Annual
Report
2023
GROWTH INITIATIVES
GROWTH INITIATIVES
VALUE-ADDED EQUIPMENT • FACILITY MODERNIZATIONS • ACQUISITIONS
Clockwise from top left:
• Energy field store acquired in 2023: Port Coquitlam (BC)
• Flat laser additions in 2023: Jonesboro (AR), Hope (AR) and
Decatur (AL)
• New energy field store opened in 2023: Dawson Creek (BC)
• Beam line addition in 2023: Roseboro (NC)
• Tube laser additions in 2023: Saskatoon (SK), Pewaukee (WI)
and Hope (AR)
Front Cover:
• Kinetic plasma and plate cutting - located in several branches
• Non-ferrous coils part of our product growth initiatives:
Boucherville (QC)
• Energy field store: Nisku (AB)
• Facility modernization in process: Saskatoon (SK)
TABL E O F CO NT EN TS
Financial Highlights
A Message from our President & CEO
Management’s Responsibility for Financial Reporting
Management’s Discussion and Analysis
1
2
4
5
Independent Auditor’s Report
Consolidated Financial Statements
Forced Labour and Child Labour Policy
20
23
58
FINANCIAL HIGHLIGHTS
OPERATING RESULTS (millions)
Revenues
EBITDA (1)
Adjusted EBITDA (1)
Adjusted EBITDA as a % of revenue (1)
EBIT (1)
Adjusted EBIT (1)
Adjusted EBIT as a % of revenue (1)
Net earnings
Basic earnings per common share ($)
BALANCE SHEET INFORMATION (millions)
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable and accruals
Net working capital
Fixed assets
Right-of-use assets
Goodwill and intangibles
Lease obligations
Net assets employed in metals operations
Other operating assets
Net income tax assets (liabilities)
Pension and benefit assets (liabilities)
Other corporate assets (liabilities)
Total net assets employed
CAPITALIZATION (millions)
Bank indebtedness, net of (cash)
Long-term debt (incl. current portion)
Total interest bearing debt, net of (cash)
Shareholders' equity
Invested Captial (1)
OTHER INFORMATION (Notes)
Book value per share ($) (1)
Free cash flow (millions)
Capital expenditures (millions)
Depreciation and amortization (millions)
Net debt to invested capital (1)
Return on invested capital (1)
COMMON SHARE INFORMATION
Ending outstanding common shares
Average outstanding common shares
Dividends per share
Share price - High
Share price - Low
Share price - Ending
(1)
Years Ended December 31
2023
2022
2021
2020
2019
$4,505.1
425.6
425.6
9.4%
357.6
357.6
7.9%
266.7
$4.33
$456.3
840.3
26.2
(411.4)
911.4
337.3
100.0
120.2
(125.3)
1,343.6
1.0
(11.7)
41.6
(66.6)
$1,307.9
$(629.2)
297.2
(332.0)
1,639.9
$1,307.9
$27.16
$320.6
$72.7
$68.0
(25%)
25%
$5,070.6
578.9
578.9
11.4%
512.8
512.8
10.1%
371.9
$5.91
$495.2
956.5
35.8
(446.3)
1,041.2
312.2
101.7
126.5
(126.9)
1,454.7
0.8
(5.7)
40.5
2.0
$1,492.3
$(363.0)
296.0
(67.0)
1,559.3
$1,492.3
$25.10
$482.8
$41.5
$66.1
(4%)
33%
$4,208.5
664.0
666.6
15.8%
606.1
608.7
14.5%
432.2
$6.90
$553.6
986.0
30.3
(521.4)
1,048.5
302.4
86.7
132.2
(109.5)
1,460.3
0.3
(68.7)
26.1
(8.0)
$1,410.0
$(133.1)
294.8
161.7
1,248.3
$1,410.0
$19.78
$609.7
$28.8
$57.9
11%
51%
$2,688.3
125.2
159.0
5.9%
64.6
98.4
3.7%
24.5
$0.39
$343.4
716.4
13.7
(273.1)
800.4
269.5
81.4
109.6
(105.8)
1,155.1
0.8
12.5
(7.9)
(28.4)
$1,132.1
$(26.3)
293.7
267.4
864.7
$1,132.1
$13.88
$94.4
$24.9
$60.6
24%
8%
$3,675.9
203.0
203.0
5.5%
146.3
146.3
4.0%
76.6
$1.23
$457.9
883.6
18.2
(307.9)
1,051.8
288.9
90.1
137.0
(111.6)
1,456.2
1.7
10.2
(5.0)
(27.5)
$1,435.6
$46.2
444.8
491.0
944.6
$1,435.6
$15.19
$136.7
$34.8
$56.7
35%
10%
60,388,426
61,527,975
$1.58
$45.44
$28.63
$45.03
62,112,220
62,891,611
$1.52
$36.15
$23.80
$28.78
63,100,220
62,667,618
$1.52
$37.57
$22.33
$33.63
62,295,441
62,191,208
$1.52
$23.09
$10.97
$22.73
62,173,430
62,132,030
$1.52
$25.22
$18.47
$22.17
(1) This chart includes certain financial measures that are not prescribed by International Financial Reporting Standards (GAAP) or have standardized
meanings, and thus, may not be comparable to similar measures presented by other companies. Refer to page 6 of this Annual Report for commentary
and certain definitions of Non-GAAP Measures and Ratios and a reconciliation of certain Non-GAAP measures to GAAP measures. Adjusted EBIT and
Adjusted EBITDA are adjusted to remove the impact of long-lived asset impairment. Management believes that measures like Adjusted EBIT and
Adjusted EBITDA may be useful in assessing our operating performance and as an indicator of our ability to service or incur indebtedness, make capital
expenditures and finance working capital requirements. Adjusted EBIT and Adjusted EBITDA should not be considered in isolation or as an alternative
to cash from operating activities or other combined income or cash flow data. Adjusted EBIT, Adjusted EBITDA and a number of the ratios provided
under Other Information are used by debt and equity analysts to compare our performance against other public companies. See financial statements for
GAAP measures.
RUSSEL METALS12023 ANNUAL REPORT A MESSAGE FROM OUR PRESIDENT & CHIEF EXECUTIVE OFFICER
Fellow Shareholders,
2023 - Year in Review
I am proud of what our team has accomplished in 2023, as the breakout year included a
series of actions that came together after several years of planning and hard work by the
Russel team. We ended the year with revenues of $4.5 billion, EBITDA of $426 million
and earnings per share of $4.33, which are stellar results. I would like to thank our entire
team for their diligent efforts and continued commitment to excellence.
Growth
Our disciplined approach to growth came from both internal and external initiatives:
Value-added equipment - we initiated or completed over 30 equipment projects in
Canada and the U.S. during 2023.
Facilities modernizations - we commenced construction of a new facility in Saskatoon
(Saskatchewan), advanced the expansion of our Joplin (Missouri) location and
approved new projects at our branches in Little Rock (Arkansas), Green Bay
(Wisconsin) and Texarkana (Texas).
Acquisitions - on December 4, 2023, we announced an agreement to acquire seven
service centers located in Western Canada and the Northeastern U.S. from Samuel,
Son & Co., Limited. We are excited about this transaction as our businesses are
from geographic, value-added equipment and product mix
complementary
perspectives. We look forward to welcoming the approximately 340 employees to the
Russel family. This acquisition is subject to Canadian regulatory approval. Our energy
field store segment also expanded through the acquisition of Alliance Supply, as well
as the opening of 3 new locations in both the U.S. and Canada.
Capital Efficiency
We are always focused on strong capital management to both reduce risk during periods
of market volatility and maximize our returns over the cycle. To this end, we achieved the
following:
Completed the $60 million sale of our retained interest in the TriMark joint venture,
which when aggregated with our previous steps to monetize our legacy OCTG/line pipe
businesses resulted in a repatriation of approximately $375 million in underperforming
capital.
Maintained strong inventory controls and disciple during a period of steel price volatility.
As a result, we maintained our industry leading position with a return on invested capital
of 25%.
Financial Flexibility
We ended 2023 with the strongest capital structure in our history. At year-end 2023, we
had a net cash position of $332 million, liquidity of $1.0 billion, a shareholder equity base
of $1.6 billion ($27.16 per share) and a share price of $45.03, all of which were at or near
record levels. As a result, we have significant flexibility to continue pursuing a range of
strategic initiatives.
Returning Capital to Shareholders
Over the past 18 months, we adopted a more flexible and balanced approach to returning
excess capital to shareholders. In particular:
We implemented an opportunistic share buyback strategy under a normal course issuer
bid ("NCIB"). In 2023, we purchased 2,159,656 shares for $82 million, which equated
to an average cost of $37.75 per share. Since the inception of the NCIB in August
2022, we purchased 3,159,656 shares for $109 million, which equated to an average
cost of $34.65 per share.
RUSSEL METALS22023 ANNUAL REPORT
We increased our quarterly dividend from $0.38 per share to $0.40 per share in May 2023. This was our first
dividend increase since September 2014 and we will continue to revisit the appropriate dividend level on a
regular cadence by taking into account our ongoing financial strength, growth and flexibility.
Health and Safety Commitment of Excellence
Our "Mission Zero" safety program has been a company priority over many years, and our 2023 results reflected
the significant accomplishments across our organization. Not only did we achieve record low lost time incidents,
but we were recognized by our industry peers with an award for our health and safety culture.
Board Succession
Stewart Burton joined our Board effective January 1, 2024. Stewart spent 36 years at RBC Capital Markets,
most recently as Vice Chair, and brings extensive business, mergers and acquisitions, and capital markets
experience to our Board. Stewart replaced Linh Austin, who stepped down as a Board member on January 1,
2024. I would like to personally thank Linh for his service and contribution to the Board.
William O'Reilly has announced that he will not be standing for re-election in 2024. Bill has had a continuous
relationship with us since 1975 when he was an associate lawyer with our primary external law firm. Over the
intervening years he has served at various times as outside counsel to management and the Board, as an
executive officer of the Company, as Corporate Secretary and since May 2009, as a Director. I would like to
personally thank Bill for everything that he has done for our Company and wish him and Becky the best in their
travel adventures.
Elyse Allan will stand for election at our May shareholders meeting. Elyse brings a significant amount of business
experience from her former role as President and CEO of General Electric Canada as well as her current Board
positions with Brookfield Corporation and Invest Ontario.
The Future is Exciting
As we look forward, there are many positive developments on the horizon as we integrate the former Samuel
branches in Western Canada and the Northeastern U.S. into Russel, our continued organic growth through
value-added services and the flexibility of our balance sheet allows us to explore other capital allocation
opportunities.
John G. Reid
President and Chief Executive Officer
RUSSEL METALS32023 ANNUAL REPORT MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements, Management's Discussion and Analysis of Financial
Condition and all information in the Annual Report have been prepared by management and approved by the
Audit Committee and the Board of Directors of the Company.
These consolidated financial statements were prepared in accordance with International Financial Reporting
Standards, as issued by the International Accounting Standards Board, and, where appropriate, reflect
management's best estimates and judgements. Management is responsible for the accuracy, integrity and
objectivity of the consolidated financial statements and Management's Discussion and Analysis of Financial
Condition within reasonable limits of materiality and for the consistency of financial data included in the text of
the Annual Report with that contained in the consolidated financial statements.
To assist management in the discharge of these responsibilities, the Company has developed, documented and
maintained a system of internal controls in order to provide reasonable assurance that its assets are
safeguarded; that only valid and authorized transactions are executed; and that accurate, timely and
comprehensive financial information is prepared in accordance with International Financial Reporting Standards.
In addition, the Company has developed and maintained a system of disclosure controls in order to provide
reasonable assurance that the financial information is relevant, reliable and accurate. The Company has
evaluated its internal and disclosure controls for the year ended December 31, 2023, and has disclosed the
results of this evaluation in its Management Discussion and Analysis of Financial Condition.
The Company's Audit Committee is appointed annually by the Board of Directors. The Audit Committee, which
is composed entirely of outside directors, meets with management to satisfy itself that management is properly
discharging its financial reporting responsibilities and to review the consolidated financial statements and the
Management's Discussion and Analysis of Financial Condition. The Audit Committee reports its findings to the
Board of Directors for consideration in approving the consolidated financial statements and the Management's
Discussion and Analysis of Financial Condition for presentation to the shareholders.
The consolidated financial statements have been audited on behalf of the shareholders by the external auditors,
Deloitte LLP, in accordance with Canadian generally accepted auditing standards. Deloitte LLP has full and free
access to the Audit Committee.
February 8, 2024
/s/ J. G. Reid
President and
Chief Executive Officer
/s/ M. L. Juravsky
Executive Vice President and
Chief Financial Officer
RUSSEL METALS42023 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2023
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of
Russel Metals Inc. and its subsidiaries provides information to assist readers of our audited Consolidated
Financial Statements for the year ended December 31, 2023, including the notes thereto and should be read in
conjunction with these financial statements. All dollar references in our financial statements and in this report are
in Canadian dollars unless otherwise stated.
Additional information related to Russel Metals Inc., including our Annual Information Form, may be obtained from
SEDAR+ at www.sedarplus.ca or on our website at www.russelmetals.com.
Unless otherwise stated, the discussion and analysis contained in this MD&A are as of February 8, 2024.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this MD&A constitute forward-looking statements or information within the
meaning of applicable securities laws, including statements as to our future capital expenditures, our outlook, the
availability of future financing and our ability to pay dividends. Forward-looking statements relate to future events
or our future performance. All statements, other than statements of historical fact, are forward-looking statements.
Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could",
"might", "should", "believe" and similar expressions. Forward-looking statements are necessarily based on
estimates and assumptions that, while considered reasonable by us, inherently involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to differ materially from those anticipated
in such forward-looking statements, including the factors described below.
We are subject to a number of risks and uncertainties which could have a material adverse effect on our future
profitability and financial position, including the risks and uncertainties listed below, which are important factors
in our business and the metals distribution industry. Such risks and uncertainties include, but are not limited to:
volatility in metal prices; cyclicality of the metals industry; future acquisitions; facilities modernization; volatility in
the energy industry; product claims; significant competition; sources of supply and supply chain disruptions;
manufacturers selling directly; material substitution; failure of our key computer-based systems; cybersecurity;
credit risk; currency exchange risk; restrictive debt covenants; goodwill or long-term asset impairment; the
unexpected loss of key individuals; decentralized operating structure; labour interruptions; laws and governmental
regulations; litigious environment; environmental liabilities; climate change; carbon emissions; health and safety
laws and regulations; and common share risk.
While we believe that the expectations reflected in our forward-looking statements are reasonable, no assurance
can be given that these expectations will prove to be correct, and our forward-looking statements included in this
MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A and, except
as required by law, we do not assume any obligation to update our forward-looking statements. Our actual results
could differ materially from those anticipated in our forward-looking statements including as a result of the risk
factors described above and under the heading "Risk" later in this MD&A, and under the heading "Risk
Management and Risks Affecting Our Business" in our most recent Annual Information Form and are otherwise
disclosed in our filings with securities regulatory authorities which are available on SEDAR+ at www.sedarplus.ca.
RUSSEL METALS52023 ANNUAL REPORT
NON-GAAP MEASURES AND RATIOS
This MD&A includes a number of measures that are not prescribed by International Financial Reporting Standards
("IFRS" or "GAAP") and as such may not be comparable to similar measures presented by other companies. We
believe these measures are commonly employed to measure performance in our industry and are used by
analysts, investors, lenders and other interested parties to evaluate financial performance and our ability to incur
and service debt to support our business activities. Investors may find these non-GAAP measures, which include
non-GAAP financial measures and non-GAAP ratios as defined in National Instrument 52-112 Non-GAAP and
Other Financial Measures Disclosure, useful in understanding how management views underlying business
performance.
These measures and ratios are defined below and include EBIT, EBITDA, liquidity and inventory turns. We
believe that these may be useful in assessing our operating performance and as an indicator of our ability to
service or incur indebtedness, make capital expenditures and finance working capital. The items excluded in
determining EBIT and EBITDA are significant in assessing operating results and liquidity. EBIT, EBITDA and
free cash flow should not be considered in isolation or as an alternative to net income, cash flows generated by
operating, investing or financing activities, or other financial statement data presented in accordance with GAAP.
A reconciliation of EBITDA to net income in accordance with GAAP is found below.
Cash from Working Capital - represents cash generated from changes in non-cash working capital.
EBIT or Operating Profits - represents net earnings before interest and income taxes.
EBITDA - represents net earnings before interest, income taxes, depreciation and amortization.
Free Cash Flow - represents cash from operating activities before changes in non-cash working capital less
capital expenditures.
Gross Margin - represents revenues less cost of sales.
Gross Margin Percentage - represents gross margin over revenues.
Inventory Turns - represent annualized cost of sales divided by ending inventory.
Liquidity - represents cash on hand less bank indebtedness plus excess availability under our bank credit facility.
Selling Price per Ton - represents revenues divided by tons shipped.
Tons Shipped - represents revenue volumes in our standardized metal service center unit of measure, which is
imperial tons.
Return on Invested Capital - represents EBIT divided by average invested capital (net debt plus shareholders'
equity).
RECONCILIATION OF NET EARNINGS TO EBITDA 1
The following table provides a reconciliation of net earnings EBITDA 1:
Three Months Ended
Year Ended
($ millions)
Net earnings
Provision for income tax
Interest expense
EBIT 1
Depreciation and amortization
EBITDA 1
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 57.9
$ 47.2
16.1
15.7
5.4
0.7
79.4
63.6
18.0
18.6
$ 97.4
$ 82.2
$ 60.6
17.1
1.6
79.3
16.3
$ 95.6
$ 371.9
115.6
25.3
512.8
66.1
$ 578.9
$ 266.7
82.0
8.9
357.6
68.0
$ 425.6
Net earnings per share
$ 0.78
$ 0.99
$ 0.93
$ 4.33
$ 5.91
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS62023 ANNUAL REPORT
OVERVIEW OF THE 2023 FOURTH QUARTER AND ANNUAL RESULTS
Our net earnings for the year ended December 31, 2023, were $267 million or $4.33 per share compared to net
earnings of $372 million or $5.91 per share for 2022. Revenues for the year ended December 31, 2023, were
$4.5 billion compared to $5.1 billion in 2022. EBITDA was $426 million compared to $579 million in 2022.
In the 2023 fourth quarter, our revenues, EBITDA and net earnings per share were $1.0 billion, $82 million and
$0.78 per share, respectively compared to $1.1 billion, $97 million and $0.93 per share in the fourth quarter of
2022 and $1.1 billion, $96 million and $0.99 per share in the third quarter of 2023. During the 2023 fourth quarter,
operating days and related shipment volumes were negatively impacted by normal seasonal factors as compared
to the third quarter, but service center shipments were higher than the comparable fourth quarter of 2022 as we
continued to focus on market share opportunities. In addition, we realized an improvement in gross margins in
each of our three operating segments in the fourth quarter of 2023 versus the third quarter of 2023, as a result of
our value-added investment initiatives and strong cost controls. EBITDA was negatively impacted by the mark-
to-market on stock-based compensation of $7 million for the fourth quarter and $15 million for the year, due to
the increase in our share price. In addition, the third quarter of 2023 benefited from the income and gain related
to our interest in the TriMark joint venture that was sold in the third quarter and therefore did not contribute to
earnings in the fourth quarter.
Our working capital management practices allowed us to generate $146 million of cash from working capital
during 2023, including $82 million in the fourth quarter. This was driven by a $112 million reduction in inventories
during 2023, including $39 million in the fourth quarter.
Market Conditions
The average steel prices in 2023 were lower than the 2022 averages, but prices began to recover late in the
fourth quarter, which has continued into the first quarter of 2024.
Our energy field stores continued to benefit from favourable dynamics in the energy sector with ongoing capital
spending activities.
Capital Investment Growth Initiatives
We invested $73 million in capital expenditures in 2023, including $28 million in the fourth quarter, that included
a series of value-added equipment and facility modernization initiatives in both Canada and the U.S. We expect
our 2024 capital expenditure level to be greater than $100 million, as a result of additional projects.
We continued to actively evaluate acquisition opportunities to grow our business and deploy capital at attractive
returns. On October 2, 2023, we completed the acquisition of Alliance Supply Ltd. ("Alliance") for approximately
$7 million in cash. The two Alliance locations have been integrated into our Canadian energy field store network.
On December 4, 2023, we announced that we had entered into an agreement to acquire seven service center
locations from Samuel, Son & Co., Limited ("Samuel"), for approximately $225 million. The acquisition is very
complementary from both geographic and product mix perspectives. In Western Canada, Samuel's five locations
will be a strong fit with our current footprint, including providing new opportunities to benefit from Samuel's focus
on non-ferrous products and our focus on value-added processing. In the U.S. Northeast, the two locations will
provide an eastern extension of our existing operations in the U.S. Midwest. In addition, we believe there will be
opportunities to achieve operating efficiencies by more effectively managing the combined footprint, including
enhanced inventory management, procurement, location integration/rationalization, and systems. These
reorganization initiatives are expected to be implemented over a two-year period. This acquisition is subject to
Canadian regulatory clearance and is expected to close in the 2024 second quarter.
TriMark Joint Venture
In the third quarter of 2023, we sold our equity interest in TriMark to our venture partner for $60 million, which
included a $10 million gain. The transaction was the final step in our exit from the OCTG/line pipe business.
Over the last three years we repatriated approximately $375 million in capital from the OCTG/line pipe business.
Returning Capital to Shareholders
We have adopted a more balanced and flexible approach to returning excess capital to shareholders through: (i)
our ongoing dividend; and (ii) share buy backs.
RUSSEL METALS72023 ANNUAL REPORT
In the second quarter of 2023, we announced a 5% increase on our quarterly dividend from $0.38 per share to
$0.40 per share. In 2023, we paid dividends of $97 million or $1.58 per share. In addition, we have declared a
dividend of $0.40 per share, payable on March 15, 2024, to shareholders of record at the close of business on
February 29, 2024.
During 2023, we purchased for cancellation 2,159,656 shares for $82 million, including 390,300 shares for $17
million in the fourth quarter. Since the beginning of our normal course issuer bid in August 2022, we have
purchased for cancellation 3,159,656 shares at an average price per share of $34.65 for total consideration of
$109 million.
Liquidity and Capital Structure
During 2023, we generated $462 million of cash from operating activities and ended the year with total available
liquidity of over $1 billion.
SUMMARIZED FINANCIAL INFORMATION
The following tables disclose selected information related to revenues, earnings and common shares over the
last three years.
2023
(in millions, except per share data and volumes)
Revenues
EBITDA 1
Net earnings
Basic and diluted earnings per common share
Total assets
Non-current financial liabilities
Dividends paid
Market price of common shares
High
Low
Mar. 31
$ 1,186.7
116.4
73.9
$ 1.19
$ 2,630.8
$ 406.8
$ 0.38
Quarters Ended
June 30
$ 1,189.6
131.4
85.0
$ 1.37
$ 2,647.1
$ 406.0
$ 0.40
Sept. 30
$ 1,109.5
95.6
60.6
$ 0.99
$ 2,632.4
$ 405.0
$ 0.40
Dec. 31
$ 1,019.3
82.2
47.2
$ 0.78
$ 2,570.1
$ 406.8
$ 0.40
Year
Ended
Dec. 31
$ 4,505.1
425.6
266.7
$ 4.33
$ 2,570.1
$ 406.8
$ 1.58
$ 37.28
$ 28.63
$ 37.85
$ 31.24
$ 40.52
$ 35.42
$ 45.44
$ 33.38
$ 45.44
$ 28.63
Shares outstanding end of quarter
Average shares outstanding
Number of common shares traded on the TSX
62,428,342
62,243,466
23,543,332
61,307,326
62,014,641
16,261,518
60,778,726
61,184,940
10,156,617
60,388,426
60,689,696
9,545,403
60,388,426
61,527,975
59,506,870
2022
(in millions, except per share data and volumes)
Revenues
EBITDA 1
Net earnings
Basic and diluted earnings per common share
Total assets
Non-current financial liabilities
Dividends paid
Market price of common shares
High
Low
Mar. 31
$ 1,338.6
153.1
98.7
$ 1.56
$ 2,353.7
$ 394.4
$ 0.38
Quarters Ended
June 30
$ 1,362.3
188.8
124.0
$ 1.96
$ 2,531.5
$ 395.8
$ 0.38
Sept. 30
$ 1,269.9
139.6
91.3
$ 1.45
$ 2,598.9
$ 402.6
$ 0.38
Dec. 31
$ 1,099.8
97.4
57.9
$ 0.93
$ 2,506.9
$ 408.2
$ 0.38
Year
Ended
Dec. 31
$ 5,070.6
578.9
371.9
$ 5.91
$ 2,506.9
$ 408.2
$ 1.52
$ 34.83
$ 29.38
$ 36.15
$ 24.65
$ 30.33
$ 23.80
$ 30.34
$ 24.53
$ 36.15
$ 23.80
Shares outstanding end of quarter
Average shares outstanding
Number of common shares traded on the TSX
63,111,470
63,105,300
15,752,821
63,112,220
63,111,940
14,540,380
62,529,312
62,997,539
13,675,814
62,112,220
62,358,711
16,297,478
62,112,220
62,891,611
60,266,493
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS82023 ANNUAL REPORT
2021
(in millions, except per share data and volumes)
Revenues
EBITDA 1
Net earnings
Basic and diluted earnings per common share
Total assets
Non-current financial liabilities
Dividends paid
Market price of common shares
High
Low
Mar. 31
$ 885.4
129.0
80.6
$ 1.29
$ 1,793.5
$ 385.5
$ 0.38
Quarters Ended
June 30
$ 1,068.2
177.8
117.8
$ 1.88
$ 1,987.9
$ 388.7
$ 0.38
Sept. 30
$ 1,108.1
195.5
131.6
$ 2.10
$ 2,216.1
$ 386.9
$ 0.38
Dec. 31
$ 1,146.8
161.7
102.2
$ 1.62
$ 2,314.5
$ 388.5
$ 0.38
Year
Ended
Dec. 31
$ 4,208.5
664.0
432.2
$ 6.90
$ 2,314.5
$ 388.5
$ 1.52
$ 26.59
$ 22.33
$ 34.80
$ 25.00
$ 37.57
$ 30.22
$ 36.91
$ 30.29
$ 37.57
$ 22.33
Shares outstanding end of quarter
Average shares outstanding
Number of common shares traded on the TSX
62,295,441
62,295,441
17,879,841
62,689,856
62,488,175
22,108,258
62,974,655
62,636,187
14,020,122
63,100,220
63,039,225
11,042,773
63,100,220
62,667,618
65,050,994
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS92023 ANNUAL REPORT
RESULTS OF OPERATIONS
We are one of the largest metals distribution companies in North America. We conduct business primarily in
three segments: metals service centers, energy field stores and steel distributors.
The following table provides segment information including revenues, gross margins and earnings before interest
and income taxes. The corporate expenses included are not allocated to specific operating segments. Gross
margins as a percentage of revenues for the operating segments are also shown below. The table shows the
segments as they are reported to management and are consistent with the segment reporting in our consolidated
financial statements.
($ millions, except percentages)
Segment Revenues
Metals service centers
Energy field stores
Steel distributors
Other
Total
Segment Gross Margins 1
Metals service centers
Energy field stores
Steel distributors
Other
Total operations
Segment Operating Profits
and EBIT 1
Metals service centers
Energy field stores
Steel distributors
Corporate expenses and other
Earnings and gain from joint venture
Earnings before interest and income taxes
Segment Gross Margin
as a % of Revenues 1
Metals service centers
Energy field stores
Steel distributors
Total operations
Segment Operating Profit and
EBIT as a % of Revenues 1
Metals service centers
Energy field stores
Steel distributors
Total operations
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 682.5
220.4
110.8
5.6
$ 1,019.3
I
$ 725.0
265.7
112.5
6.3
$ 1,109.5
I
$ 750.6
211.6
134.8
2.8
$ 1,099.8
$ 3,034.5
987.2
466.3
17.1
$ 4,505.1
I
$ 3,523.0
903.0
631.2
13.4
$ 5,070.6
I
$ 135.5
56.4
19.4
5.6
$ 216.9
$ 136.9
63.4
17.9
6.3
$ 224.5
$ 135.9
58.7
20.7
2.8
$ 218.1
$ 614.8
254.2
91.0
17.1
$ 977.1
$ 748.4
241.3
123.4
13.4
$ 1,126.5
$ 37.8
19.6
12.9
(6.7)
-
$ 63.6
$ 35.9
28.1
9.5
(5.9)
11.7
$ 79.3
$ 38.9
24.0
11.2
(5.1)
10.4
$ 79.4
$ 202.5
105.1
57.8
(34.9)
27.1
$ 357.6
$ 321.5
104.6
77.0
(21.3)
31.0
$ 512.8
19.9%
25.6%
17.5%
21.3%
5.5%
8.9%
11.6%
6.2%
18.9%
23.9%
15.9%
20.2%
5.0%
10.6%
8.4%
7.1%
18.1%
27.7%
15.4%
19.8%
5.2%
11.3%
8.3%
7.2%
20.3%
25.7%
19.5%
21.7%
6.7%
10.6%
12.4%
7.9%
21.2%
26.7%
19.6%
22.2%
9.1%
11.6%
12.2%
10.1%
Results of our U.S. operations for the year ended December 31, 2023, were converted at $1.3495 per US$1
compared to $1.3017 per US$1 for the year ended December 31, 2022. Our U.S. operations represented
approximately 39% of our total revenues. The exchange rate used to translate the balance sheet on December
31, 2023, was $1.3226 per US$1 versus $1.3544 per US$1 at December 31, 2022.
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS102023 ANNUAL REPORT
Description of operations
METALS SERVICE CENTERS
a)
We provide processing and distribution services to a broad base of approximately 34,000 end users through a
network of 45 Canadian locations and 23 U.S. locations. Our metals service centers carry a broad line of products
in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and
tubular products, stainless steel and aluminum. We purchase these products primarily from steel producers in
North America and process and package them in accordance with end user specifications. We service all major
geographic regions of Canada as well as the Southeastern and Midwestern regions in the United States.
b)
Metals service centers segment results
Financial Highlights
Revenues ($ millions)
Tons shipped (thousands of imperial tons)
Gross margin ($ millions) 1
Gross margin per ton ($)
Gross margin (%) 1
Operating profits ($ millions) 1
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 683
307
136
443
19.9%
38
$ 725
310
137
442
18.9%
36
$ 751
293
136
464
18.1%
39
$ 3,035
1,289
615
477
20.3%
203
$ 3,523
1,282
748
583
21.2%
322
Revenues in our metals service center operations decreased 14% from 2022. Tons shipped in 2023
approximated tons shipped in 2022. The average selling price per ton was 14% lower in 2023 than 2022 as a
result of lower steel prices. However, steel prices in general, and our price realizations in particular, started to
recover late in the 2023 fourth quarter. In the fourth quarter of 2023, our shipments were 1% lower than the third
quarter of 2023, but 5% higher than the comparable fourth quarter of 2022.
Gross margin as a percentage of revenues was 20.3% for the year ended December 31, 2023, which was lower
than the 21.2% in 2022 due to lower steel prices, offset by higher margins from our value-added processing
initiatives. However, the gross margin per ton of $477 continues to be higher than the historical average. Our
gross margin percentage and gross margin per ton were both higher in the fourth quarter than the third quarter,
as our margins improved towards the end of the 2023 with our cost of goods sold coming down as we benefited
from the lag effect of lower cost inventory, while price realizations started to improve.
Operating expenses were 3% lower than 2022 due, in part, to lower variable compensation more than offsetting
the inflationary factors in other operating costs.
Metals service centers operating profit for the year ended December 31, 2023, was $203 million compared to
$322 million reported for 2022. Our operating profit of $38 million in the fourth quarter was higher than the $36
million reported in the third quarter of 2023, in spite of the seasonal impacts on volumes in the fourth quarter. In
addition, our fourth quarter 2023 operating profit was comparable with the fourth quarter of 2022, even though
we experienced lower average price realization in 2023.
Description of operations
ENERGY FIELD STORES
a)
We distribute flanges, valves, fittings and other products, primarily to the energy industry in Western Canada and
the United States. We operate from 46 Canadian and 14 U.S. facilities in our operations. We purchase our
products from the pipe division of North American steel mills, independent manufacturers of flanges, valves and
fittings and other products, international steel mills and other distributors.
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS112023 ANNUAL REPORT
b)
Energy field stores segment results
Financial Highlights
Revenues ($ millions)
Gross margin ($ millions) 1
Gross margin (%) 1
Operating profits ($ millions) 1
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 220
56
25.6%
20
$ 266
63
23.9%
28
$ 212
59
27.7%
24
$ 987
254
25.7%
105
$ 903
241
26.7%
105
Revenues in our energy field stores segment increased by 9% in 2023 compared to 2022 due to continued
positive momentum in the sector. Revenues declined in the fourth quarter compared to the third quarter of 2023
as a result of shipments related to large projects undertaken in the third quarter and normal seasonal factors that
impacted shipping activity in the fourth quarter. However, revenues were higher in the fourth quarter of 2023
compared to the fourth quarter of 2022, as our business benefited from favourable business conditions and
growing market share.
Gross margin as a percentage of revenues of 25.7% compared to 26.7% in 2022 due to a change in product mix.
In the fourth quarter of 2023, our gross margins improved to 25.6% compared to 23.9% in the third quarter, as
certain of the large project shipments in the third quarter were completed at lower than normal margins.
Operating expenses as a percentage of revenues were 15.1% in both 2023 and 2022 as our operating expenses,
including variable compensation, were impacted by the financial results of the segment.
This segment generated operating profits of $105 million for 2023 and 2022.
Description of operations
STEEL DISTRIBUTORS
a)
Our steel distributors act as master distributors selling steel in large volumes to other steel service centers and
equipment manufacturers mainly on an "as is" basis. Our U.S. operation has a cut-to-length facility located in
Houston, Texas, where it processes coil for its customers. Our steel distributors source their steel both
domestically and off shore.
The main steel products sourced by this segment are structural beam, plate, coils, pipe and tubing; however,
product volumes vary based on the economy and trade actions in North America.
b)
Steel distributors segment results
Financial Highlights
Revenues ($ millions)
Gross margin ($ millions) 1
Gross margin (%) 1
Operating profits ($ millions) 1
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 111
19
17.5%
13
$ 113
18
15.9%
10
$ 135
21
15.4%
11
$ 466
91
19.5%
58
$ 631
123
19.6%
77
Revenues in our steel distributors were 26% lower in 2023 compared to 2022 due to lower selling prices coming
off a stellar year in 2022. However, revenues in the fourth quarter on 2023 were comparable to the third quarter
of 2023 as customer activity was solid.
Gross margin as a percentage of revenues was 19.5% for the year ended December 31, 2023, consistent with
the 19.6% for the year ended December 31, 2022. In the fourth quarter of 2023, margins improved to 17.5% as
a result of favourable product mix.
Operating expenses of $91 million were lower than the $123 million in 2022 due to lower volumes and variable
compensation impacted by lower profitability.
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS122023 ANNUAL REPORT
Operating profits for 2023 of $58 million were lower than the $77 million for 2022 due to lower revenues. In the
fourth quarter of 2023, operating profits of $13 million improved compared to the third quarter of 2023 and the
fourth quarter of 2022, as a result of favourable product mix and lower variable compensation expense.
CORPORATE EXPENSES AND OTHER
Three Months Ended
Year Ended
($ millions)
Corporate expenses
Other income
Total
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 7
(2)
$ 5
$ 10
(4)
$ 6
$ 10
(3)
$ 7
$ 43
(8)
$ 35
$ 26
(5)
$ 21
Corporate expenses of $43 million in 2023 were higher than $26 million in 2022, due to a mark-to-market on our
non-cash stock-based compensation expense of $15 million in 2023 compared to an expense recovery of $2
million in 2022. Other income improved in 2023 compared to 2022 as a result of stronger market conditions for
our Thunder Bay Terminal operations. In the fourth quarter of 2023, the corporate expenses and other were
comparable with the third quarter, as increases related to the mark-to-market on our non-cash stock-based
compensation expense were mostly offset by lower cash-based variable compensation expense.
EARNINGS FROM TRIMARK
($ millions)
Dividends declared on preferred shares
Change in fair value of preferred shares
Share of earnings from common shares
Gain on sale of joint venture
Total
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 1
-
9
-
$ 10
$ 3
(8)
36
-
$ 31
$ -
-
-
-
$ -
$ -
-
2
10
$ 12
$ 1
-
16
10
$ 27
On September 1, 2023, we sold our equity interest in TriMark to our venture partner for $60 million, which included
a $10 million gain. The transaction was the final step in our staged exit from the OCTG/line pipe business. Over
the last three years we repatriated approximately $375 million in capital from the OCTG/line pipe business.
INTEREST EXPENSE
($ millions)
Interest on Senior Notes
Interest on lease obligations
Other interest (income) expense, net
Total
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 5
3
(3)
$ 5
$ 5
3
(7)
$ 1
$ 19
10
(20)
$ 9
$ 5
2
(5)
$ 2
$ 19
9
(3)
$ 25
Net interest expense of $9 million for 2023 was lower compared to $25 million for 2022 due to higher interest
income from higher interest rates on our growing cash balance.
INCOME TAXES
We recorded a provision for income taxes of $82 million for 2023 compared to a provision of $116 million for
2022. Our effective income tax rate for 2023 was 23.5% compared to 23.7% for 2022.
NET EARNINGS
Net earnings for 2023 were $267 million compared to $372 million in 2022. Basic earnings per share for 2023
was $4.33 per share compared to $5.91 per share in 2022.
SHARES OUTSTANDING AND DIVIDENDS
Common shares outstanding on December 31, 2023, and February 8, 2024, were 60.4 million compared to 62.1
million on December 31, 2022, due to the share repurchases. The weighted average number of common shares
outstanding decreased to 61.5 million for 2023 compared to 62.9 million for 2022 primarily as a result of the share
repurchases in 2023.
RUSSEL METALS132023 ANNUAL REPORT
We paid common share dividends of $97 million or $1.58 per share in 2023 and $96 million or $1.52 per share in
2022. We raised our common share dividend from $0.38 per share to $0.40 per share in the 2023 second quarter.
We have $150 million of 6% senior unsecured notes due March 16, 2026, and $150 million of 5 ¾% senior
unsecured notes due October 27, 2025. These notes have restrictions on the payment of dividends which we do
not believe will restrict our ability to pay our current level of dividends.
Under our syndicated bank facility, the payment of dividends is subject to excess borrowing base availability of
not less than four times the declared dividend. We do not believe this requirement will restrict our ability to pay
our current level of dividends.
CAPITAL EXPENDITURES
($ millions)
Capital expenditures -
property, plant and equipment
Additions - right-of-use assets
Depreciation - property, plant and equipment
Depreciation - right-of-use assets
Three Months Ended
Year Ended
Dec 31 2023 Sep 30 2023 Dec 31 2022 Dec 31 2023 Dec 31 2022
$ 28
6
10
6
$ 15
1
9
4
$ 16
3
11
5
$ 73
15
39
19
$ 42
17
38
17
LIQUIDITY
On December 31, 2023, we had net cash, defined as cash less bank indebtedness, of $629 million compared to
$363 million on December 31, 2022. We generated cash of $393 million from operating activities before non-
cash working capital and generated $146 million from a reduction in working capital. We utilized $73 million for
capital expenditures, $78 million in income tax payments, $82 million to repurchase shares and returned $97
million to our shareholders in the form of dividends. We generated $60 million from the sale of our TriMark joint
venture.
During the cycle, we experience significant swings in working capital. Inventory and accounts receivable
represent a large percentage of our total assets employed and fluctuate throughout each cycle. Accounts
receivable and inventory comprise our largest liquidity risks.
Total assets were $2.6 billion on December 31, 2023, compared to $2.5 billion on December 31, 2022. On
December 31, 2023, current assets, excluding cash, represented 69% of our total assets compared to 70% on
December 31, 2022.
Inventories represented 43% of our total assets, excluding cash, on December 31, 2023, and 45% on December
31, 2022.
Inventory by Segment
($ millions)
Metals service centers
Energy field stores
Steel distributors
Total
Cost of Sales by Segment
($ millions)
Metals service centers
Energy field stores
Steel distributors
Total
Dec 31
2023
$ 500
237
103
$ 840
Dec 31
2023
$ 547
164
92
$ 803
Sep 30
2023
$ 514
249
120
$ 883
Sep 30
2023
$ 588
202
95
$ 885
Jun 30
2023
$ 547
276
125
$ 948
Jun 30
2023
$ 642
183
89
$ 914
Mar 31
2023
$ 573
245
123
$ 941
Mar 31
2023
$ 642
184
100
$ 926
Dec 31
2022
$ 585
206
166
$ 957
Dec 31
2022
$ 615
153
114
$ 882
RUSSEL METALS142023 ANNUAL REPORT
Inventory Turns 1
(quarters ended)
Metals service centers
Energy field stores
Steel distributors
Total
Dec 31
2023
4.4
2.8
3.5
Sep 30
2023
4.6
3.3
3.2
3.8
4.0
Jun 30
2023
4.7
2.6
2.9
3.9
Mar 31
2023
4.5
3.0
3.2
3.9
Dec 31
2022
4.2
3.0
2.7
3.7
On December 31, 2023, our metals service center tons were approximately 6% higher than our tons on December
31, 2022, and tons for steel distributors were approximately 26% lower. The average cost of inventory in our
metals service centers on December 31, 2023, was approximately 15% lower than 2022 and steel distributors
were approximately 3% lower. Inventory levels in our energy field stores increased year over year due to
additional locations added in 2023.
Accounts receivable generated cash of $39 million in 2023 and represented 24% of our total assets, excluding
cash, on December 31, 2023, compared to 23% on December 31, 2022.
The balances disclosed in our consolidated cash flow statements are adjusted to remove the non-cash
component related to foreign exchange rate fluctuations impacting inventory, accounts receivable, accounts
payable and income tax balances of our U.S. operations.
DEBT
As of December 31 ($ millions)
Long-term Debt
5 ¾% $150 million Senior Notes due October 27, 2025
6% $150 million Senior Notes due March 16, 2026
Total
CASH AND BANK CREDIT FACILITY
($ millions)
Bank loans
Cash net of outstanding cheques
Net cash
Letters of credit
Total
Facility
Borrowings and letters of credit
Letters of credit
Facility availability
Available line based on borrowing base
2023
2022
$ 148
149
$ 297
$ 148
148
$ 296
2023
$ -
629
629
(26)
$ 603
$ 400
50
$ 450
$ 450
2022
$ -
363
363
(45)
$ 318
$ 400
50
$ 450
$ 450
We have a committed credit facility with a syndicate of Canadian and U.S. banks that provides $50 million for
letters of credit and $400 million which can be utilized for borrowings or additional letters of credit. The borrowings
and letters of credit are available on a revolving basis, up to an amount equal to the sum of specified percentages
of our eligible accounts receivable and inventories, to a maximum of $450 million.
On December 31, 2023, we were entitled to borrow and issue letters of credit totaling $450 million under this
facility. On December 31, 2023, we had no borrowings and $26 million of letters of credit outstanding. On
December 31, 2022, we had no borrowings and letters of credit of $45 million.
On December 31, 2023, we were in compliance with all of our financial covenants.
With our cash, cash equivalents and our bank facility we have access to approximately $1 billion of cash based
on our December 31, 2023, balances. The use of our bank facilities has been predominantly to fund working
capital requirements, acquisitions and trade letters of credit for inventory purchases.
1 Refer to Non-GAAP Measures and Ratios on page 6
RUSSEL METALS152023 ANNUAL REPORT
CONTRACTUAL OBLIGATIONS
On December 31, 2023, we were contractually obligated to make payments as per the following table:
Contractual Obligations
($ millions)
Accounts payable
Debt
Long-term debt interest
Lease obligations
Total
Payments due in
2025
and 2026
$ -
300
22
47
$ 369
2027
and 2028
$ -
-
-
39
$ 39
2029 and
thereafter
$ -
-
-
65
$ 65
2024
$ 454
-
18
26
$ 498
Total
$ 454
300
40
177
$ 971
We are obligated to pay $26 million in letters of credit when they mature in 2024. We have outstanding US$32
million (2022: US$95 million) in forward exchange contracts that mature in 2024.
We provide defined contribution pension plans for a majority of our Canadian and U.S. employees; however, we
have obligations related to multiple defined benefit pension plans in Canada, as disclosed in Note 16 of our 2023
consolidated financial statements. In late 2022, we paid a premium of $35 million to annuitize $34 million of our
defined benefit obligations, as measured on an accounting basis, through a buy-out transaction with an insurance
company. On February 1, 2023, the insurance company commenced payment of the retiree benefits when our
obligations to the affected retirees ceased. During 2023 we contributed $1 million to these plans and used $3
million of our plan surplus to fund our defined contribution benefit plan. We expect to contribute $1 million to
these plans during 2024 and expect to pay $3 million from our plan surplus in one of our defined benefit plans to
fund our defined contribution plan.
The defined benefit obligations reported in the consolidated financial statements use different assumptions than
the going concern actuarial valuations prepared for funding. In addition, the actuarial valuations provide a
solvency valuation, which is a valuation assuming the plan is wound up at the valuation date. We do not have
additional funding obligations on a solvency basis and no additional funding would be required based on solvency
if the plans were wound up. We estimate the impact of a 0.25% change in the discount rate on the solvency
obligation would be approximately $3 million.
We have disclosed our obligations related to environmental litigation, regulatory actions and remediation in our
Annual Information Form under the heading "Environmental Regulation". These obligations, which are not
material, relate to previously divested or discontinued operations and do not relate to the metals distribution
business.
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements consist of the letters of credit disclosed in the bank credit facilities table and
short-term and low value operating lease obligations disclosed in the contractual obligations table.
ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements requires management to make estimates and
judgements that affect the reported amounts. On an ongoing basis, we evaluate our estimates, including those
related to bad debts, inventory valuation, useful lives of fixed assets, asset impairment, fair values, income taxes,
pensions and benefits obligations, guarantees, decommissioning liabilities, contingencies, litigation and assigned
values on net assets acquired. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgements about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Our most significant assets are accounts receivable and inventories.
RUSSEL METALS162023 ANNUAL REPORT
Accounts Receivable
An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of our customers
to make required payments. Assessments are based on aging of receivables, legal issues (bankruptcy status),
past collection experience, current financials, credit agency reports and the experience of our credit personnel.
Accounts receivable which we determine to be uncollectible are reserved in the period in which the determination
is made. If the financial condition of our customers was to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required. Our reserve for bad debts on December 31, 2023,
was $1 million higher than our reserve level on December 31, 2022.
Inventories
We review our inventories to ensure that the cost of inventories is not in excess of its estimated net realizable
value and for obsolete and slow-moving product. Inventory reserves or write-downs are recorded when cost
exceeds the estimated selling price less cost to sell and when product is determined to be slow moving or
obsolete. The inventory reserve level on December 31, 2023, approximated the level on December 31, 2022.
Other areas involving significant estimates and judgements include:
Long-lived Asset Impairment
The determination of whether long-lived assets, including goodwill and intangibles, are impaired requires the
estimation of future cash flows and an appropriate discount rate to determine value in use. An impairment occurs
when the book value of the assets associated with a particular cash generating unit is greater than the value in
use. The assessment of future cash flows and a discount rate requires significant judgement.
During 2023, no long-lived asset impairments were recorded. There is no certainty that there will not be future
impairments should the economic markets in which we operate deteriorate.
Income Taxes
We believe that we have adequately provided for income taxes based on the information that is currently available.
The calculation of income taxes in many cases requires significant judgement in interpreting tax rules and
regulations, which are constantly changing. Our tax filings are also subject to audits, which could materially
change the amount of current and future income tax assets and liabilities. Any change would be recorded as a
charge or reduction in income tax expense.
Business Combinations
For each acquisition we review the fair value of assets acquired. Where we deem it appropriate, we hire outside
business valuators to assist in the assessment of the fair value of property, plant, equipment, intangibles and
contingent consideration of acquired businesses. During 2023, we acquired Alliance for $7 million in cash which
included $3 million for intangibles.
Investment in TriMark Joint Venture
During the third quarter of 2023, we sold our interest in the common and preferred shares of the TriMark joint
venture.
Contingent Liabilities
Provisions for claims and potential claims are determined on a case-by-case basis. We recognize contingent
loss provisions when it is determined that a loss is probable and when we are able to reasonably estimate the
obligation. This determination takes significant judgement and actual cash outflows might be materially different
from estimates. In addition, we may receive claims in the future that could have a material impact on our financial
results.
The Company and certain of its subsidiaries have been named defendants in a number of legal actions. Although
the outcome of these legal actions cannot be determined, management intends to defend all such legal actions
and has recorded provisions, as required, based on its best estimate of the potential losses. In the opinion of
management, the resolution of these legal actions is not expected to have a material adverse effect on our
financial position, cash flows or operations.
RUSSEL METALS172023 ANNUAL REPORT
Employee Benefit Plans
At least every three years, our actuaries perform a valuation for each defined benefit plan to determine the
actuarial present value of the benefits. The valuation uses management's assumptions for the interest rate, rate
of compensation increase, rate of increase in government benefits and expected average remaining years of
service of employees. While we believe that these assumptions are reasonable, differences in actual results or
changes in assumptions could materially affect employee benefit obligations and future net benefit plan cost. We
account for differences between actual and assumed results by recognizing differences in benefit obligations and
plan performance immediately in other comprehensive income.
The annuitization of a portion of our defined benefit pension obligation in October 2022, resulted in a reduction of
plan assets of approximately $35 million and a reduction in our benefit obligation of approximately $34 million.
We had approximately $129 million in plan assets on December 31, 2023, which is an increase of approximately
$6 million from December 31, 2022. The discount rate used on the employee benefit plan obligation for December
31, 2023, was 4.6%, which is 40 basis points lower than the discount rate on December 31, 2022.
Leases
We recognize right-of-use assets and lease obligations which includes our arrangements that contain a lease.
The determination of the asset and obligation requires an assessment of whether we are reasonably certain that
an extension option will be exercised, calculation of a discount rate inherent in the lease or an incremental
borrowing rate and whether the right-of-use asset is impaired. These determinations require significant
judgement.
CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is
gathered and reported to senior management on a timely basis so that appropriate decisions can be made
regarding public disclosure.
The purpose of internal controls over financial reporting as defined by the Canadian Securities Administrators is
to provide reasonable assurance that:
(i)
(ii)
financial statements prepared for external purposes are in accordance with the Company's generally
accepted accounting principles,
transactions are recorded as necessary to permit the preparation of financial statements, and records
are maintained in reasonable detail,
(iii) receipts and expenditures of the Company are made only in accordance with authorizations of the
Company's management and directors, and
(iv) unauthorized acquisitions, uses or dispositions of the Company's assets that could have a material effect
on the financial statements will be prevented or detected in order to prevent material error in financial
statements.
The President & Chief Executive Officer and the Executive Vice President & Chief Financial Officer have caused
management and other employees to design and document our disclosure controls and procedures and our
internal controls over financial reporting. An evaluation of the design and operating effectiveness of the disclosure
controls and internal controls over financial reporting was conducted as of December 31, 2023. The design and
evaluation of internal controls was completed using the framework and criteria established in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation, we have concluded that our disclosure controls and procedures and our internal controls
over financial reporting were effective to provide reasonable assurance that information related to our
consolidated results and decisions to be made on those results were appropriate.
RUSSEL METALS182023 ANNUAL REPORT
VISION AND STRATEGY
The metals distribution business is a mature and cyclical industry. We believe we enhance returns by managing
costs and working capital throughout the cycle. In addition, our investment in facilities modernization and value-
added processing initiatives will enable us to better service our customers and lead to enhanced margins. Capital
allocation priorities and limits are managed centrally with day-to-day decision making delegated to the various
operations. Furthermore, our variable compensation model is based on the return on net assets for each business
unit, which provides our business managers a basis to proactively adjust costs and working capital to local market
conditions. Management believes that this strategy will result in higher average profits and that we will generate
earnings over the cycle in the top quartile of the industry.
In 2023, we commenced a facilities modernization initiative which, along with our multi-year expansion of our
value-added processing equipment, will enhance our capabilities and provide improved service to our customer
base.
Growth from selective acquisitions is also part of our strategy. We focus on investment opportunities in
businesses that have strong market niches or provide scale to our existing operations. New acquisitions could
be either major stand-alone operations or ones that complement our existing operations.
Returning capital to our shareholders through our ongoing dividends and opportunistic share buy backs is also
part of our strategy.
RISK
A summary of the risks affecting our business is described under the heading "Risk Management and Risks
Affecting Our Business" in our most recent Annual Information Form, which section is incorporated by reference
in this "Risk" section of our MD&A.
The timing and extent of future price changes from steel producers and their impact on us cannot be predicted
with any certainty due to the cyclical nature of the steel industry, capacity utilization rates for North American steel
producers and changing import levels and tariffs. Future tariff changes to country or product exemptions,
including possible modifications to the section 232 trade actions, may impact steel prices and product availability.
A portion of our revenues are dependent on the oil and gas industry whose activity fluctuates with oil and gas
prices. Our strategy includes a reduction of the capital allocated to operations that do not provide adequate
returns. Our oil field store operations provide a stable stream of earnings as their products are used in
maintenance and repair as well as new drilling activity and large energy products.
The continued impact of inflation, changing interest rates, prevailing oil price conditions and other macro-
economic factors, including geopolitical risk, may lead to changes in estimates in our financial statements and
the effect of such changes could be material and result in impairments of long-lived assets, including goodwill
and intangibles, provisions for inventory and credit losses.
OUTLOOK
Steel prices and our margins recovered towards the end of 2023 and through the early part of 2024. We expect
steel prices to remain relatively stable over the near term as a result of the solid market activity. Shipment
volumes are expected to improve in the first quarter of 2024 as compared to the fourth quarter of 2023, due to
the normal seasonal pick-up in operating days and customer demand. However, weather-related factors may
impact shipments in certain of our operating regions. Over the medium term, we expect growth in North American
steel consumption as a result of onshoring activities and infrastructure spending initiatives in both Canada and
the U.S. In addition, we are positioned to gain market share through our ongoing investment initiatives. Our
energy field stores are expected to continue to benefit from solid energy activity in 2024.
RUSSEL METALS192023 ANNUAL REPORT
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and the Board of Directors of Russel Metals Inc.
Opinion
We have audited the consolidated financial statements of Russel Metals Inc. (the "Company"), which comprise
the consolidated statements of financial position as at December 31, 2023 and December 31, 2022, and the
consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years
then ended, and notes to the consolidated financial statements, including material accounting policy information
(collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position
of the Company as at December 31, 2023 and December 31, 2022, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian
GAAS"). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2023. This matter was addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on this matter.
Revenue Recognition - Refer to Note 2 of the financial statements
Key Audit Matter Description
The Company’s revenue is generated primarily from the delivery of metal and metal products to customers.
Revenue is recognized when the performance obligation is satisfied upon transfer of control of product to the
customer which occurs when it has been packed and loaded for delivery.
Revenue is a key audit matter due to the significant audit effort required in performing audit procedures related
to the Company’s revenue recognition.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to revenue recognition included the following, among others:
Evaluated the effectiveness of controls relating to the revenue recognition process;
On a sample basis, evaluated the recognition of revenue, by obtaining and inspecting invoices, bill of
ladings/ shipping documents and cash receipts. Where cash had not been received, confirmations
were sent to applicable customers to confirm receipt of the product and dollar amount of the sale as
described on the invoice and other support.
Other Information
Management is responsible for the other information. The other information comprises:
Management's Discussion and Analysis
The information, other than the financial statements and our auditor's report thereon, in the Annual
Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon. In connection with our audit of the financial statements, our
responsibility is to read the other information identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
RUSSEL METALS202023 ANNUAL REPORT
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the
work we have performed on this other information, we conclude that there is a material misstatement of this
other information, we are required to report that fact in this auditor’s report. We have nothing to report in this
regard.
The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Company or to cease operations, or has
no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Company to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
RUSSEL METALS212023 ANNUAL REPORT
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Kimberly MacDonald.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
February 8, 2024
RUSSEL METALS222023 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31
(in millions of Canadian dollars, except per share data)
Revenues
Cost of materials (Note 7)
Employee expenses (Note 20)
Other operating expenses (Note 20)
Gain on sale of investment in joint venture (Note 8)
Earnings from joint venture (Note 8)
Earnings before interest and provision for income taxes
Interest expense, net (Note 21)
Earnings before provision for income taxes
Provision for income taxes (Note 22)
Net earnings for the year
Basic earnings per common share (Note 19)
Diluted earnings per common share (Note 19)
2023
$ 4,505.1
3,528.1
396.3
250.2
(9.8)
(17.3)
357.6
8.9
348.7
82.0
$ 266.7
2022
$ 5,070.6
3,944.0
402.5
242.3
-
(31.0)
512.8
25.3
487.5
115.6
$ 371.9
$ 4.33
$ 5.91
$ 4.33
$ 5.91
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31
(in millions of Canadian dollars)
Net earnings for the year
Other comprehensive (loss) income
Items that may be reclassified to earnings
Unrealized foreign exchange (losses) gains on translation of foreign operations
Items that may not be reclassified to earnings
Actuarial gains on pension and similar obligations, net of taxes of $0.8 million (2022: $4.3 million)
Other comprehensive (loss) income
Total comprehensive income
2023
$ 266.7
2022
$ 371.9
(21.4)
50.1
2.2
(19.2)
$ 247.5
12.0
62.1
$ 434.0
The accompanying notes are an integral part of these consolidated financial statements.
RUSSEL METALS232023 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31
(in millions of Canadian dollars)
ASSETS
Current
Cash and cash equivalents (Note 5)
Accounts receivable (Note 6)
Inventories (Note 7)
Prepaids and other
Income taxes receivable
Total
Property, Plant and Equipment (Note 9)
Right-of-Use Assets (Note 10)
Investment in Joint Venture (Note 8)
Deferred Income Tax Assets (Note 22)
Pension and Benefits (Note 16)
Financial and Other Assets (Note 11)
Goodwill and Intangibles (Note 12)
Total Assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities (Note 14)
Short-term lease obligations (Note 10)
Income taxes payable
Total
Long-Term Debt (Note 15)
Pensions and Benefits (Note 16)
Deferred Income Tax Liabilities (Note 22)
Long-term Lease Obligations (Note 10)
Provisions and Other Non-Current Liabilities (Note 23)
Total
Shareholders' Equity (Note 17)
Common shares
Retained earnings
Contributed surplus
Accumulated other comprehensive income
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
The accompanying notes are an integral part of these consolidated financial statements.
2023
2022
$ 629.2
457.4
840.3
26.2
8.2
1,961.3
339.9
100.0
-
1.2
43.6
3.9
120.2
$ 2,570.1
$ 363.0
497.9
956.5
35.8
16.3
1,869.5
313.8
102.7
46.6
1.2
42.0
4.6
126.5
$ 2,506.9
$ 454.2
15.7
3.6
473.5
$ 482.0
14.7
4.8
501.5
297.2
2.0
17.5
109.6
30.4
930.2
296.0
1.5
18.4
112.2
18.0
947.6
556.3
954.6
10.3
118.7
1,639.9
$ 2,570.1
562.4
844.6
12.2
140.1
1,559.3
$ 2,506.9
RUSSEL METALS242023 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOW
For the years ended December 31
(in millions of Canadian dollars)
Operating Activities
Net earnings for the year
Depreciation and amortization
Provision for income taxes
Interest expense, (net)
Gain on sale of property, plant and equipment
Gain on sale of investment in joint venture
Earnings from joint venture
Share-based compensation
Difference between pension expense and amount funded
Debt accretion, amortization and other
Interest paid net, including interest on lease obligations
Cash from operating activities before non-cash working capital
Changes in Non-cash Working Capital Items
Accounts receivable
Inventories
Accounts payable and accrued liabilities
Other
Change in non-cash working capital
Income tax paid, net
Cash from operating activities
Financing Activities
Issue of common shares
Repurchase of common shares
Dividends on common shares
Deferred financing
Lease obligations
Cash used in financing activities
Investing Activities
Purchase of property, plant and equipment
Proceeds on sale of property, plant and equipment
Proceeds on sale of joint venture
Dividends received from joint venture
Purchase of business
Sale of business
Cash used in investing activities
Effect of exchange rates on cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
The accompanying notes are an integral part of these consolidated financial statements.
r
2023
I
2022
$ 266.7
68.0
82.0
8.9
(0.8)
(9.8)
(17.3)
-
1.9
1.3
(7.8)
393.1
$ 371.9
66.1
115.6
25.3
(2.8)
-
(31.0)
0.2
1.9
1.1
(24.0)
524.3
39.3
111.9
(14.5)
9.6
146.3
(77.7)
461.7
11.8
(81.5)
(97.2)
-
(18.0)
(184.9)
I
62.4
45.0
(83.8)
(5.5)
18.1
(182.5)
359.9
0.3
(27.9)
(95.6)
(0.2)
(15.7)
(139.1)
(72.7)
1.2
60.0
13.7
(7.5)
-
(5.3)
(5.3)
266.2
363.0
$ 629.2
(41.5)
3.2
-
22.1
-
9.7
(6.5)
15.6
229.9
133.1
$ 363.0
I
RUSSEL METALS252023 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions of Canadian dollars)
Balance, January 1, 2023
Payment of dividends
Net income for the year
Other comprehensive loss for the year
Share options exercised
Shares repurchased
Transfer of net actuarial gains on defined benefit plans
Balance, December 31, 2023
Common
Shares
$ 562.4
-
-
-
13.7
(19.8)
-
$ 556.3
Retained
Earnings
$ 844.6
(97.2)
266.7
-
-
(61.7)
2.2
$ 954.6
Contributed
Surplus
$ 12.2
-
-
-
(1.9)
-
-
$ 10.3
(in millions of Canadian dollars)
Balance, January 1, 2022
Payment of dividends
Net income for the year
Other comprehensive income for the year
Recognition of share-based compensation
Share options exercised
Shares repurchased
Transfer of net actuarial gains on defined benefit plans
Balance, December 31, 2022
Common
Shares
$ 571.0
-
-
-
-
0.4
(9.0)
-
$ 562.4
Retained
Earnings
$ 575.2
(95.6)
371.9
-
-
-
(18.9)
12.0
$ 844.6
Contributed
Surplus
$ 12.1
-
-
-
0.2
(0.1)
-
-
$ 12.2
The accompanying notes are an integral part of these consolidated financial statements.
Accumulated
Other
Comprehensive
Income
$ 140.1
-
-
(19.2)
-
-
(2.2)
$ 118.7
Accumulated
Other
Comprehensive
Income
$ 90.0
-
-
62.1
-
-
-
(12.0)
$ 140.1
Total
$ 1,559.3
(97.2)
266.7
(19.2)
11.8
(81.5)
-
$ 1,639.9
Total
$ 1,248.3
(95.6)
371.9
62.1
0.2
0.3
(27.9)
-
$ 1,559.3
RUSSEL METALS262023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL BUSINESS DESCRIPTION
NOTE 1
Russel Metals Inc. (the "Company"), a Canadian corporation with common shares listed on the Toronto Stock
Exchange ("TSX"), is a metals distribution company operating in various locations within North America.
The Company primarily distributes steel and other metal products in three principal business segments:
Metals Service Centers
The Company's network of metals service centers carry an extensive line of metal products in a wide range of
sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products,
stainless steel aluminum and other non-ferrous specialty metals. The Company purchases these products
primarily from North American steel producers and processes, packages and sells them to end users in
accordance with their specific needs.
Energy Field Stores
The Company's energy field stores carry a specialized product line focused on the needs of energy industry
customers. These operations distribute flanges, valves and fittings and other products through our field store
operations in Western Canada and the United States.
Steel Distribution
The Company's steel distributors act as master distributors selling steel to customers in large volumes to other
steel service centers and large equipment manufacturers mainly on an "as is" basis. The main steel products
sourced by this segment are carbon steel plate, flat rolled products, beams, channel and pipe.
The Company's registered office is located at 6600 Financial Drive, Mississauga, Ontario, L5N 7J6.
BASIS OF PRESENTATION
NOTE 2
These consolidated financial statements, including comparatives, have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). These consolidated financial statements have been
prepared on a going concern basis under the historical cost convention, as modified by the revaluation of
financial assets and financial liabilities (including derivative instruments) at fair value through the consolidated
statements of earnings. Historical cost is generally based on the fair value of the consideration given in exchange
for assets at the time of the transaction.
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in applying the Company's accounting policies.
These consolidated financial statements are presented in Canadian dollars, which is the Company's functional
currency. These consolidated financial statements were authorized for issue by the Board of Directors on
February 8, 2024.
Basis of consolidation
ACCOUNTING POLICIES
a)
The consolidated financial statements include the accounts of Russel Metals Inc. and its subsidiaries.
Subsidiaries are entities controlled by the Company. Control is achieved when the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated financial statements from the date the control
commences until the date the control ceases. Accounting policies for all subsidiaries are consistent with those
of the parent and all intercompany transactions, balances, income and expenses are eliminated on consolidation.
To facilitate a better understanding of the Company's consolidated financial statements, material accounting
policies, estimates and judgements are disclosed with the related financial note disclosure.
RUSSEL METALS272023 ANNUAL REPORT
Revenue from contracts with customers
b)
Revenue is recognized at an amount that reflects the expected consideration receivable in exchange for
transferring goods or services to a customer applying the following steps:
Identify the contract with a customer
Identify the performance obligation
1.
2.
3. Determine the transaction price
4. Allocate the transaction price to the performance obligation in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation
The Company generates revenue primarily from the delivery of metal and metal products to customers. The
primary contracts to provide goods and services to customers are purchase orders (written or verbal) which
provide the Company's performance obligations and transaction prices. The primary performance obligation in
the Company's contracts is to provide metal products to customers in accordance with their specifications.
These specifications could require the Company to cut, bend and provide other metal processing prior to delivery.
The Company's performance obligation is satisfied upon transfer of control of product to the customers, which
occurs when it has been packed and loaded for delivery. Credit terms for customers are short-term in nature.
Foreign currency
c)
The accounts of foreign subsidiaries whose functional currency is the U.S. dollar are translated from U.S. dollars
to Canadian dollars at the closing rate in effect at the statement of financial position date, which was $1.3226
per US$1 at December 31, 2023 (December 31, 2022: $1.3544 per US$1). Monetary items receivable or
payable to a foreign subsidiary for which settlement is neither planned nor likely to occur form part of the net
investment in the foreign subsidiary. Revenues and expenses are translated at the average rate of exchange
during the year. For the year ended December 31, 2023, the average U.S. dollar Bank of Canada closing
exchange rate was $1.3495 per US$1 (2022: $1.3017 per US$1). The resulting gains or losses from the
translation of foreign subsidiaries and those items forming part of the net investment are included in other
comprehensive income.
Goodwill, intangibles and fair value adjustments arising on the acquisition of a foreign subsidiary are treated as
assets and liabilities of the foreign subsidiary and translated at the rate in effect at the statement of financial
position date.
Government grants
d)
Government assistance is recognized when there is reasonable assurance that the Company will comply with
all the conditions associated with the assistance and where there is reasonable assurance that it will be received.
Government grants related to an expense or waiver of expenses are recognized as a reduction of related
expenses. Government grants receivable are recorded in accounts receivable on the consolidated statements
of financial position.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make certain judgements and estimates about
the future. Judgement is commonly used in determining whether a balance or transaction should be recognized
in the consolidated financial statements and estimates and assumptions are more commonly used in determining
the measurement of recognized transactions and balances. However, judgement and estimates are often
interrelated. Estimates and assumptions are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company's management also makes estimates for net realizable value and obsolescence provisions
relating to inventory, fair values, guarantees, long-lived asset and goodwill impairment, decommissioning
obligations, lease obligations, contingencies and litigation. These estimates are based on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgements about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
RUSSEL METALS282023 ANNUAL REPORT
ACCOUNTING CHANGES -- CURRENT AND FUTURE
NOTE 3
CURRENT CHANGES
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Presentation
The amendments to IAS 8 provide guidance to assist entities in distinguishing between accounting policies and
accounting estimates. The amendments replace the definition of a change in accounting estimates with the
definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in
financial statements that are subject to measurement uncertainty. The amendments also clarify that a change
in accounting estimate that results from new information or new developments is not the correction of an error.
The amendments were effective on January 1, 2023 and were applied prospectively. The implementation of
these amendments did not have a significant impact on the Company's financial position or results of operations.
IAS 12 Income Taxes
The amendments to IAS 12 provide clarifications in accounting for deferred tax on certain transactions such as
leases and decommissioning obligations. The amendments clarify that the initial recognition exemption does
not apply to transactions such as leases and decommissioning obligations. The amendments were effective on
January 1, 2023 and were applied to transactions that occur on or after the beginning of the earliest comparative
period presented. The implementation of these amendments did not have a significant impact on the Company's
financial position or results of operations.
FUTURE CHANGES
IAS 1 Presentation of Financial Statements
The amendments to IAS 1 clarify the impact of loan arrangement covenants on the classification of liabilities as
current or non-current at the reporting date. The amendments are effective for annual reporting periods
beginning on or after January 1, 2024. The implementation of these amendments is not expected to have a
significant impact on the company's financial position or results of operations.
IFRS 16 Leases
The amendments to IFRS 16 adds subsequent measurement requirements for sale and lease back transactions
for seller-lessees. The amendments are effective for annual reporting periods beginning on or after January 1,
2024. The implementation of these amendments is not expected to have a significant impact on the company's
financial position or results of operations.
BUSINESS ACQUISITIONS
NOTE 4
ACCOUNTING POLICIES
The Company accounts for its acquisitions using the acquisition method whereby assets acquired and liabilities
assumed are recorded at their estimated fair values with the surplus of the aggregate consideration relative to
the fair value for the identifiable net assets recorded as goodwill.
The acquisition method of accounting is used to account for the acquisition of subsidiaries as follows:
(i) cost of consideration is measured as the fair value of the assets provided, equity instruments issued,
liabilities incurred or assumed and any non-controlling interest acquired at the acquisition date;
(ii)
identifiable assets acquired and liabilities assumed are measured at fair value at the acquisition date;
(iii) the excess of acquisition cost over the fair value of the identifiable net assets acquired is recorded as
goodwill;
(iv) if the acquisition cost is less than the fair value of the net assets acquired, the fair value of the net assets
is re-assessed and any residual difference is recognized directly in net earnings;
(v) any costs directly attributable to the business combination are expensed as incurred; and
(vi) contingent consideration, if any, is measured at fair value at the acquisition date and changes in fair
value are recognized in net earnings.
RUSSEL METALS292023 ANNUAL REPORT
ACCOUNTING ESTIMATES AND JUDGEMENTS
The fair value of assets acquired and liabilities assumed in a business combination are estimated based on
information available at the date of acquisition and involves considerable judgement in determining the fair
values assigned to property, plant, equipment and intangible assets acquired and liabilities, including contingent
consideration, assumed on acquisition. The determination of these fair values involves analysis including the
use of discounted cash flow models, estimated future margins, future growth rates and estimated future customer
attrition. There is measurement uncertainty inherent in this analysis, particularly in the fair value measurement
of contingent consideration, and actual results could differ from estimates.
SUPPORTING INFORMATION
2023 Acquisition
On October 2, 2023, the Company completed its acquisition of 100% of the issued and outstanding shares of
Alliance Supply Ltd. ("Alliance") which were integrated into our Canadian energy field store operations. The
following summarizes the allocation of the consideration for this acquisition:
($ millions)
Inventories
Accounts receivable
Property, plant and equipment
Right-of-use assets
Intangibles
Goodwill
Accounts payable and accrued liabilities
Deferred tax liability
Lease obligations
Net identifiable assets acquired
Consideration:
Cash, net of cash acquired of $0.2 million
$ 2.8
1.6
0.1
0.6
3.3
1.2
(0.6)
(0.9)
(0.6)
$ 7.5
$ 7.5
The goodwill represents our geographic expansion and operational synergies and is not tax deductible. If the
acquisition had taken place at the beginning of the 2023 fiscal year, management estimates that the acquired
business would have provided revenues of $17.2 million and earnings before interest and provision for income
taxes of $1.4 million.
CASH AND CASH EQUIVALENTS
NOTE 5
ACCOUNTING POLICIES
Cash includes demand deposits and cash equivalents includes bank term deposits and short-term investments
with a maturity of less than three months at time of purchase. The financial instrument designation for cash and
cash equivalents is loans and receivables.
SUPPORTING INFORMATION
($ millions)
Cash
Cash equivalents
Total
2023
$ 191.6
437.6
$ 629.2
2022
$ 87.9
275.1
$ 363.0
ACCOUNTS RECEIVABLE
NOTE 6
ACCOUNTING POLICIES
Trade receivables are amounts due from customers from the sale of goods or rendering of services in the
ordinary course of business. Trade receivables are classified as current assets if payment is due within one
year or less. The financial instrument designation for trade receivables is loans and receivables. Trade
receivables are measured at amortized cost, which approximates fair value.
The Company maintains an allowance for doubtful accounts to provide for the impairment of trade receivables.
The expense relating to doubtful accounts is included within "Other operating expenses" in the consolidated
statements of earnings.
RUSSEL METALS302023 ANNUAL REPORT
In order to minimize the risk of uncollectability of trade receivables, the Company performs regular credit reviews
for all customers with significant credit limits. Trade receivables are analyzed on a case by case basis taking
into account a customer's past credit history as well as its current ability to pay and uncollectible amounts are
recorded as an allowance for doubtful accounts.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company assesses the collectability of accounts receivable. An allowance for doubtful accounts is
estimated based on customer creditworthiness, current economic trends and past experience.
SUPPORTING INFORMATION
($ millions)
Trade receivables
Other receivables
Total
The following is the continuity of the allowance for doubtful accounts:
($ millions)
Allowance for Doubtful Accounts
Balance, beginning of the year
Increases to reserve
Amounts written off
Adjustments
Balance, end of the year
2023
$ 444.2
13.2
$ 457.4
2022
$ 484.7
13.2
$ 497.9
2023
2022
$ 4.4
1.8
(1.4)
0.4
$ 5.2
$ 5.6
0.3
(1.9)
0.4
$ 4.4
At December 31, 2023 and 2022, the allowance for doubtful accounts was less than 2% of accounts receivable.
An increase in the allowance of 1% of accounts receivable would decrease pre-tax earnings by approximately
$4.6 million for the year ended December 31, 2023 (2022: $5.0 million).
As at December 31, 2023 ($ millions)
Trade Receivables
Gross trade receivables
Allowance for doubtful accounts
Total net trade receivables
Current
Past Due
1-30 Days
Past Due
31-60 Days
Past Due
Over 60 Days
Total Trade
Receivables
$ 248.1
(0.1)
$ 248.0
$ 153.8
(0.1)
$ 153.7
$ 32.3
(0.2)
$ 32.1
$ 15.2
(4.8)
$ 10.4
$ 449.4
(5.2)
$ 444.2
As at December 31, 2022 ($ millions)
Trade Receivables
Gross trade receivables
Allowance for doubtful accounts
Total net trade receivables
Current
$ 249.8
-
$ 249.8
Past Due
1-30 Days
Past Due
31-60 Days
Past Due
Over 60 Days
Total Trade
Receivables
$ 179.2
(0.1)
$ 179.1
$ 43.7
(0.2)
$ 43.5
$ 16.4
(4.1)
$ 12.3
$ 489.1
(4.4)
$ 484.7
INVENTORIES
NOTE 7
ACCOUNTING POLICIES
Inventories are recorded at the lower of cost and net realizable value. Cost is determined on an average cost
basis. Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs necessary to make the sale. Inventories are written down to net realizable value when the cost of
inventories is estimated to be greater than the recoverable amount due to declining selling prices. When
circumstances that previously caused inventories to be written down below cost no longer exist, the amount of
the write-down previously recorded is reversed.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company's determination of the net realizable value of inventory requires the use of assumptions such as
future selling prices and costs to sell. Inventories are reviewed to ensure that the cost of inventories is not in
excess of their estimated net realizable value and for obsolete and slow moving product. Inventory reserves or
write-downs are recorded when cost exceeds the estimated selling price less costs to sell and when product is
determined to be slow moving or obsolete. Where the selling prices cannot be estimated based on recent
transactional information, they are estimated using current replacement cost plus an applicable margin.
RUSSEL METALS312023 ANNUAL REPORT
There is measurement uncertainty in these estimates. Actual selling prices and costs to sell could differ from
these estimates.
SUPPORTING INFORMATION
Inventory ($ millions)
Metals service centers
Energy field stores
Steel distributors
Total
Inventory provision
2023
$ 499.5
237.5
103.3
$ 840.3
$ 31.7
2022
$ 584.8
205.6
166.1
$ 956.5
$ 31.7
Inventories expensed in cost of sales for the year ended December 31, 2023 were $3.5 billion (2022: $3.9 billion).
INVESTMENT IN JOINT VENTURE
NOTE 8
ACCOUNTING POLICIES
Joint arrangements that involve the establishment of a separate entity in which parties to the arrangement have
joint control over the economic activity of the entity and rights to the net assets are referred to as joint ventures.
Joint control exists when the joint arrangements require the unanimous consent of the parties sharing control for
decisions about relevant activities.
Investments in the common shares of a joint venture are included in the Company's consolidated financial
statements and accounted for using the equity method, whereby the investment is initially recognized at cost,
and adjusted thereafter to recognize the Company's share of the net earnings or loss attributable to common
shareholders from the date of acquisition. The Company's share of the joint venture earnings or loss is included
in the consolidated statements of earnings.
Investments in the preferred shares of a joint venture are initially recognized at cost and are then subsequently
carried at fair market value using the Dividend Discount Model, which is an income approach valuation technique
to price preferred shares using future dividend stream and expected rates of return. Dividends received from
preferred shares are recognized in earnings when the right to receive payment is established.
The Company's investment in a joint venture is reviewed at the end of each reporting period to determine whether
there are any events or changes in circumstances that indicate that the investment might be impaired.
ACCOUNTING ESTIMATES AND JUDGEMENTS
An investment in the joint venture is considered to be impaired if there is objective evidence of impairment, as a
result of one or more events that occurred after initial recognition of the joint venture, and that event has a
negative impact on future cash flows and can be reliably estimated.
The Company makes judgements to determine whether a joint arrangement should be classified as a joint
venture and in determining whether there is any objective evidence of impairment and if so, estimating the
amount of loss. Impairments require judgement in determining the indicators of impairment and estimates used
to measure impairment losses.
SUPPORTING INFORMATION
On September 1, 2023, the Company sold its interest in the TriMark joint venture for $60.0 million and recorded
a gain of sale of $9.8 million. The Company's investment included 50% of the common shares and preferred
shares with a face value of $31.5 million.
The following is the continuity of the investment:
($ millions)
Balance, December 31, 2022
Earnings from joint venture
Dividends - common shares
Book value prior to sale
Proceeds on sale
(Gain) on sale
Common
Shares
$ 23.3
16.2
(12.6)
26.9
(28.5)
$ (1.6)
Preferred
Shares
$ 23.3
-
-
23.3
(31.5)
$ (8.2)
Total
$ 46.6
16.2
(12.6)
50.2
(60.0)
$ (9.8)
RUSSEL METALS322023 ANNUAL REPORT
The following is a summary of the earnings from joint venture:
($ millions)
Share of earnings from joint venture
Change in fair value of preferred shares
Dividends - preferred shares
Earnings from joint venture
2023
$ 16.2
-
1.1
$ 17.3
2022
$ 36.5
(8.2)
2.7
$ 31.0
The following is a summary of the joint venture's financial information prior to the sale:
($ millions)
Current assets
Non-current assets
Current liabilities, including bank indebtedness of $148 million
Non-current liabilities
Net assets
($ millions)
Revenue
Net income
Dec 31 2022
$ 422.1
11.4
(268.1)
(49.8)
$ 115.6
Period ended
Year ended
Aug 31 2023 Dec 31 2022
$ 432.2
$ 29.0
$ 875.2
$ 76.8
PROPERTY, PLANT AND EQUIPMENT
NOTE 9
ACCOUNTING POLICIES
Property, plant, equipment and leasehold improvements are recorded at cost. Component accounting is used
for both buildings and machinery and equipment. Components that make up a material portion of the original
cost of the asset and have an estimated useful life that is significantly different than the parent asset are
considered to be significant components. For buildings, roofs are the only significant component. For machinery
and equipment there are various significant components depending on the asset. Depreciation starts when the
asset or significant component is ready for use and is provided on a straight-line basis at rates that charge the
original cost of such asset, less residual values, to operations over their estimated useful lives. Periods of
depreciation are 15 to 25 years for roofs, 20 to 40 years for buildings, 3 to 10 years for machinery and equipment
components, 10 to 25 years for machinery and equipment, and over the lease term for leasehold improvements.
Depreciation ceases at the earlier of when the asset or component is derecognized, or when it is held for sale
or included in a group that is classified as held for sale. Residual values and useful lives are reviewed at the
end of each annual reporting period and whenever facts and circumstances indicate a reduction in residual value
or useful life. Changes in the estimates of residual values and useful lives are reflected in earnings in the period
of the change and future periods, as appropriate.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are
capitalized as part of the cost of that asset. Other borrowing costs not directly attributable to a qualifying asset
are expensed in the period incurred.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual
reporting period and whenever events or circumstances indicate a change in useful life. Estimated useful lives
of items of property, plant and equipment are based on a best estimate and the actual useful lives may be
different.
RUSSEL METALS332023 ANNUAL REPORT
SUPPORTING INFORMATION
Cost
($ millions)
Balance, December 31, 2021
Additions
Disposals
Foreign exchange
Balance, December 31, 2022
Business acquisition (Note 4)
Additions
Disposals
Foreign exchange
Balance, December 31, 2023
Accumulated Depreciation and Amortization
($ millions)
Balance, December 31, 2021
Additions
Disposals
Foreign exchange
Balance, December 31, 2022
Additions
Disposals
Foreign exchange
Balance, December 31, 2023
Net Book Value ($ millions)
December 31, 2022
December 31, 2023
Land and
Buildings
$ 297.5
5.3
(0.8)
4.6
$ 306.6
-
18.5
(1.4)
(2.8)
$ 320.9
Land and
Buildings
$ 138.8
9.6
(0.8)
1.7
$ 149.3
9.5
(1.4)
(0.2)
$ 157.2
Machinery and
Equipment
$ 427.3
35.1
(8.1)
10.9
$ 465.2
0.1
53.2
(12.2)
(5.9)
$ 500.4
Machinery and
Equipment
$ 289.2
27.3
(7.7)
5.7
$ 314.5
28.2
(11.7)
(1.0)
$ 330.0
Leasehold
Improvements
$ 23.2
1.1
(0.1)
0.2
$ 24.4
-
1.0
(0.5)
0.2
$ 25.1
Leasehold
Improvements
$ 17.6
0.8
(0.1)
0.3
$ 18.6
1.4
(0.6)
(0.1)
$ 19.3
Total
$ 748.0
41.5
(9.0)
15.7
$ 796.2
0.1
72.7
(14.1)
(8.5)
$ 846.4
Total
$ 445.6
37.7
(8.6)
7.7
$ 482.4
39.1
(13.7)
(1.3)
$ 506.5
$ 313.8
$ 339.9
All items of property, plant and equipment are recorded and held at cost.
On December 31, 2023, land, included in land and buildings, was $47.5 million (2022: $44.3 million).
Depreciation expense ($ millions)
Depreciation - cost of materials
Depreciation - other operating expenses
Total
2023
$ 6.6
32.5
$ 39.1
2022
$ 6.6
31.1
$ 37.7
RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS
NOTE 10
ACCOUNTING POLICIES
The Company recognizes right-of-use assets at the commencement date of the lease. The Company leases
warehouse locations, field stores, office space, land, equipment, trucks and other vehicles. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted by any initial
direct costs and costs to dismantle and remove the underlying asset less any lease incentives. The right-of use
asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of
the end of the useful life of the underlying asset or the end of the lease term. In addition, the right-of-use assets
are subject to impairment and adjusted for any remeasurement of lease liabilities. Amortization expense is
recorded in other operating expenses.
The lease liability is initially measured at the present value of lease payments to be paid and discounted either
at the interest rate implicit in the lease or the Company's incremental borrowing rate. The lease payments
measured in the initial lease liability include payments for an optional renewal period, if any, if the Company is
reasonably certain that it will exercise a renewal extension option. The liability is measured at amortized cost
using the effective interest method and will be remeasured when there is a change in either the future lease
payments or assessment of whether an extension or other option will be exercised. The lease liability is
subsequently adjusted for lease payments and interest on the obligation. Interest expense on the lease
obligation is included in interest expense in the consolidated statements of earnings.
RUSSEL METALS342023 ANNUAL REPORT
In the consolidated statements of cash flow the Company records the principal portion of lease payments in
financing activities and the interest portion in operating activities.
Lease payments on short-term leases and leases of low-value assets are recognized in other operating expense
on a straight-line basis over the lease term.
ACCOUNTING ESTIMATES AND JUDGEMENTS
In determining the lease term, the Company considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options are only
included in the lease term if the lease is reasonably certain to be extended. Termination options are only
considered if the lease is reasonably certain to be terminated. The assessment is reviewed if a significant event
or a significant change in circumstances occurs which affects this assessment and that is within the control of
the lessee. The Company's determination of lease liability requires the use of assumptions to determine
incremental borrowing rates.
SUPPORTING INFORMATION
($ millions)
Balance, December 31, 2021
Additions
Disposals and modifications
Depreciation and amortization
Lease payments
Foreign exchange
Balance, December 31, 2022
Additions
Business acquisitions (Note 4)
Disposals and modifications
Depreciation and amortization
Lease payments
Foreign exchange
Balance December 31, 2023
Current portion
Long-term portion
Right-of-use
Assets
$ 86.7
17.3
13.3
(16.7)
-
2.1
$ 102.7
14.4
0.6
2.5
(19.3)
-
(0.9)
$ 100.0
Lease
Obligations
$ 109.5
17.3
13.3
-
(15.7)
2.5
$ 126.9
14.4
0.6
2.5
-
(18.0)
(1.1)
$ 125.3
$ 15.7
$ 109.6
The carrying value of right-of-use assets and depreciation by class of underlying assets are as follows:
Right-of-use Assets ($ millions)
Land and buildings
Machinery and equipment
Total
Depreciation Expense ($ millions)
Land and buildings
Machinery and equipment
Total
2023
$ 76.9
23.1
$ 100.0
2023
$ 10.6
8.7
$ 19.3
2022
$ 83.0
19.7
$ 102.7
2022
$ 10.0
6.7
$ 16.7
For the year ended December 31, 2023, the Company expensed $0.6 million (2022: $0.4 million) for short-term
and low value leases.
FINANCIAL AND OTHER ASSETS
NOTE 11
ACCOUNTING POLICIES
Eligible costs incurred relating to the short-term revolving credit facility are deferred and amortized on a straight-
line basis over the period of the related financing. Deferred financing charges are recorded at cost less
accumulated amortization. Eligible costs related to long-term debt financing are capitalized to the carrying
amount of the associated debt and amortized using the effective interest method.
RUSSEL METALS352023 ANNUAL REPORT
SUPPORTING INFORMATION
($ millions)
Deferred charges on revolving credit facility
Other assets
Total
2023
$ 0.5
3.4
$ 3.9
2022
$ 1.1
3.5
$ 4.6
For the year ended December 31, 2023, the amortization of deferred financing charges was $0.6 million (2022:
$0.7 million).
GOODWILL AND INTANGIBLES
NOTE 12
ACCOUNTING POLICIES
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets
acquired at the date of acquisition. Goodwill is carried at cost less accumulated impairment losses. The
Company reviews goodwill for impairment annually or more frequently if events or changes in circumstances
indicate that the assets might be impaired. When testing goodwill, the carrying values of the CGUs or group of
CGUs including goodwill are compared with their respective recoverable amounts (higher of fair value less costs
to sell or value in use) and an impairment loss, if any, is recognized for the excess. A CGU is the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
Intangible assets are comprised of customer relationships and trademarks. They are recorded at cost, which for
business acquisitions represents the fair value at the date of acquisition less accumulated amortization and
accumulated impairment losses. Customer relationships are amortized on a straight line basis over their
estimated useful lives which is typically 12 to 17 years. Non-competition agreements are amortized over the
period of the agreement. Useful lives are reviewed at the end of each reporting period and adjusted if
appropriate.
Trademarks are not amortized as they have an indefinite life; however, they are tested for impairment annually
or more frequently if events or changes in circumstances indicate that the assets might be impaired. When
testing indefinite life intangibles for impairment, the carrying values of related CGUs or group of CGUs excluding
goodwill, are compared to their recoverable amounts.
ACCOUNTING ESTIMATES AND JUDGEMENTS
Intangible assets and goodwill arise from business combinations. Upon acquisition, the Company identifies and
attributes the fair value of intangible assets with the residual value allocated to goodwill acquired. These
determinations involve estimates and assumptions regarding cash flow projections, economic risk and the
weighted average cost of capital. If future events or results differ adversely from these estimates and
assumptions, the Company could record increased amortization or impairment charges.
The determination of impairment of goodwill and intangibles involves estimates and assumptions regarding cash
flow projections and estimated discount rates. There is measurement uncertainty inherent in this analysis.
SUPPORTING INFORMATION
($ millions)
Goodwill
Intangibles
Total
a)
The continuity of goodwill is as follows:
Goodwill
Goodwill ($ millions)
Balance, beginning of the year
Business acquisition (Note 4)
Foreign exchange
Balance, end of the year
2023
$ 51.3
68.9
$ 120.2
2022
$ 50.8
75.7
$ 126.5
2023
$ 50.8
1.2
(0.7)
$ 51.3
2022
$ 49.0
-
1.8
$ 50.8
RUSSEL METALS362023 ANNUAL REPORT
Impairment of goodwill
b)
In determining whether goodwill is impaired, the Company estimates the recoverable amount of CGUs or groups
of CGUs to which goodwill is allocated. Management considers the operations below to be CGUs or groups of
CGUs as they represent the lowest level at which goodwill is monitored for internal management purposes.
Accordingly, goodwill was allocated to each CGU or group of CGUs as follows:
Allocation of Goodwill ($ millions)
Metals Service Centers
U.S.
South Central
Wisconsin
South East
Canadian
Alberta
Ontario
Atlantic
Energy Field Stores
Canadian
Alberta
Total
2023
2022
$ 10.4
2.9
13.7
$ 10.6
2.9
13.8
11.0
10.1
2.0
11.0
10.5
2.0
1.2
$ 51.3
-
$ 50.8
c)
The continuity of intangibles within the metals service centers and energy field stores segments is as follows:
Intangibles
Cost ($ millions)
Balance, beginning of the year
Business acquisitions (Note 4)
Foreign exchange
Balance, end of the year
Accumulated Amortization ($ millions)
Balance, beginning of the year
Amortization
Balance, end of the year
Carrying Amount
December 31, 2022
December 31, 2023
Metals
Service Centers
$ 50.7
-
(1.1)
$ 49.6
Energy
Field Stores
$ 103.4
3.3
-
$ 106.7
Metals
Service Centers
$ (20.8)
(2.3)
$ (23.1)
Energy
Field Stores
$ (57.6)
(6.7)
$ (64.3)
Total
2023
$ 154.1
3.3
(1.1)
$ 156.3
Total
2023
$ (78.4)
(9.0)
$ (87.4)
Total
2022
$ 150.6
-
3.5
$ 154.1
Total
2022
$ (67.4)
(11.0)
$ (78.4)
$ 75.7
$ 68.9
The carrying amount of intangible assets as at December 31, 2023 relates to customer relationships and
trademarks arising from the acquisition of Alberta Industrial Metals, Apex Distribution, Color Steels, City Pipe,
Sanborn, Boyd and Alliance. The remaining amortization period for customer relationships is 2 to 15 years.
REVOLVING CREDIT FACILITY
NOTE 13
The Company has a credit agreement which consists of availability of $400 million under Tranche I to be utilized
for borrowings and letters of credit and $50 million under Tranche II to be utilized only for letters of credit. Letters
of credit are issued under Tranche II first and additional needs are issued under Tranche I. This facility expires
September 21, 2025.
The borrowings and letters of credit are available on a revolving basis, up to an amount equal to the sum of
specified percentages of the Company's eligible accounts receivable and inventories, to a maximum of $450
million. The obligations of the Company under this agreement are secured by a pledge of trade accounts
receivable and inventories.
The Company was in compliance with the financial covenants at December 31, 2023. At December 31, 2023
and 2022, the Company had no borrowings, and letters of credit of $25.5 million (2022: $45.1 million) under this
facility.
RUSSEL METALS372023 ANNUAL REPORT
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
NOTE 14
ACCOUNTING POLICIES
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business. Trade payables are classified as current liabilities if payment is due within one year or less. Trade
payables are recognized initially at fair value and subsequently measured at amortized cost.
SUPPORTING INFORMATION
($ millions)
Trade payables and accrued expenses
Accrued interest
Total
2023
$ 450.0
4.2
$ 454.2
2022
$ 477.8
4.2
$ 482.0
LONG-TERM DEBT
NOTE 15
ACCOUNTING POLICIES
Long-term debt is recognized initially at fair value, net of transaction costs incurred. Long-term debt is
subsequently recorded at amortized cost with any difference between the proceeds (net of transaction costs)
and the redemption value recognized in net earnings over the term of the debt using the effective interest method.
Debt is classified as a current liability unless the Company has an unconditional right to defer settlement for at
least 12 months after the end of the reporting period.
SUPPORTING INFORMATION
($ millions)
5 ¾% $150 million Senior Notes due October 27, 2025
6% $150 million Senior Notes due March 16, 2026
Total
2023
$ 148.5
148.7
$ 297.2
2022
$ 147.8
148.2
$ 296.0
Fees associated with the issuance of the debt are included in the carrying amount of debt and are amortized
using the effective interest method.
a)
On March 16, 2018, the Company issued through a private placement, $150 million 6% Unsecured
Senior Notes due March 16, 2026 for net proceeds of $146.0 million. Interest is due semi-annually on March 16
and September 16 of each year.
The Company may redeem the notes in whole or in part at any time after March 16, 2023 at 101.5% of the
principal amount and at 100% of the principal amount on or after March 16, 2024.
These notes contain certain restrictions on the payment of common share dividends in excess of $0.38 per share
per quarter. The Company was in compliance with these financial covenants at December 31, 2023.
On October 27, 2020, the Company issued $150 million 5 ¾% senior unsecured notes due October 27,
b)
2025, for total net proceeds of $147 million. Interest is due semi-annually on April 27 and October 27 of each
year.
The Company may redeem the notes in whole or in part at any time after October 27, 2023 at 101.4% of the
principal amount and at 100% of the principal amount on or after October 27, 2024.
These notes contain certain restrictions on the payment of common share dividends in excess of $1.60 per share
in any fiscal year. The Company was in compliance with these financial covenants at December 31, 2023.
PENSIONS AND BENEFITS
NOTE 16
ACCOUNTING POLICIES
For defined benefit pension plans and other post-employment benefits, the net periodic pension and benefit
expense is actuarially determined on an annual basis by independent actuaries using the projected benefit
method, prorated on service and is charged to expense as services are rendered. The determination of a benefit
expense requires assumptions such as the discount rate to measure obligations, the expected mortality, the
expected rate of future compensation increases and the expected healthcare cost trend rate.
RUSSEL METALS382023 ANNUAL REPORT
The past service costs arising from plan amendments is recognized immediately in net earnings. The asset or
liability recognized in the consolidated statements of financial position is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for asset
ceiling limits. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that have terms to maturity
approximating the terms of the related pension liability. All actuarial gains and losses that arise in calculating
the present value of the defined benefit obligation and the fair value of plan assets are recognized immediately
in the consolidated statements of other comprehensive income. Net interest on the defined benefit liability
(asset) represents the net defined benefit liability (asset), multiplied by the discount rate and is recorded in
employee expenses in the consolidated statements of earnings. The net interest expense (income) on the net
defined benefit liability (asset) is comprised of interest cost on the defined benefit obligation and interest income
on plan assets. Any defined benefit asset resulting from this calculation is limited to the total of unrecognized
net actuarial losses and the present value of any economic benefit in the form of refunds from the plan or
reduction in future contributions to the plan. The Company contributes to three multi-employer pension plans
which are accounted for as defined contribution plans.
The Company closes out actuarial gains and losses recognized in other comprehensive income into retained
earnings at the end of each reporting period.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company's determination of employee benefit expenses and obligations requires the use of assumptions
such as the discount rate to measure obligations, expected mortality, the expected rate of increase of future
compensation and the expected healthcare cost trend rate. Since the determination of the costs and obligations
associated with employee future benefits requires the use of various assumptions, there is measurement
uncertainty inherent in the actuarial valuation process. Actual results could differ from estimated results.
SUPPORTING INFORMATION
a)
The Company maintains a defined contribution pension plan ("DCPP") for most of its Canadian salaried
employees as its defined benefits plans were closed for new employees over 20 years ago. The Company
merged six of its defined benefit plans into the DCPP (the "merged plan") and maintains one other defined benefit
plan. The Company also maintains executive plans, post-retirement benefit plans and two additional defined
contribution plans in Canada and a 401(k) defined contribution plans in the United States.
The defined benefit pension plans are administered by a master trust, which is legally separate from the
Company and is monitored by a pension committee. The pension committee is responsible for policy setting.
The defined benefit pension plans expose the Company to actuarial risk, currency risk, interest rate risk and
market risk.
The merged plan and the other defined benefit plan had a valuation date of January 1, 2022.
In addition, under three labour contracts, the Company participates in multi-employer pension plans established
for the benefit of certain employees covered by collective bargaining contracts in both Canada and U.S. One of
the multi-employer plans is a defined benefit plan; however, this plan is accounted for as a defined contribution
plan as the Company has insufficient information to apply defined benefit plan accounting.
The components of the Company's pension and benefit expense recorded in net earnings included the following:
($ millions)
Defined Benefit Pension Plans
Current service cost
Plan administration cost
Total
Post-retirement benefits
Defined contribution plans
Pension and benefit expense
2023
2022
$ 1.6
0.3
1.9
0.1
7.0
$ 9.0
$ 3.3
0.4
3.7
0.1
6.9
$ 10.7
RUSSEL METALS392023 ANNUAL REPORT
The components of the Company's pension and benefit changes recorded in other comprehensive income
included the following:
($ millions)
Remeasurements of the Net Defined Benefit Liability
Actuarial gains due to actuarial experience
Actuarial (loss) gains due to financial assumption changes
Actuarial loss due to demographic assumption changes
Return on plan assets greater (less) than the discount rate
Remeasurement effect recognized in other comprehensive income
Cumulative Actuarial Gains Relating to Pensions and Benefits
Balance of actuarial gains at January 1
Net actuarial gains recognized in the year
Balance of actuarial gains at December 31
2023
2022
$ -
(4.4)
-
7.4
$ 3.0
$ 4.2
33.0
-
(20.9)
$ 16.3
$ 38.5
3.0
$ 41.5
$ 22.2
16.3
$ 38.5
There were no adjustments related to asset ceiling limits in other comprehensive income for the years ended
December 31, 2023 and 2022.
The actuarial determinations were based on the following assumptions:
Assumed discount rate - year end
Rate of increase in future compensation
Rate of increase in future government benefits
2023
4.60%
3.00%
2.75%
2022
5.00%
3.25%
2.75%
The discount rate is based on a review of current market interest rates of AA corporate bonds with a similar
duration as the expected future cash outflows for the pension payments. A 0.25% increase or decrease in the
discount rate would decrease or increase the defined benefit obligation by approximately $2.9 million as of
December 31, 2023 (2022: $4.4 million).
The mortality assumptions used to assess the defined benefit obligation are based on the Mortality Improvement
Scale (MI-2017). Informal practices that give rise to constructive obligations are included in the measurement
of the defined benefit obligation.
On October 4, 2022, the Company entered into a buy-out transaction with an insurance company to annuitize a
portion of the defined benefit pension plan obligation in the merged plan. The Company paid a premium of $35.1
million to annuitize obligations of $33.9 million, as measured on an accounting basis, for certain retirees.
The Company has obligations included under other benefit plans for dental and medical costs for a group of
retired employees. The health care cost trend rates used were 5% for dental and 5% for medical. A 1% change
in trend rates would not result in a significant increase or decrease in either the present value of the defined
benefit obligation or the net periodic cost.
The sensitivity analysis presented above may not be representative of the actual change in defined benefit
obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the
assumptions may be correlated. In presenting the above sensitivity analysis, the present value of the defined
benefit obligation has been calculated using the projected benefit method at the end of the reporting period,
which is consistent with the defined benefit obligation liability calculation recognized in the consolidated
statements of financial position.
RUSSEL METALS402023 ANNUAL REPORT
b)
excluding those which are in the process of being wound up.
The following information pertains to the Company's defined benefit pension and other benefit plans,
($ millions)
Reconciliation of Present Value of the Defined
Benefit Obligation
Balance, beginning of the year
Increase in liability due to settlement
Current service costs
Participant contributions
Interest cost
Benefits paid
Settlement payment
Actuarial losses (gains)
Balance, end of the year
($ millions)
Reconciliation of Present Value of the Plan Assets
Balance, beginning of the year
Interest income
Employer contributions
Employee contributions
Benefits paid
Settlement payment
Plan administration costs
Return on plan assets greater (less) than discount rate
Balance, end of the year
Pension Plans
2023
2022
Other Benefit Plans
2023
2022
$ 80.8
-
1.6
0.1
3.9
(4.7)
-
4.4
$ 86.1
$ 151.2
1.2
3.3
0.1
4.4
(7.3)
(35.1)
(37.0)
$ 80.8
$ 1.5
-
-
-
0.1
(0.1)
-
-
$ 1.5
$ 1.8
-
-
-
0.1
(0.1)
-
(0.3)
$ 1.5
Pension Plans
2023
2022
Other Benefit Plans
2023
2022
$ 122.8
5.9
(2.0)
0.1
(4.7)
-
(0.3)
7.4
$ 129.2
$ 179.1
5.3
2.0
0.1
(7.3)
(35.1)
(0.4)
(20.9)
$ 122.8
$ -
-
0.1
-
(0.1)
-
-
-
$ -
$ -
-
0.1
-
(0.1)
-
-
-
$ -
Defined benefit (asset) obligations, net
$ (43.1)
$ (42.0)
$ 1.5
$ 1.5
The fair values of the defined benefit pension plan assets at the end of the reporting period for each category
are as follows:
($ millions)
Cash and cash equivalents
Equities
Canadian equity
Global equity fund
Total
Fixed Income Investments Categorized by Type of Issuer
Government guaranteed
Provincials
Corporate
Total
2023
$ 23.5
2022
$ 17.8
23.8
35.1
58.9
47.2
28.8
76.0
10.0
20.6
16.2
46.8
$ 129.2
6.2
12.2
10.6
29.0
$ 122.8
The following table provides the defined benefit (assets) obligations for partially funded plans and unfunded
plans.
($ millions)
Defined Benefit (Asset) Obligations
Plans with surplus
Partially funded plans
Unfunded plans
Defined benefit (asset) obligations
Pension Plans
2023
2022
Other Benefit Plans
2023
2022
$ (43.6)
0.5
-
$ (43.1)
$ (42.0)
-
-
$ (42.0)
$ -
-
1.5
$ 1.5
$ -
-
1.5
$ 1.5
c)
As at December 31, 2023 approximately 46% (2022: 63%) of the fair value of all pension plan assets
was invested in equities, 36% (2022: 24%) in fixed income securities, and 18% (2022: 13%) in cash and cash
equivalents. The plan assets are not invested in derivatives or real estate assets. Management endeavours to
have an asset mix of approximately 40% - 60% in equities, 30% - 60% in fixed income securities and 0% - 20%
in cash and cash equivalents.
RUSSEL METALS412023 ANNUAL REPORT
d)
The weighted average duration of defined benefit obligations is 14.5 years (2022: 12.2 years) for defined
benefit pension plans, 9.6 years (2022: 9.6 years) for executive pension arrangements and 6.0 years (2022: 5.7
years) for other post retirement benefit plans. The Company expects to make contributions of $0.8 million to its
defined benefit pension plans and $0.2 million to its post retirement benefits medical plans in the next financial
year.
NOTE 17
a)
SHAREHOLDERS' EQUITY
At December 31, 2023 and 2022, the authorized share capital of the Company consisted of:
(i) an unlimited number of common shares without nominal or par value;
(ii) an unlimited number of Class I preferred shares without nominal or par value, issuable in series;
and
(iii) an unlimited number of Class II preferred shares without nominal or par value, issuable in series.
The Directors have the authority to issue the Class I and Class II preferred shares in series and fix the
designation, rights, privileges and conditions to be attached to each series, except that the Class I shares shall
be entitled to preference over the Class II shares with respect to the payment of dividends and the distribution
of assets in the event of liquidation, dissolution or winding-up of the Company.
b)
The number of common shares issued and outstanding was as follows:
Balance, December 31, 2021
Share options exercised
Shares repurchased
Balance, December 31, 2022
Share options exercised
Shares repurchased
Balance, December 31, 2023
Number
of Shares
63,100,220
12,000
(1,000,000)
62,112,220
435,862
(2,159,656)
60,388,426
Amount
(millions)
$ 571.0
0.4
(9.0)
$ 562.4
13.7
(19.8)
$ 556.3
During the year ended December 31, 2023, the Company purchased 2,159,656 shares under the Company's
normal course issuer bid at an average cost of $37.75 per share for a total cost of $81.5 million. The original
cost of these shares of $19.8 million was recorded as a reduction of share capital and the balance of $61.7
million as a reduction of retained earnings. The common shares purchased through this bid have been
cancelled.
The continuity of contributed surplus is as follows:
($ millions)
Balance, December 31, 2021
Share-based compensation expense
Options exercised
Balance, December 31, 2022
Options exercised
Balance, December 31, 2023
$ 12.1
0.2
(0.1)
12.2
(1.9)
$ 10.3
Dividends paid and declared were as follows:
Dividends paid ($ millions)
Dividends per share
Quarterly dividend per share declared on February 8, 2024 (February 9, 2023)
2023
$ 97.2
$ 1.58
$ 0.40
2022
$ 95.6
$ 1.52
$ 0.38
SHARE-BASED COMPENSATION
NOTE 18
ACCOUNTING POLICIES
The Company accounts for Share Options and Share Appreciation Rights ("SARs") at fair value. The Company
utilizes the Black-Scholes option pricing model to estimate the fair value of SARs and share options on the grant
date.
RUSSEL METALS422023 ANNUAL REPORT
Compensation expense is recognized for share options on a graded vesting basis, where the fair value of each
tranche is determined at the grant date based on the Company's estimate of options that will eventually vest and
is recognized over its respective vesting period, except for employees who are eligible to retire during the vesting
period whose options are expensed immediately. At the end of each reporting period, the Company revises its
estimate of the number of options expected to vest. The impact of the revision of the original estimate, if any, is
recognized in net earnings such that the cumulative expense reflects the revised estimate with a corresponding
adjustment to contributed surplus.
Changes in the fair value of outstanding SARs are calculated at each reporting period as well as at settlement
dates. The fair value of the award is recorded over the award vesting period.
Compensation expense for deferred share units is recognized when the units are issued and for changes in the
quoted market price from the issue date to the reporting date until the units are redeemed. Compensation
expense for restricted share units is recognized over the vesting period and for changes in the quoted market
price from the issue date to the reporting period date until the units mature.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The inputs for the Black-Scholes option pricing model require significant judgements including share price
volatility, expected dividends, expected life of the options and the risk free interest rate.
SUPPORTING INFORMATION
Share Options
The Company has a shareholder approved share option plan, the purpose of which is to provide the employees
of the Company and its subsidiaries with the opportunity to participate in the growth and development of the
Company. The number of common shares that may be issued under the share option plan is 4,498,909 and the
options vest over a period of four years in the amount of one quarter each year and expire ten years from their
grant date. Other terms and conditions of the plan include a 10 year life and immediate vesting under certain
change of control provisions. The consideration paid by employees for the purchase of common shares is added
to share capital. From 2014, employees other than certain senior officers no longer receive share options.
The following is a continuity of options outstanding:
Balance, beginning of year
Exercised
Expired or forfeited
Balance, end of the year
Exercisable
Number of Options
2023
575,785
(435,862)
(39,375)
100,548
48,611
2022
632,647
(12,000)
(44,862)
575,785
470,752
Weighted Average
Exercise Price
2023
$ 26.27
27.03
28.99
$ 21.89
2022
$ 26.36
27.53
27.32
$ 26.27
$ 21.94
$ 27.29
The outstanding options have exercise price ranges as follows:
(number of options)
$ 29.00 - $ 31.46
$ 25.37 - $ 28.99
$ 14.61 - $ 25.36
Options outstanding
2023
-
-
100,548
100,548
2022
126,382
154,582
294,821
575,785
The options expire in the years 2024 to 2032 and have a weighted average remaining contractual life of 3.5
years (2022: 2.9 years)
Share Appreciation Rights
In February 2017, the Board of Directors approved a Share Appreciation Rights Plan. Under this plan the
Company may award SARs to officers and full-time employees as determined by the Board of Directors. The
SARs are cash settled and vest over a period of four years in the amount of one quarter each year and expire
ten years from their grant date.
RUSSEL METALS432023 ANNUAL REPORT
The continuity of SARs is as follows:
Balance, beginning of year
Granted
Paid out
Balance, end of the year
Number of SARs
2023
332,830
55,768
(108,277)
280,321
2022
260,282
72,548
-
332,830
Weighted Average
Exercise Price
2023
$ 26.27
36.67
25.51
$ 28.63
2022
$ 24.40
32.99
-
$ 26.27
The SARs liability and fair value at December 31, 2023, was $3.3 million and $4.6 million respectively (December
31, 2022: $0.8 million and $1.2 million).
Deferred Share Units
The Company has a Deferred Share Unit ("DSU") Plan for non-executive directors. A DSU is a unit of equivalent
value to one common share based on market price, which is defined as the volume weighted average price of a
common share on the Toronto Stock Exchange for the last five trading days immediately prior to the grant date.
DSUs are granted quarterly to the account of each non-executive director by dividing the quarterly allocation by
the market price. At the option of the individual director, they may elect to receive other board fees in the form
of DSUs. DSUs vest immediately and are redeemable for cash only when a non-executive director leaves the
Board.
The continuity of DSUs is as follows:
(number of units)
Balance, beginning of the year
Granted
Paid out
Balance, end of the year
2023
343,104
43,079
-
386,183
2022
327,380
50,923
(35,199)
343,104
The liability and fair value of DSUs was $17.4 million at December 31, 2023, (2022: $9.9 million). Dividends
declared on common shares accrue to units in the DSU plan in the form of additional DSUs.
Restricted Share Units
The Company has a Restricted Share Unit ("RSU") Plan for eligible employees as designated by the Board of
Directors. The plan was established to provide medium-term compensation. RSUs are awarded by the Board
of Directors to eligible employees annually. RSUs vest one third on the first and second anniversary after the
grant date and the remaining one third on the expiry date. RSUs expire on the earlier of: (i) December 5 of the
third calendar year following the year in which the services were provided to which such grant of RSU's relates;
and (ii) the third anniversary of the grant date. The Company is obligated to pay in cash an amount equal to the
number of RSUs multiplied by the market price, which is defined as the volume weighted average price of a
common share on the Toronto Stock Exchange for the last five trading days immediately prior to the expiry date.
Continuity of RSUs outstanding is as follows:
(number of units)
Balance, beginning of the year
Granted
Paid out
Balance, end of the year
2023
312,464
256,393
(55,271)
513,586
2022
161,381
267,098
(116,015)
312,464
The RSU liability at December 31, 2023, was $17.0 million (2022: $5.7 million). The fair value of RSUs was
$23.1 million at December 31, 2023, (2022: $9.0 million). Dividends declared on common shares accrue to units
in the RSU plan in the form of additional RSUs.
RUSSEL METALS442023 ANNUAL REPORT
Employee Share Purchase Plan
The Company has an Employee Share Purchase Plan to provide employees with the opportunity to purchase
common shares. Employees may make contributions of between 1% and 5% of their base pay and the Company
will contribute an amount equal to one-third of the employee's contribution. Employees are eligible to make
contributions above the 5% of base pay threshold but the Company contributes only to a maximum of one-third
of 5% of base pay. The plan does not provide for a discount for employee purchases and is administered by a
trustee who purchases shares for the plan through the TSX. Dividends paid on the shares are used to purchase
additional shares.
Components of share-based compensation expense are as follows:
($ millions)
Share options
DSUs, SARs and RSUs
Employee Share Purchase Plan
Total
2023
$ -
19.0
0.7
$ 19.7
2022
$ 0.1
3.0
0.7
$ 3.8
EARNINGS PER SHARE
NOTE 19
ACCOUNTING POLICIES
Basic earnings per common share is calculated using the weighted average number of common shares
outstanding. Diluted earnings per share is calculated using the treasury share method.
SUPPORTING INFORMATION
The following table provides the numerator and denominator used to compute basic and diluted earnings per
share:
($ millions)
Net income used in calculation of basic and diluted earnings per share
(number of shares)
Weighted average shares outstanding
Dilution impact of share options
Diluted weighted average shares outstanding
EXPENSES
NOTE 20
($ millions)
Employee Expenses
Wages and salaries
Other employee related costs
Total
Other Operating Expenses
Plant and other expenses
Delivery expenses
Repairs and maintenance
Selling expenses
Professional fees
Gain on sale of property, plant and equipment
Foreign exchange (gain) loss
Total
INTEREST EXPENSE
NOTE 21
($ millions)
Interest on 6% $150 million Senior Notes
Interest on 5 ¾% $150 million Senior Notes
Interest on lease obligations
Other interest income, net
Interest expense, net
2023
$ 266.7
2022
$ 371.9
2023
61,527,975
39,479
61,567,454
2022
62,891,611
63,975
62,955,586
2023
2022
$ 347.7
48.6
$ 396.3
$ 350.6
51.9
$ 402.5
$ 124.4
84.9
20.5
14.1
8.9
(0.8)
(1.8)
$ 250.2
$ 121.8
86.9
19.0
10.7
4.8
(2.8)
1.9
$ 242.3
2023
$ 9.5
9.3
10.0
(19.9)
$ 8.9
2022
$ 9.5
9.3
8.7
(2.2)
$ 25.3
RUSSEL METALS452023 ANNUAL REPORT
Interest expense on long-term debt and lease obligations is charged to earnings using the effective interest
method.
Interest expense on long-term debt is comprised of the interest calculated on the face value of long-term debt,
issue costs and accretion of the carrying value of the long-term debt. Debt accretion and issue cost amortization
for the years ended December 31, 2023 was $1.3 million (2022: $1.1 million).
INCOME TAXES
NOTE 22
ACCOUNTING POLICIES
Income tax expense comprises of current and deferred tax. Income tax is recognized in the consolidated
statements of earnings except to the extent that it relates to items recognized directly in equity in which case the
related tax is recognized in equity.
Current income tax expense is based on the results for the period which is adjusted for items that are not taxable
or not deductible for tax. Current income tax is calculated using tax rates and laws that were enacted or
substantively enacted at the end of the reporting period.
Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated statements of financial position. Deferred
tax is calculated using tax rates and laws that have been enacted or substantively enacted at the end of the
reporting period, and which are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled.
Deferred Tax Liabilities
generally recognized for all taxable temporary differences;
recognized for taxable temporary differences arising on investments in subsidiaries, except where the
reversal of the temporary difference can be controlled and it is probable that the difference will not
reverse in the foreseeable future; and
not recognized on differences that arise from goodwill at acquisition.
Deferred Tax Assets
recognized to the extent it is probable that taxable income will be available against which the deductible
temporary differences and the carry forward of unused tax losses and credits can be utilized; and
reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that
sufficient taxable income will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial
recognition of assets and liabilities acquired other than in a business combination.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company computes an income tax provision in each of the jurisdictions in which it operates. Actual amounts
of income tax expense are finalized upon filing and acceptance of the tax return by the relevant authorities, which
occurs subsequent to the issuance of the consolidated financial statements. Additionally, the estimation of
income taxes includes evaluating the recoverability of deferred tax assets based on an assessment of the ability
to use the underlying future tax deductions before they expire against future taxable income. The assessment
is based upon existing tax laws and estimates of future taxable income. To the extent estimates differ from the
final tax return, earnings would be affected in a subsequent period. In interim periods, the income tax provision
is based on an estimate of earnings for a full year by jurisdiction. The estimated average annual effective income
tax rates are reviewed at each reporting date, based on projections of full year earnings. To the extent that
forecasts differ from actual results, adjustments are recorded through earnings in subsequent periods.
RUSSEL METALS462023 ANNUAL REPORT
The Company is subject to taxation in numerous jurisdictions. There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of business. The Company
maintains provisions for uncertain tax positions that it believes appropriately reflect its risk with respect to tax
matters under active discussion, audit, dispute or appeal with tax authorities, or which are otherwise considered
to involve uncertainty. These provisions are made using the best estimate of the amount expected to be paid
based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these
provisions at the end of the reporting period. It is possible that at some future date an additional liability could
result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from
the amounts that were initially recorded, such differences will affect the tax provision in the period in which such
determination is made.
SUPPORTING INFORMATION
a)
The components of the provision for income taxes are as follows:
($ millions)
Current tax expense
Deferred tax recovery
Total
b)
The Company's effective income tax rate was derived as follows:
Applicable combined Canadian statutory rate
Rate difference of U.S. companies
Share-based compensation and non-deductible items
Share of earnings from joint venture
Other (includes utilization of capital losses)
Average effective tax rate
2023
$ 84.5
(2.5)
$ 82.0
2022
$ 121.0
(5.4)
$ 115.6
2023
25.9%
(0.6%)
0.2%
(1.8%)
(0.2%)
23.5%
2022
26.1%
(0.5%)
0.1%
(1.8%)
(0.2%)
23.7%
The combined Canadian statutory rate is the aggregate of the federal income tax rate of 15.0% for both 2023
and 2022 and the average provincial rate of 10.9% for 2023 and 11.1% for 2022. The 2023 and 2022 average
effective tax rate differed from the average Canadian corporate tax rate principally due to differing tax rules
applicable to certain of the Company's subsidiaries outside Canada.
c)
Deferred income tax assets and liabilities were as follows:
Deferred Income Tax Assets
($ millions)
Balance December 31, 2021
Benefit (expense) to consolidated
statement of earnings
Reclass assets/liabilities and other
Balance December 31, 2022
Benefit (expense) to consolidated
statement of earnings
Reclass assets/liabilities and other
Balance December 31, 2023
Losses
$ -
-
-
$ -
-
-
$ -
Property
Plant and
Equipment
$ 0.5
Pension
And
Benefits
$ 0.1
Goodwill
And
Intangibles
$ 0.4
Other
Timing
Total
$ 0.5 $ 1.5
-
-
$ 0.5
-
-
$ 0.1
(0.1)
-
$ 0.4
-
-
$ 0.1
(0.5)
-
(0.6)
0.3
$ (0.1) $ 0.7 $ 1.2
(0.1)
0.3
0.3
(0.3)
$ (0.1) $ 0.8 $ 1.2
0.4
(0.3)
-
-
RUSSEL METALS472023 ANNUAL REPORT
Deferred Income Tax Liabilities
($ millions)
Balance December 31, 2021
(Benefit) expense to consolidated
statement of earnings
Benefits to other comprehensive income
Reclass assets/liabilities and other
Balance December 31, 2022
(Benefit) expense to consolidated
statement of earnings
Benefits to other comprehensive income
Business acquisition (Note 4)
Reclass assets/liabilities and other
Balance December 31, 2023
Property
Plant and
Equipment
$ 18.0
Pension
And
Benefits
$ 6.9
1.8
-
0.8
$ 20.6
2.4
-
-
(0.3)
$ 22.7
(0.5)
4.3
-
$ 10.7
(0.6)
0.8
-
-
$ 10.9
Losses
$ (1.2)
0.1
-
(0.1)
$ (1.2)
-
-
-
-
$ (1.2)
Goodwill
And
Intangibles
Other
Timing
Total
$ 1.7 $ (5.8) $ 19.6
(0.9)
-
-
(6.0)
4.3
0.5
$ 0.8 $ (12.5) $ 18.4
(6.5)
-
(0.2)
(0.9)
-
0.9
(0.1)
(2.2)
0.8
0.9
(0.4)
$ 0.7 $ (15.6) $ 17.5
(3.1)
-
-
-
Net deferred income tax liability at December 31, 2022
Net deferred income tax liability at December 31, 2023
$ 17.2
$ 16.3
d)
At December 31, 2023, the Company had U.S. state tax losses carried forward which, at U.S. state tax
rates, have an estimated value of $1.2 million (2022: $1.2 million). The majority of the state tax losses carried
forward will expire between 2031 and 2036, if not utilized. Deferred tax assets are recognized for tax loss carry-
forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The
ability to realize the tax benefits of these losses is dependent upon a number of factors, including the probability
of generating taxable income from operations in the future in the jurisdictions in which the tax losses arose.
e)
At December 31, 2023, the aggregate amount of temporary differences associated with undistributed
earnings of non-Canadian subsidiaries was $745 million. No liability has been recognized in respect of these
differences because the Company is in a position to control the timing of the reversal of the temporary
differences, and it is probable that such differences will not reverse in the foreseeable future.
PROVISIONS AND OTHER NON-CURRENT LIABILITIES
NOTE 23
ACCOUNTING POLICIES
Provisions represent liabilities to the Company for which the amount or timing is uncertain. Provisions are
recognized when the Company has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present
value of the expected expenditures to settle the obligation using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. Any increase in the provision
due to the passage of time is recognized in other finance expense.
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with
the retirement of property, plant and equipment, when those obligations result from the acquisition, construction,
development or normal operation of the assets. The net present value of the estimated future decommissioning
and rehabilitation costs are capitalized to the related asset along with a corresponding increase in the provision
in the period incurred. Pre-tax discount rates that reflect the time value of money are used to calculate the net
present value.
The estimates of decommissioning costs could change as a result of changes in regulatory requirements and
assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly
to the related asset or net earnings with a corresponding adjustment to the provision. The estimates are
reviewed annually for changes in regulatory requirements and changes in estimates. Changes in the net present
value are recognized in net earnings.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company has recorded a provision for decommissioning liabilities. The determination of these liabilities
involved analysis to estimate expected cash outflows over a long period of time which is inherently uncertain.
RUSSEL METALS482023 ANNUAL REPORT
SUPPORTING INFORMATION
($ millions)
Provision for decommissioning liabilities
Deferred compensation and employee incentives (Note 18)
Total
Less: current portion
Total
2023
$ 3.1
37.7
40.8
(10.4)
$ 30.4
2022
$ 3.1
16.4
19.5
(1.5)
$ 18.0
Deferred compensation includes the RSU, DSU and SAR liabilities. RSU liabilities that will be paid within the
current year amounting to $10.4 million have been reclassified to current liabilities.
SEGMENTED INFORMATION
NOTE 24
ACCOUNTING POLICIES
The Company's operating segments are organized around the markets it serves and are reported in a manner
consistent with the internal reporting provided to the chief operating decision-maker which is the Chief Executive
Officer.
SUPPORTING INFORMATION
For the purpose of segment reporting, operating segments are identified as a component of an entity:
that engages in business activities from which it may earn revenues and incur expenses;
whose operating results are regularly reviewed by the Company's Chief Executive Officer to make
decisions about resources to be allocated to the segment and assess its performance; and
for which discrete financial information is available.
Accordingly, the Company conducts business in Canada and the U.S. in three reportable segments.
Metals Service Centers
The Company's network of metals service centers carry an extensive line of metal products in a wide
range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and
tubular products, stainless steel, aluminum and other non-ferrous specialty metals. The Company
purchases these products primarily from North American steel producers, and processes, packages and
sells them to end users in accordance with their specific needs.
Energy Field Stores
The Company's energy field stores operations carry a specialized product line focused on the needs of
energy industry customers. These operations distribute flanges, valves, fittings and other products
through our field store operations in Canada and the United States.
Steel Distributors
The Company's steel distributors operations act as master distributors selling steel to customers in large
volumes to other steel service centers and large equipment manufacturers mainly on an "as is" basis.
The main steel products sourced by this segment are carbon steel plate, flat rolled products, beams,
channel and pipe.
RUSSEL METALS492023 ANNUAL REPORT
The Company has segmented its operations on the basis of management reporting and geographic segments
in which it operates. The inter-segment sales from steel distributors to metals service centers were $113.5
million (2022: $171.7 million). These sales, which are at market rates, are eliminated in the following table.
a)
Results by business segment:
($ millions)
Segment Revenues
Metals service centers
Energy field stores
Steel distributors
Total
Other
Total
Segment Operating Profits
Metals service centers
Energy field stores
Steel distributors
Total
Corporate expenses and other
Gain on sale of investment in joint venture
Earnings from joint venture
Earnings before interest and provision for income taxes
Interest expense, net
Provision for income taxes
Net earnings
Capital Expenditures
Metals service centers
Energy field stores
Steel distributors
Other
Total
Depreciation and Amortization Expense
Metals service centers
Energy field stores
Steel distributors
Other
Total
2023
2022
$ 3,034.5
987.2
466.3
4,488.0
17.1
$ 4,505.1
I
$ 3,523.0
903.0
631.2
5,057.2
13.4
$ 5,070.6
I
$ 202.5
105.1
57.8
365.4
(34.9)
9.8
17.3
357.6
(8.9)
(82.0)
$ 266.7
$ 60.0
9.9
1.6
1.2
$ 72.7
$ 46.8
18.7
1.4
1.1
$ 68.0
$ 321.5
104.6
77.0
503.1
(21.3)
-
31.0
512.8
(25.3)
(115.6)
$ 371.9
$ 32.5
7.0
1.9
0.1
$ 41.5
$ 46.4
17.4
1.2
1.1
$ 66.1
RUSSEL METALS502023 ANNUAL REPORT
($ millions)
Current Identifiable Assets
Metals service centers
Energy field stores
Steel distributors
Total
Non-Current Identifiable Assets
Metals service centers
Energy field stores
Steel distributors
Total identifiable assets included in segments
Assets Not Included in Segments
Cash and cash equivalents
Investment in joint venture
Income taxes receivable and deferred income tax assets
Financial and other assets
Pension and benefits
Corporate and other operating assets
Total assets
Liabilities
Metals service centers
Energy field stores
Steel distributors
Liabilities by segment
Liabilities Not Included in Segments
Income taxes payable and deferred income tax liabilities
Long-term debt
Pension and benefits
Corporate and other liabilities
Total liabilities
b)
Results by geographic segment:
($ millions)
Segment Revenues
Canada
United States
Total
Segment Operating Profits
Canada
United States
Total
Identifiable Assets
Canada
United States
Total
2023
2022
$ 793.0
392.4
139.5
1,324.9
$ 906.1
366.8
216.6
1,489.5
424.6
121.7
11.2
1,882.4
629.2
-
9.4
3.9
43.6
1.6
$ 2,570.1
$ 365.6
134.6
34.9
535.1
21.1
297.2
2.0
74.8
$ 930.2
409.1
121.1
11.3
2,031.0
363.0
46.6
17.5
4.6
42.0
2.2
$ 2,506.9
$ 352.6
166.7
52.2
571.5
23.2
296.0
1.5
55.4
$ 947.6
f
2023
I
2022
$ 2,720.5
1,767.5
$ 4,488.0
$ 3,068.0
1,989.2
$ 5,057.2
$ 236.3
129.1
$ 365.4
$ 338.4
164.7
$ 503.1
$ 1,172.1
710.3
$ 1,882.4
$ 1,280.0
751.0
$ 2,031.0
RUSSEL METALS512023 ANNUAL REPORT
c)
Revenues by product:
($ millions)
Carbon
Structurals and Pipe (WF & I Beams, Angles, Channels, Hollow Tubes)
Plate (Discrete & Plate in Coil)
Flanges, Valves, Fittings and other related products
Bars (Hot Rolled and Cold Finished)
Flat Rolled (Sheet & Coil)
Grating/ Expanded/Rails
Total Carbon
Total Non-Ferrous (Sheet, Extrusion, Tubes, etc.)
Other
Total
2023
2022
$ 1,803.6
912.0
647.4
221.5
423.4
44.2
4,052.1
209.8
243.2
$ 4,505.1
$ 2,046.8
1,125.8
590.7
256.7
498.0
50.7
4,568.7
230.6
271.3
$ 5,070.6
RELATED PARTY TRANSACTIONS
NOTE 25
During the years ended December 31, 2023 and 2022 the Company did not have any transactions with
subsidiaries outside the normal course of business. All subsidiaries are wholly owned and all transactions with
subsidiaries are recorded at fair value and have been eliminated upon consolidation.
At December 31, 2023, there were no loans or credit transactions outstanding with key management personnel
or directors. Key management personnel includes the Chief Executive Officer, Chief Financial Officer and certain
Vice Presidents. Compensation costs of key management personnel and directors were as follows:
($ millions)
Salaries and other benefits
Share based compensation cost
Post-employment benefits
Total
2023
$ 15.8
8.1
0.1
$ 24.0
2022
$ 16.2
7.2
0.1
$ 23.5
FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT
NOTE 26
ACCOUNTING POLICIES
a)
The Company measures certain financial and non-financial assets and liabilities at fair value at each statement
of financial position date. In addition, fair value measurements are disclosed for certain financial and non-
financial assets and liabilities.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at the measurement date.
Assets and liabilities, for which fair value is measured or disclosed in the consolidated financial statements, are
classified using a three-level fair value hierarchy that reflects the significance and transparency of the inputs
used in making the fair value measurements. Each level is based on the following:
Level 1
Values based on unadjusted quoted prices in active markets that are accessible at the measurement
date for identical assets or liabilities.
Level 2
Values based on quoted prices in markets that are not active or model inputs that are observable either
directly or indirectly for substantially the full term of the asset or liability.
Level 3
Values based on prices or valuation techniques that require inputs which are both unobservable and
significant to the overall fair value measurement.
RUSSEL METALS522023 ANNUAL REPORT
Financial assets
b)
Purchases and sales of financial assets are recognized on the settlement date, which is the date on which the
asset is delivered to or by the Company. Financial assets are derecognized when the rights to receive cash
flows from the instruments have expired or have transferred and the Company has transferred substantially all
risks and rewards of ownership. Financial assets are classified in the following categories at the time of initial
recognition based on the purpose for which the financial assets were acquired:
Financial Assets at Fair Value through Profit or Loss
Classification
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by
management. Assets in this category include preferred shares, forward exchange contracts and embedded
derivatives in inventory purchases.
Recognition and measurement
Financial assets carried at fair value are initially recognized, and subsequently carried, at fair value with changes
recognized in net earnings. Transaction costs are expensed.
Fair value of preferred shares
Preferred shares which are not held for trading are carried at fair value with changes recognized in net income.
Loans and Receivables
Classification
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for those with maturities greater than
12 months after the end of the reporting period which are classified as non-current assets. Assets in this category
include cash and cash equivalents and accounts receivable and are classified as current assets in the
consolidated statements of financial position.
Recognition and measurement
Loans and receivables are initially recognized at fair value plus transaction costs and subsequently carried at
amortized cost, less impairment.
Financial liabilities and equity instruments
c)
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
Other Financial Liabilities
Classification
Other financial liabilities include bank indebtedness, accounts payable and accrued liabilities and long-term debt.
Recognition and measurement
Short-term borrowings are recorded at the fair value of the proceeds received. Long-term debt is measured at
amortized cost using the effective interest method, with interest expense recognized in net earnings. Eligible
costs related to long-term debt financing are carried at amortized cost and amortized using the effective interest
method over the period of the related financing.
Derivative financial instruments
d)
Derivatives are initially recognized at fair value on the date a contract is entered into and are subsequently re-
measured at fair value. The method of recognizing the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument and the nature of the item being hedged.
Embedded Derivatives
An embedded derivative is a feature within a contract, where the cash flows associated with that feature behave
in a similar fashion to a stand-alone derivative. The Company has embedded foreign currency derivatives in
certain purchase contracts where the currency of the contract is different from the functional or local currencies
of the parties involved. These derivatives are accounted for as separate instruments and are measured at fair
value and included in accounts payable and accrued liabilities at the end of the reporting period. Changes in
their fair values are recognized within "Other operating expense" in the consolidated statements of earnings.
RUSSEL METALS532023 ANNUAL REPORT
Impairment of financial assets
e)
At each financial position date, the Company assesses whether there is objective evidence that a financial asset
or a group of financial assets is impaired. When impairment has occurred, the asset's carrying value is reduced
with the loss recognized in net earnings.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset's
carrying amount and the present value of the estimated future cash flows discounted at the financial asset's
original effective interest rate.
In a subsequent period, if the impairment loss decreases and the decrease relates to an event occurring after
the impairment was recognized, the previously recognized impairment loss is reversed through net earnings.
On the date of impairment reversal, the carrying amount of the financial asset cannot exceed its amortized cost
had impairment not been recognized.
SUPPORTING INFORMATION
Financial assets and liabilities
a)
Financial assets and liabilities were as follows:
December 31, 2023 ($ millions)
Cash and cash equivalents
Accounts receivable
Other financial assets
Accounts payable and accrued liabilities
Lease obligations
Long-term debt
Total
December 31, 2022 ($ millions)
Cash and cash equivalents
Accounts receivable
Other financial assets
Preferred shares held in joint venture
Accounts payable and accrued liabilities
Lease obligations
Long-term debt
Total
Loans and
Receivables
$ 629.2
457.4
3.4
-
-
-
$ 1,090.0
Fair Value
Through Profit
and Loss
$ -
-
-
23.3
-
-
-
$ 23.3
Loans and
Receivables
$ 363.0
497.9
3.5
-
-
-
-
$ 864.4
Other
Financial
Liabilities
$ -
-
-
(454.2)
(125.3)
(297.2)
$ (876.7)
Other
Financial
Liabilities
$ -
-
-
-
(482.0)
(126.9)
(296.0)
$ (904.9)
Total
$ 629.2
457.4
3.4
(454.2)
(125.3)
(297.2)
$ 213.3
Total
$ 363.0
497.9
3.5
23.3
(482.0)
(126.9)
(296.0)
$ (17.2)
For the year ended December 31, 2023, the fair value of derivative financial instruments on the consolidated
statements of earnings was a gain of $2.9 million (2022: gain of $0.8 million) including embedded derivative and
forward contracts.
Fair value
b)
The fair value of cash and cash equivalents, accounts receivable, bank indebtedness, accounts payable and
accrued liabilities approximate their carrying amounts because of the short-term maturity of these instruments.
The fair value of long-term debt is set forth below.
Carrying Amounts
Amounts recorded in the consolidated statements of financial position are referred to as carrying amounts. The
carrying amounts of primary debt are reflected in "Long-term debt" and "Current portion long-term debt".
RUSSEL METALS542023 ANNUAL REPORT
Fair Value
The Company records its debt at amortized cost using the effective interest method. The fair value of long-term
debt as at December 31, 2023 and 2022 was estimated based on the last quoted trade price, where it exists, or
based on current rates available to the Company for similar debt with the same period to maturity.
The following summary reflects the fair value of long-term debt:
December 31, 2023 ($ millions)
5 ¾% $150 million Senior Notes due October 27, 2025
6% $150 million Senior Notes due March 16, 2026
Total
Current portion
Long-term portion
December 31, 2022 ($ millions)
5 ¾% $150 million Senior Notes due October 27, 2025
6% $150 million Senior Notes due March 16, 2026
Total
Current portion
Long-term portion
Fair Value
Level 2
$ 150.2
150.2
$ 300.4
Fair Value
Level 2
$ 146.9
147.1
$ 294.0
Carrying
Amount
$ 148.5
148.7
$ 297.2
$ -
$ 297.2
Carrying
Amount
$ 147.8
148.2
$ 296.0
$ -
$ 296.0
Fair Value of Preferred Shares
Preferred shares which are not held for trading are carried at fair value with changes recognized in net income.
Credit risk
c)
Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument fails to meet
its contractual obligation. Credit risk arises from cash and cash equivalents and derivative financial instruments,
as well as credit exposure to customers including accounts receivable.
The Company attempts to minimize credit exposure as follows:
Cash investments are placed with high-quality financial institutions with limited exposure to any one
institution. At December 31, 2023, nearly all cash and cash equivalents were held in institutions that
were R1 High by DBRS;
Counterparties to derivative contracts are members of the syndicated banking facility (Note 13);
Credit limits minimize exposure to any one customer; and
The customer base is geographically diverse and in different industries.
No allowance for credit losses on financial assets was required as of December 31, 2023 and 2022, other than
the allowance for doubtful accounts (Note 6). As at December 31, 2023, trade accounts receivable greater than
90 days represented less than 4% of trade accounts receivable (2022: 3%).
Interest rate risk
d)
Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate
because of changes in market rates of interest. The Company is not exposed to significant interest rate risk.
The Company's long-term debt is at fixed rates. The Company's bank borrowings, net of cash and cash
equivalents, used to finance working capital which is short-term in nature, is at floating interest rates.
Foreign exchange risk
e)
Foreign exchange risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Company uses foreign exchange contracts with maturities
of less than a year to manage foreign exchange risk on certain future committed cash outflows. As at December
31, 2023, the Company had outstanding forward foreign exchange contracts in the amount of US$32.3 million,
maturing in 2024 (2022: US$95.3 million). A 1% change in foreign exchange rates would not result in a
significant increase or decrease in accounts payable or net earnings.
RUSSEL METALS552023 ANNUAL REPORT
Liquidity risk
f)
Liquidity risk is the risk that the Company will not meet its financial obligations when due. Liquidity adequacy is
assessed in view of seasonal needs, growth requirements, capital expenditures, and the maturity profile of
indebtedness. Cash is managed by the centralized treasury function and is invested in money market
instruments or bank deposits, with durations ranging up to sixty days. A centralized treasury function ensures
that the Company maintains funding flexibility by assessing future cash flow expectations and by maintaining its
committed borrowing facilities.
As at December 31, 2023, the Company was contractually obligated to make payments under its financial
liabilities that come due during the following periods:
($ millions)
2024
2025
2026
2027
2028
2029 and beyond
Total
Accounts
Payable
$ 454.2
-
-
-
-
-
$ 454.2
Long-Term
Debt Maturities
$ -
150.0
150.0
-
-
-
$ 300.0
Long-Term
Debt Interest
$ 17.6
17.5
4.9
-
-
-
$ 40.0
Lease
Obligations
$ 26.2
24.3
22.8
21.3
17.8
64.7
$ 177.1
Total
$ 498.0
191.8
177.7
21.3
17.8
64.7
$ 971.3
At December 31, 2023, the Company was contractually obligated to repay its letters of credit under its bank
facilities (Note 13).
Capital management
g)
The Company manages capital in order to safeguard its ability to continue as a going concern, provide returns
to shareholders through its dividend policy and provide the ability to finance future growth. Capital includes
shareholders' equity, bank indebtedness and long-term debt, net of cash. The Company manages its capital
structure and may make adjustments to the amount of dividends paid to shareholders, purchase shares for
cancellation pursuant to issuer bids, issue new shares, issue new debt, repurchase existing debt and extend or
amend its banking facilities.
Commitment
CONTINGENCIES, COMMITMENTS AND GUARANTEES
NOTE 27
a)
On December 4, 2023, the Company entered into an agreement to acquire seven service center locations from
Samuel, Son & Co., Limited for approximately $225 million. This acquisition is subject to Canadian regulatory
clearance and is expected to close in the 2024 second quarter.
Lawsuits and legal claims
b)
The Company recognizes contingent loss provisions for losses that are probable when management is able to
reasonably estimate the loss. When the estimated loss lies within a range, the Company records a contingent
loss provision based on its best estimate of the probable loss. If no particular amount within that range is a
better estimate than any other amount, the minimum amount is recorded. Estimates of losses may be developed
before the ultimate loss is known, and are revalued each accounting period as additional information becomes
known. In instances where the Company is unable to develop a reasonable loss estimate, no contingent loss
provision is recorded at that time. A contingent loss provision is recorded when a reasonable estimate can be
made. Estimates are reviewed quarterly and revised when expectations change.
An outcome that deviates from the Company’s estimate may result in an additional expense or income in a future
accounting period.
The Company and certain of its subsidiaries have been named defendants in a number of legal actions. Although
the outcome of these legal actions cannot be determined, management intends to defend all such legal actions
and has recorded provisions, as required, based on its best estimate of the potential losses. In the opinion of
management, the resolution of these legal actions is not expected to have a material adverse effect on the
Company's financial position, cash flows or operations.
RUSSEL METALS562023 ANNUAL REPORT
The Company has also entered into other agreements that provide indemnifications to counterparties in certain
transactions including underwriting agreements. These indemnifications generally require the Company to
indemnify the counterparties for costs incurred as a result of losses from litigation that may be suffered by
counterparties arising from those transactions except in the case of gross negligence by the counterparties.
Decommissioning liability
c)
The Company is incurring site cleanup and restoration costs related to properties not utilized in current
operations. Remedial actions continue at two sites. Decommissioning liabilities have been estimated using
discounted cash flow valuation techniques for cleanup costs based on management's best estimates of the
amount required to settle the liability.
The Company has asset retirement obligations relating to the land lease for the Thunder Bay Terminal operation
whose lease term expires in 2031. The landlord has the option to retain the equipment or to require the Company
to remove it. In addition, the Company has end-of-lease obligations in certain service center operations.
RUSSEL METALS572023 ANNUAL REPORT
FORCED LABOUR AND
CHILD LABOUR POLICY
The Fighting Against Forced Labour and Child Labour in Supply Chains Act ("the Act") requires certain businesses to publish a
statement setting out the steps taken in the previous financial year to prevent and reduce the risk that forced labour or child labour
are used in the production or importation of goods.
Russel Metals Inc. is publishing this statement on behalf of itself and its relevant subsidiaries to whom the Act applies (collectively, "Russel Metals" or "the
Company").
Structure, Activities and Supply Chains
Russel Metals is one of the largest metals distribution companies in North America. We conduct our business in three principal segments: metals service centers;
energy field stores; and steel distributors. Our business is comprised of approximately 132 locations, 93 in Canada and 39 in the United States.
The Company's supply chain is predominantly North American based with approximately 76% of our aggregate purchases of metal products coming from Canada
and the United States. The Company's primary metal products sold include carbon hot rolled and cold finished steel, pipe and tubular products, valves, flanges
and fittings, stainless steel, aluminum, and other non-ferrous metals.
Our steel distributors segment comprises the majority of our import purchases as they act as master distributors selling steel in large volumes to other steel
service centers and large equipment manufactures mainly on an "as is" basis. The main products sourced by this segment are carbon steel plate, flat rolled
products, beams, channel and pipe. Much of the material sourced by this segment is due to it not being produced in North America or not available in sufficient
quantities.
Policies and Due Diligence
Policies and Compliance
The Company has policies and standards in place to ensure that we conduct business in a legal and ethical manner globally. These policies include our Code of
Business Conduct and Ethics Policy ("the Code") to ensure ethical business practice and compliance with applicable law. The Company monitors compliance
with the Code and every employee is required to sign and agree to follow the Code.
The Company also has a Supplier Code of Conduct ("the Supplier Code"). The Supplier Code articulates the Company's expectations with respect to the goods
it procures and asks each Supplier to follow and to certify its compliance with the Supplier Code. The Supplier Code expressly prohibits the use of forced labour
or child labour in the production of the goods purchased by the Company. The Supplier Code also sets out the Company's expectations with respect to compliance
with applicable laws, business ethics, environmental impact, conflict minerals, health and safety and human rights.
The Company maintains a confidential and anonymous reporting system that allows employees to raise concerns free of discrimination, retaliation, or harassment.
The Company encourages the reporting of any complaints or concerns, including those relating to compliance with the Company's policies (including the Code),
human rights issues and any unethical business conduct.
Due Diligence - Own Operations
Russel Metals' human resources team have strong processes in place for vetting new employees and ensuring they are legally entitled to work in Canada or the
United States, as applicable. There are also robust processes in place for assessing compensation and verifying payments. All new employees are taken through
a comprehensive onboarding process where they are made aware of the Company's standards and policies, including the Code. The vast majority of the
Company's employees are permanent and full-time.
Due Diligence - Supply Chain
Russel Metals' prides itself in maintaining long-term, trusting relationships with suppliers who have strong reputations, ethics and reliable business practices.
Many of the Company's top suppliers are publicly traded North American steel mills with comparable governance practices to those of Russel Metals.
The Company's procurement personnel manage the due diligence and onboarding process with suppliers including providing copies of the Company's terms and
conditions of purchase and Supplier Code, each of which the Company requests the supplier to accept. The Company's procurement personnel, as a matter of
practice, also regularly visit the mills of key suppliers for site visits and tours. With respect to overseas mills, our personnel customarily visit the mill prior to
purchasing from it and those businesses which regularly purchase from overseas regularly travel to visit with their counterparts and review the mill and its
processes.
Procurement personnel take an active, risk-based approach considering the country of origin of a supplier with respect to the Global Slavery Index when assessing
and onboarding new suppliers.
Additionally, many of our sophisticated and experienced customers, particular in our energy filed stores segment, maintain approved manufacturers lists based
upon their own due diligence and assessment of suppliers which adds an additional layer of safeguard.
Risk of Forced or Child Labour
Russel Metals has assessed both its operations and its supply chain and, taking into account our policies, procedures and diligence in place, we consider the risk
of forced labour or child labour in our supply chain to be low.
Russel Metals acknowledges there is risk when contracting with third parties as part of a global supply chain and believes the activity that carries the most risk of
forced labour or child labour is the purchase of materials from overseas mills. Russel Metals has implemented the policies, procedures and due diligence
processes described above to manage and mitigate this risk.
Measures to Remediate Forced or Child Labour or the Loss of Income Resulting from Measures Taken to Eliminate Forced or Child Labour in the
Supply Chain
Russel Metals has not and would not knowingly engage with any supplier who is in violation of fundamental human rights. The Company has not taken any
remediation measures at this time.
Training
The Company provides annual training to management employees with respect to the Code. The Company's procurement personnel are provided with training
on the Supplier Code.
Effectiveness Assessment
Russel Metals recognizes that tackling the risk of forced and child labour in supply chains requires an ongoing commitment of time, resources, and awareness
amongst all stakeholders. The Company will continue to assess the risk of forced and child labour in conjunction with its enterprise risk management program,
and procurement personnel will take an active risk-based approach considering the country of origin with respect to the Global Slavery Index when assessing
and onboarding new suppliers.
Approval
This statement on behalf of Russel Metals was approved by its Board of Directors on February 8, 2024.
/s/ John G. Reid
President, Chief Executive Officer and Director
RUSSEL METALS582023 ANNUAL REPORT BOARD OF DIRECTORS
STEWART C. BURTON
Corporate Director
OFFICERS
JAMES F. DINNING
Chair of the Board
ANNUAL MEETING
The Annual Meeting of Shareholders will
be held at the Corporate Head office on
Thursday, May 2, 2024 at 10:00 am
TRANSFER AGENT AND REGISTRAR
TSX TRUST COMPANY
301-100 Adelaide Street, West
Toronto, Ontario, Canada M5H 4H1
T: 1.800.387.0825 F: 1.888.249.6189
shareholderinquiries@tmx.com
www.tsxtrust.com
The Toronto Stock Exchange - RUS
JOHN G. REID
President &
Chief Executive Officer
MARTIN L. JURAVSKY
Executive Vice President,
Chief Financial Officer &
Secretary
LESLEY M. COLEMAN
Vice President,
Controller &
Assistant Secretary
RYAN W. MACDERMID
Vice President,
Risk Management & Legal
SHERRI L. MCKELVEY
Assistant Secretary
GLOSSARY
(refer to page six for commentary on Non-GAAP Measures and Ratios)
Book Value Per Share - Shareholders’ equity divided by common shares outstanding
EBIT - Earnings before deduction of interest and provision for income taxes
EBITDA - Earnings before deduction of interest, provision for income taxes, depreciation
and amortization
Free Cash Flow - Cash from operating activities before change in non-cash working capital
less capital expenditures
Invested Capital - Net Debt plus shareholders’ equity
Net Debt - Total interest bearing debt, net of cash and cash equivalents
Net Debt to Invested Capital - Net Debt divided by Invested Capital
Return on Capital Employed - EBIT divided by Invested Capital
JOHN M. CLARK
President
Investment and Technical
Management Corp.
JAMES F. DINNING
Chair of the Board
BRIAN R. HEDGES
Corporate Director
CYNTHIA JOHNSTON
Corporate Director
ALICE D. LABERGE
Corporate Director
WILLIAM M. O’REILLY
Corporate Director
ROGER D. PAIVA
Corporate Director
JOHN G. REID
President &
Chief Executive Officer
ANNIE THABET
Corporate Director
CORPORATE HEAD OFFICE
6600 Financial Drive
Mississauga, Ontario
L5N 7J6
www.russelmetals.com
6600 Financial Drive
Mississauga, Ontario
L5N 7J6
905-819-7777
1-800-268-0750
www.russelmetals.com