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Press release from Marketwire

Russel Metals Announces Strong Second Quarter Results

Wednesday, August 03, 2011

Russel Metals Announces Strong Second Quarter Results16:20 EDT Wednesday, August 03, 2011TORONTO, ONTARIO--(Marketwire - Aug. 3, 2011) - Russel Metals Inc. (TSX:RUS) today announced improved second quarter 2011 earnings of $31 million, or $0.52 per share on revenues of $619 million. Our comparative second quarter 2010 results were earnings of $25 million or $0.41 per share on revenues of $507 million. Net earnings for the six months ended June 30, 2011 improved by 89% to $64 million, or $1.07 per share on revenues of $1.3 billion compared to net earnings of $34 million or $0.57 per share on revenues of $1.0 billion for the same period in 2010.Brian R. Hedges, President and CEO, stated, "In light of some softness in steel pricing, we are very pleased with the second quarter results. Margins in the quarter held up very well in the metals service centers and steel distributors. Results in our energy segment were lower than expected due to the extremely wet conditions in Western Canada, which restricted drilling activities. We expect this segment to have a pick up in the third quarter."Revenues in our metals service centers increased 24% to $388 million for the second quarter of 2011 compared to the second quarter of 2010. Operating profits in our metals service centers of $33 million significantly exceeded our 2010 operating profits of $19 million. Operating profits were down slightly from the 2011 first quarter, however, due to declining steel prices and lower margins. Revenues in the energy tubular product segment increased 12% to $145 million for the second quarter of 2011 compared to the 2010 second quarter. This segment reported operating profits of $11 million for the second quarter of 2011, equalling those of 2010. An unusually wet spring in the Canadian oil country delayed the start of the spring drilling season adversely affecting our operations servicing this sector. Our other operating units in this segment experienced improved volumes.Our steel distributor segment had a 35% increase in revenues for the second quarter of 2011 to $83 million. Operating profits increased 55% to $10 million, for the second quarter of 2011 over the 2010 second quarter, a result of stronger margins due to rising prices and volume increases. "During the quarter, we renewed and extended our syndicated bank facility to 2014 at favourable rates. The extension of our bank facility to a three-year term, positions us to continue to capitalize on growth opportunities during that period," commented Marion Britton, Vice President and CFO. The Board of Directors approved a 9% increase in our quarterly dividend to $0.30 per common share payable September 15, 2011 to shareholders of record as of August 29, 2011.The Company will be holding an Investor Conference Call on Thursday August 4, 2011 at 9:00 a.m. ET to review its second quarter 2011 results. The dial-in telephone numbers for the call are 416-340-8530 (Toronto and International callers) and 1-877-240-9772 (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 18, 2011. You will be required to enter pass code 5650285 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 tubular products and steel distributors, under various names including Russel Metals, A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, 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, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis.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 have stabilized and these conditions will continue to slowly improve 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 at similar levels with what we experienced at the end of the second quarter of 2011. 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)Quarters endedSix months endedJune 30June 30(in millions of Canadian dollars, except per share data)2011201020112010Revenues$618.6$506.6$1,276.3$1,033.4Cost of materials484.9398.71,004.2829.3Employee expenses48.443.9103.086.8Other operating expenses33.228.962.856.3Earnings before the following52.135.1106.361.0Interest expense6.97.014.014.2Interest income(0.5)(0.3)(1.1)(0.6)Finance expense (income) convertible-(5.8)-1.1Other finance expense (income), net0.9-1.3(1.5)Earnings before income taxes44.834.292.147.8Provision for income taxes(13.7)(9.4)(28.0)(13.9)Net earnings for the period$31.1$24.8$64.1$33.9Basic earnings per common share$0.52$0.41$1.07$0.57Diluted earnings per common share$0.50$0.41$1.03$0.57CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)Quarters endedSix months endedJune 30June 30(in millions of Canadian dollars)2011201020112010Net earnings for the period$31.1$24.8$64.1$33.9Other comprehensive income (loss)Unrealized foreign exchange (losses) gains on translation of foreign operations(2.4)15.0(10.4)4.8Unrealized gains (losses) on items designated as net investment hedges1.0(6.4)4.3(0.8)Unrealized losses on items designated as cash flow hedges---(2.5)Gains (losses) on derivatives designated as cash flow hedges transferred to net income in the period0.30.30.6(0.4)Other comprehensive (loss) income(1.1)8.9(5.5)1.1Total comprehensive income$30.0$33.7$58.6$35.0CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)June 30December 31(in millions of Canadian dollars)20112010ASSETSCurrentCash and cash equivalents$224.7$323.7Accounts receivable347.7301.4Inventories632.4544.1Prepaid expenses5.43.0Income taxes receivable0.82.81,211.01,175.0Property, Plant and Equipment201.7205.2Deferred Income Tax Assets7.47.1Pensions and Benefits0.70.7Other Assets3.93.8Goodwill and Intangibles24.124.9$1,448.8$1,416.7LIABILITIES AND SHAREHOLDERS' EQUITYCurrentAccounts payable and accrued liabilities$306.0$272.8Income taxes payable12.414.4Current portion long-term debt1.21.2319.6288.4Long-Term Debt298.7318.5Pensions and Benefits17.017.9Provision5.45.6Deferred Income Tax Liabilities5.07.0Other Non-Current Liabilities2.16.5647.8643.9Shareholders' EquityCommon shares485.2483.7Retained earnings288.6257.5Contributed surplus15.013.9Accumulated other comprehensive (loss) income(16.5)(11.0)Equity component of convertible debenture28.728.7801.0772.8$1,448.8$1,416.7CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED)Quarters endedSix months endedJune 30June 30(in millions of Canadian dollars)2011201020112010Operating activitiesNet earnings for the period$31.1$24.8$64.1$33.9Depreciation and amortization5.96.311.912.6Deferred income taxes(0.7)-(1.2)1.8Gain on investment and sale of property, and equipment--(0.1)(1.5)Stock-based compensation0.40.51.30.7(Gain) loss on derivatives-(5.5)-1.4Difference between pension expense and amount funded(0.4)(0.2)(1.0)(0.2)Debt accretion, amortization and other2.10.83.41.5Cash from operating activities before non-cash working capital38.426.778.450.2Changes in non-cash working capital itemsAccounts receivable33.114.9(48.4)(60.8)Inventories(85.1)(65.4)(93.3)(18.7)Accounts payable and accrued liabilities(9.1)6.726.215.7Current income taxes receivable/ payable2.33.6(1.0)3.6Other(0.5)(0.7)(2.5)(0.2)Change in non-cash working capital(59.3)(40.9)(119.0)(60.4)Cash used in operating activities(20.9)(14.2)(40.6)(10.2)Financing activitiesIssue of common shares0.3-1.2-Dividends on common shares(16.5)(14.9)(33.0)(29.8)Repayment of long-term debt(16.8)(8.1)(17.1)(8.5)Deferred financing(0.5)(0.7)(0.5)(0.7)Swap termination---(35.2)Cash used in financing activities(33.5)(23.7)(49.4)(74.2)Investing activitiesPurchase of property, plant and equipment(5.2)(2.1)(9.6)(3.4)Proceeds on sale of property, plant and equipment-0.30.70.3Proceeds on sale of investment-6.0-6.0Cash (used in) from investing activities(5.2)4.2(8.9)2.9Effect of exchange rates on cash and cash equivalents(1.8)6.4(0.1)5.7Decrease in cash and cash equivalents(61.4)(27.3)(99.0)(75.8)Cash and cash equivalents, beginning of the period286.1311.1323.7359.6Cash and cash equivalents, end of the period$224.7$283.8$224.7$283.8Supplemental cash flow information:Income taxes paid$12.9$2.3$31.2$5.0Interest paid$0.5$0.7$12.7$13.5CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)(in millions of Canadian dollars) Common Shares Contributed Surplus Retained EarningsEquity Component of Convertible DebenturesAccumulated Other Comprehensive Income TotalBalance, January 1, 2011$483.7$13.9$257.5$28.7$(11.0)$772.8Payment of dividends--(33.0)--(33.0)Net earnings for the period--64.1--64.1Other comprehensive income for the period----(5.5)(5.5)Recognition of stock-based compensation-1.1---1.1Stock options exercised1.5----1.5Balance, June 30, 2011$485.2$15.0$288.6$28.7$(16.5)$801.0(in millions of Canadian dollars) Common Shares Contributed Surplus Retained EarningsEquity Component of Convertible DebenturesAccumulated Other Comprehensive Income TotalBalance, January 1, 2010$478.9$13.2$259.9$-$(1.1)$750.9Payment of dividends--(29.8)--(29.8)Net earnings for the period--33.9--33.9Other comprehensive income for the period----1.11.1Recognition of stock-based compensation-0.8---0.8Balance, June 30, 2010$478.9$14.0$264.0$-$-$756.9FOR FURTHER INFORMATION PLEASE CONTACT: Marion E. Britton, C.A.Russel Metals Inc.Vice President and Chief Financial Officer(905) 819-7407info@russelmetals.comwww.russelmetals.com