UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May , 1996.
Russel Metals Inc.
Suite 210, 1900 Minnesota Court, Mississauga, Ontario L5N 3C9
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file annual reports
under cover
of Form 20-F or Form 40-F.]
Form 20-F Form 40-F
[Indicate by check mark whether the registrant by furnishing the information
contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule
12g3-2(b) under the Securities Exchange Act of 1934.]
Yes No
[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection
with Rule 12g3-2(b):
82- ______________.]
RUSSEL METALS/NEWS
FOR IMMEDIATE RELEASE
STOCK SYMBOL: TSE: RUS.A NASDAQ: RUSAF
RUSSEL METALS REPORTS FIRST QUARTER RESULTS
TORONTO (May 15, 1996) -- Russel Metals Inc. today reported a first quarter net
loss of
$2.5 million or 6 cents per share, compared to earnings of $4.4 million or 8
cents per share in the
first quarter of last year. Lower margins in the Metals segment were the
principal reason for the
decline.
The Company's consolidated revenues for the quarter decreased by 10.3% to
$356.7 million
compared to $397.7 million in the first quarter of last year. Metals segment
revenues declined
7.2% in the quarter reflecting lower selling prices and volumes. Metals first
quarter revenue was
up 12.1% when compared to the fourth quarter of fiscal 1995.
Metals operating profit in the quarter declined to $7.1 million from $20.2
million in the
comparable quarter of 1995. The first quarter of 1995 was the Company's
strongest quarter in the
current cycle. Lower volumes and prices in the current quarter, combined with
customer
resistance to recent price increases by the steel mills, were the principal
reasons for the lower
Metals earnings. Metals first quarter operating profit was ahead $2.1 million
when compared to
the fourth quarter of fiscal 1995.
Reduced revenue and operating margins in the Transport operations for the
current quarter relate
primarily to the absence of the White Pass Petroleum operations that were sold
effective May 31,
1995.
The lower operating margin in the quarter was offset by an improvement in the
Company's
interest expense. Interest costs declined $2.7 million, or 25%, from the
first quarter of 1995 to
$8.2 million in the current quarter. The continuing reduction in Metals
working capital
requirements combined with proceeds from the sale of non-metals assets are
the principal factors
contributing to the lower interest costs.
Russel Metals Chairman and Chief Executive Officer, John S. Pelton,
commented, "The results
for the quarter reflect the downturn in the steel cycle that started in the
second quarter of last
year. While the current round of mill price increases may help margins in the
second quarter, the
increase in supply as new mill capacity comes on stream and as North American
production
problems are corrected could lead to further erosion later in 1996."
Russel Metals is one of the five largest distributors and processors of metal
and metal products in
North America through its network of 59 service centers. The Company's operating
units trade
under various names including Russel Metals, Drummond McCall, Baldwin
International, Bahcall
Group, Total Distributors, Pioneer Steel & Tube, Copco Steel, Comco Pipe and
Supply and
Wirth Limited. Russel Metals also has investments in the transportation sector.
-30-
For further information, contact:
David Fine
Vice President Planning
and Communications,
Russel Metals
(905) 819 - 7402<PAGE>
<TABLE>
<CAPTION>
RUSSEL METALS INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($000)
March 31, December 31,
1996 1995
<S> <C> <C>
Current assets
Accounts receivable $214,211 $206,419
Income taxes recoverable 11,940 11,940
Inventories 233,014 242,568
Prepaid expenses and other assets 6,302 3,247
465,467 464,174
Fixed assets
Property, plant and equipment 160,480 161,526
Property held for resale 58,234 57,224
218,714 218,750
Other assets
Long-term receivable 22,917 22,676
Other investments 15,981 16,441
Deferred charges 13,173 14,218
Goodwill 11,865 12,160
Deferred income taxes 61,287 57,089
125,223 122,584
$809,404 $805,508
Current liabilities
Bank indebtedness $ 62,564 $ 63,987
Accounts payable and accrued liabilities 180,548 171,360
Current portion of long-term debt 16,585 16,585
259,697 251,932
Long-Term Debt 166,320 166,520
Convertible Debentures and Shareholders' Equity 383,387 387,056
$809,404 $805,508
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUSSEL METALS INC.
EARNINGS DATA (UNAUDITED)
($000)
For the Quarter
Ended March 31
1996 1995
<S> <C> <C>
Sales and services
Metals $324,783 $350,148
Transport 31,940 47,525
$356,723 $397,673
Earnings before interest and taxes
Metals $7,103 $ 20,202
Transport (269) 1,210
Corporate (2,744) (2,585)
4,090 18,827
Interest 8,160 10,865
Earnings (loss) before income taxes (4,070) 7,962
Provision for (recovery of) income taxes (1,617) 3,546
Net earnings (loss) for the period $ (2,453) $ 4,416
Net earnings (loss) per common share
Basic $(0.06) $0.08
Fully diluted $(0.06) $0.08
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RUSSEL METALS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(UNAUDITED)
Quarter ended March 31
($000)
1996 1995
<S> <C> <C>
Operating activities
Net earnings (loss) $(2,453) $ 4,416
Depreciation and amortization 4,478 4,389
Deferred income taxes (4,198) 2,699
Accrued revenue - deferred income taxes (123) (141)
Gain on sale of fixed assets (16) (28)
Cash from (used in) continuing operations (2,312) 11,335
Changes in working capital items
Accounts receivable (7,792) (21,037)
Inventories 9,554 (44,127)
Accounts payable and accrued liabilities 9,188 44,245
Other (3,055) (2,301)
Cash from (used in) continuing operating activities 5,583 (11,885)
Financing activities
Decrease in long-term debt - (415)
(Increase) decrease in long-term receivable (118) 169
Dividends (563) (563)
Cash used in financing activities (681) (809)
Investing activities
Purchase of fixed assets (2,605) (6,732)
Proceeds on sale of fixed assets 73 93
Purchase of subsidiary companies - (4,857)
Other 63 2,226
Cash used in investing activities (2,469) (9,270)
Increase (decrease) in cash from continuing
operations 2,433 (21,964)
Cash used in discontinued operations (1,010) (25,319)
Increase (decrease) in cash 1,423 (47,283)
Cash position, beginning of the period (63,987) (99,122)
Cash position, end of the period $ (62,564) $(146,405)
NOTE: Cash position represents bank indebtedness.
</TABLE>
<PAGE>
Russel Metals Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For The Three Months Ended March 31, 1996
The following management discussion and analysis of financial condition and
results of operations
should be read in conjunction with the audited Consolidated Financial Statements
for the year
ended December 31, 1995, including the notes thereto, and the accompanying
condensed
unaudited Consolidated Financial Statements for the quarter ended March 31,
1996. In the
opinion of management, such interim information contains all adjustments,
consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of such periods. The
results of operations for the periods shown are not necessarily indicative of
the results for the full
year. All dollar references in this report are in Canadian dollars.
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1996 Change
1996 1995 As % of 1995
(in thousands)
<S> <C> <C> <C>
Revenues
Metals $324,783 $350,148 (7.2) %
Transport 31,940 47,525 (32.8) %
$356,723 $397,673 (10.3) %
Segment Operating Margins
Metals $ 7,103 $ 20,202 (64.8) %
Transport (269) 1,210 (122.2) %
$ 6,834 $ 21,412 (68.1) %
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
Annualized Operating Margin
Average Net Assets Return on Average Net Assets
1996 1995 1996 1995
(in thousands)
<S> <C> <C> <C> <C>
Return on Average Net Assets
Metals $345,500 $382,000 8.2% 21.2%
Transport 99,600 119,400 (1.1)% 4.1%
Corporate and Discontinued 185,900 201,200
$631,000 $702,600 4.3% 12.2%
</TABLE>
Average net assets are calculated based on opening and closing monthly
positions.
Segment Information
Metals - The following table shows the revenues and operating margins and the
changes for the
business segments of the Metals operations for the periods indicated:
Quarter Ended
March 31,
1996 Change
1996 1995 As % of 1995
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Revenues
Service Centers $212,939 $219,856 (3.1) %
Specialty Metals and Trading 111,844 130,292 (14.2) %
$324,783 $350,148 (7.2) %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Segment Operating Margins
Service Centers $ 2,794 $ 13,366 (79.1) %
Specialty Metals and Trading 4,309 6,836 (37.0) %
$ 7,103 $ 20,202 (64.8) %
</TABLE>
Metals revenues decreased 7.2% for the first quarter of 1996 compared to the
same period in 1995.
The decrease in service center revenues for the first quarter of 1996 compared
to the first quarter
of 1995 relates primarily to lower volumes. Average selling price per ton of
general line product
for the three months ended March 31, 1996 approximates that of the three months
ended March
31, 1995. Average selling price per ton of flat rolled product was $55 per ton
less in the three
months ended March 31, 1996 compared to the same period in 1995. High inventory
levels
experienced throughout the industry, in the service center sector, further
lowered the margins as
inventory positions were reduced.
The lower volumes combined with lower pricing resulted in a 79.1% decrease in
segment
operating margins for service centers in the three months ended March 31, 1996
compared to the
three months ended March 31, 1995. Margin pressures experienced in the first
quarter are
expected to continue throughout fiscal 1996.
Specialty Metals and Trading had lower sales in the quarter related to reduced
trading activity.
The high demand for steel products in the first quarter 1995 resulted in high
imports compared
to the last half of 1995 and the first quarter of 1996 during which inventory
reductions in service
centers resulted in fewer imports. Trading segment operating margins as a
percent of sales were
also down in 1996 compared to 1995 mainly related to fixed overhead costs. The
specialty metals
units had sales in the first quarter of 1996 comparable to the first quarter of
1995 although the
gross margin was reduced in all operations in 1996 compared to 1995, resulting
in lower segment
operating margins.
Transport - Reduced revenue and operating margins in the Transport operations
for the quarter
ended March 31, 1996 relate primarily to the absence of the White Pass Petroleum
operations sold
effective May 31, 1995. The revenue from transport operations for the three
months ended March
31, 1996 represents 9.0% of total revenue, compared to 12.0% for the three
months ended March
31, 1995. Thunder Bay Terminals and White Pass Rail experienced similar
revenues and
operating margins as compared to the same periods last year. Tri-Line trucking
operations had
increased revenue of 7.5% due to higher volumes although lower pricing resulted
in lower
operating margin compared to the same three months in 1995.
Consolidated Results
Revenues - The decrease in consolidated revenues for the quarter represent
decreases in both
Metals and Transport as discussed above.
Operating Margins - The decrease in segment operating margins from continuing
operations of
$14.6 million for the quarter ended March 31, 1996 is a result of lower margins
in Metals and
Transport as discussed above.
<PAGE>
Interest Expense - The following table shows the components of interest expense.
The floating rate
long-term interest relates primarily to the U.S. note which was previously
swapped from fixed to
floating rates. The lower floating rate interest expense compared to the first
quarter of 1995, is
generated by a more favourable exchange rate in 1996. The table of average net
assets employed
(see page 2) shows that the average net assets for the first three months of
1996 were $71.6 million
lower than for the same period in 1995. The reduction in short-term interest
for the three months
ended March 31, 1996 compared to the three months ended March 31, 1995 is a
result of the lower
volume plus a lower interest rate in the first quarter of 1996.
<TABLE>
<CAPTION>
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
1996 1995 1995 1995 1995
(in thousands)
<S> <C> <C> <C> <C> <C>
Interest
Long-term
Fixed Rate $3,152 $3,173 $3,161 $3,138 $3,122
Floating Rate 3,502 3,324 4,279 4,239 4,449
Short-term
Operating Loans 1,506 2,588 2,905 4,253 3,294
$8,160 $9,085 $10,345 $11,630 $10,865
Net Earnings (Loss) - Net losses from operations for the quarter were $2.5
million compared to
earnings of $4.4 million for the same quarter in 1995. The reduction is a
result of the combination
of lower Metals and Transport segment margins improved somewhat by lower
interest expense.
Liquidity and Capital Resources
The net assets employed, shown on page two, indicate the operating assets of the
Company for
the Metals and Transport operations. The remaining $185.9 million of corporate
assets are not
productively employed by the Company. The reduction in the assets of
$20.7 million since March
31, 1995 was used to reduce interest bearing debt. The increase in deferred tax
debits of $4.2
million since December 1995 relates to taxes recoverable of $1.6 million
recorded on first quarter
losses plus income tax payments in the quarter mainly related to 1995 U.S.
taxable profits.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Corporate and discontinued assets are comprised of the following items:
As at March 31,
1996 1995
<S> <C> <C>
Deferred Tax Debits and Taxes Recoverable $ 73.2 $ 65.3
Working Capital - Discontinued Operations -- 42.8
Property Held For Resale 58.2 68.1
Minority Equity Interest in Divested Operations 13.4 13.1
Deferred Financing Costs 7.5 8.0
Debt in Divested Operations 22.9 7.8
Other 6.3 (2.9)
TOTAL $181.5 $202.2
</TABLE>
During the three months ended March 31, 1996, the Company generated $2.4 million
in cash from
continuing operations. Continuing operations utilized $2.3 million cash in
operations and
generated $7.9 million from working capital, primarily related to higher
accounts payable and
lower inventories in Metals. Discontinued operations expended $1.0 million
during the period
related to previously agreed capital expenditures on properties leased to
Cashway Building
Centres.
For the three months ended March 31, 1995, the Company utilized $22.0 million of
cash in
continuing operations. Continuing operations generated cash from operations of
$11.3 million
and utilized $23.2 million for working capital requirements. The increased
working capital mainly
relates to increased inventory and accounts receivable in Metals. Cash utilized
by continuing
operations included $4.9 million to acquire three specialty metals processing
businesses and $6.7
million in capital spending. Discontinued operations consumed $25.3 million in
cash primarily
related to seasonal inventory buildup at Cashway Building Centres and operating
losses of these
operations normally experienced in the seasonally slow first quarter.
The Company currently has a $350 million banking facility, of which $112.9
million was utilized
for bank borrowings and letters of credit at March 31, 1996. Based on the
current level of
accounts receivable and inventory and the specified percentages in the banking
facility, at March
31, 1996, the available unutilized line is $67.0 million.
<PAGE>
The Company has no significant long-term debt repayments scheduled before 1998.
The $16.6
million in current long-term debt as at March 31, 1996, represents the 10.2%
debentures
retractable annually until due on July 13, 1998.
The ratio of current assets to current liabilities was 1.8 at March 31, 1996 and
1.9 at December 31,
1995. The debt to equity ratio was 0.6 at March 31, 1996 and 0.7 at December
31, 1995.
OUTLOOK
The first quarter results reflected the continued competitive margins being
experienced in the
service center sector and the general decline in volumes across Canada. The
Company anticipates
the current tightness in steel supply to help margins in the second quarter and
has put in to place
initiatives to enhance margins and reduce costs.
<PAGE>
<TABLE>
<CAPTION>
Russel Metals Inc.
Reconciliation of Net Income to U.S. GAAP
Quarter Ended March 31, 1996
(000)
1996 1995
(in thousands)
<S> <C> <C>
Net income (loss) as shown in the
financial statements $(2,453) $4,416
Items having the effect of
increasing reported income
Amortization of unrealized
exchange loss (gain) on
long-term debt (4) 31
Items having the effect of decreasing
reported income
Unrealized exchange gain (loss)
on long-term debt 56 (24)
______ ______
Net income (loss) according to U.S. GAAP $(2,401) $4,423
</TABLE>
<PAGE>
Report to Shareholders
March 31, 1996
The first quarter results were substantially below the comparable period last
year, impacted by the
softening of demand for steel products and reduced prices for flat rolled
products. Margins were
also affected by downward pressures caused by reductions in overall inventories
in the service
center sector. However, recent price increases for hot rolled steel announced
by the mills have
stabilized selling prices of this commodity, and margins improved in our flat
rolled operations
compared with the fourth quarter of 1995.
The Transport segment of our operations experienced slightly lower earnings due
to a tightening
of margins in the long haul trucking industry.
FIRST QUARTER RESULTS
First quarter revenue was $356.7 million, a decline of 10.3% from the first
quarter of 1995 revenue
of $397.7 million. First quarter revenue was up 10.8% from the fourth quarter
of 1995.
The Metals segment revenue declined by 7.2% in the first quarter when compared
with the same
quarter of 1995, as indicated in the table. Metals revenue was up 12.1% over
the fourth quarter
of 1995.
In the first quarter of 1996, the Metals segment operating profit declined to
$7.1 million from
$20.2 million in the comparable quarter of 1995, which was our strongest quarter
of the current
cycle.
Transport revenues from continuing business for the first quarter are unchanged
when compared
with the first quarter of 1995. The White Pass Petroleum operation, which was
divested in June
1995, contributed $17.9 million sales in the first quarter of 1995. Transport
operating margins are
reduced due primarily to the absence of White Pass Petroleum.
The unaudited net loss from operations for the first quarter of 1996 was $2.5
million compared to
net earnings of $4.4 million in the first quarter of 1995. After preferred
share dividends, the
unaudited net loss per common share was $0.06 compared with net earnings of
$0.08 in the first
quarter last year.
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1996 Change
1996 1995 As % of 1995
(in millions)
<S> <C> <C> <C>
Revenues
Metals $324.8 $350.1 (7.2) %
Transport 31.9 47.6 (32.8) %
$356.7 $397.7 (10.3) %
Segment Operating Margins
Metals $ 7.1 $ 20.2 (64.8) %
Transport (0.3) 1.2 (122.2) %
$ 6.8 $ 21.4 (68.1) %
</TABLE>
OUTLOOK
The first quarter results reflected the continued competitive margins being
experienced in the
service center sector and the general decline in volumes across Canada. The
Company anticipates
the current tightness in steel supply to help margins in the second quarter and
has put in to place
initiatives to enhance margins and reduce costs.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly
authorized.
Russel Metals Inc.
(Registrant)
Date: May 15, 1996 By:
(signed)
Brian R. Hedges
Senior Vice-President and CFO
