Stella-Jones Inc. (TSX:SJ) today announced financial results for
its fourth quarter and fiscal year ended December 31, 2012.
"2012 represented another record year for Stella-Jones in terms
of sales and net income. It also marked our twelfth consecutive
year of growth in net income, driven by constant efforts to further
enhance operating efficiency and a methodical execution of our
continental expansion strategy. These achievements reflect solid
demand for our products, the strength of our business model,
rigorous adherence to our core competencies and the dedication of
the Stella-Jones team," said Brian McManus, President and Chief
Executive Officer.
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Financial highlights Quarters ended Dec. 31, Years ended Dec. 31,
(in thousands of Canadian
dollars, except per share
data) 2012 2011 2012 2011
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Sales 159,345 147,520 717,494 640,148
Operating income 21,127 20,399 109,596 87,968
Net income for the period 16,546 13,369 73,070 55,709
Per share - basic ($) 1.01 0.84 4.54 3.49
Per share - diluted ($) 1.00 0.83 4.53 3.48
Cash flow from operations(1) 22,363 24,760 120,797 99,627
Weighted average shares
outstanding (basic, in
'000s) 16,387 15,953 16,078 15,946
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(1) Before changes in non-cash working capital components and
interest and income tax paid.
2012 RESULTS
Sales reached $717.5 million, up 12.1% from $640.1 million a
year earlier. The operating facilities acquired from McFarland
Cascade Holdings, Inc. ("McFarland") on November 30, 2012
contributed sales of $15.9 million over a one-month period, while
the Russellville, Arkansas operating facility acquired from
Thompson Industries in December 2011 ("Russellville facility")
contributed additional sales of $43.9 million in 2012. The
conversion effect from fluctuations in the value of the Canadian
dollar, Stella-Jones' reporting currency, versus the U.S. dollar,
increased the value of U.S. dollar denominated sales by about $8.6
million when compared with the previous year. Excluding these
factors, 2012 sales increased approximately $9.0 million.
Railway tie sales amounted to $404.5 million in 2012, up 19.4%
over sales of $338.8 million in 2011. This increase is attributable
to solid market demand and additional tie sales of approximately
$43.4 million from the Russellville facility. Utility pole sales
reached $218.5 million in 2012, up 12.2% from $194.8 million in
2011. The increase reflects one month sales of $13.6 million from
the McFarland operations and higher sales of distribution poles
from solid maintenance demand, partially offset by slightly lower
sales of transmission poles due to the year-over-year timing
differences in orders. Industrial product sales were $59.0 million
in 2012, versus $78.9 million in 2011. This decline is mainly due
to an anticipated reduction in the tie recycling business, while
demand held steady for the Company's other principal products in
this category. Residential lumber sales totalled $35.5 million in
2012, up from $27.7 million a year earlier, as a result of stronger
demand in Western Canada and sales of $2.3 million from the
McFarland operations in the U.S. Northwest.
Operating income amounted to $109.6 million, or 15.3% of sales,
versus $88.0 million, or 13.7% of sales a year earlier. The
increase in absolute dollars reflects higher business activity and
acquisitions, while the increase as a percentage of sales is due to
a better absorption of fixed costs from increased volume and
greater efficiencies throughout Stella-Jones' network. Results for
2012 include approximately $4.1 million in acquisition costs, of
which $3.0 million are related to the McFarland transaction. Last
year's results included an asset impairment charge of $2.2 million
and acquisition costs of $423,000 related to the purchase of the
Russellville facility.
Net income for 2012 totalled $73.1 million, or $4.53 per share,
fully diluted, versus $55.7 million, or $3.48 per share, fully
diluted, in 2011, representing a year-over-year increase of 31.2%.
Cash flow from operating activities before changes in non-cash
working capital components and interest and income tax paid rose
21.2% to $120.8 million.
FOURTH QUARTER RESULTS
Sales totalled $159.3 million, up 8.0% from last year's
fourth-quarter sales of $147.5 million. This increase is
attributable to a $15.9 million contribution from the McFarland
operations and to an additional contribution of $12.0 million from
the Russellville facility. The conversion effect from
year-over-year fluctuations in the value of the Canadian dollar,
versus the U.S. dollar, reduce the value of U.S. dollar denominated
sales by $2.5 million. Excluding these factors, sales decreased
approximately $13.6 million due to lower advanced railway tie
deliveries in the fourth quarter of 2012, compared with last year,
and to a reduction in the tie recycling business.
Fourth quarter sales of railway ties reached $73.7 million in
2012, versus $74.4 million in 2011. This slight decrease reflects
lower year-over-year advanced deliveries, partially offset by the
additional contribution from the Russellville facility. Utility
pole sales rose $18.9 million to $70.2 million due to a $13.6
million contribution from the McFarland operations and higher sales
of distribution poles. Industrial product sales were $10.4 million,
versus $19.9 million a year ago, as a result of a planned reduction
in the tie recycling business. Residential lumber sales reached
$5.1 million, up from $2.0 million last year, mainly due to
additional sales of $2.3 million from the McFarland operations.
Operating income was $21.1 million, or 13.3% of sales, compared
with $20.4 million, or 13.8% of sales, last year. Results for the
fourth quarter of 2012 include acquisition costs of $2.4 million
related to the McFarland transaction, while results for the fourth
quarter of 2011 included an asset impairment charge of $2.2 million
and acquisition costs of $423,000 related to the purchase of the
Russellville facility. Excluding these elements, operating income
for the fourth quarter of 2012 was $23.5 million, or 14.8% of
sales, compared with $23.0 million, or 15.6% of sales, a year
earlier. The reduction as a percentage of sales mainly stems from
lower margins at the McFarland operations.
Net income for the period reached $16.5 million, or $1.00 per
share, fully diluted, up from $13.4 million, or $0.83 per share,
fully diluted, last year. The Company's effective tax rate for the
fourth quarter of 2012 was reduced by tax benefits resulting from
the donation to local economic development authorities of land
located in Stanton, Kentucky and by the deductibility of
acquisition costs related to the McFarland transaction. Cash flow
from operating activities before changes in non-cash working
capital components and interest and income tax paid was $22.4
million, compared with $24.8 million a year ago.
SOUND FINANCIAL POSITION
As at December 31, 2012, the Company's financial position
remained healthy with total debt of $363.6 million, including the
increased draw-down of $152.6 million on the committed revolving
credit facility to partially finance the acquisition of McFarland.
At that same date, the ratio of total debt to total capitalization
was 0.44:1, versus 0.35:1 twelve months earlier.
Reflecting the acquisition of McFarland, working capital stood
at $444.8 million as at December 31, 2012, up from $273.2 million a
year earlier. Excluding McFarland, accounts receivable declined as
a result of lower business activity in the fourth quarter of 2012,
compared with the same period in 2011, while inventories increased
following a planned increase of air-dried wood, both to improve
future treating cycles and meet anticipated sales growth.
QUARTERLY DIVIDEND OF $0.20 PER SHARE
On March 21, 2013, the Board of Directors declared a quarterly
dividend of $0.20 per common share payable on April 30, 2013 to
shareholders of record at the close of business on April 2,
2013.
OUTLOOK
"We continue to expect healthy demand for our core products in
2013. North American railroad operators continue to upgrade and
expand their infrastructure to maintain optimal efficiency, while
demand is expected to hold in the utility pole market. In the
short-term, our main priority is to integrate the McFarland
operations and benefit from greater market penetration, synergies
and additional operating efficiencies from a larger network. We
will also focus on cash flow generation in order to reduce debt,
invest in initiatives that further enhance our network and maintain
an optimal dividend policy to the benefit of our shareholders,"
concluded Mr. McManus.
CONFERENCE CALL
Stella-Jones will hold a conference call to discuss these
results on Friday, March 22, 2013, at 10:00 AM Eastern Time.
Interested parties can join the call by dialling 647-427-7450
(Toronto or overseas) or 1-888-231-8191 (elsewhere in North
America). Parties unable to call in at this time may access a tape
recording of the meeting by calling 1-855-859-2056 and entering the
passcode 90531951. This tape recording will be available on Friday,
March 22, 2013 as of 1:00 PM Eastern Time until 11:59 PM Eastern
Time on Friday, March 29, 2013.
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.
Note to readers: Complete unaudited fourth-quarter and year-end
financial statements are available on Stella-Jones' website at
www.stella-jones.com
Contacts: Source: Stella-Jones Inc. Contacts: Eric Vachon, CPA,
CA Senior Vice-President and Chief Financial Officer Tel.: (514)
940-3903evachon@stella-jones.com Martin Goulet, CFA MaisonBrison
Tel.: (514) 731-0000martin@maisonbrison.com
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