Stella-Jones Reports Continued Strong Results in Third Quarter
November 11 2011 - 6:00AM
Marketwired Canada
Stella-Jones Inc. (TSX:SJ) today announced financial results for its third
quarter ended September 30, 2011. These results reflect the adoption, on January
1, 2011, of International Financial Reporting Standards ("IFRS"). Results for
the prior year have been restated.
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Quarters Nine
ended months ended
Sept. 30, Sept. 30,
Financial highlights
(in thousands of Canadian
dollars, except per share
data) 2011 2010 2011 2010
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Sales 181,812 161,298 492,628 427,975
Operating income 25,569 19,744 67,569 41,496
Net income for the period 16,569 12,440 42,340 23,791
Per share - basic ($) 1.04 0.78 2.66 1.60
Per share - diluted ($) 1.03 0.78 2.65 1.60
Cash flow from operations 1 27,796 23,495 74,867 54,910
Weighted average shares
outstanding (basic, in
'000s) 15,950 15,901 15,943 14,840
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(1) Before changes in non-cash working capital components and interest and
income tax paid.
THIRD-QUARTER RESULTS
Sales reached $181.8 million, an increase of $20.5 million, or 12.7% over last
year's third-quarter sales of $161.3 million. The conversion effect from
fluctuations 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 $10.2 million when compared with the previous year. Excluding
this conversion effect, sales increased approximately 19.0%, as demand remained
robust for the Company's core railway tie and utility pole product categories.
Railway tie sales amounted to $92.3 million, up 9.7% from last year, reflecting
solid market demand. Adjusting for a negative foreign exchange effect of $7.1
million due to a lower average conversion rate on U.S. dollar denominated tie
sales, year-over-year comparable railway tie sales increased $15.3 million, or
18.2%. Utility pole sales reached $56.2 million, up 31.6% from a year ago. This
increase mainly reflects robust demand for transmission poles resulting from
orders for special projects, while a lower year-over-year conversion rate
reduced the value of U.S. dollar denominated pole sales by $1.7 million.
Industrial product sales decreased 9.4% to $22.6 million due to the sale of
certain assets of the Terre Haute, Indiana facility in the fourth quarter of
2010 and a $1.4 million negative impact from a lower conversion rate on U.S.
dollar denominated sales. However, demand remained solid for the balance of the
Company's principal products and services in this category. Finally, sales of
residential lumber increased 12.0% to $10.7 million, as a result of more
favourable weather compared with last year.
Operating income was $25.6 million or 14.1% of sales, compared with $19.7
million or 12.4% of sales last year. The increase as a percentage of sales
mainly stems from a product mix more heavily weighted towards utility poles and
greater efficiencies throughout our plant network. Net income for the period
reached $16.6 million or $1.03 per share, fully diluted, up 33.2% from $12.4
million or $0.78 per share, fully diluted, in 2010. Cash flow from operating
activities before changes in non-cash working capital components and interest
and income tax paid rose 18.3% to $27.8 million.
"Stella-Jones continues to benefit from robust investment in the North American
rail and electrical utility infrastructure, which led to another strong
financial performance in the third quarter," said Brian McManus, President and
Chief Executive Officer. "A greater geographical reach and a more extensive
breadth of products and services have further enhanced Stella-Jones' market
position and driven sales growth. More importantly, additional efficiencies from
increased throughput provided additional thrust to operating profitability."
NINE-MONTH RESULTS
For the nine-month period ended September 30, 2011, sales reached $492.6
million, up 15.1% from $428.0 million a year earlier. Excluding the additional
sales contribution of $37.7 million from the Tangent Rail Corporation operations
in the first quarter of 2011, and net of a $20.9 million conversion effect from
fluctuations in the value of the Canadian dollar versus the U.S. currency, sales
increased approximately 11.0%.
Operating income amounted to $67.6 million, or 13.7% of sales, versus $41.5
million, or 9.7% of sales a year earlier. Last year's nine-month results
included non-recurring expenses and asset impairment charges of approximately
$7.5 million. Net income for the period totalled $42.3 million, or $2.65 per
share, fully diluted, in 2011 versus $23.8 million, or $1.60 per share, fully
diluted, in 2010. Finally, cash flow from operating activities before changes in
non-cash working capital components and interest and income tax paid grew 36.3%
to $74.9 million.
SOLID FINANCIAL POSITION
As at September 30, 2011, the Company's financial position remained solid with
total debt, including short-term bank indebtedness, of $172.9 million, down from
$175.8 million as at June 30, 2011. The ratio of total debt to shareholders'
equity was 0.53:1 as at September 30, 2011, down from 0.59:1 three months
earlier.
During the quarter, Stella-Jones entered into an agreement to amend its existing
revolving credit agreement. The amended facility consists of a $170.0 million
committed revolving facility made available for a five-year term. As a result of
this agreement, all bank indebtedness is now considered long-term debt with the
exception of the Company's proportion of the operating line of its joint
venture.
"Operating activities produced a solid cash flow that allowed Stella-Jones to
further reduce debt and finance its growth. As a result, the proposed
acquisition of Thompson Industries, Inc. ("Thompson") would, if finalized, be
entirely financed through readily available sources of funds," added George
Labelle, Senior Vice-President and Chief Financial Officer.
OUTLOOK
"Despite recent volatility in the macro-economic environment, we expect demand
for our core products to remain solid in the fourth quarter of 2011. In the
short-term, our priority is to complete our due diligence and, if satisfactory,
proceed with the closing of our proposed acquisition of Thompson. If successful,
this network expansion would further enhance Stella-Jones' product and service
offering to the North American railroad industry. As fundamentals remain solid
in our core product categories, we will proactively assess prospective business
opportunities to maintain our market momentum," concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these results on Friday,
November 11, 2011, at 10:00 AM Eastern Time. Interested parties can join the
call by dialling 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
4478464#. This tape recording will be available on Friday, November 11, 2011 as
of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 18,
2011.
NON-IFRS FINANCIAL MEASURES
Operating income and cash flow from operations are financial measures not
prescribed by IFRS and are not likely to be comparable to similar measures
presented by other issuers. Management considers these measures 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.
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