Russel Metals Inc.

Russel Metals Inc.

February 24, 2005 13:10 ET

Russel Metals Announces Strong 4th Qtr. Earnings of $0.87 Per Share and Record 2004 Earnings of $3.64 Per Share


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: RUSSEL METALS INC.

TSX SYMBOL: RUS

FEBRUARY 24, 2005 - 13:10 ET

Russel Metals Announces Strong 4th Qtr. Earnings of
$0.87 Per Share and Record 2004 Earnings of $3.64 Per
Share

TORONTO, ONTARIO--(CCNMatthews - Feb. 24, 2005) - Russel Metals Inc.
(TSX:RUS) today announced fourth quarter 2004 earnings of $43.5 million
or $0.87 per share up from $7.7 million or $0.17 per share for the
fourth quarter of 2003. The fourth quarter 2004 revenues increased 52%
to $625.0 million from $410.7 million in 2003.

The fourth quarter results include three adjustments that reduced
earnings per share by $0.07. Without these charges, reported earnings
per share would have been $0.94 for the fourth quarter versus adjusted
earnings of $0.21 for the fourth quarter of 2003. The fourth quarter
2004 adjustments included an after tax charge of $2.5 million for
discontinued operations and before tax charges of $0.7 million for
restructuring costs related to the Acier Leroux acquisition and $0.5
million related to the restructuring of the bank syndicate.

The earnings per share for the year ended December 31, 2004 were $3.64
or $177.8 million versus $0.41 per share or $18.5 million in 2003. The
2004 earnings per share before adjustments were $3.95. The year's
adjustments included a $13.7 million charge for debt restructuring, $3.0
million of restructuring charges related to the Acier Leroux acquisition
both of which are pre tax numbers. In addition, the adjustments included
an after tax charge of $2.9 million for discontinued operations. In
2003, the adjusted earnings per share were $0.51 after adjustments of
$0.10 for restructuring, goodwill impairment and discontinued operations.

Revenue for 2004 was $2,418.6 million, up 60% from $1,507.0 million in
2003. Revenue increased significantly in all business segments.

Bud Siegel, President and CEO stated, "2004 was an outstanding year
throughout the steel industry and our operations produced industry
leading results. Our favorite measurable, return on ending capital
employed, was in double digits for the eighth straight year. The return
on ending capital at December 31, 2004 was 46%. The earnings from
continuing operations before interest and taxes increased five times
from $55.3 million in 2003 to $306.2 million in 2004. The strong
operating results recorded in the year are a direct reflection of the
superior efforts of the employees of Russel Metals Inc. Our shareholders
were rewarded with dividend increases of over 100% during the year to an
annualized dividend of $0.70 per share and a 76% increase in the market
price of the common shares year over year."

Brian Hedges, Executive Vice President and Chief Financial Officer,
stated, "The strengthening of the balance sheet accelerated during 2004,
thanks to the first quarter common share issue, total restructuring of
all our interest bearing debt at significantly lower interest rates, the
redemption of the preferred shares and the high level of profitability
experienced in 2004. The book value per share jumped 55% to $9.15 at
year-end from $5.60 at December 31, 2003."

The total interest bearing debt declined during 2004 and is 35% of the
total balance sheet capitalization at year-end versus 46% at December
31, 2003. In 2004, the Company financed an 86%, or $261 million,
increase in inventory and an increase of 49%, or $123 million, in
accounts receivable. These increases were funded from current
liabilities, the common share issue and earnings. The increase in
current assets was primarily driven by the increase in the transaction
price per ton of steel. It is anticipated that the working capital
requirements will remain at similar levels or decline in 2005 and the
Company will not be required to fund a similar increase in working
capital that occurred in 2004.

The Board of Directors approved a quarterly dividend of 20 cents per
common share payable March 15, 2005 to shareholders of record as of
March 8, 2005.

The Company will be holding an Investor Conference Call on Friday,
February 25, 2005 at 9:00 a.m. ET to review its fourth quarter and
year-end results for 2004. The dial in telephone number for the call is
1-800-291-5032.

For those unable to participate in the conference call, it will be
recorded and available for listening at 1-800-558-5253 until midnight,
March 4th. You will be required to enter reservation number 21214189 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, Vantage Laser, Wirth
Steel and York-Ennis.



RUSSEL METALS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

December 31, December 31,
($000) 2004 2003
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ASSETS
Current
Cash $ 634 $ 19,008
Accounts receivable 360,696 248,904
Inventories 553,915 303,048
Prepaid expenses and other assets 7,069 5,028
Income taxes recoverable 5,996 5,912
Discontinued operations 9,483 1,107
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937,793 583,007


Property, Plant and Equipment 180,655 184,929
Assets Held For Sale 6,291 1,622
Deferred Financing Charges 8,357 3,547
Goodwill 9,205 4,216
Future Income Tax Assets 1,614 10,458
Other Assets 2,566 2,840
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$ 1,146,481 $ 790,619
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 33,242 $ 78,093
Accounts payable and accrued liabilities 348,166 217,173
Income taxes payable 60,049 11,729
Discontinued operations 9,403 2,729
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450,860 309,724
Other Accrued Liabilities 11,440 -
Long-Term Debt 210,630 179,402
Pensions and Benefits 10,146 11,542
Future Income Tax Liabilities 6,831 6,109
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689,907 506,777
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Shareholders' Equity
Preferred shares - 30,000
Shareholders' equity 456,574 253,842
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456,574 283,842
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$ 1,146,481 $ 790,619
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RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)


Quarters ended Years ended
($000, except per December 31, December 31,
share data) 2004 2003 2004 2003
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Segment Revenues
Metals service
centers $ 381,106 $ 279,291 $ 1,538,170 $ 912,671
Energy tubular
products 108,563 65,892 395,296 297,532
Steel distributors 131,780 61,395 471,205 283,579
Other 3,593 4,110 13,953 13,201
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$ 625,042 $ 410,688 $ 2,418,624 $ 1,506,983
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Segment Operating Profits
Metals service
centrers $ 42,525 $ 13,546 $ 209,850 $ 37,832
Energy tubular
products 16,248 4,605 47,200 13,764
Steel distributors 16,144 4,188 78,189 13,380
Other 1,514 1,916 4,565 4,002
Corporate expenses (2,911) (1,492) (16,256) (8,018)
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Earnings before the
following 73,520 22,763 323,548 60,960
Restructuring costs (682) 14 (3,632) (3,583)
Debt restructuring
costs (546) - (13,718) -
Foreign exchange
gain (loss) - - - 348
Goodwill impairment - (2,410) - (2,410)
Interest expense (4,317) (6,316) (20,024) (22,723)
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Earnings before
income taxes 67,975 14,051 286,174 32,592
Provision for income
taxes (21,984) (6,051) (105,405) (13,333)
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Earnings from
continuing
operations 45,991 8,000 180,769 19,259
Loss from
discontinued
operations (2,461) (169) (2,923) (760)
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Net earnings 43,530 7,831 177,846 18,499

Retained earnings --

Dividends on
preferred shares - (562) (611) (2,250)
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Earnings available
to common
shareholders 43,530 7,269 177,235 16,249
Dividends on common
shares (8,723) (3,347) (25,004) (11,605)
Retained earnings,
beginning of the
period 227,926 106,580 110,502 105,858
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Retained earnings,
end of the period $ 262,733 $ 110,502 $ 262,733 $ 110,502
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Basic earnings per
common share continuing
operations $ 0.92 $ 0.18 $ 3.70 $ 0.42
Basic earnings per
common share $ 0.87 $ 0.17 $ 3.64 $ 0.41
Diluted earnings per
common share continuing
operations $ 0.91 $ 0.17 $ 3.62 $ 0.42
Diluted earnings per
common share $ 0.86 $ 0.17 $ 3.56 $ 0.39
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RUSSEL METALS INC.
CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)

Quarters ended Years ended
December 31, December 31,
($000) 2004 2003 2004 2003
---------------------------------------------------------------------

Operating activities
Earnings from continuing
operations $ 45,991 $ 7,831 $ 180,769 $ 19,287
Depreciation and
amortization 4,535 5,009 18,608 16,502
Restructuring costs 2,051 (276) 2,051 3,162
Future income taxes 2,630 (1,146) 5,021 (464)
Loss (gain) on sale of
fixed assets 15 (103) 264 (89)
Debt restructuring 546 - 3,071 -
Stock-based compensation 187 217 924 217
Goodwill impairment - 2,410 - 2,410
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Cash from operating
activities before
working capital 55,955 13,942 210,708 41,025

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Changes in non-cash
working capital items
Accounts receivable 37,366 34,349 (122,814) 18,193
Inventories (95,811) 4,404 (260,898) 91,439
Accounts payable and
accrued liabilities 11,935 10,074 128,353 (12,669)
Current income taxes 9,992 12,000 54,711 11,719
Other (1,442) 1,344 (2,075) 2,571
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Change in non-cash working
capital (37,960) 62,171 (202,723) 111,253

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Cash from operating
activities 17,995 76,113 7,985 152,278

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Financing activities
Increase (decrease) in
bank borrowing 1,237 (67,756) (44,851) 56,952
Repayment of debt assumed - - - (99,262)
Repurchase of long-term debt - - (184,715) -
Issuance of long-term debt - - 235,200 -
Redemption of preferred shares - - (30,000) -
Issue of common shares 224 5,058 54,439 5,663
Dividends on common shares (8,723) (3,347) (25,004) (11,605)
Dividends on preferred
shares - (562) (611) (2,250)
Deferred financing costs (1,958) (16) (9,117) (77)
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Cash from financing
activities (9,220) (66,623) (4,659) (50,579)

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Investing activities
Purchase of fixed assets (7,021) (14,847) (25,394) (34,879)
Proceeds on sale of fixed
assets and assets held for
sale 1,753 843 4,524 1,804
Purchase of businesses - - - (70,359)
Other (2,898) (488) 305 (4,628)
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Cash used in investing
activities (8,166) (14,492) (20,565)(108,062)

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Discontinued operations
Operating activities 61 (156) (1,484) (788)
Investing activities (36) 1,091 349 1,091
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Cash from discontinued
operations 25 935 (1,135) 303

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Increase (decrease) in cash 634 (4,067) (18,374) (6,060)
Cash position, beginning
of the period - 23,075 19,008 25,068
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Cash position, end of the
period $ 634 $ 19,008 $ 634 $ 19,008

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