Metals USA Misses Estimates
Metals USA Holdings Corp. (MUSA) reported adjusted earnings (excluding items) of 23 cents per share in the fourth quarter of 2012 compared with 37 cents per share earned in the year-ago quarter. The results, however, were well below the Zacks Consensus Estimate of 31 cents, reflecting a negative surprise of around 26%.
Profit, as reported, was $3.7 million or 10 cents per share. This represents a roughly 74% decline from $14 million or 37 cents per share posted in the prior-year quarter. The results were impacted by lower demand for steel.
For full-year 2012, Metals USA posted adjusted earnings of $1.55 per share, excluding the non-recurring items, missing the Zacks Consensus Estimate by 8 cents.
Revenues decreased 4% to $437.5 million in the quarter from $455.7 million in the year-ago quarter, missing the Zacks Consensus Estimate of $451 million. The results were hurt by prevailing weak business environment and seasonality during the holiday season.
For full-year 2012, revenues increased 5.2% to $1,983.6 million from $1,885.9 million in 2011. Shipments totaled 1,550,000 tons, up 11% from 1,396,000 tons shipped in 2011.
Operational Update
Shipments were 353,000 tons in the quarter, up 8% from 327,000 tons shipped in the same period last year. The shipment results were better than the 3.1% decrease for the industry as reported by the Metals Service Center Institute.
Cost of sales (excluding operating and delivery, and depreciation and amortization) decreased 4.8% to $336.1 million and gross profit inched up 0.9% to $101.4 million. Selling, general and administrative expenses increased 17.2% year over year to $29.4 million. However, gross margin of 23.2% was consistent with the levels achieved throughout 2012.
Financial Position
Metal USA ended 2012 with a strong liquidity position with cash increasing 26.4% to $15.3 million from $12.1 million recorded a year ago. Long-term debt was $451.6 million as of Dec 31, 2012, down 3.6% from $468.6 million as of Dec 31, 2011. The company refinanced long-term debts, thereby extending maturity and considerably reducing annual interest expense.
For 2012, net cash provided by operating activities was $67.2 million. Capital expenditures were $6.8 million for the fourth quarter and $20.1 million for 2012.
Dividend
Metals USA’s board of directors declared a quarterly cash dividend of 6 cents per share payable on Mar 12, 2013, to shareholders of record as of Feb 26, 2013.
Acquisition by Reliance Steel
Reliance Steel & Aluminum Co. (RS) recently entered into an agreement to acquire all outstanding shares of Metals USA for $20.65 per share in cash, representing an enterprise value of around $1.2 billion. The boards of both the companies have unanimously approved the acquisition. The deal is also subject to the approval of the shareholders of Metals USA. The transaction is expected to close in the second quarter of 2013.
Metals USA, which is among the prominent metals producers along with A. M. Castle & Co. (CAS), and Lawson Products Inc. (LAWS), currently retains a Zacks Rank #3 (Hold).
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