Russel Metals Announces December 31, 2007 Fourth Quarter and Annual Results
Russel Metals Inc. (TSX: RUS) today announced earnings of $0.40 per share for the fourth quarter of 2007 and $1.77 per share for the year ended December 31, 2007. Fourth quarter 2006 earnings were $0.49 per share and the fiscal 2006 earnings were $2.65 per share.
Net earnings for the fourth quarter 2007 were $25.3 million, including a $1.6 million gain from discontinued operations. Earnings are down 22.5% from $30.6 million in the same period of 2006. Net earnings for the year were $111.2 million, a decrease of 30% from fiscal 2006 net earnings of $158.7 million.
The fourth quarter results reflect a slight improvement in demand from the prior year in our metals service center segment; however, steel prices and margins remained under pressure. Announced steel mill price increases in the first quarter of 2008 are expected to increase both selling prices and margins. Fourth quarter 2007 same store revenues, excluding JMS, were down 4% compared to the fourth quarter of 2006. Demand for our products in the manufacturing sector of Ontario and Quebec was up over the fourth quarter of 2006 and the third quarter of 2007. Demand in the B.C. region, however, was negatively impacted by weakness in the forestry sector in the last half of 2007.
The energy tubular products segment had a strong year lead by our Comco Pipe operation, which had a record year. The strong performance of this operation, which is a leading service provider in the oil sands of northern Alberta, has helped to offset the decline in volume of our other Western Canadian operations that distribute pipe primarily to those of our customers who are involved in drilling for gas. Lower active drilling rigs and excess pipe availability has reduced volumes and margins. Our U.S. energy tubular operations continue to have strong shipments of line pipe. Revenues in the fourth quarter of 2007 increased 3% compared to the fourth quarter of 2006.
Bud Siegel, President and CEO, stated, “Cash generated from operating activities was $111 million for the fourth quarter of 2007 demonstrating our ability to free up cash from working capital when earnings decline. Our fourth quarter free cash flow was $33 million and was used to pay our industry leading dividend of $28 million. The additional $78 million of working capital freed up in the fourth quarter funded an increase in our cash position to $182 million.”
Mr. Siegel continued, “We are happy with the progress of the integration of JMS Metal Services with Russel Metals. These operations, now known as JMS Russel Metals, made an accretive contribution in the quarter. As the JMS units do not overlap with any of our other operating units there is no rationalization of operations needed. The operations will be transitioned to our metals service centers central computer systems in the first half of 2008.”
The Board of Directors approved a quarterly dividend of $0.45 per common share payable March 15, 2008 to shareholders of record as of March 3, 2008. In addition the Board approved a normal course issuer bid for up to six million of our outstanding common shares.
The Company will be holding an Investor Conference Call on Tuesday, February 19, 2008 at 10:00 a.m. ET to review its fourth quarter results for 2007. The dial-in telephone numbers for the call are 416-340-8010 (Toronto and International callers) and 1-866-540-8136 (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 416-695-5800 (Toronto and International callers) and 1-800-408-3053 (U.S. and Canada) until midnight, Tuesday, February 26, 2008. You will be required to enter pass code 3247709 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 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, Megantic Metal, Metaux Russel, Metaux Russel Produits Specialises, Milspec Industries, 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: there will be steady demand in the manufacturing, resource and construction segments of the Canadian economy, oil and gas prices will not change materially, there will be continued consolidation of steel producers, the recent stability in the price of steel will continue, and the Canadian dollar will maintain recent gains while not appreciating significantly. 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.
RUSSEL METALS INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) At December 31 (millions) 2007 2006 ————————————————————————— ASSETS Current Cash and cash equivalents $ 181.8 $ 209.9 Accounts receivable 341.8 329.0 Inventories 572.6 664.0 Prepaid expenses and other assets 8.5 7.4 Income taxes 3.9 2.1 ————————————————————————— 1,108.6 1,212.4 Property, Plant and Equipment 227.9 189.5 Deferred Financing Charges 0.3 6.8 Future Income Tax Assets 1.0 0.4 Other Assets 12.1 3.9 Goodwill and Intangibles 53.4 9.2 ————————————————————————— $ 1,403.3 $ 1,422.2 ————————————————————————— ————————————————————————— LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities $ 294.2 $ 283.9 Income taxes payable 2.8 15.0 Current portion long-term debt 0.9 – ————————————————————————— 297.9 298.9 Other Accrued Liabilities – 15.4 Derivatives 39.5 – Long-Term Debt 174.9 203.9 Pensions and Benefits 1.4 2.6 Future Income Tax Liabilities 5.8 6.8 ————————————————————————— 519.5 527.6 ————————————————————————— Shareholders’ Equity 883.8 894.6 ————————————————————————— $ 1,403.3 $ 1,422.2 ————————————————————————— ————————————————————————— RUSSEL METALS INC. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) Quarters Ended Years Ended December 31, December 31, (millions, except per share data) 2007 2006 2007 2006 —————————————————————————- Revenues $ 598.4 $ 593.2 $ 2,559.2 $ 2,692.1 Cost of sales and operating expenses 560.8 544.6 2,379.9 2,443.1 —————————————————————————- Earnings before the following 37.6 48.6 179.3 249.0 Other expense (income) 0.9 – 2.5 (1.2) Interest expense, net 2.2 1.4 7.1 6.7 —————————————————————————- Earnings before income taxes 34.5 47.2 169.7 243.5 Provision for income taxes (10.8) (16.6) (60.1) (84.8) —————————————————————————- Earnings from continuing operations 23.7 30.6 109.6 158.7 Income from discontinued operations 1.6 – 1.6 – —————————————————————————- Net earnings for the period $ 25.3 $ 30.6 $ 111.2 $ 158.7 —————————————————————————- —————————————————————————- Basic earnings per common share – continuing operations $ 0.38 $ 0.49 $ 1.74 $ 2.65 —————————————————————————- —————————————————————————- Basic earnings per common share $ 0.40 $ 0.49 $ 1.77 $ 2.65 —————————————————————————- —————————————————————————- Diluted earnings per common share – continuing operations $ 0.37 $ 0.49 $ 1.73 $ 2.63 —————————————————————————- —————————————————————————- Diluted earnings per common share $ 0.40 $ 0.49 $ 1.76 $ 2.63 —————————————————————————- —————————————————————————- RUSSEL METALS INC. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED) Quarters Ended Years Ended December 31, December 31, (millions) 2007 2006 2007 2006 —————————————————————————- Retained earnings, beginning of the period, as previously reported $ 414.7 $ 405.4 $ 411.1 $ 341.8 Transitional adjustment – financial instruments – – (0.5) – —————————————————————————- Retained earnings, beginning of the period, as restated 414.7 405.4 410.6 341.8 Net earnings for the period 25.3 30.6 111.2 158.7 Dividends on common shares (28.3) (24.9) (110.1) (89.4) —————————————————————————- Retained earnings, end of the period $ 411.7 $ 411.1 $ 411.7 $ 411.1 —————————————————————————- —————————————————————————- RUSSEL METALS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Quarter Ended Year Ended December 31 December 31 (millions) 2007 2007 —————————————————————————- Net earnings for the period $ 25.3 $ 111.2 —————————————————————————- Other comprehensive loss Unrealized foreign exchange losses on translating financial statements of self sustaining foreign operation (U.S. subsidiaries) (3.4) (34.5) Gains on items designated as net investment hedges (1.6) 9.1 Gains on items designated as cash flow hedges 4.6 7.6 —————————————————————————- Other comprehensive loss (0.4) (17.8) —————————————————————————- Comprehensive income $ 24.9 $ 93.4 —————————————————————————- —————————————————————————- RUSSEL METALS INC. CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED) Quarters ended Years ended December 31, December 31, (millions) 2007 2006 2007 2006 —————————————————————————- Operating activities Earnings from continuing operations $ 23.7 $ 30.6 $ 109.6 $ 158.7 Depreciation and amortization 5.6 5.1 20.4 20.0 Future income taxes 1.8 1.6 4.2 3.9 Gain on sale of fixed assets and assets held for sale 0.1 0.1 (0.5) (1.3) Stock-based compensation 0.4 0.8 4.8 3.4 Pension expense (funding) (0.1) (0.7) (1.3) (6.2) Other 1.2 – 3.2 – —————————————————————————- Cash from operating activities before working capital 32.7 37.5 140.4 178.5 —————————————————————————- Changes in non-cash working capital items Accounts receivable 63.9 84.3 (5.0) 30.3 Inventories 16.7 (33.4) 89.1 (188.2) Accounts payable and accrued liabilities 5.0 (79.6) 4.7 (30.9) Current income taxes (5.6) (0.4) (17.6) 9.2 Other (1.7) (3.2) (0.9) (0.4) —————————————————————————- Change in non-cash working capital 78.3 (32.3) 70.3 (180.0) —————————————————————————- Cash from (used in) operating activities 111.0 5.2 210.7 (1.5) —————————————————————————- Financing activities Decrease in bank borrowing – (0.5) – (2.1) Issue of common shares – 0.1 10.9 277.9 Dividends common shares (28.3) (24.9) (110.1) (89.4) Deferred financing (0.2) (0.1) (0.2) (1.1) Repayment of long-term debt (0.3) – (0.3) – —————————————————————————- Cash from (used in) financing activities (28.8) (25.4) (99.7) 185.3 —————————————————————————- Investing activities Purchase of fixed assets (3.6) (6.0) (16.6) (27.6) Proceeds on sale of fixed assets 0.1 0.1 1.5 1.7 Purchase of business – – (109.0) – Proceeds from assets held for sale – – – 6.2 Reclassification of cash equivalents to other assets – – (11.0) – Other 1.2 3.6 1.6 (0.9) —————————————————————————- Cash used in investing activities (2.3) (2.3) (133.5) (20.6) —————————————————————————- Effect of exchange rates on cash (1.7) 1.3 (5.6) (0.4) —————————————————————————- (Decrease) increase in cash and cash equivalents 78.2 (21.2) (28.1) 162.8 Cash and cash equivalents, beginning of the period 103.6 231.1 209.9 47.1 —————————————————————————- Cash and cash equivalents, end of the period $ 181.8 $ 209.9 $ 181.8 $ 209.9 —————————————————————————- —————————————————————————-
Contacts: Russel Metals Inc. Marion E. Britton, C.A. Vice President and Chief Financial Officer (905) 819-7407 Email: info@russelmetals.com Website: www.russelmetals.com
SOURCE: Russel Metals Inc.