Mr. Brian Hedges reports
RUSSEL METALS ANNOUNCES SOLID FIRST QUARTER RESULTS
Russel Metals Inc. earned $33-million, or 55 cents per share, on revenues of $803-million during the first quarter of 2012. These results matched the earnings of $33-million, or 55 cents per share, on revenues of $658-million in the same quarter last year, and are above the fourth quarter 2011 earnings of 47 cents per share.
Revenues in the metals service centre segment increased 18 per cent to $428-million in the first quarter of 2012, compared with the 2011 first quarter on stronger demand levels. The gross margins improved from the 2011 fourth quarter and operating profit as a percentage of revenues improved to 7.5 per cent in the 2012 first quarter, from 5.7 per cent in the fourth quarter last year.
Brian Hedges, president and chief executive officer, commented: "Operating profit for the first quarter in our metals service centre segment was generated by strong demand levels, unlike the comparable first quarter of 2011, which experienced inventory holding gains. The growth in the first quarter reflects a continued healthy recovery in the industrial segment of the North American economy. In Canada, the western provinces were buoyed by high oil prices, which led to a stronger recovery in the west compared to the eastern provinces."
Revenues in the energy tubular products segment for the first quarter of 2012 increased 23 per cent to $275-million, compared with the 2011 first quarter. Increased volume as a result of large linepipe orders improved the operating profits to $19-million. These large orders have lower gross margin percentages, and consequently our operating profits as a percentage of revenues declined to 6.9 per cent from 7.9 per cent reported in the first quarter of 2011. The second quarter is historically the weakest quarter for this segment as spring break-up impacts Canadian shipments.
Strong demand was also experienced in the steel distributors segment, which had a 42-per-cent increase in 2012 first quarter revenues to $99-million from the 2011 first quarter. Operating profits for the first quarter of 2012 increased by $1-million to $10-million from the 2011 first quarter.
Mr. Hedges further commented: "Both of our operations in this segment positioned themselves well during the fourth quarter of 2011, which generated strong operating profits of 9.8 per cent in the first quarter of 2012. This is a strong performance in a market experiencing tighter gross profit margins due to softening domestic steel prices."
During April, 2012, the market for Canadian denominated high-yield bonds strengthened due to a shortage of issuers and the company was able to take advantage of this window to strengthen its capital structure. It issued $300-million of Canadian dollar ten-year senior notes at a 6-per-cent interest rate.
Marion Britton, vice-president and chief financial officer, stated: "We are extremely pleased with our capital structure and the timing could not have been better as the number of acquisition opportunities in the marketplace has escalated in 2012. Our recently announced purchase of Siemens Laserworks allows us to increase our plate processing capabilities by acquiring a leading laser facility in the prairie region."
The board of directors approved an increase of 17 per cent in the quarterly dividend to 35 cents per common shar, payable June 15, 2012, to shareholders of record as of May 30, 2012.
The company will be holding an investor conference call on Friday, May 4, 2012, at 9 a.m. EDT, to review its 2012 first quarter results. The dial-in telephone numbers for the call are 416-340-2216 (Toronto and international callers) and 1-866-226-1792 (United States and Canada). Please dial in 10 minutes prior to the call to ensure connection.
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, Friday, May 18, 2012. Callers will be required to enter pass code 5331872 in order to access the call.
Additional supplemental financial information is available in the investor conference call package located on Russel's website.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Quarters ended March 31
(In millions of Canadian dollars, except per share 2012 2011
data)
Revenues $ 802.9 $ 657.7
Cost of materials 659.0 519.3
Employee expenses 57.9 54.6
Other operating expenses 32.9 29.6
Earnings before interest, finance and provision for 53.1 54.2
income taxes
Interest expense 6.7 7.1
Interest income (0.4) (0.6)
Other finance expense 0.4 0.4
Earnings before provision for income taxes 46.4 47.3
Provision for income taxes 13.3 14.3
Net earnings for the period $ 33.1 $ 33.0
Basic earnings per common share $ 0.55 $ 0.55
Diluted earnings per common share $ 0.53 $ 0.53
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters ended March 31
(in millions of Canadian dollars) 2012 2011
Net earnings for the period $ 33.1 $ 33.0
Other comprehensive income (loss), net of tax
Unrealized foreign exchange losses on translation (6.7) (8.0)
of foreign operations
Unrealized gains on items designated as net 2.1 3.3
investment hedges
Losses on derivatives designated as cash flow 0.3 0.3
hedges transferred to net earnings in the current
period
Actuarial losses on pension and similar obligations (2.2) -
Other comprehensive loss (6.5) (4.4)
Total comprehensive income $ 26.6 $ 28.6
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
March 31 Dec. 31
(in millions of Canadian dollars) 2012 2011
Assets
Current
Cash and cash equivalents $ 160.3 $ 270.7
Accounts receivable 451.6 382.4
Inventories 692.1 645.6
Prepaid expenses 4.4 4.6
Income taxes receivable 1.4 0.5
1,309.8 1,303.8
Property, plant and equipment 206.9 201.3
Deferred income tax assets 5.0 5.3
Other assets 3.1 3.3
Goodwill and intangibles 24.3 24.7
$ 1,549.1 $ 1,538.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 374.7 $ 362.8
Income taxes payable 4.6 17.4
Current portion long-term debt 1.3 1.3
380.6 381.5
Long-term debt 294.6 296.5
Pensions and benefits 36.1 33.3
Deferred income tax liabilities 0.6 0.4
Provisions 5.3 5.4
Other non-current liabilities 2.9 1.9
720.1 719.0
Shareholders' equity
Common shares 486.0 485.4
Retained earnings 321.8 306.7
Contributed surplus 16.1 15.7
Accumulated other comprehensive loss (23.6) (17.1)
Equity component of convertible debenture 28.7 28.7
829.0 819.4
$ 1,549.1 $ 1,538.4
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED)
Quarters ended March 31
(in millions of Canadian dollars) 2012 2011
Operating activities
Net earnings for the period $ 33.1 $ 33.0
Depreciation and amortization 5.7 6.0
Deferred income taxes 0.6 (0.5)
Gain on sale of property, plant and equipment - (0.1)
Stock-based compensation 0.5 0.9
Difference between pension expense and amount (0.2) (0.6)
funded
Debt accretion, amortization and other 1.4 1.3
Cash from operating activities before non-cash 41.1 40.0
working capital
Changes in non-cash working capital items
Accounts receivable (71.0) (81.5)
Inventories (49.7) (8.2)
Accounts payable and accrued liabilities 13.5 35.3
Income tax receivable/payable (11.5) (3.3)
Other 0.1 (2.0)
Change in non-cash working capital (118.6) (59.7)
Cash used in operating activities (77.5) (19.7)
Financing activities
Issue of common shares 0.5 0.9
Dividends on common shares (18.0) (16.5)
Repayment of long-term debt (0.3) (0.3)
Cash used in financing activities (17.8) (15.9)
Investing activities
Purchase of property, plant and equipment (11.9) (4.4)
Proceeds on sale of property, plant and equipment - 0.7
Cash used in investing activities (11.9) (3.7)
Effect of exchange rates on cash and cash (3.2) 1.7
equivalents
Decrease in cash and cash equivalents (110.4) (37.6)
Cash and cash equivalents, beginning of the period 270.7 323.7
Cash and cash equivalents, end of the period $ 160.3 $ 286.1
Supplemental cash flow information:
Income taxes paid $ 26.4 $ 18.3
Interest paid (net) $ 5.0 $ 12.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(in millions of Common Retained Contri- Accumulated Equity Total
Canadian shares earnings buted other component
dollars) surplus comprehensive of
loss convertible
debentures
Balance, Dec. $485.4 $ 306.7 $15.7 $ (17.1) $ 28.7 $819.4
31, 2011
Payment of - (18.0) - - - (18.0)
dividends
Net earnings for - 33.1 - - - 33.1
the period
Other - - - (6.5) - (6.5)
comprehensive
loss for the
period
Recognition of - 0.4 - - 0.4
stock-based
compensation
Stock options 0.6 - - - - 0.6
exercised
Balance, March $486.0 $ 321.8 $ 16.1 $ (23.6) $ 28.7 $829.0
31, 2012
(in millions of Common Retained Contri- Accumulated Equity Total
Canadian shares earnings buted other component
dollars) surplus comprehensive of
loss convertible
debentures
Balance, Dec. $483.7 $ 257.5 $ 13.9 $ (11.0)$ 28.7 $772.8
31, 2010
Payment of - (16.5) - - - (16.5)
dividends
Net earnings for - 33.0 - - - 33.0
the period
Other - - - (4.4) - (4.4)
comprehensive
loss for the
period
Recognition of - - 0.7 - - 0.7
stock-based
compensation
Stock options 1.2 - - - - 1.2
exercised
Balance, March $484.9 $ 274.0 $ 14.6 $ (15.4) $ 28.7 $786.8
31, 2011
We seek Safe Harbor.