Russel Metals Inc.
TSX : RUS

Russel Metals Inc.

October 30, 2006 15:20 ET

Russel Metals Announces a Significant Increase in Net Income

TORONTO, ONTARIO--(CCNMatthews - Oct. 30, 2006) - Russel Metals Inc. (TSX:RUS) reported third quarter 2006 net earnings of $45 million or $0.72 per common share. Net earnings were 72% above the third quarter 2005 net earnings of $26 million. The earnings per common share were up 41% from the $0.51 per common share recorded for the third quarter of 2005. In the third quarter of 2006, revenues increased by 7% to $672 million, up from $629 million in the third quarter of 2005. All three of our business segments - metals service centers, steel distributors and energy tubular products recorded higher revenues and operating profits in the third quarter compared with the third quarter of 2005.

The ratios of gross margin and operating profits as a percentage of revenues improved for the fifth consecutive quarter. Steel prices have strengthened since the third quarter last year and remain at historically high levels. All three business segments benefited from higher segment operating profits compared with the third quarter of 2005.

Net earnings for the first nine months of 2006 were 55% higher than the same period last year and both the energy tubular products and steel distributors segments have produced year to date record earnings. Net earnings for the nine months ended September 30, 2006 were $128 million or $2.17 per common share compared to $83 million or $1.64 per common share for the same period in 2005. The average number of common shares outstanding in the first nine months of 2006 was 59.1 million versus 50.4 million in 2005. The total number of common shares outstanding at September 30, 2006 was 62.4 million.

The 7% growth in revenues for the nine months ended September 30, 2006 was generated by the steel distributors and energy tubular products segments as metals service center revenues remained unchanged. Revenues for the first nine months of 2006 were $2.1 billion versus $2.0 billion in 2005.

Bud Siegel, President and Chief Executive Officer, commented, "All three business segments experienced continued strong results in the third quarter and we are on track to have our second best year of earnings." Mr. Siegel continued, "The industry finds itself in a similar scenario to the fourth quarter of 2004. Steel prices have peaked for most products, the inventory pipeline in the service center sector is overstocked and carbon flat rolled steel prices have started to decline. Fortunately for the Company, carbon flat rolled steel only represents approximately 7% of our total product mix. The steel producers have experienced further consolidation within the industry since 2004, which is a positive development. There is a strong indication that the major steel producers will curtail production levels, which should help to keep supply and demand in balance."

Diluted earnings per common share were $0.71 for the quarter ended September 30, 2006 based on average shares outstanding of 62.8 million and $2.15 for the nine months ended September 30, 2006 based on average shares outstanding of 59.6 million.

The Board of Directors approved a quarterly dividend of $0.40 per common share payable December 15, 2006 to shareholders of record as of November 15, 2006.

The Company will be holding an Investor Conference Call on Tuesday, October 31, 2006 at 9:00 a.m. ET to review its third quarter results for 2006. The dial in telephone number for the call is 1-800-346-5998.

For those unable to participate in the conference call, it will be recorded and available for listening at 1-800-558-5253 until midnight, Tuesday, November 7, 2006. You will be required to enter reservation number 21268318 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, Leroux Steel, McCabe Steel, Megantic Metal, Metaux Russel, Milspec Industries, Pioneer Pipe, Russel Leroux, 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)

September 30, December 31,
($000) 2006 2005
---------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 231,111 $ 47,055
Accounts receivable 410,478 359,594
Inventories 623,640 474,034
Prepaid expenses and other assets 6,241 7,010
Income taxes receivable 102 304
---------------------------------------------------------------------------
1,271,572 887,997

Property, Plant and Equipment 188,143 181,841
Assets Held For Sale - 5,085
Deferred Financing Charges 7,072 7,240
Goodwill 9,205 9,205
Future Income Tax Assets 960 994
Other Assets 2,871 2,821
---------------------------------------------------------------------------
$ 1,479,823 $ 1,095,183
---------------------------------------------------------------------------
---------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 528 $ 2,098
Accounts payable and accrued
liabilities 355,673 312,937
Income taxes payable 14,949 5,588
Discontinued operations 1,855 2,386
---------------------------------------------------------------------------
373,005 323,009

Other Accrued Liabilities 20,270 15,210
Long-Term Debt 195,178 204,033
Pensions and Benefits 2,693 8,949
Future Income Tax Liabilities 9,730 5,285
---------------------------------------------------------------------------
600,876 556,486
---------------------------------------------------------------------------
Shareholders' Equity 878,947 538,697
---------------------------------------------------------------------------
$ 1,479,823 $ 1,095,183
---------------------------------------------------------------------------
---------------------------------------------------------------------------



RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)

Quarters ended Nine months ended
September 30, September 30,
($000) 2006 2005 2006 2005
-------------------------------------------------------------------------
Revenues $ 672,272 $ 629,328 $ 2,098,930 $ 1,967,400
Cost of sales and
operating expenses 603,057 586,700 1,898,521 1,826,830
-------------------------------------------------------------------------
Earnings before the
following 69,215 42,628 200,409 140,570
Restructuring - (1,862) 1,237 520
Interest expense, net (982) (3,583) (5,310) (13,882)
-------------------------------------------------------------------------
Earnings before income
taxes 68,233 37,183 196,336 127,208
Provision for income
taxes (23,646) (11,310) (68,195) (44,375)
-------------------------------------------------------------------------
Earnings from continuing
operations 44,587 25,873 128,141 82,833
Loss from discontinued
operations - - - (62)
-------------------------------------------------------------------------
Net earnings for the
period $ 44,587 $ 25,873 $ 128,141 $ 82,771
-------------------------------------------------------------------------
-------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)

Quarters ended Nine months ended
September 30, September 30,
($000, except per share
data) 2006 2005 2006 2005
-------------------------------------------------------------------------
Retained earnings,
beginning of the period $ 385,782 $ 299,474 $ 341,793 $ 262,700
Net earnings for the
period 44,587 25,873 128,141 82,771
Dividends on common
shares (24,916) (12,648) (64,481) (32,772)
-------------------------------------------------------------------------
Retained earnings, end of
the period $ 405,453 $ 312,699 $ 405,453 $ 312,699
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per common
share
- continuing operations $ 0.72 $ 0.51 $ 2.17 $ 1.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per common
share $ 0.72 $ 0.51 $ 2.17 $ 1.64
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
common share
- continuing operations $ 0.71 $ 0.51 $ 2.15 $ 1.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
common share $ 0.71 $ 0.51 $ 2.15 $ 1.62
-------------------------------------------------------------------------
-------------------------------------------------------------------------



RUSSEL METALS INC.
CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)

Quarters ended Nine months ended
September 30, September 30,
($000) 2006 2005 2006 2005
---------------------------------------------------------------------------
Operating activities
Earnings from continuing
operations $ 44,587 $ 25,873 $ 128,141 $ 82,833
Depreciation and
amortization 5,317 4,832 14,935 14,235
Future income taxes 2,043 (298) 2,300 8,378
Loss (gain) on sale of fixed
assets and assets held
for sale 22 1,282 (1,424) (1,916)
Stock-based compensation 777 433 2,587 1,354
Pension expense (funding) 704 - (5,501) -
---------------------------------------------------------------------------
Cash from operating activities
before working capital 53,450 32,122 141,038 104,884
---------------------------------------------------------------------------
Changes in non-cash working
capital items
Accounts receivable (7,934) 4,638 (54,056) (19,847)
Inventories (68,182) 60,099 (154,764) 104,229
Accounts payable and accrued
liabilities 11,082 (18,311) 48,642 (68,917)
Current income taxes 6,222 5,631 11,669 (56,219)
Other 526 457 769 1,317
---------------------------------------------------------------------------
Change in non-cash working
capital (58,286) 52,514 (147,740) (39,437)
---------------------------------------------------------------------------
Cash (used in) from
operating activities (4,836) 84,636 (6,702) 65,447
---------------------------------------------------------------------------
Financing activities
Increase (decrease) in bank
borrowing 528 (49,917) (1,570) (13,723)
Issue of common shares -
public issue - - 271,420 -
Issue of common shares -
options exercised 968 227 6,409 4,109
Dividends on common shares (24,916) (12,648) (64,481) (32,772)
Deferred financing costs (14) (32) (985) (188)
---------------------------------------------------------------------------
Cash (used in) from
financing activities (23,434) (62,370) 210,793 (42,574)
---------------------------------------------------------------------------
Investing activities
Purchase of fixed assets (8,069) (4,141) (21,590) (16,300)
Proceeds on sale of fixed
assets 68 97 1,556 1,462
Proceeds from assets held
for sale and sale of
businesses - - 6,220 5,869
Other (3,475) (2,112) (6,221) (1,318)
---------------------------------------------------------------------------
Cash used in investing
activities (11,476) (6,156) (20,035) (10,287)
---------------------------------------------------------------------------
Discontinued operations
Operating activities - - - (62)
I nvesting activities - - - 6,504
---------------------------------------------------------------------------
Cash from discontinued
operations - - - 6,442
---------------------------------------------------------------------------
(Decrease) increase in cash
and cash equivalents (39,746) 16,110 184,056 19,028
Cash and cash equivalents,
beginning of the period 270,857 3,552 47,055 634
---------------------------------------------------------------------------
Cash and cash equivalents,
end of the period $ 231,111 $ 19,662 $ 231,111 $ 19,662
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Contact Information