Ryerson Tull Reports Year-End Income
01/31/2005 - Ryerson Tull, Inc. reported net income of $3.8 million on net sales of $904 million for the fourth quarter and net income of $54.5 million on net sales of $3302 million for the year ended December 31, 2004.
Ryerson Tull, Inc. reported net income of $3.8 million on net sales of $904 million for the fourth quarter and net income of $54.5 million on net sales of $3302 million for the year ended December 31, 2004.
Fourth Quarter Results—Net income of $3.8 million ($0.15 per diluted share) compares with a net loss of $7.5 million ($0.30 per share) in the fourth quarter of 2003. Results included a pretax gain of $927,000 ($0.02 per share) on the sale of assets, a $1.9 million ($0.07 per share) income tax benefit attributable to the reassessment of the valuation allowance for a deferred tax asset, and a $3.5 million ($0.14 per share) after-tax positive income adjustment associated with a discontinued operation. Fourth quarter 2003 results included a pretax restructuring charge of $3.8 million ($0.09 per share).
Sales increased 65.1% compared to the fourth quarter of 2003, on an 11.3% increase in tons shipped per day and a 50.9% increase in the average selling price per ton. On a sequential basis, sales increased 0.6% from the third quarter of 2004. Tons shipped per day increased 4.6%, sequentially, while the average selling price per ton increased 2.5%. The fourth quarter included a three-month contribution from J&F, compared with two months in the third quarter of 2004.
Gross profit per ton improved to $183 compared with $167 in the year-ago period, but declined from $213 in the third quarter of 2004. Gross margins declined to 14.1%, compared with 19.4% in the fourth quarter of 2003 and 16.8% in the third quarter of 2004. "While gross profit per ton expanded significantly, year-over-year, it declined $30 sequentially," said Neil S. Novich, Chairman, President, and CEO of Ryerson Tull. "More than 80% of the deterioration was the result of two specific factors. As the carbon flat rolled mills caught up on past-due deliveries, carbon flat rolled inventories rose relative to overall levels. Adding a layer of relatively high-cost carbon flat rolled inventory resulted in higher material costs passing through cost of goods sold in the fourth quarter of 2004. Additionally, carbon flat rolled — which carries a lower gross margin — comprised a higher percentage of our product mix, following the acquisition of J&F in August 2004. Ryerson Tull's product mix will change significantly as of the first quarter of 2005, with the inclusion of Integris, due to its emphasis on higher margin stainless and aluminum."
Operating expenses per ton were $176, compared to $168 in the year-ago period, and $170 in the third quarter of 2004. While productivity continued to expand, certain expenses, including Sarbanes-Oxley compliance and facility consolidation costs, rose. On a year-over-year basis, freight and performance incentive expenses increased as well.
Full Year Results—Net income of $54.5 million ($2.11 per diluted share) compares with a net loss of $14.1 million ($0.58 per share) for 2003. Results included a pretax restructuring charge of $3.6 million ($0.08 per share), a pretax gain of $5.6 million ($0.13 per share) on the sale of assets, a $1.9 million ($0.07 per share) income tax benefit attributable to the reassessment of the valuation allowance for a deferred tax asset, and an after-tax gain of $7.0 million ($0.27 per share) from discontinued operations. 2003 results included a pretax restructuring charge of $6.2 million ($0.15 per share) and a $4.5 million ($0.18 per share) valuation allowance for a portion of the deferred tax asset.
Sales increased 50.8% to $3.3 billion in 2004, on a 10.5% gain in tons shipped and a 36.4% increase in the average selling price per ton. Gross profit per ton improved to $200 for 2004, compared with $166 for 2003. Operating expense per ton was $166 in 2004, compared with $165 in 2003.
Comments—"We are very proud of our performance for the year," said Neil S. Novich, Chairman, President, and CEO of Ryerson Tull. "Our aggressive restructuring actions improved our cost structure, asset management, and customer service — all of which enabled us to capitalize on the long-awaited recovery in the metals marketplace."
"While growth in metal industry demand slowed from the very strong pace experienced in the first half of 2004, Ryerson Tull's volume remained good in the fourth quarter," continued Novich. "However, gross margins were affected in the period, primarily from two factors."
Acquisition of Integris Metals—On January 4, 2005, Ryerson Tull completed the acquisition of Integris Metals for $410 million plus the assumption of $234 million of Integris' debt. "The new organizational structure is in place, and we are very excited about our now unparalleled product offerings, value-added capabilities, customer service, and geographic reach," said Novich. Integris generated strong growth and profitability in 2004. Revenues increased 34% to $2.0 billion in 2004. Operating income expanded 291%, year-over-year, to $103.3 million, while net income increased 448% to $59.8 million. (These unaudited results, compiled by Integris, are subject to completion of Integris' 2004 audit.)
Financial Condition—During the fourth quarter, the company completed the offering of $175 million of convertible senior notes and $150 million of senior notes. Consequently, at year-end 2004, Ryerson Tull had a debt-to-capital ratio of 55% and approximately $373 million available under its credit facility, compared with a debt-to-capital ratio of 41% and availability of $151 million at the end of 2003. On January 4, 2005, simultaneously with the acquisition of Integris, Ryerson Tull closed its new $1.1 billion revolving credit agreement, leaving the company with approximately $300 million available under its credit facility, post acquisition, and a debt-to-capital ratio of 73%.
Outlook—"We expect the U.S. manufacturing sector and metals demand to sustain slow to moderate growth in 2005," concluded Novich. "Moreover, we believe Ryerson Tull's strategy to continuously improve our operating efficiency, customer service, and overall competitiveness — as well as the shift to a higher percentage of stainless and aluminum, and the many other benefits from the acquisition of Integris — will provide further opportunities to grow and enhance our profitability."
Ryerson Tull, Inc. is a leading North American distributor and processor of metals, with 2004 revenues of $3.3 billion. The company services customers through a network of service centers across the United States and in Canada, Mexico, and India. On January 4, 2005, Ryerson Tull acquired Integris Metals, Inc., North America's fourth largest metals service center with 2004 revenues of $2.0 billion.