Stella-Jones Reports Fourth Quarter and Year-End Results
March 11 2011 - 6:00AM
Marketwired Canada
Stella-Jones Inc. (TSX:SJ)
-- Sales of $561.0 million, up 36.5% from $411.1 million last year
-- Gross profit of $103.6 million versus $76.7 million in 2009
-- Net earnings of $34.4 million compared with $30.1 million last year, up
14.4%
-- Significant debt reduction resulting from solid cash flow generation
Stella-Jones Inc. (TSX:SJ) today announced financial results for its fourth
quarter and fiscal year ended December 31, 2010.
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Financial highlights Quarters ended Years ended
(in thousands of dollars, except Dec. 31, Dec. 31,
per share data) 2010 2009 2010 2009
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Sales 133,071 65,390 561,046 411,119
Gross profit 27,240 10,614 103,618 76,669
Cash flow from operations(1) 15,296 6,698 50,092 40,936
Net earnings for the period 10,753 3,041 34,395 30,069
Per share - basic ($) 0.68 0.24 2.27 2.38
Per share - diluted ($) 0.67 0.24 2.26 2.37
Weighted average shares outstanding
(basic, in '000s) 15,912 12,682 15,163 12,638
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(1) Before changes in non-cash working capital components.
2010 RESULTS
Sales reached $561.0 million, an increase of $149.9 million, or 36.5% over last
year's sales of $411.1 million. The acquisition of Tangent Rail Corporation
("Tangent"), effective April 1, 2010, contributed sales of approximately $120.5
million. Changes in the value of the Canadian dollar, Stella-Jones' reporting
currency, versus the U.S. dollar, decreased the value of U.S. dollar denominated
sales by about $23.8 million when compared with the prior year. Adjusting for
year-over-year currency fluctuations, sales excluding Tangent increased
approximately 13.0%, reflecting higher railway tie sales in the United States
and Canada as well as improved utility pole sales in Canada.
Railway tie sales for 2010 amounted to $283.2 million, an increase of 53.0% over
2009, reflecting tie sales of approximately $83.0 million from Tangent as well
as increased market penetration. Excluding Tangent's sales and adjusting for a
negative foreign exchange effect of $16.5 million due to a lower average
conversion rate on U.S. dollar denominated tie sales, year-over-year comparable
railway tie sales increased $31.7 million. Utility pole sales amounted to $166.7
million in 2010, an increase of 11.4% over 2009, due to higher sales of
distribution poles in both Canada and the United States stemming from solid
maintenance demand and greater market penetration. Industrial product sales rose
81.7% to $81.4 million, an increase essentially attributable to Tangent's coal
tar distillation and used tie pickup and disposal operations. Finally, sales of
residential lumber declined 5.6% to $29.8 million.
Gross profit was $103.6 million or 18.5% of sales, compared with $76.7 million
or 18.6% of sales last year. The increase in gross profit dollars essentially
reflects the contribution of the Tangent operations, partially offset by a lower
average rate applied to convert gross profit from U.S. dollar denominated sales.
The marginal reduction in gross profit as a percentage of sales mainly stems
from a different product mix, more heavily weighted towards railway ties.
Net earnings for 2010 increased 14.4% to $34.4 million or $2.26 per share, fully
diluted, compared with $30.1 million or $2.37 per share, fully diluted, in 2009.
Cash flow from operating activities before changes in non-cash working capital
components rose 22.4% to $50.1 million.
"Stella-Jones achieved its tenth consecutive year of sales and net earnings
growth, as recessionary pressures eased in our core markets and we completed the
largest acquisition in the Company's history," said Brian McManus, President and
Chief Executive Officer of Stella-Jones. "Stella-Jones is now widely recognized
as one of the largest suppliers of treated wood products on the continent. This
has positioned the Company to pursue a larger share of the business of existing
customers, and has strengthened our approach to new customers. As a full-service
provider to the railway tie market, our competitive position has unquestionably
improved, as the Company can confidently bid on larger and broader projects."
FOURTH-QUARTER RESULTS
Sales for the fourth quarter of 2010 reached $133.1 million, up from $65.4
million reported for the same period in 2009. This $67.7 million increase is
attributable to a $37.1 million contribution from the Tangent operations, solid
demand for the Company's core products and strong advanced deliveries of railway
ties. The stronger year-over-year value of the Canadian dollar decreased the
value of U.S. dollar denominated sales by approximately $2.1 million.
Railway tie sales amounted to $62.4 million, up from $22.1 million a year
earlier. This increase reflects a $26.6 million contribution from the Tangent
operations and stronger industry demand. Utility pole sales reached $48.7
million, compared with $31.1 million last year. This increase is for the most
part attributable to higher sales of distribution and transmission poles in
Canada. Industrial product sales amounted to $19.8 million, up from $10.1
million a year earlier, due essentially to a $10.6 million contribution from the
Tangent operations. Finally, residential lumber sales rose 5.6% to $2.2 million.
Gross profit in the fourth quarter of 2010 totalled $27.2 million, or 20.5% of
sales, compared with $10.6 million, or 16.2% of sales, in the corresponding
period in 2009. While higher gross profit dollars essentially result from the
contribution of the Tangent operations and the strong increase in organic sales,
the increase in gross profit as a percentage of sales principally reflects
higher volume and resulting efficiencies, overall cost savings and higher
selling prices. Net earnings for the period totalled $10.8 million, or $0.67 per
share, fully diluted, compared with $3.0 million, or $0.24 per share, fully
diluted, in the fourth quarter of 2009. Cash flow from operating activities
before changes in non-cash working capital components was $15.3 million, up from
$6.7 million a year earlier.
SOLID BALANCE SHEET
As at December 31, 2010, the Company's long-term debt, including the current
portion, amounted to $125.8 million, representing a ratio of total long-term
debt to shareholders' equity of 0.45:1, down from 0.53:1 three months earlier
and 0.48:1 at the end of 2009. In addition, a strong cash flow generation and
improved working capital resulted in a $24.2 million decrease in short-term bank
indebtedness, which stood at $31.9 million at the end of 2010.
"These factors enabled Stella-Jones to reduce its total debt by $44.1 million
during the second half of 2010. Of note, the Company proceeded with the
accelerated repayment of more than $15.0 million in various financial
obligations during the fourth quarter," added George Labelle, Senior
Vice-President and Chief Financial Officer.
SEMI-ANNUAL DIVIDEND OF $0.24 PER SHARE
The Board of Directors declared a semi-annual dividend of $0.24 per share on the
outstanding common shares of Stella-Jones, payable on May 13, 2011 to
shareholders of record at the close of business on April 1, 2011.
OUTLOOK
As global economic conditions continue to improve, Management expects demand for
the Company's core products to further accelerate in the upcoming year. However,
the strong deliveries in the latter part of the fourth quarter are expected to
slightly soften first quarter results. In the railway tie market, increased
freight volume on North American railroads should lead to greater investments in
the continental rail network, as operators constantly seek optimal line
efficiency. Meanwhile, demand is expected to steadily progress in utility poles,
as regular maintenance projects provide a stable business flow for distribution
poles, while the vigour of the transmission pole market is more correlated to
the timing of orders, mostly for special projects.
"Leveraging the Tangent acquisition remains a priority in 2011 as we fully take
advantage of synergies in our expanded network. The efficiencies we continue to
implement should further contribute to margin improvement and shareholder value.
While remaining committed to our traditional business, we will also continue to
pursue our strategic vision in a methodical fashion. A solid financial position
and growing cash flow are key attributes of our readiness to study acquisition
opportunities in core markets, as Stella-Jones seeks to further its continental
expansion and industry consolidation," concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these results on Friday,
March 11, 2011, at 10:00 AM Eastern Time. Interested parties can join the call
by dialing 416-644-3426 (Toronto or overseas) or 1-800-731-5319 (elsewhere in
North America). Parties unable to call in at this time may access a tape
recording of the meeting by calling 1-877-289-8525 and entering the passcode
4404802#. This tape recording will be available on Friday, March 11, 2011 as of
12:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, March 18, 2011.
NON-GAAP MEASURE
Cash flow from operations is a financial measure not prescribed by Canadian
generally accepted accounting principles ("GAAP") and is not likely to be
comparable to similar measures presented by other issuers. Management considers
it to be useful information to assist knowledgeable investors in evaluating the
cash generating capabilities of the Company.
ABOUT STELLA-JONES
Stella-Jones Inc. (TSX:SJ) is a leading producer and marketer of pressure
treated wood products. The Company supplies North America's railroad operators
with railway ties, timbers and recycling services; and the continent's
electrical utilities and telecommunications companies with utility poles.
Stella-Jones also provides industrial products and services for construction and
marine applications, as well as residential lumber to retailers and wholesalers
for outdoor applications. The Company's common shares are listed on the Toronto
Stock Exchange.
Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of future
events. Such factors may include, without excluding other considerations,
fluctuations in quarterly results, evolution in customer demand for the
Company's products and services, the impact of price pressures exerted by
competitors, the ability of the Company to raise the capital required for
acquisitions, and general market trends or economic changes. As a result,
readers are advised that actual results may differ from expected results.
Note to readers: Complete unaudited fourth-quarter and year-end financial
statements are available on Stella-Jones' website at www.stella-jones.com
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