
|
(in millions of Canadian
dollars) |
Shares |
Earnings |
Surplus |
Income (Loss) |
Debentures |
Interest |
Total |
|
Balance, January 1, 2013 |
$ |
487.9 |
$ |
305.3 |
$ |
17.3 |
$ |
(11.2) |
$ |
28.7 |
$ |
1.4 |
$ |
829.4 |
Payment of dividends |
- |
(42.6) |
- |
- |
- |
- |
(42.6) |
Net earnings for the period |
- |
41.6 |
- |
- |
- |
- |
41.6 |
Other comprehensive income |
|
|
for the period |
- |
- |
- |
24.4 |
- |
- |
24.4 |
Recognition of stock-based |
|
|
compensation |
- |
- |
1.2 |
- |
- |
- |
1.2 |
Stock options exercised |
19.7 |
- |
(3.2) |
- |
- |
- |
16.5 |
Conversion of debentures |
0.1 |
- |
- |
- |
- |
- |
0.1 |
Transfer of net actuarial gains |
|
|
on defined benefit plans |
- |
5.4 |
- |
(5.4) |
- |
- |
- |
|
Balance, June 30, 2013 |
$ |
507.7 |
$ |
309.7 |
$ |
15.3 |
$ |
7.8 |
$ |
28.7 |
$ |
1.4 |
$ |
870.6 |
|
SOURCE Russel Metals Inc.