Toromont Industries Ltd. (TSX: TIH) reported its financial results
for the third quarter ended September 30, 2018.
|
Three months ended September 30 |
|
Nine months ended September 30 |
millions,
except per share amounts |
2018 |
2017 |
% change |
|
2018 |
2017 |
% change |
|
|
|
|
|
|
|
|
Revenues |
$ |
900.1 |
$ |
584.2 |
54
% |
|
$ |
2,538.2 |
$ |
1,527.4 |
66
% |
Operating income |
$ |
99.8 |
$ |
68.6 |
45 % |
|
$ |
247.9 |
$ |
163.0 |
52 % |
Net earnings |
$ |
68.7 |
$ |
49.4 |
39 % |
|
$ |
167.1 |
$ |
116.8 |
43 % |
Basic earnings per
share ("EPS") |
$ |
0.84 |
$ |
0.63 |
33 % |
|
$ |
2.06 |
$ |
1.49 |
38 % |
|
|
|
|
|
|
|
|
These results include the operations of the
significant acquisition completed by the Company on October 27,
2017. This transaction expanded Toromont’s operations to include
the Caterpillar dealerships for Quebec, the Maritime Provinces and
Western Labrador and the MCFA lift truck dealership for Quebec and
Ontario, in addition to other distribution rights. The acquired
operations are collectively referenced as “Toromont QM or TQM”
throughout this report.
“We have considerable work to complete to unlock
the significant value of the TQM acquisition, but remain pleased
with the integration and transition progress and with the earnings
accretion over the relatively short timeline since the transaction
closing. The team has embraced the sharing of best practices
including key operational and financial disciplines, to further
strengthen our position as a world class dealership,” said Scott J.
Medhurst, President and Chief Executive Officer of Toromont
Industries Ltd. “Overall, the Company delivered good results in the
third quarter on solid execution in the legacy Equipment Group
together with the incremental contribution from the acquired
businesses.”
Highlights:
- Consolidated results
- Net earnings increased $19.3 million or 39% in the quarter
versus a year ago to $68.7 million or $0.84 EPS. The following
table identifies the components of contributions to the third
quarter results versus a year ago:
|
Three months ended September 30 |
|
Net earnings |
Basic EPS (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions,
except per share amounts |
|
2018 |
|
|
2017 |
|
% change |
|
|
2018 |
|
|
2017 |
|
% change |
|
Legacy Toromont (b) |
|
54.1 |
|
$ |
50.7 |
|
7% |
|
|
0.68 |
|
$ |
0.65 |
|
5
% |
|
Toromont QM (c) |
|
18.8 |
|
|
- |
|
- |
|
|
0.24 |
|
|
- |
|
- |
|
Acquisition-related
interest expense and integration-related costs (e) |
|
(4.2 |
) |
|
(1.3 |
) |
nm |
|
|
(0.05 |
) |
|
(0.02 |
) |
nm |
|
Dilutive impact of
acquisition shares (d) |
|
- |
|
|
- |
|
- |
|
|
(0.03 |
) |
|
- |
|
- |
|
As reported |
$ |
68.7 |
|
$ |
49.4 |
|
39% |
|
$ |
0.84 |
|
$ |
0.63 |
|
33% |
|
(a)
Separately identifies impact of shares issued at acquisition for
year-over-year comparability |
(b)
Defined as all businesses continuing from prior to the
acquisition |
(c)
Defined as all businesses acquired October 27, 2017 |
(d) EPS
impact of 2.2 million shares issued on acquisition to total net
earnings |
(e)
Expenses shown net of taxes |
- Earnings in the legacy Toromont businesses (“Legacy Toromont”)
increased 7% in the quarter versus a year ago on solid growth in
the Equipment Group, partially offset by weaker results at CIMCO.
Toromont QM contributed $18.8 million and achieved improved
profitability versus a year ago in the predecessor organization.
Integration-related costs included severance and other
one-time-only costs and combined with interest expense on the
acquisition financing were $4.2 million in the quarter versus $1.3
million a year ago. Due to increases in Toromont’s share price,
significant increases in the mark-to-market adjustments related to
Deferred Share Units (“DSUs”) were experienced in all periods.
These increased expenses by $3.6 million in the third quarter and
$4.4 million for the first nine months of 2018, and $4.0 million
and $6.1 million for the comparable periods of 2017.
- On a year-to-date basis, net earnings increased $50.3 million
or 43% to $167.1 million or $2.06 EPS. The following table
identifies the components of contributions to year-to-date results
versus a year ago:
|
Nine months ended September 30 |
|
Net earnings |
Basic EPS (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions,
except per share amounts |
2018 |
|
|
2017 |
|
% change |
|
|
2018 |
|
|
2017 |
|
% change |
|
Legacy Toromont (b) |
|
139.6 |
|
$ |
118.7 |
|
18% |
|
|
1.77 |
|
$ |
1.51 |
|
17% |
|
Toromont QM (c) |
|
42.5 |
|
|
- |
|
- |
|
|
0.54 |
|
|
- |
|
- |
|
Acquisition-related
interest expense and integration-related costs (e) |
|
(15.0 |
) |
|
(1.9 |
) |
nm |
|
|
(0.19 |
) |
|
(0.02 |
) |
nm |
|
Dilutive impact of
acquisition shares (d) |
|
- |
|
|
- |
|
- |
|
|
(0.06 |
) |
|
- |
|
- |
|
As reported |
$ |
167.1 |
|
$ |
116.8 |
|
43% |
|
$ |
2.06 |
|
$ |
1.49 |
|
38% |
|
(a)
Separately identifies impact of shares issued at acquisition for
year-over-year comparability |
(b)
Defined as all businesses continuing from prior to the
acquisition |
(c)
Defined as all businesses acquired October 27, 2017 |
(d) EPS
impact of 2.2 million shares issued on acquisition to total net
earnings |
(e)
Expenses shown net of taxes |
- Legacy Toromont earnings increased 18% with EPS closely
tracking the increase at 17%.
- Equipment Group
- Revenues of $800.1 million in the quarter increased $312.1
million or 64% versus last year. Legacy Toromont revenues were down
2% in the quarter as higher rentals and product support were more
than offset by lower equipment sales. Toromont QM contributed
$322.5 million in the quarter, reflecting an increase of 20% from
revenues achieved at the predecessor organization in the third
quarter last year, with growth across most lines of business.
- Revenues were up $981.3 million or 75% to $2.3 billion
year-to-date. Legacy Toromont reported a 5% growth versus last
year. Toromont QM contributed $912.6 million in revenues
year-to-date, an increase of 19% from revenues reported under the
predecessor organization for the comparable period.
- Operating income1 was up $34.1 million or 57% in the quarter.
Legacy Toromont increased $9.6 million or 16% on higher margins.
Toromont QM contributed $24.5 million in the quarter, net of
integration-related costs.
- Operating income1 was up $88.8 million or 61% year-to-date.
Legacy Toromont increased $33.5 million or 23% while Toromont QM
contributed $55.3 million, net of integration related costs.
- Bookings1 increased $136.0 million in the quarter and $429.0
million year-to-date. At Legacy Toromont, bookings increased 19% in
the quarter and were relatively unchanged on a year-to-date basis.
Toromont QM reported good activity in the quarter ($101.1 million)
and year-to-date ($427.7 million) across most market segments.
Backlogs1 were $366.0 million at the end of September 30, 2018,
including $132.5 million at Toromont QM. Approximately two-thirds
of the orders in backlog are expected to be delivered over the
remainder of this year.
- CIMCO
- Revenues increased 4% to $100.0 million in the quarter, largely
on product support growth. Operating income decreased 32% to $6.3
million, reflecting lower margins on package sales, partially
offset by a lower expense ratio.
- Revenues were up 13% year-to-date to $251.0 million. Package
sales grew 22% with increases in both Canada (up 25%) and the US
(up 10%). Product support was up 3% on growth in Canada, while the
US was relatively unchanged. The lower operating income margin1
(5.9% versus 8.4% last year) was attributable to problems
encountered on one US-based project.
- Bookings were down in the quarter (64%) and year-to-date (29%)
against record levels set last year. In Canada, both industrial and
recreational orders were lower for the quarter and year-to-date. In
the US, recreational activity was strong in the quarter but lower
year-to-date, while industrial activity was lower for both the
quarter and year-to-date. Backlogs of $126.0 million were down
$50.0 million compared to the record set last year but still
significantly higher than the previous five-year average.
Approximately half of the backlog is expected to be delivered over
the remainder of this year.
- Financial position remains strong
- Toromont’s share price of $66.77 at the end of September 2018
translated to a market capitalization1 of $5.4 billion and a total
enterprise value1 of $5.9 billion.
- Toromont maintained a very strong financial position. Leverage
as represented by the net debt to total capitalization1 ratio at
September 30, 2018 was 25% versus 28% at June 30, 2018, 33% at
March 31, 2018 and 40% at December 31, 2017.
- The Board of Directors announced a quarterly dividend of 23
cents per common share, payable January 3, 2019 to shareholders of
record on December 7, 2018. The quarterly dividend was previously
increased 21% to 23 cents per share effective with the dividend
paid April 2, 2018.
“Infrastructure projects and broader
construction activity, continue to present opportunities for
Toromont’s Equipment Group. Opportunities exist for equipment
supply into the mining sector, for new mines planned and in support
of the replacement and expansion requirements at existing mine
sites,” continued Mr. Medhurst. “We’re now one year into our
ownership of TQM and our senior leadership team remains focused on
the integration and expansion of the exciting opportunity. Success
presents a substantial long-term growth opportunity for Toromont,
so appropriately, we are taking a methodical approach to each
element of the integration. CIMCO continues to grow its revenue
base, reflecting its strong presence and solid reputation as a
leader in the key markets it serves. The tariff increases and
global trade disputes seen this year have not had a direct material
impact on our business.”
Quarterly Results Materials
The complete third quarter report for 2018,
including MD&A and unaudited interim condensed consolidated
financial statements, is available on our website at
www.toromont.com.
Quarterly Conference Call and
Webcast
Analysts, members of the media and other interested parties are
invited to join the quarterly conference call, in listen-only mode,
on Tuesday, November 6, 2018 at 8:00 a.m. (EST).
The call may be accessed by telephone at 1-800-239-9838 (toll
free) or 647-794-4605 (Toronto area), and participants will be
asked to provide either the confirmation code (8207297), speaker
name (Paul Jewer) or the title of the conference call (Q3
conference call).
A digital replay of the conference call will be available until
November 13, 2018 by calling 1-800-408-3053 or 905-694-9451
(Toronto area) and entering passcode 4807382#.
Both the live webcast and the replay of the
quarterly conference call can be accessed at www.toromont.com.
Advisory
Information in this press release that is not a
historical fact is "forward-looking information". Words such as
"plans", "intends", "outlook", "expects", "anticipates",
"estimates", "believes", "likely", "should", "could", "will", "may"
and similar expressions are intended to identify statements
containing forward-looking information. Forward-looking information
in this press release reflect current estimates, beliefs, and
assumptions, which are based on Toromont’s perception of historical
trends, current conditions and expected future developments, as
well as other factors management believes are appropriate in the
circumstances. Toromont’s estimates, beliefs and assumptions are
inherently subject to significant business, economic, competitive
and other uncertainties and contingencies regarding future events
and as such, are subject to change. Toromont can give no assurance
that such estimates, beliefs and assumptions will prove to be
correct. This press release also contains forward-looking
statements about the recently acquired businesses.
Numerous risks and uncertainties could cause the
actual results to differ materially from the estimates, beliefs and
assumptions expressed or implied in the forward-looking statements,
including, but not limited to: business cycles, including general
economic conditions in the countries in which Toromont operates;
commodity price changes, including changes in the price of precious
and base metals; changes in foreign exchange rates, including the
Cdn$/US$ exchange rate; the termination of distribution or original
equipment manufacturer agreements; equipment product acceptance and
availability of supply; increased competition; credit of third
parties; additional costs associated with warranties and
maintenance contracts; changes in interest rates; the availability
of financing; potential environmental liabilities of the acquired
businesses and changes to environmental regulation; failure to
attract and retain key employees; damage to the reputation of
Caterpillar, product quality and product safety risks which could
expose Toromont to product liability claims and negative publicity;
new, or changes to current, federal and provincial laws, rules and
regulations including changes in infrastructure spending; and any
requirement of Toromont to make contributions to the registered
funded defined benefit pension plans, postemployment benefits plan
or the multi-employer pension plan obligations in which it
participates in and acquired from in excess of those currently
contemplated. Risks and uncertainties related to the 2017
significant acquisition could also cause the actual results to
differ materially from the estimates beliefs and assumptions
expressed or implied in the forward-looking statements, including
but not limited to: changes in consumer and business confidence as
a result of the change in ownership; the potential for liabilities
assumed in the acquisition to exceed our estimates or for material
undiscovered liabilities in 2017 acquisition; the potential for
third parties to terminate or alter their agreements or
relationships with Toromont as a result of the acquisition; and
risks related to integration of the acquired operations with those
of Toromont including cost of integration and ability to achieve
the expected benefits. Readers are cautioned that the foregoing
list of factors is not exhaustive.
Any of the above mentioned risks and
uncertainties could cause or contribute to actual results that are
materially different from those expressed or implied in the
forward-looking information and statements included in this press
release. For a further description of certain risks and
uncertainties and other factors that could cause or contribute to
actual results that are materially different, see the risks and
uncertainties set out in the "Risks and Risk Management" and
"Outlook" sections of Toromont’s most recent annual Management
Discussion and Analysis, as filed with Canadian securities
regulators at www.sedar.com or at our website www.toromont.com.
Other factors, risks and uncertainties not presently known to
Toromont or that Toromont currently believes are not material could
also cause actual results or events to differ materially from those
expressed or implied by statements containing forward-looking
information.
Readers are cautioned not to place undue
reliance on statements containing forward-looking information,
which reflect Toromont’s expectations only as of the date of this
press release, and not to use such information for anything other
than their intended purpose. Toromont disclaims any obligation to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by law.
About Toromont
Toromont Industries Ltd. operates through two
business segments: the Equipment Group and CIMCO. The Equipment
Group includes one of the larger Caterpillar dealerships by revenue
and geographic territory - spanning the Canadian provinces of
Newfoundland & Labrador, Nova Scotia, New Brunswick, Prince
Edward Island, Québec, Ontario and Manitoba, in addition to most of
the territory of Nunavut. The Group includes industry leading
rental operations, a complementary material handling business and
an agricultural equipment business. CIMCO is a market leader in the
design, engineering, fabrication and installation of industrial and
recreational refrigeration systems. Both segments offer
comprehensive product support capabilities. This press release and
more information about Toromont Industries Ltd. can be found at
www.toromont.com.
For more information contact:
Paul R. JewerExecutive Vice President and Chief
Financial OfficerToromont Industries Ltd.Tel: (416) 514-4790
FOOTNOTES
- These financial metrics do not have
a standardized meaning under International Financial Reporting
Standards (IFRS), which are also referred to herein as Generally
Accepted Accounting Principles (GAAP), and may not be comparable to
similar measures used by other issuers. These measurements are
presented for information purposes only. The Company’s Management’s
Discussion and Analysis (MD&A) includes additional information
regarding these financial metrics, including definitions and a
reconciliation to the most directly comparable GAAP measures, under
the headings “Additional GAAP Measures”, “Non-GAAP Measures” and
“Key Performance Indicators.”
TOROMONT INDUSTRIES LTD. |
INTERIM CONDENSED CONSOLIDATED INCOME
STATEMENTS |
(Unaudited) |
|
Three months ended |
Nine months ended |
|
September 30 |
September 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
($
thousands, except share amounts) |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenues |
$ |
900,094 |
|
$ |
584,158 |
|
$ |
2,538,189 |
|
$ |
1,527,396 |
|
Cost of
goods sold |
|
671,798 |
|
|
442,871 |
|
|
1,918,253 |
|
|
1,163,561 |
|
Gross profit |
|
228,296 |
|
|
141,287 |
|
|
619,936 |
|
|
363,835 |
|
Selling
and administrative expenses |
|
128,545 |
|
|
72,702 |
|
|
371,990 |
|
|
200,834 |
|
Operating
income |
|
99,751 |
|
|
68,585 |
|
|
247,946 |
|
|
163,001 |
|
Interest expense |
|
7,479 |
|
|
1,818 |
|
|
24,093 |
|
|
5,489 |
|
Interest
and investment income |
|
(2,199 |
) |
|
(914 |
) |
|
(6,429 |
) |
|
(3,022 |
) |
Income before income
taxes |
|
94,471 |
|
|
67,681 |
|
|
230,282 |
|
|
160,534 |
|
Income
taxes |
|
25,774 |
|
|
18,326 |
|
|
63,196 |
|
|
43,700 |
|
Net earnings |
$ |
68,697 |
|
$ |
49,355 |
|
$ |
167,086 |
|
$ |
116,834 |
|
|
|
|
|
|
Earnings per
share |
|
|
|
|
Basic |
$ |
0.84 |
|
$ |
0.63 |
|
$ |
2.06 |
|
$ |
1.49 |
|
Diluted |
$ |
0.84 |
|
$ |
0.62 |
|
$ |
2.04 |
|
$ |
1.47 |
|
|
|
|
|
|
Weighted
average number of shares outstanding |
|
|
|
|
Basic |
|
81,383,350 |
|
|
78,522,123 |
|
|
81,165,183 |
|
|
78,475,990 |
|
Diluted |
|
82,233,892 |
|
|
79,373,016 |
|
|
81,913,066 |
|
|
79,252,736 |
|
|
|
|
|
|
Toromont Industries (TSX:TIH)
Historical Stock Chart
From Jul 2024 to Aug 2024
Toromont Industries (TSX:TIH)
Historical Stock Chart
From Aug 2023 to Aug 2024