Russel Metals (RUSMF) 6-K Russel Metals Announces First Quarter 2003 Results

NEWS


FOR IMMEDIATE RELEASE

STOCK SYMBOL:   TSX: RUS, RUS.PR.C

RUSSEL METALS ANNOUNCES FIRST QUARTER 2003 RESULTS

TORONTO, CANADA -- April 24, 2003 -- Russel Metals Inc. announced today first quarter 2003 net earnings of Cdn. $3.6 million and basic earnings per share of $0.08.  The results are unchanged from the first quarter of 2002 which had net earnings of $3.5 million and earnings per share of $0.08. 

Revenue for the first quarter 2003 was $367.0 million up 13% from the first quarter of 2002 revenue of $325.9 million.  The revenue increase occurred due to higher average selling prices and the acquisition of Williams Steel, which resulted in 9% higher service center revenues.  Energy revenues were up 13% due to higher volumes.  The import/export operations experienced 22% higher revenues due to both higher volumes and higher selling prices.

The elevated inventory position experienced at year end was corrected during the first quarter primarily in our import/export operations.  Overall inventory levels declined to $282.4 million, an improvement of $39.3 million.  The key financial ratios were all strong.  On a trailing twelve months basis EBITDA to interest was 4.2 and return on ending capital employed was 15.4%.

The Company recently announced that it had entered into agreements pursuant to which Russel will offer to purchase all of the outstanding shares of Leroux Steel Inc.  The $185 million aggregate value of the transaction includes debt of $66 million for the share purchase and assumed debt of $119 million.  The transaction will be financed out of Russel's existing credit facility.  The agreements include an irrevocable commitment by Mr. Gilles Leroux, certain of his affiliates and Canam Manac Group Inc. to tender all of their Leroux Steel Inc. securities to Russel's offer and not to solicit other proposals.

Bud Siegel, President and C.E.O., stated, "The strength generated on our Balance Sheet over the last several years has provided Russel with the foundation to finance the announced Leroux Steel acquisition.  The acquisition of Leroux Steel is an excellent development in our acquisition strategy of focusing our acquisitions on building our Canadian Service Center presence."

The Company will be holding an Investor Conference Call on Friday, April 25, 2003 at 9:00 a.m. EST to review its first quarter results for 2003. The dial-in-telephone number for the call is 1-888-433-1657.

For those unable to participate in the conference call, it will be recorded and available for listening at 1-800-558-5253 until midnight, May 2.  You will be required to enter reservation number 21014580 in order to access the call. 

Russel Metals is one of the largest metals distribution companies in North America.  It carries on business in three metals distribution segments: service center, energy sector and import/export, under various names including Russel Metals, A.J. Forsyth, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Drummond McCall, Fedmet Tubulars, McCabe Steel, Métaux Russel, Milspec Industries, Pioneer Pipe, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Vantage Laser, Wirth Steel and York Steel.

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For further information, contact:
Brian R. Hedges, C.A.
Executive Vice President
and Chief Financial Officer
Russel Metals Inc.
(905) 819-7401
Web site : www.russelmetals.com
e-mail: info@russelmetals.com

RUSSEL METALS INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
	March 31,	Dec. 31,
($000)	2003	2002
ASSETS
Current
Cash	$    10,605	$    25,068
Accounts receivable	223,821	201,675
Inventories	282,357	329,415
Prepaid expenses and other assets	4,960	6,077
Income taxes recoverable	1,798	1,306
	523,541	563,541
Property, Plant and Equipment	109,551	110,512
Deferred Financing Charges	4,556	4,962
Goodwill	2,500	2,709
Future Income Tax Assets	10,350	10,698
Other Assets	2,347	3,172
	$  652,845	$  695,594
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness	$   12,259	$   21,141
Accounts payable and accrued liabilities	164,610	188,585
Current income taxes payable	1,629	2,487
	178,498	212,213
Long-Term Debt	199,851	212,602
Pensions and Benefits	9,713	9,590
Future Income Tax Liabilities	11,840	8,749
	399,902	443,154
Shareholders' Equity
Preferred shares	30,000	30,000
Shareholders' equity	222,943	222,440
	252,943	252,440
	$  652,845	$  695,594

RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
	Quarters ended March 31,
($000)	2003	2002
Segment Revenues
Service center distribution	$   194,213	$   178,512
Energy sector distribution	83,789	74,027
Steel import/export	87,669	72,076
Other	1,350	1,248
	$   367,021	$   325,863
Segment Operating Profits
Service center distribution	$       6,072	$       5,968
Energy sector distribution	4,167	3,978
Steel import/export	3,650	3,901
Other	(970)	(770)
Corporate expenses	(2,310)	(2,053)
Earnings before the following	10,609	11,024
Foreign exchange gain (loss)	348	(9)
Interest expense	(5,104)	(5,131)
Earnings before income taxes	5,853	5,884
Provision for income taxes	2,266	2,370
Net earnings for the period	3,587	3,514
Retained earnings --
Dividends on preferred shares	(563)	(563)
Earnings available to common shareholders	3,024	2,951
Dividends on common shares	(2,667)	-
Retained earnings, beginning of the period	105,858	100,461
Adjustment for goodwill impairment	-	(15,123)
Retained earnings, end of the period	$  106,215	$   88,289
Basic and diluted earnings per common share	$        0.08	$        0.08
Number of Shares
Common shares
Average for the period	38,080,041	37,981,501
End of the period	38,118,101	37,981,501
Class II preferred shares, Series C	1,200,000	1,200,000

RUSSEL METALS INC.
CONSOLIDATED CASH FLOW STATEMENTS
(UNAUDITED)
	Quarters ended March 31,
($000)	2003	2002
Operating activities
Net earnings for the period	$      3,587	$      3,514
Depreciation and amortization	3,616	3,865
Future income taxes	1,055	1,121
Loss on sale of fixed assets	15	122
Foreign exchange loss	-	9
Cash from operating activities before working capital	$      8,273	$      8,631
Changes in non-cash working capital items
Accounts receivable	(25,813)	(11,661)
Inventories	39,256	24,770
Accounts payable and accrued liabilities	(21,679)	12,289
Current income taxes	1,034	4
Other	1,117	440
Cash in non-cash working capital	(6,085)	25,842
Cash from operating activities	2,188	34,473
Financing activities
Increase in bank borrowing	(8,882)	-
Issue of common shares	212	-
Dividends on common shares	(2,667)	-
Dividends on preferred shares	(563)	(563)
Cash used in financing activities	(11,900)	(563)
Investing activities
Purchase of business	-	(4,387)
Purchase of fixed assets	(4,233)	(1,300)
Proceeds on sale of fixed assets	21	836
Other	(539)	252
Cash used in investing activities	(4,751)	(4,599)
Increase (decrease) in cash	(14,463)	29,311
Cash position, beginning of the period	25,068	17,151
Cash position, end of the period	$   10,605	$   46,462
Supplemental information:
Interest Paid (Received)	$        216	$        (75)
Income Taxes Paid	$     3,815	$     1,207

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
1.	These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles; however, they do not include all of the disclosure requirements for annual consolidated financial statements.  These interim consolidated financial statements follow the same accounting policies disclosed in note 1 to the 2002 annual consolidated financial statements.  These interim consolidated financial statements should be read in conjunction with the 2002 annual consolidated financial statements including notes thereto.  These interim consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the periods reported.
2.	Economic Cycle
	All three of the metals operating segments are significantly affected by economic cycles.  Revenues and operating profits in the energy sector are also affected by oil and gas drilling in western Canada, which is predominantly carried out during the period from October to March.  For these reasons, the results of operations for the periods shown are not necessarily indicative of the results for the full year.
3.	Interest Expense

	Quarters ended March 31,
($000)	2003	2002
Interest on long-term debt	$4,969	$5,194
Other interest expense (income)	135	(63)
Total Interest	$5,104	$5,131

4.	Stock-based Compensation
	During the quarter ended March 31, 2003, the Company issued 735,000 stock options (2002 - 534,000) at an exercise price of $5.20 (2002 - $3.75).  The assumptions used in the Black Scholes option-pricing model are not materially different from those disclosed in Note 11 to the 2002 annual consolidated financial statements.
	Pro-forma net earnings and earnings per share under the fair value-based method of accounting for stock options are as follows:

	Quarters ended March 31,
($000, except per share data)	2003	2002
Net earnings	$3,414	$3,329
Basic earnings per share	$  0.07	$  0.07

5.

Subsequent Event

On April 15, 2003, the Company announced that it had reached an agreement with the controlling shareholders of Leroux Steel Inc. to extend an offer to purchase all the outstanding shares of Leroux Steel Inc. at a price of $6.30 per share.  At the option of the Leroux Steel Inc. shareholders, the $6.30 price can be satisfied by all cash or a combination of cash and common shares of the Company to a maximum of 3,612,672 common shares.  The aggregate value of the transaction, including net debt assumed is approximately $185 million, which will be financed out of the Company's existing credit facility.