Metals USA Holdings Corp (MUSA) …..I’m here! Are you?


This company just reported a very profitable and frankly surprising to most (except me) third quarter 2011. Closed today @ $10.03 (+11.1%).  EPS of $0.45 on revenues of $492 million. Not an easy task by any stretch, in the base metals sector and it’s businesses the last few months. They did meet and even exceed a bit, previous guidance of 2Q. They did what they said, so they get some props/kudos for that in my book. Especially those companies with predominantly domestic manufacturing exposure. They also were aided by some very savvy feed stock buying/stoking, to lay away in inventory/stockpiling it seems. And used it and managed it well as to not have over hang inventory. Also a “vast  diversification of produced products mixture that is not only beneficial, but defensive of profit margins.” This in Plates and Shapes added to core ferrous business that was before. They managed to mitigate the cyclically nature of the business it seems. They stepped in and filled the supply gap created by some others going out of business during these tough economic conditions. They did this for a major HVAC maker just recently in fact.
The number of clients MUSA has across a vast array of industries really makes them a good proxy for the overall parts and manufacturing macro picture in the USA. 14 different markets they touch. 25% of revenues come from non ferrous sales this Q. That is up 20% from last year alone. (PCP) Precision Cast Parts should be looking at this company IMO. As well as Harold Simmons from Contran Corps Valhi Inc. (VHI). One analyst on the call today asked the CEO if he (the CEO) had any intentions of acquiring anything else soon. I felt that was the wrong question to ask. I would have asked > “Anybody been sniffing around looking to buy MUSA?” Because they are a target rich M&A caidate here at this market cap….. for sure in my book. (RS) (NUE) (AA) (CMC)(STLD)…all potential buyers

They supply Boeing (BA) and it’s 787 Dream-Liner (uses twice as much aluminum sheeting  as rest of BA’s models), among other aerospace companies that will be refurbishing fleets over the next decade, the oil and gas service industry, The trucking industry, Farm and agriculture equipment, Major Appliance Manufacturers, General Electric (GE), They make some electrical components and cabinets for them. Like the aluminum cabinets you see on street corners that house the traffic light controllers. That is bullish in itself for USA infrastructure revamp. This company has a monopoly on many specific things used in a lot of specific industries that will be seeing increased sales and demand soon. They also have some very lucrative Federal Government contracts both military and non. They also make ‘heat exchangers’ for geothermal wells/alternative energy and home heating industry. I personally would give this company any credit facility they needed or wanted and send them on a shopping spree to grow some more. I also see a dividend in future from the cash flow creation taking shape here. They make a lot of the steel for the automotive business (flat rolled steel) from their Ohio Valley recent acquisition. This is a USA jobs producer company (that goes milessssssssss in my trading book) Look below. They are paying less in taxes and employing more people. All USA companies should take note and lessons!

7. Accrued Liabilities

Accrued liabilities consist of the following:

     June 30,      December 31,  
     2011      2010  
Salaries and employee benefits    $ 14.2       $ 10.8   
Income taxes      2.3         3.1  

June 29, 2010

Metals USA Holdings announced  the acquisition of J. Rubin & Co.. A well-established metal service center with locations in Illinois, Wisconsin and Minnesota, J. Rubin’s broad product range consists of carbon steel bars, carbon plate and laser-cut flat-rolled products. J. Rubin’s product mix and value-added services are provided to a diverse range of end-markets.

March 11, 2011

Acquires The Richardson Trident Company. It’s third acquisition since its IPO last April. With sales for the twelve months ending December 31, 2010 at approximately $148 million on 23,000 shipped tons, Trident is also the largest company acquired by Metals USA so far. With the addition of Trident’s eight processing centers located in Texas, Oklahoma, Georgia, California, and Massachusetts, Metals USA significantly increases its geographic coverage toward desired target markets in the Southeast, South central, Northeast and the West Coast of the United States

Flag Intermediate Holdings Corporation (“Flag Intermediate”) and its 100% wholly owned subsidiary Metals USA, Inc. (“Metals USA”) and the 100% wholly owned subsidiaries of Metals USA are referred to collectively herein as the “Company,” “we” or “our.” Metals USA prior to its November 30, 2005 acquisition by Apollo Management V L.P. (“Apollo Management” and together with its affiliated investment entities “Apollo” or “Apollo V”) (the “Merger”) is referred to herein as the “Predecessor Company.” The condensed consolidated financial statements include the accounts of Flag Intermediate, and Metals USA and its subsidiaries. Intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. Flag Intermediate and Metals USA are 100% wholly owned subsidiaries of Metals USA Holdings Corp. (“Metals USA Holdings”).

“Trident provides a broad range of metals and processing services with a product mix that emphasizes aluminum, stainless steel and nickel. The majority of Trident’s customer base operates in the oil and gas services sector. Trident also serves customers in the aerospace, defense and transportation industries. Processing services include precision sawing, boring, honing, slitting, sheeting, shearing and tuning. Trident also offers supply chain solutions such as just-in-time delivery and value-added components required by original equipment manufacturers. As a result of the acquisition, we expect to increase our non-ferrous and value-added processing product and service offerings in the geographic areas and end markets that Trident currently serves.”

http://www.sec.gov/Archives/edgar/data/1038363/000119312511223280/d10q.htm

 This from the CEO’s comments today in the 3Q conference call. Who by the way, while on the call was very adamant as to how MUSA managed to do so well this past quarter. And the PE the market is currently treating MUSA with is utterly ridiculous. He seemed actually mad in his speaking tone about this. I think he is justified in his sentiment based upon the growth MUSA has exhibited in it’s recent acquisitions within the space. I also took note how he was very stern and repetitive towards the 3 analyst who were on the call (GS, JMP, JEF). Who all congratulated him on a ‘beat’ on earnings this Q. I am expecting an upgrade or two in the net few days from someone beside myself.

The cash flow machine created here will be paying off and down acquisition debt here in no time. Plus a little company debt is a good thing right now on balance sheets. He also stated he had ‘BIG’ clients who have recently moved some of their manufacturing businesses from abroad to grow operations domestically now. It seems the (MADE IN THE USA) protectionist trading thesis is also hitting MUSA here of late. He stated that because the cost of production in some cases is  no longer significantly more beneficial to do outside the USA. DID I JUST HEAR THEY/WE ARE STEELING JOB BACK FROM OVERSEAS? Niiceeee……re patriot-ising America JOBS JOBS JOBS they are!

Metal shipments were 340,600 tons for the third quarter of 2011, up 25% from metal shipments of 272,600 tons in the third quarter of 2010. Metal shipments for the first nine months of 2011 were 1,069,000 tons, up 35% compared to metal shipments of 791,600 tons for the first nine months of 2010. Toll processed tonnage was 36,900 tons during the third quarter of 2011 compared to 15,500 tons for the third quarter of 2010. Toll processed tonnage was 123,600 tons during the first nine months of 2011 compared to 36,000 tons for the first nine months of 2010.

Lourenco Goncalves, the Company’s Chairman, President and C.E.O., stated: “Our third quarter results confirm we are succeeding with our plan to make Metals USA the most efficient company in the service center industry. We operate with a mentality to constantly go after profitable business, regardless of the economic headwinds, and have shifted our business to support markets that are doing well. Growth in automotive, energy, lawn and garden, heavy equipment, and agriculture, to name a few, have all contributed to offset end-markets that continue to struggle with recession overhang, such as non-residential construction.”

*YOY a 25% increase in shipping tonnage

*43% improvement in revenues

*70% improvement in EBITDA

*188% net income increase YOY

Net sales for the third quarter of 2011 were $492.3 million, up 43% from net sales of $345.3 million for the third quarter of 2010. Net income for the third quarter of 2011 was $16.7 million compared to net income of $5.8 million for the third quarter of 2010. Earnings per diluted share (“EPS”) were $0.45 in the third quarter of 2011 compared to $0.16 for the third quarter of 2010.

Net sales for the first nine months of 2011 were $1,430.2 million, up 48% from net sales of $968.2 million for the first nine months of 2010. Net income for the first nine months of 2011 was $50.6 million compared to net income of $8.4 million for the nine months ended September 30, 2010. EPS was $1.36 in the first nine months of 2011 compared to $0.26 for the first nine months of 2010.

I’m a ‘committed, shares in strong hands’ LONG here! And very bullish on this company here today at $10. I owned the stock higher from here but did some good ‘blood in the streets’ buying in August to dollar cost average down to a nice avg that is well above water now. But frankly, that lack of them NOT doing the same opportunistic buying (and them as insiders and me as only Average Joe Investor) bothers me some. They need to put up some money and do some buying for me to commit more capital to my investment here. But what I do own I feel is going to make a lot of money here!

The 11 1/8% Senior Secured Notes due 2015 (Metals USA Notes) are obviously first thing to get paid down with cash or restructured. 

Metals USA Holdings is not a guarantor of the Metals USA Notes. There is a limitation on the amount of funds which can be transferred by the Guarantors to Metals USA Holdings in the form of dividends. Such amount available for distribution shall be increased by an amount equal to 50% of Consolidated Net Income, as defined, or reduced by an amount equal to 100% of Consolidated Net Loss, as defined. As of June 30, 2011, $3.4 was available for general distribution under the restricted payment covenant contained in the Indenture governing the Metals USA Notes.

 Com onnnnnn Bank of America, N.A., as Administrative Agent and Collateral Agent…..help a brother out!

23-Dec-2010

Entry into a Material Definitive Agreement, Creation of a Direct Financ

Item 1.01 Entry into a Material Definitive Agreement. On December 17, 2010, Flag Intermediate Holdings Corporation (“Flag Intermediate”), Metals USA, Inc. (“Metals USA”), and certain subsidiaries of Metals USA (collectively referred to herein as the “Company”) entered into an amended and restated loan and security agreement (the “New ABL Credit Agreement”) with the lenders party thereto and the Bank of America, N.A., as administrative agent and collateral agent. Flag Intermediate and Metals USA are wholly-owned subsidiaries of Metals USA Holdings Corp.The New ABL Credit Agreement provides for a new $500 million (which may be increased up to $750 million at the option of the Company), 5-year, senior secured asset-based credit facility (the “New ABL Facility”) that amends and restates the Company’s existing $625 million senior secured asset-based credit facility (the “Existing ABL Facility”) that was scheduled to mature on November 30, 2011.At the Company’s option, interest accrues on the loans made under the New ABL Facility at either LIBOR plus a specified margin (currently set at 2.50%), or the Base Rate (which is based off of the federal funds rate plus 0.50%, Bank of America’s prime rate or LIBOR plus 1.00%), plus a specified margin (currently set at 1.50%).

http://biz.yahoo.com/e/101223/musa8-k.html

Here is the link to conference call >

The 1 year beat down!

Shares Outstanding5: 37.06M
Float: 8.15M
% Held by Insiders1: 1.33%
% Held by Institutions1: 94.40%
Shares Short (as of Sep 30, 2011)3: 600.12K
Short Ratio (as of Sep 30, 2011)3: 3.80
Short % of Float (as of Sep 30, 2011)3: 5.10%
Shares Short (prior month)3: 606.66K
Top Institutional Holders
Holder Shares % Out Value* Reported
Tempus Quo Capital Management, LLC 3,692,582 9.96 55,019,471 Jun 30, 2011
Apollo Management Holdings, L.P. 23,728,650 64.03 353,556,885 Jun 30, 2011
Ameriprise Financial, Inc. 2,009,115 5.42 29,935,813 Jun 30, 2011
GOLDMAN SACHS GROUP INC 1,037,233 2.80 15,454,771 Jun 30, 2011
UBS O’CONNOR LLC 573,722 1.55 8,548,457 Jun 30, 2011
VANGUARD GROUP, INC. (THE) 481,475 1.30 7,173,977 Jun 30, 2011
FRIESS ASSOCIATES INC 414,200 1.12 6,171,580 Jun 30, 2011
SHAW D.E. & CO., INC. 410,238 1.11 6,112,546 Jun 30, 2011
TOURADJI CAPITAL MANAGEMENT LP 350,000 0.94 5,215,000 Jun 30, 2011
ADAGE CAPITAL PARTNERS GP, L.L.C. 245,768 0.66 3,661,943 Jun 30, 2011
Top Mutual Fund Holders
Holder Shares % Out Value* Reported
Columbia Fds Ser Tr-Columbia Small Cap Value II Fd 950,000 2.56 14,934,000 May 31, 2011
GOLDMAN SACHS SMALL CAP VALUE FUND 639,697 1.73 5,725,288 Sep 30, 2011
Columbia Fds Ser Tr I-Columbia Small Cap Core Fd 404,290 1.09 6,023,921 Jun 30, 2011
VANGUARD SMALL-CAP INDEX FUND 197,965 0.53 2,949,678 Jun 30, 2011
ISHARES RUSSELL 2000 INDEX FD 148,567 0.40 1,852,630 Aug 31, 2011
Advanced Series Tr-AST/Goldman Sachs Small Cap Value Port 105,465 0.28 1,571,428 Jun 30, 2011
ING Parners Inc.-ING/Columbia Small Cap Value II portfolio 105,000 0.28 1,564,500 Jun 30, 2011
COLLEGE RETIREMENT EQUITIES FUND-STOCK ACCOUNT 90,136 0.24 1,475,526 Mar 31, 2011
Powershares Exhg Traded Fd-Powershares Dyn Basic Materials S 82,671 0.22 1,030,907 Aug 31, 2011
ISHARES RUSSELL 2000 GROWTH INDEX FD 75,256 0.20 938,442 Aug 31, 2011
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About Steven L. Goff

I'm a 38 yr old, modern day Renaissance Man, Polymath, in ever sense of the words. Self educated genius no doubt. "The Police often questioned me, just because they found me interesting" (The Most Interesting Man in the World...drink Dos Equis beer...lol) I come from the last generation who knows what it was like before the computer age per se. The Rotary style phone to the iPhone I like to say. Don't be shocked by this below.......because it's only HALF of it! All true I assure you. Days of telling lies to myself and others are done. Masters Degree from the School of Hard Knocks. Double Doctorate PhD from Google University (like most will have in future). Jack of all trades. Jack Russel loving dog owner of 8yrs. Master of them all. 38 yr old heterosexual. Master electrician and stock trader now, wanna be fund manager, a never be nothing, political and economics junkie, former master safe cracker thief, liar, professional slot machine cheat, before tech advancement made me obsolete! A bad father, bad brother, bad son, and much more. Have been baker, cook, barber, teacher, student, ultra submissive lovers master, semi pro poker player. I'm a novice mathematician, mechanical genius ALL most would say. Sun worshiper, surfer, convicted felon at age 18. Five year prison stay from 18 until 24yrs old. Hence school of Hard Knocks Degrees. Amateur magician, Rubik's Cube solver, social algorithms developer, exponential growth being humanity's most powerful force. My mom was a closet drinker for much of my youth and worked night and slept all day. I am Drake Equation believer, a Luddite I think, student of great societal cyclicality in humanity. I've been shot, I've been stabbed, I've been loved more than life to some, and abandon by the same. Raised Catholic, now of the agnostic mindset. Frankly I dont care if God Almighty exist, for we have bigger problems as a species to solve. I'm speed reader semi cursed with photographic memory, say cursed for some memories are not good. Great pool player, better marksman, Have hunted and killed the beast. A believer information to the masses is more powerful than oil and gold put together. Occam's Razor believer, Rube Goldberg simplifier, Huge student of propaganda and all it's techniques, I wanna go to outer space someday before I die. I dont fear death. I fear not Livin'
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