TORONTO,
Nov. 4, 2014 /PRNewswire/ - Russel
Metals Inc. (RUS - TSX) today announced third quarter 2014 earnings
of $33 million or $0.54 per share on record revenues of
$1 billion reflecting strong volumes
in all segments. These results compare to earnings of
$19 million or $0.31 per share on revenues of $797 million in the same quarter last year and
second quarter 2014 earnings of $31
million or $0.50 per share on
revenues of $893 million.
Revenues in our metals service center segment
increased 14% to $417 million in the
quarter compared to the 2013 third quarter due to stronger demand
and higher steel prices. Gross margins at metals service
centers decreased to 20.2% from 20.7% in the same quarter last year
reflecting increased competitive pressures. Operating profit
as a percentage of revenues of 5.3% was consistent with the same
quarter last year as segment operating profits increased 12%.
Revenues in our energy products segment for the
third quarter of 2014 increased 41% to $497
million compared to the 2013 third 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 the 2013
third quarter to 15.9% from 15.0%, primarily due to mix of product
sold. Operating profit as a percentage of revenues was 6.6%
compared to 4.6% in the same quarter of 2013.
Apex Distribution and Apex Monarch, our recent
acquisitions in the energy products segment, both experienced
stronger than expected results and therefore we expensed an
additional $4 million in the quarter
to provide for an increase in the potential future payments for
these acquisitions under our contractual earnout obligations.
Third quarter 2014 revenues in our steel
distributors segment increased by 65% to $122 million compared to the 2013 third quarter
due to international market conditions making imported steel prices
more attractive. Operating profits for the third quarter
increased to $12 million from
$5 million for the 2013 third
quarter.
Brian R. Hedges,
President and CEO, commented "Our operating profits were up 74% in
the quarter reflecting continued strength in all three operating
segments. Revenues increased by 30% which was the main lever
for improved profitability but higher margins and stronger
inventory turns also contributed. Our increase in revenues
was fueled by organic growth initiatives, acquisitions and
increased activity in the energy sector, particularly in
Canada."
Mr. Hedges further commented, "Our Apex
acquisitions experienced continued strong performance in the
quarter, especially at our Apex Remington operation in the United States. This increase in operating
profits required us to record an additional charge of $4 million or $0.06
per share for increased future payments for the earnout
obligations. For the year to date, this additional charge was
$5 million or $0.09 per share. Without this charge, our
earnings per share would have been $0.60 in the quarter and $1.60 year to date."
The Board of Directors approved a quarterly
dividend of $0.38 per common share
payable December 15, 2014 to
shareholders of record as of November 26,
2014.
The Company will be holding an Investor
Conference Call on Wednesday, November 5,
2014 at 9:00 a.m. ET to review
its 2014 third 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, Wednesday, November 19, 2014. You will be
required to enter pass code 540838 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 |
Nine months ended |
|
|
September 30 |
September 30 |
(in millions of
Canadian dollars, except per share data) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Revenues |
$ |
1,038.8 |
$ |
796.8 |
$ |
2,856.1 |
$ |
2,376.7 |
Cost of materials |
|
854.9 |
|
656.5 |
|
2,327.7 |
|
1,955.2 |
Employee expenses |
|
73.3 |
|
63.2 |
|
215.2 |
|
184.0 |
Other operating expenses |
|
47.2 |
|
40.6 |
|
139.9 |
|
119.3 |
Asset impairment |
|
- |
|
5.2 |
|
- |
|
5.2 |
|
Earnings before interest, finance
expense and |
|
|
provision for income taxes |
|
63.4 |
|
31.3 |
|
173.3 |
|
113.0 |
Interest expense |
|
9.3 |
|
9.1 |
|
27.4 |
|
27.1 |
Interest income |
|
- |
|
(0.3) |
|
- |
|
(0.4) |
Other finance expense (income) |
|
5.5 |
|
(2.8) |
|
10.3 |
|
0.3 |
|
Earnings before provision for
income taxes |
|
48.6 |
|
25.3 |
|
135.6 |
|
86.0 |
Provision for income taxes |
|
15.6 |
|
6.4 |
|
43.1 |
|
25.5 |
|
Net earnings for the
period |
$ |
33.0 |
$ |
18.9 |
$ |
92.5 |
$ |
60.5 |
|
Net earnings attributed
to: |
|
|
Equity holders |
$ |
32.9 |
$ |
18.9 |
$ |
92.4 |
$ |
60.4 |
|
Non-controlling interest |
|
0.1 |
|
- |
|
0.1 |
|
0.1 |
|
|
$ |
33.0 |
$ |
18.9 |
$ |
92.5 |
$ |
60.5 |
|
Basic earnings per common
share |
$ |
0.54 |
$ |
0.31 |
$ |
1.51 |
$ |
1.00 |
|
Diluted earnings per common
share |
$ |
0.52 |
$ |
0.31 |
$ |
1.46 |
$ |
0.99 |
|
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
Quarters ended |
Nine months ended |
|
September 30 |
September 30 |
(in millions of Canadian
dollars) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
Net earnings for the
period |
$ |
33.0 |
$ |
18.9 |
$ |
92.5 |
$ |
60.5 |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net
of tax |
|
|
|
|
|
|
|
|
Items that may be reclassified to
earnings |
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange gains
(losses) on translation |
|
|
|
|
|
|
|
|
|
|
foreign operations |
|
19.4 |
|
(7.9) |
|
20.4 |
|
11.1 |
Items that may not be reclassified
to earnings |
|
|
|
|
|
|
|
|
|
Actuarial (losses)
gains on pension and similar obligations, |
|
|
|
|
|
|
|
|
|
|
net of taxes |
|
(3.8) |
|
1.4 |
|
(6.5) |
|
6.8 |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
15.6 |
|
(6.5) |
|
13.9 |
|
17.9 |
|
|
|
|
|
|
|
|
|
Total comprehensive income |
$ |
48.6 |
$ |
12.4 |
$ |
106.4 |
$ |
78.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION (UNAUDITED) |
|
|
|
|
|
|
September 30 |
December 31 |
(in millions of Canadian
dollars) |
2014 |
2013 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current |
|
|
|
|
|
Cash and cash equivalents |
$ |
27.6 |
$ |
116.2 |
|
Accounts receivable |
|
622.7 |
|
456.2 |
|
Inventories |
|
872.1 |
|
766.3 |
|
Prepaid expenses |
|
9.4 |
|
5.9 |
|
Income taxes receivable |
|
2.7 |
|
6.3 |
|
Assets held for sale |
|
8.2 |
|
- |
|
|
|
|
|
|
|
1,542.7 |
|
1,350.9 |
|
|
|
|
|
Property, Plant and
Equipment |
|
254.6 |
|
238.9 |
Deferred Income Tax Assets |
|
1.3 |
|
3.0 |
Pension and Benefits |
|
0.1 |
|
0.2 |
Financial and Other Assets |
|
5.9 |
|
6.1 |
Goodwill and Intangibles |
|
215.2 |
|
218.7 |
|
|
|
|
|
|
$ |
2,019.8 |
$ |
1,817.8 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
|
Current |
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
513.8 |
$ |
384.1 |
|
Income taxes payable |
|
10.7 |
|
0.2 |
|
Current portion long-term debt |
|
0.5 |
|
1.2 |
|
Liabilities associated with assets held for
sale |
|
3.8 |
|
- |
|
|
|
|
|
|
|
528.8 |
|
385.5 |
|
|
|
|
|
Long-Term Debt |
|
459.7 |
|
457.2 |
Pensions and Benefits |
|
31.4 |
|
23.3 |
Deferred Income Tax
Liabilities |
|
16.6 |
|
20.5 |
Provisions and Other Non-Current
Liabilities |
|
42.5 |
|
48.9 |
|
|
|
|
|
|
|
1,079.0 |
|
935.4 |
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
Common shares |
|
530.1 |
|
509.5 |
|
Retained earnings |
|
334.4 |
|
314.6 |
|
Contributed surplus |
|
13.8 |
|
16.2 |
|
Accumulated other comprehensive income |
|
32.4 |
|
12.0 |
|
Equity component of convertible debentures |
|
28.7 |
|
28.7 |
|
|
|
|
|
Total Shareholders' Equity
Attributable to Equity Holders |
|
939.4 |
|
881.0 |
|
Non-controlling interest |
|
1.4 |
|
1.4 |
|
|
|
|
|
Total Shareholders' Equity |
|
940.8 |
|
882.4 |
|
|
|
|
|
Total Liabilities and Shareholders'
Equity |
$ |
2,019.8 |
$ |
1,817.8 |
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
CASHFLOW (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
Quarters ended |
Nine months ended |
|
September 30 |
September 30 |
(in millions of Canadian
dollars) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
Operating activities |
|
|
Net earnings for the period |
$ |
33.0 |
$ |
18.9 |
$ |
92.5 |
$ |
60.5 |
|
Depreciation and amortization |
|
8.8 |
|
8.8 |
|
26.0 |
|
25.2 |
|
Deferred income taxes |
|
0.3 |
|
(3.5) |
|
(0.2) |
|
(4.1) |
|
(Gain) loss on sale of
property, plant and equipment |
|
(0.3) |
|
0.1 |
|
0.7 |
|
(0.5) |
|
Stock-based compensation |
|
0.4 |
|
0.7 |
|
1.2 |
|
1.9 |
|
Difference between pension expense and amount funded |
|
(0.3) |
|
0.2 |
|
(0.7) |
|
0.8 |
|
Asset impairment |
|
- |
|
5.2 |
|
- |
|
5.2 |
|
Debt accretion, amortization and
other |
|
1.2 |
|
1.0 |
|
3.6 |
|
3.1 |
|
Change in fair value of contingent
consideration |
|
5.5 |
|
(2.8) |
|
10.3 |
|
0.3 |
|
Cash from operating activities
before |
|
|
non-cash working capital |
|
48.6 |
|
28.6 |
|
133.4 |
|
92.4 |
|
Changes in non-cash working capital
items |
|
|
Accounts receivable |
|
(108.5) |
|
(42.4) |
|
(163.7) |
|
1.6 |
|
Inventories |
|
(1.4) |
|
35.7 |
|
(95.8) |
|
41.7 |
|
Accounts payable and accrued
liabilities |
|
59.2 |
|
(0.8) |
|
113.9 |
|
(35.0) |
|
Income tax receivable/payable |
|
8.1 |
|
(2.5) |
|
14.8 |
|
- |
|
Other |
|
0.8 |
|
1.2 |
|
(3.6) |
|
(1.2) |
|
Change in non-cash working
capital |
|
(41.8) |
|
(8.8) |
|
(134.4) |
|
7.1 |
|
|
|
Cash from (used in)
operating activities |
|
6.8 |
|
19.8 |
|
(1.0) |
|
99.5 |
|
Financing activities |
|
|
Decrease in bank borrowings |
|
- |
|
(6.7) |
|
- |
|
(0.3) |
|
Issue of common shares |
|
5.6 |
|
0.3 |
|
16.9 |
|
16.8 |
|
Dividends on common shares |
|
(23.3) |
|
(21.3) |
|
(66.1) |
|
(63.9) |
|
Issuance of long-term debt |
|
- |
|
0.8 |
|
- |
|
0.8 |
|
Repayment of long-term debt |
|
(0.4) |
|
(0.8) |
|
(0.9) |
|
(2.0) |
|
Deferred financing |
|
- |
|
(1.3) |
|
- |
|
(1.3) |
|
Cash used in financing
activities |
|
(18.1) |
|
(29.0) |
|
(50.1) |
|
(49.9) |
|
Investing activities |
|
|
Purchase of property, plant and
equipment |
|
(21.7) |
|
(5.6) |
|
(37.2) |
|
(19.6) |
|
Proceeds on sale of property, plant
and equipment |
|
0.5 |
|
- |
|
1.1 |
|
2.3 |
|
Payment of contingent
consideration |
|
- |
|
- |
|
(4.1) |
|
- |
|
Purchase of business |
|
(0.7) |
|
(10.5) |
|
(0.7) |
|
(10.5) |
|
Cash used in investing
activities |
|
(21.9) |
|
(16.1) |
|
(40.9) |
|
(27.8) |
|
Effect of exchange rates |
|
8.6 |
|
3.8 |
|
3.4 |
|
2.2 |
|
(Decrease) increase in cash and
cash equivalents |
|
(24.6) |
|
(21.5) |
|
(88.6) |
|
24.0 |
Cash and cash equivalents, beginning
of the period |
|
52.2 |
|
160.6 |
|
116.2 |
|
115.1 |
|
Cash and cash equivalents, end of
the period |
$ |
27.6 |
$ |
139.1 |
$ |
27.6 |
$ |
139.1 |
|
Supplemental cash flow
information: |
|
Income taxes paid |
$ |
6.8 |
$ |
12.4 |
$ |
27.8 |
$ |
30.4 |
Interest paid (net) |
$ |
8.3 |
$ |
7.4 |
$ |
26.3 |
$ |
25.9 |
|
|
|
|
|
|
|
|
|
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 |
Debentures |
Interest |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2014 |
$ |
509.5 |
$ |
314.6 |
$ |
16.2 |
$ |
12.0 |
$ |
28.7 |
$ |
1.4 |
$ |
882.4 |
Payment of dividends |
|
- |
|
(66.1) |
|
- |
|
- |
|
- |
|
- |
|
(66.1) |
Net earnings for the period |
|
- |
|
92.4 |
|
- |
|
- |
|
- |
|
0.1 |
|
92.5 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for the period |
|
- |
|
- |
|
- |
|
13.9 |
|
- |
|
- |
|
13.9 |
Recognition of stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation |
|
- |
|
- |
|
1.2 |
|
- |
|
- |
|
- |
|
1.2 |
Stock options exercised |
|
20.5 |
|
- |
|
(3.6) |
|
- |
|
- |
|
- |
|
16.9 |
Conversion of debenture |
|
0.1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
0.1 |
Transfer of net actuarial losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on defined benefit plans |
|
- |
|
(6.5) |
|
- |
|
6.5 |
|
- |
|
- |
|
- |
Change in non-controlling
interest |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(0.1) |
|
(0.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2014 |
$ |
530.1 |
$ |
334.4 |
$ |
13.8 |
$ |
32.4 |
$ |
28.7 |
$ |
1.4 |
$ |
940.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
- |
|
(63.9) |
|
- |
|
- |
|
- |
|
- |
|
(63.9) |
Net earnings for the period |
|
- |
|
60.4 |
|
- |
|
- |
|
- |
|
0.1 |
|
60.5 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for the period |
|
- |
|
- |
|
- |
|
17.9 |
|
- |
|
- |
|
17.9 |
Recognition of stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation |
|
- |
|
- |
|
1.9 |
|
- |
|
- |
|
- |
|
1.9 |
Stock options exercised |
|
20.1 |
|
- |
|
(3.3) |
|
- |
|
- |
|
- |
|
16.8 |
Conversion of debentures |
|
0.1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
0.1 |
Transfer of net actuarial gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on defined benefit plans |
|
- |
|
6.8 |
|
- |
|
(6.8) |
|
- |
|
- |
|
- |
Change in non-controlling
interest |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(0.1) |
|
(0.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30,
2013 |
$ |
508.1 |
$ |
308.6 |
$ |
15.9 |
$ |
(0.1) |
$ |
28.7 |
$ |
1.4 |
$ |
862.6 |
|
SOURCE Russel Metals Inc.