TORONTO, Oct. 30, 2015 /PRNewswire/ - Russel Metals Inc.
(RUS - TSX) today announced financial results for the 2015 third
quarter.
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
773
|
|
$
|
1,039
|
|
$
|
2,439
|
|
$
|
2,856
|
EBIT
1
|
$
|
19
|
|
$
|
63
|
|
$
|
87
|
|
$
|
173
|
Net Income
|
$
|
13
|
|
$
|
33
|
|
$
|
48
|
|
$
|
93
|
Earnings per
Share
|
$
|
0.21
|
|
$
|
0.54
|
|
$
|
0.77
|
|
$
|
1.51
|
Cash from
Operations
|
$
|
104
|
|
$
|
7
|
|
$
|
178
|
|
$
|
(1)
|
Dividends paid
2
|
$
|
23
|
|
$
|
23
|
|
$
|
70
|
|
$
|
66
|
|
All amounts are
reported in millions of Canadian dollars except per share, which is
in Canadian dollars
|
|
1 EBIT is
a non-GAAP measure. EBIT represents earnings before interest
and taxes.
2
Dividends paid during the period.
|
Third quarter earnings were $13
million, or $0.21 per share on
revenues of $773 million. These
results compare to earnings of $33
million or $0.54 per share on
revenues of $1 billion in the same
quarter 2014. Our third quarter earnings were negatively
impacted by workforce reduction costs of $2
million and additional inventory reserves of $8 million resulting in a reduction of our
earnings per share of $0.13. We have
reduced our manpower by more than 7% on a year to date basis as we
continue to actively manage our costs.
Revenues of $369 million in our
metals service center segment were 11% lower than the 2014 third
quarter due to weaker demand, primarily in Western Canada from customers supplying the
oil and gas industry. Our metals service center selling
prices decreased by 2% and tons shipped decreased by 10% compared
to the 2014 third quarter. Gross margin was 19.3% compared to
20.2% for the third quarter of 2014 and 18.3% for the second
quarter of 2015. Our metals service center operating profits
in the 2015 third quarter were $10
million which was 56% lower than the 2014 third quarter,
mainly due to the decreased margins and lower volumes.
Third quarter 2015 revenues in our energy products segment
decreased 40% to $300 million
compared to the 2014 third quarter due to reduced drilling activity
in the energy sector. Operating profits decreased 67% to
$11 million in the 2015 third quarter
versus the same quarter last year as lower segment operating
results were exacerbated by workforce reduction costs and increased
inventory reserves.
Revenues in our steel distributors segment in the 2015 third
quarter of $103 million were 16%
lower than the 2014 third quarter. Gross margins as a
percentage of revenues were 7% compared to 15% in the same period
in 2014 due to the decline in selling prices as mill pricing
dropped and excess inventory in the industry added further margin
pressure. Operating profits in the third quarter decreased to
$2 million from $12 million in the same period in 2014.
We recorded financial income of $6
million or $0.09 per share due
to the change in fair value of the contingent consideration related
to our Apex Distribution and Apex Monarch acquisitions. This
change was a result of a projected reduction in future payments
related to lower expected profitability caused by the lower oil
price and rig counts.
Our revenues for the nine months ended September 30, 2015 were $2.4 billion down 15% from $2.8 billion for the same period in 2014.
Our 2015 year to date earnings of $48
million or $0.77 per share
compared to $92 million or
$1.51 per share for the same period
in 2014.
Mr. Brian R. Hedges, President
and CEO, commented "The difficult economic conditions in all three
segments continued in the third quarter. The further drop in
the price of steel at the end of the quarter was greater than
anticipated. During the quarter, we focused on reducing
inventory levels. Metals service centers are in good shape
with $31 million in inventory
reductions in the third quarter and inventory turns of 4.7
times. Steel distributors reduced inventories by $36 million which is moving in the right
direction but turns remain low due to reduced revenues.
Energy remains the area with the most challenges due to the
collapse in exploration activity and industry-wide over-supply of
pipe. Energy inventory levels did improve by $28 million in the quarter but energy inventories
remain an area of concern."
Mr. Hedges further commented, "Cash flows continue to be strong
as we have generated $178 million in
cash flow from operations in 2015 which helps to support our
dividend. During the quarter, we increased our syndicated
credit facility to $400 million and
announced the redemption of our Convertible Debentures. This
redemption on November 4, 2015 will
be funded by available cash and our upsized credit facility.
The redemption will reduce our annual interest cost by
approximately $7 million however, we
expect a pre-tax, non-cash charge of $5
million relating to the redemption in the fourth
quarter."
The Board of Directors approved a quarterly dividend of
$0.38 per common share payable
December 15, 2015 to shareholders of
record as of November 25, 2015.
The Company will be holding an Investor Conference Call on
Monday, November 2, 2015 at
9:00 a.m. ET to review its 2015 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
ET Monday November 16, 2015. You will be required to
enter pass code 745578 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.
About Russel Metals
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, Apex Western
Fiberglass, 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; product claims from customers, 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; cyber security breach; 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 under the heading "Risks Related to Our
Business and the Metals Distribution Industry" in our most recent
Annual Information Form and as otherwise disclosed in our filings
with securities regulatory authorities which are available on SEDAR
at www.sedar.com.
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
September 30
|
Nine months
ended
September 30
|
(in millions of
Canadian dollars, except per share
data)
|
2015
|
2014
|
2015
|
2014
|
|
Revenues
|
$
|
773.4
|
$
|
1,038.8
|
$
|
2,438.6
|
$
|
2,856.1
|
Cost of
materials
|
645.7
|
854.9
|
2,019.9
|
2,327.7
|
Employee
expenses
|
66.1
|
73.3
|
199.2
|
215.2
|
Other operating
expenses
|
42.6
|
47.2
|
132.8
|
139.9
|
Earnings before
interest, finance expense and provision for income
taxes
|
19.0
|
63.4
|
86.7
|
173.3
|
Interest
expense
|
9.6
|
9.3
|
28.7
|
27.4
|
Other finance (income)
expense
|
(5.5)
|
5.5
|
(5.5)
|
10.3
|
Earnings before
provision for income taxes
|
14.9
|
48.6
|
63.5
|
135.6
|
Provision for income
taxes
|
2.1
|
15.6
|
15.8
|
43.1
|
Net earnings for
the period
|
$
|
12.8
|
$
|
33.0
|
$
|
47.7
|
$
|
92.5
|
Net earnings
attributed to:
|
|
Equity
holders
|
$
|
12.8
|
$
|
32.9
|
$
|
47.7
|
$
|
92.4
|
Non-controlling
interest
|
-
|
0.1
|
-
|
0.1
|
|
$
|
12.8
|
$
|
33.0
|
$
|
47.7
|
$
|
92.5
|
Basic earnings per
common share
|
$
|
0.21
|
$
|
0.54
|
$
|
0.77
|
$
|
1.51
|
Diluted earnings
per common share
|
$
|
0.21
|
$
|
0.52
|
$
|
0.77
|
$
|
1.46
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
|
|
Quarters
ended
September 30
|
Nine months
ended
September 30
|
|
(in millions of
Canadian dollars)
|
2015
|
2014
|
2015
|
2014
|
Net earnings for
the period
|
$
|
12.8
|
$
|
33.0
|
$
|
47.7
|
$
|
92.5
|
Other comprehensive
(loss) income
|
|
|
|
|
Items that may be
reclassified to earnings
|
|
|
|
|
|
Unrealized foreign
exchange gains on translation of foreign operations
|
34.9
|
19.4
|
67.8
|
20.4
|
Items that may not
be reclassified to earnings
|
|
|
|
|
|
Actuarial losses on
pension and similar obligations, net of taxes
|
(2.9)
|
(3.8)
|
(2.5)
|
(6.5)
|
Other comprehensive
income
|
32.0
|
15.6
|
65.3
|
13.9
|
Total comprehensive
income
|
$
|
44.8
|
$
|
48.6
|
$
|
113.0
|
$
|
106.4
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
|
|
|
|
|
September
30
2015
|
December
31
2014
|
(in millions of
Canadian dollars)
|
ASSETS
|
|
Current
|
|
|
Cash and cash
equivalents
|
$
|
94.4
|
$
|
53.4
|
|
Accounts
receivable
|
443.6
|
569.3
|
|
Inventories
|
828.6
|
930.8
|
|
Prepaid
expenses
|
11.0
|
11.6
|
|
Income taxes
receivable
|
8.2
|
2.8
|
|
1,385.8
|
1,567.9
|
|
|
Property, Plant and
Equipment
|
265.9
|
249.8
|
Deferred Income Tax
Assets
|
3.6
|
4.9
|
Financial and Other
Assets
|
7.0
|
5.9
|
Goodwill and
Intangibles
|
215.0
|
214.3
|
|
$
|
1,877.3
|
$
|
2,042.8
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
Current
|
|
|
Bank
indebtedness
|
$
|
13.6
|
$
|
24.2
|
|
Accounts payable and
accrued liabilities
|
316.5
|
500.4
|
|
Income taxes
payable
|
0.4
|
14.1
|
|
Current portion
long-term debt
|
169.6
|
0.5
|
|
500.1
|
539.2
|
|
|
Long-Term
Debt
|
295.2
|
460.5
|
Pensions and
Benefits
|
27.6
|
26.1
|
Deferred Income Tax
Liabilities
|
16.8
|
17.0
|
Provisions and
Other Non-Current Liabilities
|
28.6
|
35.0
|
|
868.3
|
1,077.8
|
Shareholders'
Equity
|
|
|
Common
shares
|
531.7
|
531.2
|
|
Retained
earnings
|
318.9
|
344.0
|
|
Contributed
surplus
|
14.9
|
14.1
|
|
Accumulated other
comprehensive income
|
114.9
|
47.1
|
|
Equity component of
convertible debentures
|
28.6
|
28.6
|
Total Shareholders'
Equity
|
1,009.0
|
965.0
|
Total Liabilities
and Shareholders' Equity
|
$
|
1,877.3
|
$
|
2,042.8
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
|
|
|
|
Quarters
ended
September 30
|
Nine months
ended
September 30
|
|
(in millions of
Canadian dollars)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net earnings for the
period
|
$
|
12.8
|
$
|
33.0
|
$
|
47.7
|
$
|
92.5
|
|
Depreciation and
amortization
|
8.9
|
8.8
|
26.4
|
26.0
|
|
Deferred income
taxes
|
(0.9)
|
0.3
|
1.9
|
(0.2)
|
|
(Gain) loss on sale
of property, plant and equipment
|
-
|
(0.3)
|
(2.0)
|
0.7
|
|
Share-based
compensation
|
0.3
|
0.4
|
0.9
|
1.2
|
|
Difference between
pension expense and amount funded
|
(0.7)
|
(0.3)
|
(1.9)
|
(0.7)
|
|
Debt accretion,
amortization and other
|
1.4
|
1.2
|
4.1
|
3.6
|
|
Change in fair value
of contingent consideration
|
(5.5)
|
5.5
|
(5.5)
|
10.3
|
Cash from operating
activities before non-cash working capital
|
16.3
|
48.6
|
71.6
|
133.4
|
Changes in non-cash
working capital items
|
|
|
|
|
|
Accounts
receivable
|
8.6
|
(108.5)
|
146.3
|
(163.7)
|
|
Inventories
|
113.5
|
(1.4)
|
156.5
|
(95.8)
|
|
Accounts payable and
accrued liabilities
|
(37.2)
|
59.2
|
(178.7)
|
113.9
|
|
Income tax
receivable/payable
|
1.0
|
8.1
|
(18.2)
|
14.8
|
|
Other
|
1.7
|
0.8
|
0.6
|
(3.6)
|
Change in non-cash
working capital
|
87.6
|
(41.8)
|
106.5
|
(134.4)
|
Cash from (used in)
operating activities
|
103.9
|
6.8
|
178.1
|
(1.0)
|
Financing
activities
|
|
|
|
|
|
Decrease in bank
indebtedness
|
(11.0)
|
-
|
(10.6)
|
-
|
|
Issue of common
shares
|
-
|
5.6
|
0.4
|
16.9
|
|
Dividends on common
shares
|
(23.4)
|
(23.3)
|
(70.3)
|
(66.1)
|
|
Repayment of
long-term debt
|
(0.2)
|
(0.4)
|
(0.4)
|
(0.9)
|
|
Deferred
financing
|
(1.0)
|
-
|
(1.0)
|
-
|
Cash used in
financing activities
|
(35.6)
|
(18.1)
|
(81.9)
|
(50.1)
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(10.9)
|
(21.7)
|
(29.5)
|
(37.2)
|
|
Proceeds on sale of
property, plant and equipment
|
0.4
|
0.5
|
3.2
|
1.1
|
|
Payment of contingent
consideration
|
-
|
-
|
(17.5)
|
(4.1)
|
|
Purchase of
business
|
-
|
(0.7)
|
(27.3)
|
(0.7)
|
Cash used in
investing activities
|
(10.5)
|
(21.9)
|
(71.1)
|
(40.9)
|
Effect of exchange
rates on cash and cash equivalents
|
9.1
|
8.6
|
15.9
|
3.4
|
Increase (decrease)
in cash and cash equivalents
|
66.9
|
(24.6)
|
41.0
|
(88.6)
|
Cash and cash
equivalents, beginning of the period
|
27.5
|
52.2
|
53.4
|
116.2
|
Cash and cash
equivalents, end of the period
|
$
|
94.4
|
$
|
27.6
|
$
|
94.4
|
$
|
27.6
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
Income taxes
paid
|
$
|
2.2
|
$
|
6.8
|
$
|
32.7
|
$
|
27.8
|
Interest paid
(net)
|
$
|
7.8
|
$
|
8.3
|
$
|
27.2
|
$
|
26.3
|
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
Equity
Component
of Convertible
Debentures
|
Total
|
|
|
(in millions of
Canadian dollars)
|
|
Balance, January
1, 2015
|
$
|
531.2
|
$
|
344.0
|
$
|
14.1
|
$
|
47.1
|
$
|
28.6
|
$
|
965.0
|
Payment of
dividends
|
-
|
(70.3)
|
-
|
-
|
-
|
(70.3)
|
Net earnings for the
period
|
-
|
47.7
|
-
|
-
|
-
|
47.7
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
65.3
|
-
|
65.3
|
Recognition of
share-based compensation
|
-
|
-
|
0.9
|
-
|
-
|
0.9
|
Share options
exercised
|
0.5
|
-
|
(0.1)
|
-
|
-
|
0.4
|
Transfer of net
actuarial losses on defined benefit plans
|
-
|
(2.5)
|
-
|
2.5
|
-
|
-
|
Balance, September
30, 2015
|
$
|
531.7
|
$
|
318.9
|
$
|
14.9
|
$
|
114.9
|
$
|
28.6
|
$
|
1,009.0
|
|
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
Equity
Component
of Convertible
Debentures
|
Non-
Controlling
Interest
|
Total
|
|
|
(in millions of
Canadian dollars)
|
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
share-based compensation
|
-
|
-
|
1.2
|
-
|
-
|
-
|
1.2
|
Share 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
|
SOURCE Russel Metals Inc.