Russel Metals Announces 2015 Annual and Fourth Quarter Results and Charges

TORONTO, Feb. 16, 2016 /CNW/ - Russel Metals Inc. (RUS - TSX) today announced financial results for fourth quarter and fiscal year ended December 31, 2015.

Adjusted Earnings		Quarters Ended December 31					Year Ended December 31
		2015		2014			2015		2014
Adjusted EBIT ^2
	Metals Service Centers	$	5	$	14		$	44	$	83
	Energy Products	13		36			70		137
	Steel Distributors	1		12			18		38
Adjusted EBIT ^2		$	18	$	59		$	119	$	242
Adjusted Net Earnings		$	10	$	38		$	61	$	145
Adjusted Earnings per Share ^3		$	0.16	$	0.62		$	0.99	$	2.36
Cash Flow
Cash Flow from Operating Activities		$	188	$	29		$	366	$	28
Dividends Paid ^1		$	0.38	$	0.38		$	1.52	$	1.46
GAAP Earnings
Revenues		$	673	$	1,013		$	3,112	$	3,869
Net Income (Loss)		$	(135)	$	31		$	(88)	$	124
Earnings (Loss) per Share		$	(2.19)	$	0.50		$	(1.42)	$	2.01
All amounts are reported in millions of Canadian dollars except per share and dividend figures, which are in Canadian dollars
^1 Dividends paid during the period ^2Adjusted EBIT and Adjusted Net Earnings are Non GAAP measures.  Adjusted EBIT represents earnings before interest and taxes excluding asset impairment, product warranty provision and inventory write-downs.  Adjusted Net Earnings excludes the net after tax amounts for asset impairment, product warranty provision, debt redemption and inventory write-downs ^3Adjusted Earnings per Share is a Non GAAP measure.  Adjusted Earnings per share excludes asset impairment, product warranty provision debt redemption and inventory provisions

We reported a net loss of $88 million or $1.42 per share on revenues of $3.1 billion, for the year ended December 31, 2015.  The loss includes a non cash impairment charge of $124 million or $1.87 per share.  Adjusted net income was $61 million or $0.99 per share, excluding items shown in the table below totaling $149 million or $2.41 per share.

These results compare to revenues of $3.9 billion and net earnings of $124 million or $2.01 per share which on an adjusted basis were net earnings of $145 million or $2.36 per share for the year ended December 31, 2014.

The 2015 fourth quarter loss was $135 million or $2.19 per share on revenues of $0.7 billion.  The weakness in the energy sector and the decline in steel prices that we experienced in the fourth quarter resulted in after tax inventory write-downs of $32 million and asset impairment and other charges of $115 million as shown on the reconciliation of GAAP net earnings to adjusted net earnings below.  The fourth quarter adjusted net earnings were $10 million and adjusted earnings per share was $0.16.

Reconciliation of Net Earnings
(millions, net of tax)			Quarters Ended December 31						Year Ended December 31
			2015		2014				2015		2014
Adjusted Net Earnings			$	10	$	38			$	61	$	145
Less:
		Asset Impairments	115		10				115		7
		Inventory Write-Downs	32		3				42		10
	Change in Fair Value
		of Contingent Consideration	(21)		(6)				(27)		4
		Product Warranty Claims	15		-				15		-
		Debt Redemption Charge	4		-				4		-
GAAP Net Earnings			$	(135)	$	31			$	(88)	$	124

Revenues of $326 million in our metals service center segment were 19% lower than the 2014 fourth quarter due to weaker demand and lower selling prices.  Tons shipped at our metals service centers decreased by 14% and selling prices were lower by 6% over the 2014 fourth quarter.  Economic uncertainty caused by the severe fall in oil prices has spilled over into supporting industries primarily in the Western Canadian operations.  Adjusted gross margin was 19.0% compared to 19.4% for the fourth quarter of 2014 due to competitive pricing pressure as demand weakened.  The 2015 fourth quarter metals service center adjusted operating profits were $5 million compared to $14 million in the same quarter last year.

Fourth quarter 2015 revenues in our energy products segment decreased 43% to $274 million compared to $484 million in the 2014 fourth quarter due to lower drilling activity and fewer projects caused by the weaker oil and natural gas prices.  This segment had operating income of $13 million after excluding the inventory write-downs of $27 million primarily recorded in our U.S. operations compared to adjusted operating profits of $36 million in the same quarter last year.

Revenues in our steel distributors segment decreased by 43% to $72 million in the 2015 fourth quarter compared to $125 million in the 2014 fourth quarter due to the decrease in steel prices and market weakness, particularly in Houston and surrounding areas.  Operating profits after excluding inventory write-downs of $19 million were $1 million in the 2015 fourth quarter compared to adjusted operating profits of $12 million in the same quarter last year.

Mr. Brian R. Hedges, CEO, commented "The weakness in steel prices lasted longer and was deeper than expected.  Steel prices declined for most of 2015, falling below our cost in the fourth quarter and triggering inventory write-downs.  Mill price increases in early 2016 lead us to believe that steel prices should stabilize in 2016."

"The decline in energy prices and exploration activity has impacted both the energy and steel industries.  We recorded non cash asset impairment charges of $124 million in 2015, the majority of which relates to our energy acquisitions since 2012.  These business units were profitable excluding asset impairment charges in 2015; however, their customer base continued to reduce rig activity and capital spending throughout the year.  Late in 2015, select oil sands producers announced the deferral of additional phases of new or existing projects.  If this continues, it will further impact activity levels in the sector."

Mr. Hedges continued "Cash flow in 2015 was strong as we generated $366 million from operating activities which enabled us to redeem our Convertible Debentures and reduce our interest cost."

The Board of Directors approved a quarterly dividend of $0.38 per common share payable March 15, 2016 to shareholders of record as of March 1, 2016.

The Company will be holding an Investor Conference Call on Wednesday, February 17, 2016 at 9:00 a.m. ET to review its 2015 fourth 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, March 2, 2016.  You will be required to enter pass code 120079 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, 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 Processing, Russel Metals Specialty Products, Russel Metals Williams Bahcall, 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 volatility in metal prices; volatility in oil and natural gas prices; cyclicality of the metals industry and the industries that purchase our products; decreased capital and other expenditures in the energy industry; product claims from customers; significant competition that could reduce our market share; the interruption in sources of metals supply; manufacturers selling directly to our customer base; material substitution; credit risk of our customers; lack of credit availability; change in our credit ratings; currency exchange risk; restrictive debt covenants; non-cash asset impairments; the loss of key individuals; decentralized operating structure; the integration of future acquisitions; the failure of our key computer-based systems, including our enterprise resource and planning systems; failure to renegotiate any of our collective agreements and work stoppages; litigious business environment; environmental liabilities; environmental concerns or changes in government regulations; proposed legislative changes on carbon emissions; changes in government regulations relating to workplace safety and worker health; fluctuation of our common share price; dilution; and variability of dividends.

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 should not be unduly relied upon.  These statements speak only as of the date of this press release, 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, under the heading "Risk" in our most recent MD&A, under the heading "Risk Management and Risks Affecting Our Business" in our most recent Annual Information Form and as are 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 [email protected]; or by calling our Investor Relations Line: 905-816-5178.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
		Quarters ended				Years ended
		December 31				December 31
(in millions of Canadian dollars, except per share data)		2015		2014		2015		2014
Revenues		$	673.0	$	1,013.2	$	3,111.6	$	3,869.3
Cost of materials		604.7		838.3		2,624.6		3,166.0
Employee expenses		55.6		72.6		254.8		287.8
Other operating expenses		42.0		49.4		174.8		189.3
Impairment of goodwill and long-lived assets		123.5		9.9		123.5		9.9
Product warranty provision		20.0		-		20.0		-
Gain on sale of business		-		(0.7)		-		(0.7)
Earnings (loss) before interest, finance expense
	and provision for income taxes	(172.8)		43.7		(86.1)		217.0
Interest expense		11.9		9.5		40.6		36.9
Other finance expense (income)		(21.2)		(6.2)		(26.7)		4.1
Earnings (loss) before provision for income taxes		(163.5)		40.4		(100.0)		176.0
Provision for (recovery of) income taxes		(28.2)		9.3		(12.4)		52.4
Net earnings (loss) for the period		$	(135.3)	$	31.1	$	(87.6)	$	123.6
Net earnings (loss) attributed to:
	Equity holders	$	(135.3)	$	31.1	$	(87.6)	$	123.5
	Non-controlling interest	-		-		-		0.1
		$	(135.3)	$	31.1	$	(87.6)	$	123.6
Basic earnings (loss) per common share		$	(2.19)	$	0.50	$	(1.42)	$	2.01
Diluted earnings (loss) per common share		$	(2.19)	$	0.49	$	(1.42)	$	1.95

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
			Quarters ended				Years ended
			December 31				December 31
(in millions of Canadian dollars)			2015		2014		2015		2014
Net earnings (loss) for the period			$	(135.3)	$	31.1	$	(87.6)	$	123.6
Other comprehensive income
Items that may be reclassified to earnings
	Unrealized foreign exchange gains on
		translation of foreign operations	15.0		14.7		82.8		35.1
Items that may not be reclassified to earnings
	Actuarial gains (losses) on pension and similar
		obligations	3.4		2.0		0.9		(4.5)
Other comprehensive income			18.4		16.7		83.7		30.6
Total comprehensive income (loss)			$	(116.9)	$	47.8	$	(3.9)	$	154.2

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
		December 31		December 31
(in millions of Canadian dollars)		2015		2014
ASSETS
Current
	Cash and cash equivalents	$	143.4	$	53.4
	Accounts receivable	333.5		569.3
	Inventories	712.5		930.8
	Prepaid expenses	10.7		11.6
	Income taxes	24.2		2.8
		1,224.3		1,567.9
Property, Plant and Equipment		267.8		249.8
Deferred Income Tax Assets		15.8		4.9
Financial and Other Assets		7.1		5.9
Goodwill and Intangibles		92.0		214.3
		$	1,607.0	$	2,042.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
	Bank indebtedness	$	94.2	$	24.2
	Accounts payable and accrued liabilities	303.1		500.4
	Income taxes payable	0.4		14.1
	Current portion long-term debt	0.5		0.5
		398.2		539.2
Long-Term Debt		295.2		460.5
Pensions and Benefits		21.7		26.1
Deferred Income Tax Liabilities		14.2		17.0
Provisions and Other Non-Current Liabilities		8.8		35.0
		738.1		1,077.8
Shareholders' Equity
	Common shares	531.7		531.2
	Retained earnings	192.1		344.0
	Contributed surplus	15.2		14.1
	Accumulated other comprehensive income	129.9		47.1
	Equity component of convertible debenture	-		28.6
Total Shareholders' Equity		868.9		965.0
Total Liabilities and Shareholders' Equity		$	1,607.0	$	2,042.8

CONSOLIDATED STATEMENTS OF CASHFLOW
			Quarters ended				Years ended
			December 31				December 31
(in millions of Canadian dollars)			2015		2014		2015			2014
Operating activities
	Net earnings (loss) for the period		$	(135.3)	$	31.1	$	(87.6)	$	123.6
	Depreciation and amortization		8.7		8.8		35.1		34.8
	Deferred income taxes		(16.0)		(2.8)		(14.1)		(3.0)
	(Gain) loss on sale of property, plant and equipment		0.1		0.3		(1.9)		1.0
	Gain on sale of business		-		(0.7)		-		(0.7)
	Share-based compensation		0.3		0.4		1.2		1.6
	Difference between pension expense and
		amount funded	(2.0)		(2.5)		(3.9)		(3.2)
	Impairment of goodwill and long-lived assets		123.5		9.9		123.5		9.9
	Debt accretion, amortization and other		5.4		1.3		9.5		4.9
	Change in fair value of contingent consideration		(21.2)		(6.2)		(26.7)		4.1
Cash from operating activities
	before non-cash working capital		(36.5)		39.6		35.1		173.0
Changes in non-cash working capital items
	Accounts receivable		111.8		57.1		258.1		(106.6)
	Inventories		73.0		(55.8)		215.0		(161.0)
	Inventories net increase in NRV reserve		46.8		5.2		61.3		14.6
	Accounts payable and accrued liabilities		7.9		(17.4)		(170.8)		96.5
	Income taxes		(15.1)		2.4		(33.3)		17.2
	Other		0.2		(2.0)		0.8		(5.6)
Change in non-cash working capital			224.6		(10.5)		331.1		(144.9)
Cash from operating activities			188.1		29.1		366.2		28.1
Financing activities
	Increase in bank borrowings		80.6		24.2		70.0		24.2
	Issue of common shares		0.1		0.5		0.5		17.4
	Dividends on common shares		(23.5)		(23.5)		(93.8)		(89.6)
	Repayment of long-term debt		(174.5)		-		(174.9)		(0.9)
	Deferred financing		-		-		(1.0)		-
Cash used in financing activities			(117.3)		1.2		(199.2)		(48.9)
Investing activities
	Purchase of property, plant and equipment		(8.8)		(11.0)		(38.3)		(48.2)
	Proceeds on sale of property, plant and equipment		0.1		0.6		3.3		1.7
	Purchase of business		-		(0.9)		(27.3)		(1.6)
	Proceeds on sale of business		-		2.3		-		2.3
	Payment of contingent consideration		-		-		(17.5)		(4.1)
Cash used in investing activities			(8.7)		(9.0)		(79.8)		(49.9)
Effect of exchange rates on cash
		and cash equivalents	(13.1)		4.5		2.8		7.9
Increase (decrease) in cash and cash equivalents			49.0		25.8		90.0		(62.8)
Cash and cash equivalents, beginning of the period			94.4		27.6		53.4		116.2
Cash and cash equivalents, end of the year			$	143.4	$	53.4	$	143.4	$	53.4
Supplemental cash flow information:
Income taxes paid			$	2.6	$	9.8	$	35.3	$	37.6
Interest paid (net)			$	11.3	$	10.5	$	38.5	$	36.8

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
								Accumulated Other Comprehensive Income		Equity Component of Convertible Debentures
		Common Shares		Retained Earnings		Contributed Surplus
(in millions of Canadian dollars)												Total
Balance, January 1, 2015		$	531.2	$	344.0	$	14.1	$	47.1	$	28.6	$	965.0
Payment of dividends		-		(93.8)		-		-		-		(93.8)
Net loss for the year		-		(87.6)		-		-		-		(87.6)
Other comprehensive income
	for the year	-		-		-		83.7		-		83.7
Recognition of share-based
compensation		-		-		1.2		-		-		1.2
Share options exercised		0.5		-		(0.1)		-		-		0.4
Redemption of debentures		-		28.6		-		-		(28.6)		-
Transfer of net actuarial gains
	on defined benefit plans	-		0.9		-		(0.9)		-		-
Balance, December 31, 2015		$	531.7	$	192.1	$	15.2	$	129.9	$	-	$	868.9

								Accumulated Other Comprehensive Income		Equity Component of Convertible Debentures
												Non Controlling Interest
		Common Shares		Retained Earnings		Contributed Surplus
(in millions of Canadian dollars)														Total
Balance, January 1, 2014		$	509.5	$	314.6	$	16.2	$	12.0	$	28.7	$	1.4	$	882.4
Changed during the year		-		-		-		-		-		(0.1)		(0.1)
Payment of dividends		-		(89.6)		-		-		-		-		(89.6)
Net earnings for the year		-		123.5		-		-		-		0.1		123.6
Other comprehensive income
	for the year	-		-		-		30.6		-		-		30.6
Recognition of share-based
compensation		-		-		1.6		-		-		-		1.6
Share options exercised		21.2		-		(3.7)		-		-		-		17.5
Conversion of debentures		0.5		-		-		-		(0.1)		-		0.4
Sale of business		-		-		-		-		-		(1.4)		(1.4)
Transfer of net actuarial losses
	on defined benefit plans	-		(4.5)		-		4.5		-		-		-
Balance, December 31, 2014		$	531.2	$	344.0	$	14.1	$	47.1	$	28.6	$	-	$	965.0

SOURCE Russel Metals Inc.

Marion E. Britton, CPA, CA, Executive Vice President and Chief Financial Officer, Russel Metals Inc., [phone], E-mail: [email protected], Website: www.russelmetals.com