Wajax Corporation ("Wajax" or the "Corporation") (TSX:WJX) today announced a 12%
increase in 2012 second quarter earnings.
--------------------------------
Three Months Six Months
(Dollars in millions, except per share data) Ended June 30 Ended June 30
--------------------------------
2012 2011 2012 2011
--------------------------------
CONSOLIDATED RESULTS
Revenue $ 386.6 $ 334.1 $ 744.7 $ 638.0
Net earnings $ 18.5 $ 16.5 $ 35.6 $ 29.4
Basic earnings per share $ 1.11 $ 0.99 $ 2.13 $ 1.77
SEGMENTS
Revenue - Equipment $ 212.3 $ 164.2 $ 382.7 $ 315.6
- Power Systems $ 81.8 $ 81.0 $ 177.7 $ 154.0
- Industrial Components $ 94.0 $ 89.9 $ 187.2 $ 170.6
Earnings - Equipment $ 15.7 $ 12.0 $ 28.8 $ 23.1
% margin 7.4% 7.3% 7.5% 7.3%
- Power Systems $ 6.4 $ 8.3 $ 15.1 $ 15.3
% margin 7.9% 10.2% 8.5% 9.9%
- Industrial Components $ 6.2 $ 6.5 $ 13.0 $ 11.0
% margin 6.6% 7.3% 6.9% 6.4%
--------------------------------
Second Quarter Highlights
-- Consolidated second quarter revenue of $386.6 million increased $52.5
million, or 16% compared to last year, with gains in western Canada
accounting for the majority of the increase. Equipment sales rose 29% on
higher revenue in all key product sectors with particular strength noted
in construction and mining. Power Systems revenue was up only slightly
as the positive comparative effect of the May 2, 2011 acquisition of
Ontario based Harper Power Products was mostly offset by declines in the
western Canada oil and gas sector. Industrial Components revenue
increased 5% on stronger demand for all major product categories.
-- Net earnings for the quarter were $18.5 million, or $1.11 per share, up
12% compared to $16.5 million, or $0.99 per share recorded in 2011 on
stronger results in the Equipment segment. Equipment segment earnings
increased 31% on the higher volumes. Power Systems segment earnings
declined $1.9 million mainly on lower energy sector related sales in
western Canada and lower parts and service margins in Ontario.
Industrial Components segment earnings declined slightly as higher
revenue was more than offset by a small reduction in margins and higher
selling and administrative costs.
-- Consolidated backlog of $244.0 million at June 30, 2012 decreased 5%,
from $257.2 million at March 31, 2012, mainly as a result of a higher
volume of customer deliveries in the Equipment segment.
On May 24, 2012, the Corporation increased the limit of the revolving term
portion of its bank credit facility by $50 million on substantially the same
terms and conditions as the existing facility. As a result, total borrowing
capacity under the facility, due August 12, 2016, increased from $175 million to
$225 million. The increase provides Wajax with additional borrowing capacity to
fund future growth, including increases in working capital and acquisitions. At
June 30, 2012 Wajax had utilized $104.8 million of the facility.
The Corporation declared monthly dividends of $0.27 per share ($3.24 annualized)
for the months of August, September and October.
Commenting on the second quarter results and the outlook for the remainder of
2012, Mark Foote, President and CEO, stated:
"Overall we continue to be very pleased with our 2012 results, particularly in
the Equipment segment where we had record sales of Hitachi construction
excavators in western Canada in the quarter and mining equipment sales exceeded
amounts recorded last year. Results from the Power Systems segment fell short of
our expectation on softness in the western Canada energy sector and lower
margins in Ontario.
With market forecasters continuing to lower their expectations for growth in the
global and Canadian economies as a result of the European debt crisis and a
slowing Chinese economy, we are slightly more cautious regarding our outlook for
the remainder of 2012. While most of our end markets continue to hold up well
and quoting activity particularly in mining remains buoyant, we have seen a
weakening of oil and gas drilling and well servicing activities in western
Canada. This, combined with phasing out of the LeTourneau aftermarket business
in the second quarter leads us to expect that results for the full year of 2012
will be modestly higher than the previous year."
Wajax is a leading Canadian distributor and service support provider of mobile
equipment, power systems and industrial components. Reflecting a diversified
exposure to the Canadian economy, its three distinct core businesses operate
through a network of 117 branches across Canada. Its customer base spans natural
resources, construction, transportation, manufacturing, industrial processing
and utilities.
Wajax will Webcast its Second Quarter Financial Results Conference Call. You are
invited to listen to the live Webcast on Friday, August 10, 2012 at 2:00 p.m.
ET. To access the Webcast, enter www.wajax.com and click on the link for the
Webcast on the Investor Relations page.
Cautionary Statement Regarding Forward Looking Information
This news release contains certain forward-looking statements and
forward-looking information, as defined in applicable securities laws
(collectively, "forward-looking statements"). These forward-looking statements
relate to future events or the Corporation's future performance. All statements
other than statements of historical fact are forward-looking statements. Often,
but not always, forward looking statements can be identified by the use of words
such as "plans", "anticipates", "intends", "predicts", "expects", "is expected",
"scheduled", "believes", "estimates", "projects" or "forecasts", or variations
of, or the negatives of, such words and phrases or state that certain actions,
events or results "may", "could", "would", "should", "might" or "will" be taken,
occur or be achieved. Forward looking statements involve known and unknown
risks, uncertainties and other factors beyond the Corporation's ability to
predict or control which may cause actual results, performance and achievements
to differ materially from those anticipated or implied in such forward looking
statements. There can be no assurance that any forward looking statement will
materialize. Accordingly, readers should not place undue reliance on forward
looking statements. The forward looking statements in this news release are made
as of the date of this news release, reflect management's current beliefs and
are based on information currently available to management. Although management
believes that the expectations represented in such forward-looking statements
are reasonable, there is no assurance that such expectations will prove to be
correct.
Specifically, this news release includes forward looking statements regarding,
among other things, our outlook for the global and Canadian economies for the
remainder of 2012, the impact of global economic events on our end markets and
our outlook with respect to results for the financial year. These statements are
based on a number of assumptions which may prove to be incorrect, including, but
not limited to, assumptions regarding general business and economic conditions,
the supply and demand for, and the level and volatility of prices for,
commodities, financial market conditions, including interest rates, the future
financial performance of the Corporation, our costs, market competition, our
ability to attract and retain skilled staff, our ability to procure quality
products and inventory and our ongoing relations with suppliers, employees and
customers. The foregoing list of assumptions is not exhaustive. Factors that may
cause actual results to vary materially include, but are not limited to, a
deterioration in general business and economic conditions, volatility in the
supply and demand for, and the level of prices for, commodities, fluctuations in
financial market conditions, including interest rates, the level of demand for,
and prices of, the products and services we offer, market acceptance of the
products we offer, termination of distribution or original equipment
manufacturer agreements, unanticipated operational difficulties (including
failure of plant, equipment or processes to operate in accordance with
specifications or expectations, cost escalation, unavailability of quality
products or inventory, supply disruptions, job action and unanticipated events
related to health, safety and environmental matters), our ability to attract and
retain skilled staff and our ability to maintain our relationships with
suppliers, employees and customers. The foregoing list of factors is not
exhaustive. The forward-looking statements contained in this news release are
expressly qualified in their entirety by this cautionary statement. The
Corporation does not undertake any obligation to publicly update such
forward-looking statements to reflect new information, subsequent events or
otherwise unless so required by applicable securities laws. Further information
concerning the risks and uncertainties associated with these forward looking
statements and the Corporation's business may be found in our Annual Information
Form for the year ended December 31, 2011, filed on SEDAR.
Management's Discussion and Analysis - Q2 2012
The following management's discussion and analysis ("MD&A") discusses the
consolidated financial condition and results of operations of Wajax Corporation
("Wajax" or the "Corporation") for the quarter ended June 30, 2012. This MD&A
should be read in conjunction with the information contained in the unaudited
Condensed Consolidated Financial Statements and accompanying notes for the
quarter ended June 30, 2012, the annual Audited Consolidated Financial
Statements and accompanying notes for the year ended December 31, 2011 and the
associated MD&A. Information contained in this MD&A is based on information
available to management as of August 10, 2012.
Unless otherwise indicated, all financial information within this MD&A is in
millions of dollars, except share and per share data.
Additional information, including Wajax's Annual Report and Annual Information
Form, are available on SEDAR at www.sedar.com.
Responsibility of Management and the Board of Directors
Management is responsible for the information disclosed in this MD&A and the
unaudited Condensed Consolidated Financial Statements and accompanying notes,
and has in place appropriate information systems, procedures and controls to
ensure that information used internally by management and disclosed externally
is materially complete and reliable. Wajax's Board of Directors has approved
this MD&A and the unaudited Condensed Consolidated Financial Statements and
accompanying notes. In addition, Wajax's Audit Committee, on behalf of the Board
of Directors, provides an oversight role with respect to all public financial
disclosures made by Wajax, and has reviewed this MD&A and the unaudited
Condensed Consolidated Financial Statements and accompanying notes.
Disclosure Controls and Procedures and Internal Control over Financial Reporting
As at June 30, 2012, Wajax's management, under the supervision of its CEO and
CFO, had designed disclosure controls and procedures ("DC&P") to provide
reasonable assurance that information required to be disclosed by Wajax in
annual filings, interim filings or other reports filed or submitted under
securities legislation is recorded, processed, summarized and reported within
the time periods specified in the securities legislation. DC&P are designed to
ensure that information required to be disclosed by Wajax in annual filings,
interim filings or other reports filed or submitted under securities legislation
is accumulated and communicated to Wajax's management, including its CEO and
CFO, as appropriate, to allow timely decisions regarding required disclosure.
As at June 30, 2012, Wajax's management, under the supervision of its CEO and
CFO, had designed internal control over financial reporting ("ICFR") to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
International Financial Reporting Standards ("IFRS"). In completing the design,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in Internal Control -
Integrated Framework. With regard to general controls over information
technology, management also used the set of practices of Control Objectives for
Information and related Technology ("COBIT") created by the IT Governance
Institute.
During the quarter, Wajax completed the design of DC&P and ICFR relating to the
former operations of Harper Power Products Inc. ("Harper"). Wajax acquired the
assets of Harper on May 2, 2011. Other than the completion of the integration of
the former Harper operation, there was no change in Wajax's ICFR that occurred
during the three months ended June 30, 2012 that has materially affected, or is
reasonably likely to materially affect, Wajax's ICFR.
Wajax Corporation Overview
Wajax's core distribution businesses are engaged in the sale and after-sale
parts and service support of mobile equipment, power systems and industrial
components through a network of 117 branches across Canada. Wajax is a
multi-line distributor and represents a number of leading worldwide
manufacturers in its core businesses. Its customer base is diversified, spanning
natural resources, construction, transportation, manufacturing, industrial
processing and utilities.
Wajax's strategy is to continue to grow earnings in all segments through
continuous improvement of operating margins and revenue growth while maintaining
a strong balance sheet. Revenue growth will be achieved through market share
gains, the addition of new or complementary product lines and aftermarket
support services and expansion into new Canadian geographic territories, either
organically or through acquisitions.
In 2012, the Corporation established an objective of declaring annual dividends
equal to at least 75% of earnings subject to the Corporation's financial
condition, economic outlook and capital requirements for growth including
acquisitions. The Corporation's intention is to continue paying dividends on a
monthly basis.
Cautionary Statement Regarding Forward-Looking Information
This MD&A contains certain forward-looking statements and forward-looking
information, as defined in applicable securities laws (collectively,
"forward-looking statements"). These forward-looking statements relate to future
events or the Corporation's future performance. All statements other than
statements of historical fact are forward-looking statements. Often, but not
always, forward looking statements can be identified by the use of words such as
"plans", "anticipates", "intends", "predicts", "expects", "is expected",
"scheduled", "believes", "estimates", "projects" or "forecasts", or variations
of, or the negatives of, such words and phrases or state that certain actions,
events or results "may", "could", "would", "should", "might" or "will" be taken,
occur or be achieved. Forward looking statements involve known and unknown
risks, uncertainties and other factors beyond the Corporation's ability to
predict or control which may cause actual results, performance and achievements
to differ materially from those anticipated or implied in such forward looking
statements. There can be no assurance that any forward looking statement will
materialize. Accordingly, readers should not place undue reliance on forward
looking statements. The forward looking statements in this MD&A are made as of
the date of this MD&A, reflect management's current beliefs and are based on
information currently available to management. Although management believes that
the expectations represented in such forward-looking statements are reasonable,
there is no assurance that such expectations will prove to be correct.
Specifically, this MD&A includes forward looking statements regarding, among
other things, our outlook for the global and Canadian economies for the
remainder of 2012, the impact of global economic events on our end markets, our
outlook with respect to results for the financial year, our plans and
expectations for revenue and earnings growth, planned marketing, strategic,
operational and growth initiatives and their expected outcomes, our current and
future plans regarding the expansion of our business, the addition of new
product offerings and aftermarket support services and expansion into new
Canadian geographic territories, our financing and capital requirements and our
objectives with respect to the future payment of dividends.
These statements are based on a number of assumptions which may prove to be
incorrect, including, but not limited to, assumptions regarding general business
and economic conditions, the supply and demand for, and the level and volatility
of prices for, commodities, financial market conditions, including interest
rates, the future financial performance of the Corporation, our costs, market
competition, our ability to attract and retain skilled staff, our ability to
procure quality products and inventory and our ongoing relations with suppliers,
employees and customers. The foregoing list of assumptions is not exhaustive.
Factors that may cause actual results to vary materially include, but are not
limited to, a deterioration in general business and economic conditions,
volatility in the supply and demand for, and the level of prices for,
commodities, fluctuations in financial market conditions, including interest
rates, the level of demand for, and prices of, the products and services we
offer, market acceptance of the products we offer, termination of distribution
or original equipment manufacturer agreements, unanticipated operational
difficulties (including failure of plant, equipment or processes to operate in
accordance with specifications or expectations, cost escalation, unavailability
of quality products or inventory, supply disruptions, job action and
unanticipated events related to health, safety and environmental matters), our
ability to attract and retain skilled staff and our ability to maintain our
relationships with suppliers, employees and customers. The foregoing list of
factors is not exhaustive. Further information concerning the risks and
uncertainties associated with these forward looking statements and the
Corporation's business may be found in this MD&A under the heading "Risk
Management and Uncertainties" and in our Annual Information Form for the year
ended December 31, 2011, filed on SEDAR. The forward-looking statements
contained in this MD&A are expressly qualified in their entirety by this
cautionary statement. The Corporation does not undertake any obligation to
publicly update such forward-looking statements to reflect new information,
subsequent events or otherwise unless so required by applicable securities laws.
Readers are further cautioned that the preparation of financial statements in
accordance with IFRS requires management to make certain judgments and estimates
that affect the reported amounts of assets, liabilities, revenues and expenses.
These estimates may change, having either a negative or positive effect on net
earnings as further information becomes available, and as the economic
environment changes.
Consolidated Results
Three months Six months
ended June 30 ended June 30
2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue $ 386.6 $ 334.1 $ 744.7 $ 638.0
----------------------------------------------------------------------------
Gross profit $ 79.2 $ 72.5 $ 157.1 $ 138.4
Selling and administrative expenses $ 52.9 $ 49.0 $ 106.6 $ 95.9
----------------------------------------------------------------------------
Earnings before finance costs and income
taxes $ 26.4 $ 23.5 $ 50.5 $ 42.5
Finance costs $ 1.1 $ 1.1 $ 1.9 $ 2.1
----------------------------------------------------------------------------
Earnings before income taxes $ 25.2 $ 22.4 $ 48.6 $ 40.4
Income tax expense $ 6.8 $ 5.8 $ 13.0 $ 11.1
----------------------------------------------------------------------------
Net earnings $ 18.5 $ 16.5 $ 35.6 $ 29.4
----------------------------------------------------------------------------
Earnings per share
- Basic $ 1.11 $ 0.99 $ 2.13 $ 1.77
- Diluted $ 1.09 $ 0.98 $ 2.10 $ 1.74
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Revenue
Revenue in the second quarter of 2012 increased 16%, or $52.5, million to $386.6
million, from $334.1 million in the second quarter of 2011. Excluding revenue
from the former Harper operation, revenue increased 14%, or $46.9 million.
Segment revenue increased 29% in Equipment, 1% in Power Systems (decrease of 7%
excluding revenue from the former Harper operation) and 5% in Industrial
Components compared to the same quarter last year.
For the six months ended June 30, 2012, revenue increased 17%, or $106.7
million, over the same period last year. Excluding revenue from the former
Harper operation, revenue increased 14%, or $85.3 million.
Gross profit
Gross profit in the second quarter of 2012 increased $6.7 million due mainly to
the positive impact of higher volumes, and offset partially by a lower gross
profit margin percentage compared to the second quarter last year. The gross
profit margin percentage for the quarter of 20.5% decreased from 21.7% in the
second quarter of 2011 due to the negative sales mix variance resulting from a
higher proportion of equipment sales and slightly lower gross profit margins
compared to last year.
For the six months ended June 30, 2012, gross profit increased $18.7 million due
to higher volumes compared to the same period last year. The gross profit margin
percentage decreased to 21.1% in 2012 from 21.7% in 2011 due mainly to the
negative sales mix variance resulting from a higher proportion of equipment
sales compared to the same period last year.
Selling and administrative expenses
Selling and administrative expenses increased $3.9 million in the second quarter
of 2012 compared to the same quarter last year. Increases due to higher
personnel and sales related costs and $1.1 million related to Harper, were
offset in part by lower incentive accruals. Selling and administrative expenses
as a percentage of revenue decreased to 13.7% in the second quarter of 2012 from
14.7% in the same quarter of 2011.
For the six months ended June 30, 2012, selling and administrative expenses
increased $10.7 million compared to the same period last year due primarily to
increased personnel and sales related costs, $3.9 million related to Harper and
a $1.9 million increase in stock based mid-term incentive accruals. These
increases were partially offset by lower incentive accruals and reduced bad debt
expense. Selling and administrative expenses as a percentage of revenue
decreased to 14.3% in 2012 from 15.0% in 2011.
Finance costs
Quarterly finance costs of $1.1 million remained the same compared to the same
quarter last year as the positive impact of the Corporation's lower cost of
borrowing was offset by higher funded net debt. Funded net debt includes bank
debt, bank indebtedness and obligations under finance leases, net of cash.
For the six months ended June 30, 2012, finance costs of $1.9 million decreased
$0.2 million compared to the same period in 2011 due mainly to the Corporation's
lower costs of borrowing, offset partially by higher funded net debt.
Income tax expense
The effective income tax rate of 26.8% for the quarter increased from 26.1% the
previous year due to an adjustment made in the second quarter of last year to
reflect the positive impact of reduced statutory income tax rates.
For the six months ended June 30, 2012, the effective income tax rate of 26.8%
decreased from 27.4% in the previous year due mainly to the positive impact of
lower expenses not deductible for tax purposes.
Net earnings
Quarterly net earnings increased $2.0 million to $18.5 million, or $1.11 per
share, from $16.5 million, or $0.99 per share, in the same quarter of 2011 as
the positive impact of higher volumes more than offset the lower gross profit
margin percentage, increased selling and administrative expenses and higher
income tax expense compared to the same quarter last year.
For the six months ended June 30, 2012, net earnings increased $6.2 million to
$35.6 million, or $2.13 per share, from $29.4 million, or $1.77 per share, in
the same period in 2011. The positive impact of higher volumes and lower finance
costs more than offset the lower gross profit margin percentage and increased
selling and administrative and income tax expenses compared to the same period
last year.
Comprehensive income
Comprehensive income for the second quarter of $18.9 million increased $1.9
million from $17.0 million compared to the same quarter in the previous year as
the $2.0 million increase in net earnings was only partially offset by a $0.1
million decrease in other comprehensive income.
For the six months ended June 30, 2012, comprehensive income of $35.7 million
increased $5.6 million from $30.1 million in the same period of the previous
year as the $6.2 million increase in net earnings was only partially offset by a
$0.7 million decrease in other comprehensive gains. The decrease in other
comprehensive gains resulted primarily from a decrease in losses on derivative
instruments designated as cash flow hedges in prior periods reclassified to cost
of inventory or finance costs in the current period.
Funded net debt
Funded net debt of $119.3 million at June 30, 2012 increased $11.2 million
compared to March 31, 2012. Net cash flows generated from operating activities
of $6.4 million were insufficient to cover the uses of cash including dividends
paid of $13.5 million, investing activities of $2.6 million, finance lease
payments of $0.4 million and debt facility amendment costs of $0.2 million.
Wajax's quarter-end funded net debt-to-equity ratio of 0.50:1 at June 30, 2012
increased from the March 31, 2012 ratio of 0.46:1.
Funded net debt of $119.3 million at June 30, 2012 increased $55.6 million
compared to December 31, 2011. The increase comprised mainly of net cash flows
used in operating activities of $26.1 million, dividends paid of $23.5 million
and investing activities of $3.8 million. Wajax's period-end funded net
debt-to-equity ratio of 0.50:1 at June 30, 2012 increased from the December 31,
2011 ratio of 0.28:1.
Dividends
For the second quarter ended June 30, 2012 monthly dividends declared totaled
$0.81 per share and included $0.27 per share for each of the months of April,
May and June. For the second quarter ended June 30, 2011 monthly dividends
declared were $0.51 per share.
For the six months ended June 30, 2012 monthly dividends declared totaled $1.48
per share. For the six months ended June 30, 2011 monthly dividends declared
were $0.96 per share.
On May 8, 2012 Wajax announced a dividend of $0.27 per share ($3.24 annualized)
for the month of July payable on August 20, 2012 to shareholders of record on
July 31, 2012.
On August 10, 2012 Wajax announced monthly dividends of $0.27 per share ($3.24
annualized) for each of the months of August, September and October payable on
September 20, 2012, October 22, 2012 and November 20, 2012 to shareholders of
record on August 31, 2012, September 28, 2012 and October 31, 2012 respectively.
Backlog
Consolidated backlog at June 30, 2012 of $244.0 million decreased $13.2 million
or 5% compared to March 31, 2012 due to reductions in the Equipment and Power
Systems segments. Consolidated backlog decreased $37.7 million compared to June
30, 2011 due to reductions in the Power System and Equipment segments, partially
offset by increases in Industrial Components. Backlog includes the total retail
value of customer purchase orders for future delivery or commissioning. See the
Results of Operations section for further backlog detail by segment.
Results of Operations
Equipment
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
----------------------------------------------------------------------------
Equipment(i) $ 144.4 $ 98.5 $ 250.7 $ 186.0
Parts and service $ 67.9 $ 65.7 $ 132.0 $ 129.6
----------------------------------------------------------------------------
Segment revenue $ 212.3 $ 164.2 $ 382.7 $ 315.6
----------------------------------------------------------------------------
Segment earnings $ 15.7 $ 12.0 $ 28.8 $ 23.1
Segment earnings margin 7.4% 7.3% 7.5% 7.3%
----------------------------------------------------------------------------
(i) Includes rental revenue.
Revenue in the second quarter of 2012 increased $48.1 million, or 29%, to $212.3
million from $164.2 million in the second quarter of 2011. Segment earnings for
the quarter increased $3.7 million to $15.7 million compared to the second
quarter of 2011. The following factors contributed to the Equipment segment's
second quarter results:
-- Equipment revenue for the second quarter increased $45.9 million
compared to the same quarter last year. Specific quarter-over-quarter
variances included the following:
-- Construction equipment revenue increased $22.1 million as a result
of increased Hitachi excavator sales driven by strong demand in
western Canada and higher Wirtgen road building equipment sales in
Ontario. JCB equipment sales declined slightly due to a lower dollar
average sale price per unit compared to last year.
-- Mining equipment sales increased $18.1 million due to higher Hitachi
mining equipment deliveries in all regions and delivery of a
LeTourneau loader in western Canada.
-- Material handling equipment revenue increased $2.9 million on higher
volumes in eastern and western Canada, offset partially by lower
volumes in Ontario.
-- Crane and utility equipment revenue increased $1.7 million
attributable to higher sales in western and eastern Canada.
-- Forestry equipment revenues increased $1.0 million resulting from
higher Tigercat product sales in western Canada.
-- Parts and service volumes for the second quarter increased $2.2 million
compared to the same quarter last year on improved construction sector
sales in western Canada and Ontario.
-- Segment earnings for the second quarter increased $3.7 million to $15.7
million compared to the same quarter last year. The positive impact of
higher volumes outweighed the negative impact of lower gross profit
margins resulting from a higher proportion of equipment sales, and a
$1.7 million increase in selling and administrative expenses. Selling
and administrative expenses increased compared to the same quarter last
year as higher personnel and sales related expenses were partially
offset by lower bad debt and occupancy expenses.
Backlog of $133.9 million at June 30, 2012 decreased $9.5 million compared to
March 31, 2012 due mainly to construction sector equipment deliveries and
includes $13.4 million of LeTourneau equipment orders. Backlog decreased $17.1
million compared to June 30, 2011 due to mining equipment deliveries and the
elimination of product shipment delays experienced in 2011.
On October 17, 2011, Wajax announced it had reached an agreement with LeTourneau
Technologies, Inc. ("LeTourneau") providing for the dealer agreement relating to
Wajax's distribution of LeTourneau mining equipment and parts products in Canada
to be discontinued effective April 27, 2012. Wajax Equipment continued to
provide parts and service on LeTourneau equipment until April 27, 2012, and has
equipment orders in backlog of $13.4 million that are expected to be delivered
by the end of 2012. Sales and service of LeTourneau products in 2011 generated
approximately $35 million of revenue for Wajax and contributed approximately $11
million to its earnings before finance costs and income tax expense. LeTourneau
revenue for the six months ended June 30, 2012 included equipment sales of $11.9
million and parts and service volumes of $12.4 million.
Power Systems
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
-------------------------------------------------------------------------
Equipment(i) $ 28.4 $ 36.1 $ 68.8 $ 71.6
Parts and service $ 53.4 $ 44.9 $ 108.9 $ 82.4
-------------------------------------------------------------------------
Segment revenue $ 81.8 $ 81.0 $ 177.7 $ 154.0
-------------------------------------------------------------------------
Segment earnings $ 6.4 $ 8.3 $ 15.1 $ 15.3
Segment earnings margin 7.9% 10.2% 8.5% 9.9%
-------------------------------------------------------------------------
(i) Includes rental and other revenue.
Revenue in the second quarter of 2012 increased $0.8 million to $81.8 million
compared to $81.0 million in the same quarter of 2011. Excluding revenue from
the former Harper operation, Power Systems revenue in the second quarter of 2012
decreased $4.8 million, or 7%, compared to the same quarter last year. Segment
earnings decreased $1.9 million to $6.4 million in the second quarter compared
to the same quarter in the previous year. The following factors impacted
quarterly revenue and earnings compared to last year:
-- Equipment revenue decreased $7.7 million as lower equipment sales to
off-highway oil and gas customers in western Canada and lower power
generation equipment sales in western and eastern Canada more than
offset an increase in Ontario.
-- Parts and service volumes increased $8.5 million compared to last year.
This was mainly due to the addition of one month's revenue in Ontario
from Harper; higher sales to off-highway mining customers in eastern
Canada; the final settlement of a long-term maintenance and repair
contract in western Canada; and increased volumes attributable to the
oil and gas and power generation markets in western Canada.
-- Segment earnings in the second quarter of 2012 decreased $1.9 million
compared to the same quarter last year. The positive impact of higher
parts and service volumes and higher gross margins in western and
eastern Canada was partially offset by the lower equipment sales and
reduced parts and service margins in Ontario. Selling and administrative
expenses included $1.1 million of additional expenses from Harper and
higher personnel, sales and occupancy costs. Portions of these cost
increases represent investments for future growth in the off-highway and
electrical power generation markets.
Backlog of $60.9 million as of June 30, 2012 decreased $3.7 million compared to
March 31, 2012. Backlog decreased $22.8 million compared to June 30, 2011 due
primarily to reductions in oil and gas related off-highway orders in western
Canada and the timing of orders received related to power generation.
Industrial Components
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
----------------------------------------------------------------------------
Segment revenue $ 94.0 $ 89.9 $ 187.2 $ 170.6
----------------------------------------------------------------------------
Segment earnings $ 6.2 $ 6.5 $ 13.0 $ 11.0
Segment earnings margin 6.6% 7.3% 6.9% 6.4%
----------------------------------------------------------------------------
Revenue of $94.0 million in the second quarter of 2012 increased $4.1 million,
or 5%, from $89.9 million in the second quarter of 2011. Segment earnings
decreased $0.3 million to $6.2 million in the second quarter compared to the
same quarter in the previous year. The following factors contributed to the
segment's second quarter results:
-- Bearings and power transmission parts sales increased $2.2 million
compared to the same quarter last year due mainly to higher mining
sector volumes in eastern and western Canada and increased sales to
metal processing customers across all regions. These increases were
partially offset by reductions in sales to forestry sector customers in
eastern Canada.
-- Fluid power and process equipment products and service revenue in the
second quarter of 2012 increased $1.9 million due primarily to higher
industrial sector volumes across all regions and higher sales to oil and
gas customers in western Canada.
-- Segment earnings in the second quarter of 2012 decreased $0.3 million
compared to the same quarter last year. The negative impact of slightly
lower gross profit margins and a $1.2 million increase in selling and
administration expenses outweighed the positive impact of higher
volumes. The increase in selling and administrative expenses resulted
mainly from higher personnel and sales related costs and computer system
upgrade expenses.
Backlog of $49.2 million as of June 30, 2012 remained unchanged compared to
March 31, 2012 and increased $2.2 million compared to June 30, 2011.
Selected Quarterly Information
The following table summarizes unaudited quarterly consolidated financial data
for the eight most recently completed quarters. This quarterly information is
unaudited but has been prepared on the same basis as the 2011 annual audited
Consolidated Financial Statements.
2012 2011 2010
Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
----------------------------------------------------------------------------
Revenue $ 386.6 $ 358.1 $ 377.2 $ 361.9 $ 334.1 $ 303.9 $ 316.4 $ 294.4
----------------------------------------------------------------------------
Earnings
before
income
taxes $ 25.2 $ 23.3 $ 22.5 $ 24.6 $ 22.4 $ 18.0 $ 14.9 $ 18.7
Net earnings $ 18.5 $ 17.1 $ 16.6 $ 17.9 $ 16.5 $ 12.8 $ 15.8 $ 19.6
Net earnings
per share
- Basic $ 1.11 $ 1.03 $ 1.00 $ 1.08 $ 0.99 $ 0.77 $ 0.95 $ 1.18
- Diluted $ 1.09 $ 1.01 $ 0.98 $ 1.06 $ 0.98 $ 0.76 $ 0.93 $ 1.16
----------------------------------------------------------------------------
Significant seasonal trends in quarterly revenue and earnings have not been
evident over the last two years.
A discussion of Wajax's previous quarterly results can be found in Wajax's
quarterly MD&A reports available on SEDAR at www.sedar.com.
Cash Flow, Liquidity and Capital Resources
Net Cash Flows Used In Operating Activities
Net cash flows generated from operating activities amounted to $6.4 million in
the second quarter of 2012, compared to $6.6 million in the same quarter of the
previous year. The $0.2 million decrease was due mainly to higher rental
equipment additions of $3.3 million and an increased use of operating assets and
liabilities of $0.8 million. This was mostly offset by higher cash flows from
operating activities before changes in operating assets and liabilities of $3.8
million.
For the six months ended June 30, 2012, net cash flows used in operating
activities amounted to $26.1 million, compared to $14.1 million for the same
period in the previous year. The $12.0 million increase in net cash flows used
in operating activities was due primarily to an increased use of operating
assets and liabilities of $17.8 million, higher other liabilities of $2.4
million and rental equipment additions of $1.9 million. This was partially
offset by higher cash flows from operating activities before changes in
operating assets and liabilities of $9.7 million.
Changes in operating assets and liabilities for the three and six months of 2012
compared to the same periods in 2011 include the following components:
Three months Six months
ended June 30 ended June 30
Changes in operating assets and
liabilities (i) 2012 2011 2012 2011
----------------------------------------------------------------------------
Trade and other receivables $ 2.2 $ 21.7 $ 21.6 $ 38.4
Inventories $ 14.4 $ 1.6 $ 42.6 $ 12.1
Prepaid expenses $ (2.1) $ 1.2 $ 0.8 $ (0.1)
Trade and other payables $ (0.7) $ (4.7) $ (17.7) $ 0.6
Accrued Liabilities $ 0.1 $ (5.5) $ 17.5 $ (2.6)
Provisions $ 0.6 $ (0.6) $ 1.0 $ (0.4)
----------------------------------------------------------------------------
Total $ 14.5 $ 13.7 $ 65.8 $ 48.0
----------------------------------------------------------------------------
(i) Cash used in (generated)
Significant components of the changes in operating assets and liabilities for
the quarter ended June 30, 2012 are as follows:
-- Trade and other receivables increased $2.2 million due primarily to
higher sales activity in the Equipment segment.
-- Inventories increased $14.4 million across all regions due in part to
higher mining equipment inventory in the Equipment segment and certain
delays in customer deliveries in the Power Systems segment.
Significant components of the changes in operating assets and liabilities for
the six months ended June 30, 2012 are as follows:
-- Trade and other receivables increased $21.6 million due mainly to higher
sales activity in the Equipment and Industrial Components segments.
-- Inventories increased $42.6 million across all regions due primarily to
increases in mining and construction equipment in the Equipment segment,
delays in certain customer deliveries in the Power Systems segment and
increases in stock levels in the Industrial Components segment's western
Canada operation.
-- Trade and other payables increased $17.7 million reflecting higher
inventory related trade payables.
-- Accrued liabilities decreased $17.5 million due mainly to the payment of
prior year annual and mid-term incentive accruals in the first quarter
and decreases in customer deposits in the Equipment segment.
On the consolidated statement of financial position at June 30, 2012, Wajax had
employed $196.0 million in current assets net of current liabilities, exclusive
of funded net debt, compared to $165.0 million at December 31, 2011. The $31.0
million increase was due primarily to the cash flow factors listed above, offset
partially by an increase of $34.5 million in income taxes payable due in January
2013. The $34.5 million increase in income taxes payable includes approximately
$23 million of tax on partnership income generated in 2011 and tax on income to
be included in 2012 taxable income resulting from the change in tax legislation
that has effectively removed the partnership income deferral benefit. See
Liquidity and Capital Resources section for further detail.
Investing Activities
During the second quarter of 2012, Wajax invested $2.6 million in property,
plant and equipment additions, net of disposals, compared to $1.0 million in the
second quarter of 2011. The increase of $1.6 million included leasehold
additions and shop equipment related to the Power Systems segment's new leased
facility in Drummondville, Quebec.
For the six months ended June 30, 2012, Wajax invested $3.8 million in property,
plant and equipment additions, net of disposals, compared to $1.9 million in the
same period of 2011.
Investing activities in the second quarter of 2011 also included $21.6 million
of cash paid on closing for the acquisition of Harper and intangible assets
additions of $0.2 million.
Financing Activities
The Corporation used $13.1 million of cash in financing activities in the second
quarter of 2012 compared to $5.4 million of cash generated from financing
activities in the same quarter of 2011. Financing activities in the quarter
included dividends paid to shareholders totaling $13.5 million, or $0.81 per
share, finance lease payments of $0.4 million and debt facility amendment costs
of $0.2 million, offset partially by bank debt borrowing of $1.0 million.
For the six months ended June 30, 2012, the Corporation generated $8.9 million
of cash in financing activities compared to $13.0 million of cash used in
financing activities in the same period of 2011. Financing activities for the
six months ended included bank debt borrowing of $34.0 million, offset partially
by dividends paid to shareholders totaling $23.5 million, or $1.41 per share,
finance lease payments of $1.4 million and debt facility amendment costs of $0.2
million.
Funded net debt of $119.3 million at June 30, 2012 increased $11.2 million
compared to March 31, 2012. Net cash flows generated from operating activities
of $6.4 million were insufficient to cover the uses of cash including dividends
paid of $13.5 million, investing activities of $2.6 million, finance lease
payments of $0.4 million and debt facility amendment costs of $0.2 million.
Wajax's quarter-end funded net debt-to-equity ratio of 0.50:1 at June 30, 2012
increased from the March 31, 2012 ratio of 0.46:1.
Funded net debt of $119.3 million at June 30, 2012 increased $55.6 million
compared to December 31, 2011. The increase comprised mainly of net cash flows
used in operating activities of $26.1 million, dividends paid of $23.5 million
and investing activities of $3.8 million. Wajax's period-end funded net
debt-to-equity ratio of 0.50:1 at June 30, 2012 increased from the December 31,
2011 ratio of 0.28:1.
Liquidity and Capital Resources
On May 24, 2012, Wajax amended its bank credit facility to increase the limit of
the revolving term portion of the facility by $50 million on substantially the
same terms and conditions as the existing facility. The fully secured facility,
due August 12, 2016, is now comprised of a $30 million non-revolving term
portion and a $195 million revolving term portion. The $0.2 million cost of
amending the facility has been capitalized and will be amortized over the
remaining term of the facility.
At June 30, 2012, Wajax had borrowed $98.6 million and issued $6.2 million of
letters of credit for a total utilization of $104.8 million of its $225 million
bank credit facility and had no utilization of its $15 million equipment
financing facility. Borrowing capacity under the bank credit facility is
dependent on the level of inventories on-hand and outstanding trade accounts
receivables. At June 30, 2012 borrowing capacity under the bank credit facility
was equal to $225.0 million.
Since its conversion back to a corporation on January 1, 2011, Wajax has not
made any significant income tax payments and will not be required to make any
such payments until 2013. This is due to income tax payments being deferred as a
result of its partnership structure. In January 2013, Wajax will be required to
make an income tax payment of approximately $44 million. This includes
approximately $23 million of tax on partnership income generated in 2011 and the
balance representing tax on income to be included in 2012 taxable income as a
result of a change in tax legislation that has effectively removed the
partnership income deferral benefit. The Corporation will also commence making
monthly income tax installments in January 2013.
Wajax's $225 million bank credit facility along with an additional $15 million
of capacity permitted under the credit facility should be sufficient to meet
Wajax's short-term requirements. However, Wajax may be required to access the
equity or debt markets in order to fund acquisitions and growth related working
capital and capital expenditures.
Financial Instruments
Wajax uses derivative financial instruments in the management of its foreign
currency and interest rate exposures. Wajax's policy is not to utilize
derivative financial instruments for trading or speculative purposes.
Significant derivative financial instruments outstanding at the end of the
quarter were as follows:
-- As at June 30, 2012, Wajax had no interest rate swaps outstanding. (As
at June 30, 2011, Wajax had entered into interest rate swaps that
effectively fixed the interest rate on $80 million of debt until
December 31, 2011).
-- Wajax enters into short-term currency forward contracts to fix the
exchange rate on the cost of certain inbound inventory and to hedge
certain foreign currency-denominated sales to (receivables from)
customers as part of its normal course of business. As at June 30, 2012,
Wajax had contracts outstanding to buy U.S.$31.9 million and EUR0.02
million and to sell U.S.$7.5 million (December 31, 2011 - to buy
U.S.$36.0 million and EUR0.2 million and to sell U.S.$1.0 million, June
30, 2011 - to buy U.S.$29.3 million and to sell U.S.$4.4 million and
EUR0.006 million). The U.S. dollar contracts expire between July 2012
and April 2013, with a weighted average U.S./Canadian dollar rate of
1.0227 and weighted average Euro / Canadian dollar rate of 1.2868.
Wajax measures financial instruments held for trading and not accounted for as
hedging items, at fair value with subsequent changes in fair value being charged
to earnings. Derivatives designated as effective hedges are measured at fair
value with subsequent changes in fair value being charged to other comprehensive
income until the related hedged item is recorded and affects income. The fair
value of derivative instruments is estimated based upon market conditions using
appropriate valuation models. The carrying values reported in the balance sheet
for financial instruments are not significantly different from their fair
values.
Wajax is exposed to non-performance by counterparties to short-term currency
forward contracts. These counterparties are large financial institutions with a
"Stable" outlook and high short-term and long-term credit ratings from Standard
and Poor's. To date, no such counterparty has failed to meet its financial
obligations to Wajax. Management does not believe there is a significant risk of
non-performance by these counterparties and will continue to monitor the credit
risk of these counterparties.
Currency Risk
There have been no material changes to currency risk since December 31, 2011.
Contractual Obligations
There have been no material changes to the Corporation's contractual obligations
since December 31, 2011.
Off Balance Sheet Financing
Off balance sheet financing arrangements include operating lease contracts
entered into for facilities with various landlords, a portion of the long-term
lift truck rental fleet in Equipment with a non-bank lender and office equipment
with various non-bank lenders. There have been no material changes to the
Corporation's total obligations for all operating leases since December 31,
2011, see the Contractual Obligations section.
Although Wajax's consolidated contractual annual lease commitments decline
year-by-year, it is anticipated that existing leases will either be renewed or
replaced, resulting in lease commitments being sustained at current levels. In
the alternative, Wajax may incur capital expenditures to acquire equivalent
capacity.
The Equipment segment had $93.9 million (2011 - $27.9 million) of consigned
inventory on-hand from a major manufacturer at June 30, 2012. In the normal
course of business, Wajax receives inventory on consignment from this
manufacturer which is generally sold to customers or purchased by Wajax. This
consigned inventory is not included in Wajax's inventory as the manufacturer
retains title to the goods.
In the event the inventory consignment program was terminated, Wajax would
utilize interest free financing, if any, made available by the manufacturer
and/or utilize capacity under its credit facilities. Although management
currently believes Wajax has adequate debt capacity, Wajax would have to access
the equity or debt markets, or temporarily reduce dividends to accommodate any
shortfalls in Wajax's credit facilities. See the Liquidity and Capital Resources
section.
Dividends
Dividends to shareholders were declared as follows:
Per
Record Date Payment Date Share Amount
----------------------------------------------------------------------------
April 30, 2012 May 22, 2012 $ 0.27 $ 4.5
May 31, 2012 June 20, 2012 0.27 4.5
June 29, 2012 July 20, 2012 0.27 4.5
---------------------------------------------------------------------------
Three months ended June 30, 2012 $ 0.81 $ 13.5
---------------------------------------------------------------------------
On May 8, 2012 Wajax announced a dividend of $0.27 per share ($3.24 annualized)
for the month of July payable on August 20, 2012 to shareholders of record on
July 31, 2012.
On August 10, 2012 Wajax announced monthly dividends of $0.27 per share ($3.24
annualized) for each of the months of August, September and October payable on
September 20, 2012, October 22, 2012 and November 20, 2012 to shareholders of
record on August 31, 2012, September 28, 2012 and October 31, 2012 respectively.
Tax information relating to 2012 and prior year dividends is available on
Wajax's website at www.wajax.com.
Productive Capacity and Productive Capacity Management
There have been no material changes to the Corporation's productive capacity and
productive capacity management since December 31, 2011.
Financing Strategies
Wajax's $225 million bank credit facility along with the $15 million demand
inventory equipment financing facility should be sufficient to meet Wajax's
short-term normal course working capital, maintenance capital and growth capital
requirements.
Wajax's short-term normal course requirements for current assets net of current
liabilities, exclusive of funded net debt ("working capital") can swing widely
quarter-to-quarter due to the timing of large inventory purchases and/or sales
and changes in market activity. In general, as Wajax experiences growth, there
is a need for additional working capital as was the case in 2011. Conversely, as
Wajax experiences economic slowdowns working capital reduces reflecting the
lower activity levels as was the case in 2009. Fluctuations in working capital
are generally funded by, or used to repay, the bank credit facility.
Wajax may be required to access the equity or debt markets in order to fund
acquisitions and growth related working capital and capital expenditures.
Borrowing capacity under the bank credit facility is dependent on the level of
Wajax's inventories on-hand and outstanding trade accounts receivables. At June
30, 2012, total borrowing capacity under the bank credit facility was equal to
$225 million of which $104.8 million was utilized at June 30, 2012.
The bank credit facility contains covenants that could restrict the ability of
Wajax to make dividend payments, if (i) the leverage ratio (Debt to EBITDA) is
greater than 3.0 at the time of declaration of the dividend, and (ii) an event
of default exists or would exist as a result of a dividend payment.
Share Capital
The shares of Wajax issued are included in shareholders' equity on the balance
sheet as follows:
Issued and fully paid Shares as at June 30, 2012 Number Amount
----------------------------------------------------------------------------
Balance at the beginning of the quarter 16,629,444 $ 105.4
Rights exercised 107,003 1.3
----------------------------------------------------------------------------
Balance at the end of the quarter 16,736,447 $ 106.7
----------------------------------------------------------------------------
Wajax has five share-based compensation plans; the Wajax Share Ownership Plan
("SOP"), the Deferred Share Program ("DSP"), the Directors' Deferred Share Unit
Plan ("DDSUP"), the Mid-Term Incentive Plan for Senior Executives ("MTIP") and
the Deferred Share Unit Plan ("DSUP"). SOP, DSP and DDSUP rights are issued to
the participants and are settled by issuing Wajax Corporation shares. The
cash-settled MTIP and DSUP consist of annual grants that vest over three years
and are subject to time and performance vesting criteria. A portion of the MTIP
and the full amount of the DSUP grants are determined by the price of the
Corporation's shares. Compensation expense for the SOP, DSP and DDSUP is
determined based upon the fair value of the rights at the date of grant and
charged to earnings on a straight line basis over the vesting period, with an
offsetting adjustment to contributed surplus. Compensation expense for the DSUP
and the share-based portion of the MTIP varies with the price of the
Corporation's shares and is recognized over the vesting period. Wajax recorded
compensation cost of $0.3 million for the quarter (2011 - $1.1 million) and $3.1
million for the six months ended (2011 - $2.5 million) in respect of these
plans.
Critical Accounting Estimates
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities and revenue and expenses during the
reporting period. Actual results could differ from those estimates. The
Corporation bases its estimates on historical experience and various other
assumptions that are believed to be reasonable in the circumstances.
The areas where significant judgements and assumptions are used to determine the
amounts recognized in the financial statements include the provision for
doubtful accounts, inventory obsolescence, asset impairment, classification of
leases, impairment of intangible assets, warranty provision and the measurement
of employee defined benefit obligations. In preparing the financial statements
for the quarter ended June 30, 2012, the significant judgments made by
management in applying the Corporation's accounting policies and the key sources
of estimation uncertainty are the same as those applied in the recently reported
audited consolidated financial statements for the year ended December 31, 2011
which can be found on SEDAR at www.sedar.com.
Accounting Changes
Standards and interpretations not yet effective
In its MD&A for the year ended December 31, 2011 the Corporation described
numerous new accounting standards which have been published but which have not
yet been adopted by the Corporation. There have been no updates to these
standards except as follows:
During the first quarter of 2012, the Corporation assessed the impact of
adopting IFRS 9 Financial Instruments and does not believe that it will have a
material impact on its consolidated financial statements because of the types of
financial instruments that it holds.
As of January 1, 2013, the Corporation will be required to adopt amendments to
IFRS 7 Financial Instruments: Disclosures, which contain new disclosure
requirements for financial assets and financial liabilities that are offset in
the statement of financial position. The Corporation is currently assessing the
impact of the amendments to this standard on its consolidated financial
statements.
As of January 1, 2014, the Corporation will be required to adopt amendments to
IAS 32 Financial Instruments: Presentation, which clarifies the conditions for
offsetting financial assets and financial liabilities. As the amendments only
require changes in the presentation of items in the statement of financial
position, the Corporation does not expect the amendments to IAS 32 to have a
material impact on the financial statements.
Risk Management and Uncertainties
As with most businesses, Wajax is subject to a number of marketplace and
industry related risks and uncertainties which could have a material impact on
operating results and Wajax's ability to pay cash dividends to shareholders.
Wajax attempts to minimize many of these risks through diversification of core
businesses and through the geographic diversity of its operations. In addition,
Wajax has adopted an annual enterprise risk management assessment which is
prepared by the Corporation's senior management and overseen by the Board of
Directors and Committees of the Board. The enterprise risk management framework
sets out principles and tools for identifying, evaluating, prioritizing and
managing risk effectively and consistently across Wajax. There are however, a
number of risks that deserve particular comment which are discussed in detail in
the MD&A for the year ended December 31, 2011 which can be found on SEDAR at
www.sedar.com. There have been no material changes to the business of Wajax that
require an update to the discussion of the applicable risks discussed in the
MD&A for the year ended December 31, 2011.
Outlook
The Corporation's earnings increased 12% in the second quarter of 2012 compared
to the same quarter in 2011. The Equipment segment had record sales of Hitachi
construction excavators in western Canada in the second quarter and mining
equipment sales exceeded amounts recorded last year. Results from the Power
Systems segment fell short of management's expectation on softness in the
western Canada energy sector and lower margins in Ontario.
With market forecasters continuing to lower their expectations for growth in the
global and Canadian economies as a result of the European debt crisis and a
slowing Chinese economy, management is slightly more cautious regarding the
outlook for Wajax for the remainder of 2012. While most of the Corporation's end
markets continue to hold up well and quoting activity particularly in mining
remains buoyant, management has seen a weakening of oil and gas drilling and
well servicing activities in western Canada. This, combined with phasing out of
the LeTourneau aftermarket business in the second quarter leads management to
expect that results for the full year of 2012 will be modestly higher than the
previous year.
Additional information, including Wajax's Annual Report and Annual Information
Form, are available on SEDAR at www.sedar.com.
WAJAX CORPORATION
Unaudited Condensed Consolidated Financial Statements
For the three and six months ended June 30, 2012
Notice required under National Instrument 51-102, "Continuous Disclosure
Obligations" Part 4.3(3) (a):
The attached condensed consolidated financial statements have been prepared by
Management of Wajax Corporation and have not been reviewed by the Corporation's
auditors.
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
As at June December
(unaudited, in thousands of Canadian dollars) Note 30, 2012 31, 2011
----------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ - $ 5,659
Trade and other receivables 195,858 174,233
Inventories 284,782 241,524
Prepaid expenses 8,801 8,033
----------------------------------------------------------------------------
489,441 429,449
----------------------------------------------------------------------------
NON-CURRENT
Rental equipment 3 37,577 28,060
Property, plant and equipment 4 49,610 47,924
Intangible assets 83,800 84,493
Deferred taxes 9 4,226 -
----------------------------------------------------------------------------
175,213 160,477
----------------------------------------------------------------------------
$ 664,654 $ 589,926
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank indebtedness $ 15,404 $ -
Trade and other payables 180,532 163,108
Accrued liabilities 66,697 84,050
Provisions 4,714 5,704
Dividends payable 4,519 3,326
Income taxes payable 36,922 2,398
Obligations under finance leases 3,647 3,646
Derivative instruments 34 208
----------------------------------------------------------------------------
312,469 262,440
----------------------------------------------------------------------------
NON-CURRENT
Provisions 4,788 4,010
Deferred taxes 9 - 17,694
Employee benefits 6,837 6,843
Other liabilities 1,365 5,644
Obligations under finance leases 7,381 6,688
Bank debt 5 92,897 59,021
----------------------------------------------------------------------------
113,268 99,900
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 6 106,651 105,371
Contributed surplus 3,905 4,888
Retained earnings 128,372 117,477
Accumulated other comprehensive loss (11) (150)
----------------------------------------------------------------------------
Total shareholders' equity 238,917 227,586
----------------------------------------------------------------------------
$ 664,654 $ 589,926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
These condensed consolidated financial statements were approved by the Board of
Directors on August 10, 2012.
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three months Six months ended
ended June 30 June 30
(unaudited, in thousands of
Canadian dollars, except per
share data) Note 2012 2011 2012 2011
-------------------------------------------------------------------------
Revenue $386,613 $334,069 $744,689 $637,998
Cost of sales 307,389 261,539 587,576 499,605
-------------------------------------------------------------------------
Gross profit 79,224 72,530 157,113 138,393
Selling and administrative
expenses 52,851 49,044 106,575 95,887
-------------------------------------------------------------------------
Earnings before finance costs
and income taxes 26,373 23,486 50,538 42,506
Finance costs 1,128 1,109 1,944 2,085
-------------------------------------------------------------------------
Earnings before income taxes 25,245 22,377 48,594 40,421
Income tax expense 9 6,776 5,839 13,024 11,067
-------------------------------------------------------------------------
Net earnings $ 18,469 $ 16,538 $ 35,570 $ 29,354
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per share 10 $ 1.11 $ 0.99 $ 2.13 $ 1.77
Diluted earnings per share 10 $ 1.09 $ 0.98 $ 2.10 $ 1.74
-------------------------------------------------------------------------
-------------------------------------------------------------------------
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
Three months Six months ended
ended June 30 June 30
(unaudited, in thousands of Canadian
dollars) 2012 2011 2012 2011
----------------------------------------------------------------------------
Net earnings $ 18,469 $ 16,538 $ 35,570 $ 29,354
----------------------------------------------------------------------------
Losses on derivative instruments
designated as cash flow hedges in
prior periods reclassified to cost
of inventory or finance costs during
the period, net of tax of $106 (2011
- $160) and year to date, net of tax
of $109 (2011 - $390) 289 422 297 1,029
Gains (losses) on derivative
instruments designated as cash flow
hedges during the period, net of tax
of $46 (2011 - $16) and year to
date, net of tax of $147 (2011 -
$87) 126 34 (158) (238)
----------------------------------------------------------------------------
Other comprehensive income, net of
tax 415 456 139 791
----------------------------------------------------------------------------
Total comprehensive income $ 18,884 $ 16,994 $ 35,709 $ 30,145
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
other
For the six comprehensive
months ended (loss) income
June 30, 2012 ("AOCL")
---------------
(unaudited, in
thousands of
Canadian Share Contributed Retained Cash flow
dollars) Note capital surplus earnings hedges Total
----------------------------------------------------------------------------
January 1,
2012 $105,371 4,888 117,477 (150) $227,586
----------------------------------------------------------------------------
Net earnings - - 35,570 - 35,570
Other
comprehensive
income - - - 139 139
----------------------------------------------------------------------------
Total
comprehensive
income for
the period - - 35,570 139 35,709
----------------------------------------------------------------------------
Shares issued
to settle
share-based
compensation
plans 1,280 (1,280) - - -
----------------------------------------------------------------------------
Dividends 7 - - (24,675) - (24,675)
----------------------------------------------------------------------------
Share-based
compensation
expense 8 - 297 - - 297
----------------------------------------------------------------------------
June 30, 2012 $106,651 3,905 128,372 (11) $238,917
----------------------------------------------------------------------------
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
AOCL
--------
For the six
months ended
June 30, 2011
(unaudited, in
thousands of Cash
Canadian Share Trust Contributed Retained flow
dollars) Note capital units surplus earnings hedges Total
----------------------------------------------------------------------------
January 1,
2011 $ - 105,371 3,931 91,805 (1,777) $199,330
----------------------------------------------------------------------------
Conversion to
corporation 105,371 (105,371) - - - -
Net earnings - - - 29,354 - 29,354
Other
comprehensive
income - - - - 791 791
----------------------------------------------------------------------------
Total
comprehensive
income for
the period - - - 29,354 791 30,145
----------------------------------------------------------------------------
Dividends 7 - - - (15,964) - (15,964)
----------------------------------------------------------------------------
Share-based
compensation
expense 8 - - 912 - - 912
----------------------------------------------------------------------------
June 30, 2011 $105,371 - 4,843 105,195 (986) $214,423
----------------------------------------------------------------------------
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
Three months ended Six months ended
June 30 June 30
(unaudited, in thousands
of Canadian dollars) Note 2012 2011 2012 2011
----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $ 18,469 $ 16,538 $ 35,570 $ 29,354
Items not affecting cash
flow:
Depreciation and
amortization
Rental equipment 1,834 1,104 3,400 2,066
Property, plant and
equipment 1,204 1,059 2,312 2,035
Assets under finance
lease 880 726 1,737 1,446
Intangible assets 364 301 730 581
Loss (gain) on
disposal of property,
plant and equipment 4 95 - 146 (16)
Share-based
compensation expense 8 146 367 297 912
Non-cash rental income (147) (79) (289) (49)
Employee benefits
expense (income), net
of payments 12 (76) (6) (254)
Non-cash (gain) loss
on derivative
instruments (103) - 18 -
Finance costs 1,128 1,109 1,944 2,085
Income tax expense 9 6,776 5,839 13,024 11,067
----------------------------------------------------------------------------
Cash flows from operating
activities before changes
in operating assets and
liabilities 30,658 26,888 58,883 49,227
----------------------------------------------------------------------------
Changes in operating
assets and liabilities:
Trade and other
receivables (2,248) (21,717) (21,625) (38,376)
Inventories (14,365) (1,586) (42,608) (12,107)
Prepaid expenses 2,099 (1,198) (768) 101
Trade and other payables 654 4,719 17,713 (601)
Accrued liabilities (100) 5,454 (17,516) 2,611
Provisions (576) 594 (990) 394
----------------------------------------------------------------------------
(14,536) (13,734) (65,794) (47,978)
----------------------------------------------------------------------------
Cash flows generated from
(used in) operating
activities 16,122 13,154 (6,911) 1,249
----------------------------------------------------------------------------
Rental equipment
additions 3 (9,283) (6,027) (13,567) (11,709)
Provisions, non-current 145 (102) 778 37
Other liabilities 619 771 (4,279) (1,849)
Finance costs paid (1,070) (970) (1,669) (1,826)
Income taxes paid (165) (206) (475) (37)
----------------------------------------------------------------------------
Net cash flows generated
from (used in) operating
activities 6,368 6,620 (26,123) (14,135)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Property, plant and
equipment additions 4 (2,970) (996) (4,179) (1,964)
Proceeds on disposal of
property, plant and
equipment 4 347 3 387 57
Intangible assets
additions (26) (218) (37) (243)
Acquisition of business - (21,603) - (21,603)
----------------------------------------------------------------------------
Net cash flows used in
investing activities (2,649) (22,814) (3,829) (23,753)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank debt 5 1,000 14,000 33,998 14,000
Debt facility amendment
costs 5 (232) - (232) -
Finance lease payments (409) (667) (1,395) (1,593)
Dividends paid (13,504) (7,982) (23,482) (25,443)
----------------------------------------------------------------------------
Net cash flows (used in)
generated from financing
activities (13,145) 5,351 8,889 (13,036)
----------------------------------------------------------------------------
Net change in cash (9,426) (10,843) (21,063) (50,924)
----------------------------------------------------------------------------
(Bank indebtedness) cash -
beginning of period (5,978) 2,873 5,659 42,954
----------------------------------------------------------------------------
Bank indebtedness - end of
period $ (15,404) $ (7,970) $ (15,404) $ (7,970)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WAJAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2012
(unaudited, amounts in thousands of Canadian dollars, except share and per share
data)
1. COMPANY PROFILE
Wajax Corporation (the "Corporation") is incorporated in Canada. The address of
the Corporation's registered office is 3280 Wharton Way, Mississauga, Ontario,
Canada. The Corporation's core distribution businesses are engaged in the sale
and after-sale parts and service support of equipment, power systems and
industrial components, through a network of 117 branches across Canada. The
Corporation is a multi-line distributor and represents a number of leading
worldwide manufacturers across its core businesses. Its customer base is
diversified, spanning natural resources, construction, transportation,
manufacturing, industrial processing and utilities.
2. BASIS OF PREPARATION
Statement of compliance
These condensed consolidated financial statements have been prepared in
accordance with International Accounting Standard 34 Interim Financial Reporting
and do not include all of the disclosures required for full consolidated
financial statements. Accordingly, these condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements of Wajax Corporation for the year ended December 31, 2011. The
significant accounting policies follow those disclosed in the most recently
reported audited consolidated financial statements.
Basis of measurement
The condensed consolidated financial statements have been prepared under the
historical cost basis except for derivative financial instruments and
liabilities for cash-settled share-based payment arrangements that have been
measured at fair value. The employee benefit liability is recognized as the net
total of the pension plan assets, plus unrecognized past service cost and
unrecognized actuarial losses, less unrecognized actuarial gains and the present
value of the defined benefit obligation.
Functional and presentation currency
These condensed consolidated financial statements are presented in Canadian
dollars, which is the Corporation's functional currency. All financial
information presented in Canadian dollars has been rounded to the nearest
thousand, unless otherwise stated and except share and per share data.
3. RENTAL EQUIPMENT
The Corporation acquired rental equipment with a cost of $9,283 during the
quarter (2011 - $6,027) and $13,567 year to date (2011 - $11,709). Rental
equipment with a carrying amount of $339 during the quarter (2011 - $922) and
$650 year to date (2011 - $2,066) ceased to be rented and was classified as held
for sale in the normal course of business and transferred to inventories.
4. PROPERTY, PLANT AND EQUIPMENT
The Corporation acquired property, plant and equipment with a cost of $2,970
during the quarter (2011 - $996) and $4,179 year to date (2011 - $1,964). Assets
with a carrying amount of $442 during the quarter (2011 - $3) and $533 year to
date (2011 - $41) were disposed of, resulting in losses on disposal of $95
during the quarter (2011 - nil) and $146 year to date (2011 - gain of $16).
5. BANK DEBT
On May 24, 2012, the Corporation amended its bank credit facility to increase
the limit of the revolving term portion of the facility by $50,000 on
substantially the same terms and conditions as the existing facility. The fully
secured facility, due August 12, 2016, is now comprised of a $30,000
non-revolving term portion and a $195,000 revolving term portion. The $232 cost
of amending the facility has been capitalized and will be amortized over the
remaining term of the facility.
6. SHARE CAPITAL
Number of Shares Amount
---------------------------------------------------------------------------
Balance, January 1, 2012 16,629,444 $ 105,371
Shares issued to settle share-based compensation
plans 107,003 1,280
---------------------------------------------------------------------------
Balance, June 30, 2012 16,736,447 $ 106,651
---------------------------------------------------------------------------
7. DIVIDENDS DECLARED
During the three months ended June 30, 2012, the Corporation declared cash
dividends of $0.81 per share or $13,533 (June 30, 2011, dividends of $0.51 per
share or $8,481).
Year to date, the Corporation declared cash dividends of $1.48 per share or
$24,675 (June 30, 2011, dividends of $0.96 per share or $15,964).
The Corporation has declared dividends of $4,519 ($0.27 per share) for the month
of July 2012.
8. SHARE-BASED COMPENSATION PLANS
The Corporation has five share-based compensation plans: the Wajax Share
Ownership Plan ("SOP"), the Deferred Share Program ("DSP"), the Directors'
Deferred Share Unit Plan ("DDSUP"), the Mid-Term Incentive Plan for Senior
Executives ("MTIP") and the Deferred Share Unit Plan ("DSUP").
a) Share Rights Plans
The Corporation recorded compensation cost of $146 for the quarter (2011 - $367)
and $297 for the year to date (2011 - $912) in respect of these plans.
Share Ownership Plan June 30, 2012 June 30, 2011
----------------------------------------------------------------------------
Fair Fair
Number value at Number value at
of time of of time of
Rights grant Rights grant
----------------------------------------------------------------------------
Outstanding at beginning of year 111,306 $ 1,024 101,999 $ 1,024
Granted in the
period - new grants 14,311 726 - -
- dividend equivalents 1,239 - 4,285 -
Settled in the period (55,522) (471) - -
----------------------------------------------------------------------------
Outstanding at end of period 71,334 $ 1,279 106,284 $ 1,024
----------------------------------------------------------------------------
At June 30, 2012, 52,308 SOP rights were vested (June 30, 2011 - 97,524).
Deferred Share Program June 30, 2012 June 30, 2011
----------------------------------------------------------------------------
Fair Fair
value value
Number at time Number at time
of of of of
Rights grant Rights grant
----------------------------------------------------------------------------
Outstanding at beginning of year 30,216 $ 750 24,165 $ 600
Granted in the
period - new grants - - 3,989 150
- dividend equivalents 929 - 1,098 -
----------------------------------------------------------------------------
Outstanding at end of period 31,145 $ 750 29,252 $ 750
----------------------------------------------------------------------------
All DSP rights have vested at June 30, 2012 (no rights had vested at June 30, 2011).
Directors' Deferred Share Unit Plan June 30, 2012 June 30, 2011
----------------------------------------------------------------------------
Fair Fair
Number value at Number value at
of time of of time of
Rights grant Rights grant
----------------------------------------------------------------------------
Outstanding at beginning of year 176,591 $ 3,134 147,797 $ 2,509
Granted in the
period - new grants 5,633 267 7,017 264
- dividend equivalents 5,388 - 6,252 -
Settled in the period (51,481) (809) - -
----------------------------------------------------------------------------
Outstanding at end of period 136,131 $ 2,592 161,066 $ 2,773
----------------------------------------------------------------------------
DDSUP rights vest immediately upon grant.
b) Mid-Term Incentive Plan for Senior Executives ("MTIP")
The Corporation recorded compensation cost of $60 for the quarter (2011 - $771)
and $2,575 for the year to date (2011 - $1,559) in respect of the share-based
portion of the MTIP. At June 30, 2012, the carrying amount of the share-based
portion of the MTIP liability was $5,873 (2011 - $5,411).
c) Deferred Share Unit Plan ("DSUP")
The Corporation recorded compensation cost of $136 for the quarter (2011 - nil)
and $194 for the year to date (2011 - nil) in respect of the DSUP. At June 30,
2012, the carrying amount of the DSUP liability was $363 (2011 - nil).
9. INCOME TAXES
Income tax expense comprises current and deferred tax as follows:
For the six months ended June 30 2012 2011
----------------------------------------------------------------------------
Current $ 34,998 $ 506
Deferred - Origination and reversal of
temporary difference (21,901) 11,057
- Change in tax law and rates (73) (496)
----------------------------------------------------------------------------
Income tax expense $ 13,024 $ 11,067
----------------------------------------------------------------------------
The calculation of current tax is based on a combined federal and provincial
statutory income tax rate of 26.2% (2011 - 27.7%). The tax rate for the current
year is 1.5% lower than 2011 due to the effect of the reduced statutory tax
rates. Deferred tax assets and liabilities are measured at tax rates that are
expected to apply to the period when the asset is realized or the liability is
settled. Deferred tax assets and liabilities have been measured using an
expected average combined statutory income tax rate of 26.1% based on the tax
rates in years when the temporary differences are expected to reverse.
The reconciliation of effective income tax is as follows:
For the six months ended June 30 2012 2011
---------------------------------------------------------------------------
Combined statutory income tax rate 26.2% 27.7%
Expected income tax expense at statutory rates $ 12,731 $11,196
Non-deductible expenses 244 418
Deferred tax related to changes in tax law and rates (73) (496)
Other 122 (51)
---------------------------------------------------------------------------
Income tax expense $ 13,024 $11,067
---------------------------------------------------------------------------
Recognized deferred tax assets and liabilities
Recognized deferred tax assets and liabilities are comprised as follows:
June 30, December
2012 31, 2011
----------------------------------------------------------------
Accrued liabilities $ 5,658 $ 5,249
Provisions 1,299 2,504
Employee benefits 1,843 1,752
Property, plant and equipment (1,725) (1,773)
Finance leases (376) (195)
Intangible assets (2,516) (2,355)
Deferred financing costs (32) (29)
Partnership income not currently taxable (259) (23,236)
Tax loss carryforwards 331 333
Derivative instruments 3 56
----------------------------------------------------------------
Net deferred tax assets (liabilities) $ 4,226 $ (17,694)
----------------------------------------------------------------
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Numerator for basic and
diluted earnings per
share:
- net earnings $ 18,469 $ 16,538 $ 35,570 $ 29,354
----------------------------------------------------------------------------
Denominator for basic
earnings per share: -
weighted average shares 16,696,348 16,629,444 16,662,896 16,629,444
----------------------------------------------------------------------------
Denominator for diluted
earnings per share:
- weighted average
shares 16,696,348 16,629,444 16,662,896 16,629,444
- effect of dilutive
share rights 246,360 284,656 274,694 280,641
----------------------------------------------------------------------------
Denominator for diluted
earnings per share 16,942,708 16,914,100 16,937,590 16,910,085
----------------------------------------------------------------------------
Basic earnings per share $ 1.11 $ 0.99 $ 2.13 $ 1.77
----------------------------------------------------------------------------
Diluted earnings per
share $ 1.09 $ 0.98 $ 2.10 $ 1.74
----------------------------------------------------------------------------
----------------------------------------------------------------------------
No share rights were excluded from the above calculations as none were
anti-dilutive.
11. OPERATING SEGMENTS
The Corporation operates through a network of 117 branches in Canada in three
core businesses which reflect the internal organization and management structure
according to the nature of the products and services provided. The Corporation's
three core businesses are: i) the distribution, modification and servicing of
equipment; ii) the distribution, servicing and assembly of power systems; and
iii) the distribution, servicing and assembly of industrial components.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment
Eliminations
For the three and
months ended Power Industrial Unallocated
June 30, 2012 Equipment Systems Components Amounts Total
----------------------------------------------------------------------------
Equipment $ 135,822 $ 27,110 $ $ $ 162,932
Parts 43,968 34,276 89,456 167,700
Service 23,942 19,143 4,503 47,588
Rental and other 8,574 1,242 (1,423) 8,393
----------------------------------------------------------------------------
Revenue $ 212,306 $ 81,771 $ 93,959 $ (1,423) $ 386,613
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings
before finance
costs and income
taxes $ 15,690 $ 6,424 $ 6,205 $ $ 28,319
Corporate costs
and eliminations (1,946) (1,946)
----------------------------------------------------------------------------
Earnings before
finance costs
and income taxes 15,690 6,424 6,205 (1,946) 26,373
Finance costs 1,128 1,128
Income tax
expense 6,776 6,776
----------------------------------------------------------------------------
Net earnings $ 15,690 $ 6,424 $ 6,205 $ (9,850) $ 18,469
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment
Eliminations
For the six and
months ended Power Industrial Unallocated
June 30, 2012 Equipment Systems Components Amounts Total
----------------------------------------------------------------------------
Equipment $ 234,532 $ 66,135 $ $ $ 300,667
Parts 84,677 72,624 177,576 334,877
Service 47,316 36,224 9,664 93,204
Rental and other 16,147 2,690 (2,896) 15,941
----------------------------------------------------------------------------
Revenue $ 382,672 $ 177,673 $ 187,240 $ (2,896) $ 744,689
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings
before finance
costs and income
taxes $ 28,829 $ 15,111 $ 13,012 $ $ 56,952
Corporate costs
and eliminations (6,414) (6,414)
----------------------------------------------------------------------------
Earnings before
finance costs
and income taxes 28,829 15,111 13,012 (6,414) 50,538
Finance costs 1,944 1,944
Income tax
expense 13,024 13,024
----------------------------------------------------------------------------
Net earnings $ 28,829 $ 15,111 $ 13,012 $ (21,382) $ 35,570
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at June 30,
2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment assets
excluding
intangible
assets $ 299,651 $ 152,376 $ 124,301 $ $ 576,328
Intangible assets 21,968 14,626 47,195 11 83,800
Corporate and
other assets 4,526 4,526
----------------------------------------------------------------------------
Total assets $ 321,619 $ 167,002 $ 171,496 $ 4,537 $ 664,654
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment
Eliminations
For the three and
months ended Power Industrial Unallocated
June 30, 2011 Equipment Systems Components Amounts Total
----------------------------------------------------------------------------
Equipment $ 91,086 $ 35,113 $ $ $ 126,199
Parts 43,954 29,368 84,965 158,287
Service 21,730 15,560 4,930 42,220
Rental and other 7,411 991 (1,039) 7,363
----------------------------------------------------------------------------
Revenue $ 164,181 $ 81,032 $ 89,895 $ (1,039) $ 334,069
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings
before finance
costs and income
taxes $ 11,951 $ 8,271 $ 6,544 $ $ 26,766
Corporate costs
and eliminations (3,280) (3,280)
----------------------------------------------------------------------------
Earnings before
finance costs
and income taxes 11,951 8,271 6,544 (3,280) 23,486
Finance costs 1,109 1,109
Income tax
expense 5,839 5,839
----------------------------------------------------------------------------
Net earnings $ 11,951 $ 8,271 $ 6,544 $ (10,228) $ 16,538
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment
Eliminations
For the six and
months ended Power Industrial Unallocated
June 30, 2011 Equipment Systems Components Amounts Total
----------------------------------------------------------------------------
Equipment $ 171,586 $ 68,847 $ $ $ 240,433
Parts 88,777 53,449 161,695 303,921
Service 40,816 28,963 8,924 78,703
Rental and other 14,445 2,704 (2,208) 14,941
----------------------------------------------------------------------------
Revenue $ 315,624 $ 153,963 $ 170,619 $ (2,208) $ 637,998
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment earnings
before finance
costs and income
taxes $ 23,142 $ 15,285 $ 10,989 $ $ 49,416
Corporate costs
and eliminations (6,910) (6,910)
----------------------------------------------------------------------------
Earnings before
finance costs
and income taxes 23,142 15,285 10,989 (6,910) 42,506
Finance costs 2,085 2,085
Income tax
expense 11,067 11,067
----------------------------------------------------------------------------
Net earnings $ 23,142 $ 15,285 $ 10,989 $ (20,062) $ 29,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at June 30,
2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment assets
excluding
intangible
assets $ 238,974 $ 123,109 $ 117,713 $ $ 479,796
Intangible assets 21,663 14,916 48,074 12 84,665
Corporate and
other assets 362 362
----------------------------------------------------------------------------
Total assets $ 260,637 $ 138,025 $ 165,787 $ 374 $ 564,823
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Segment assets do not include assets associated with the corporate office,
financing or income taxes. Additions to corporate assets, and depreciation of
these assets, are included in segment eliminations and unallocated amounts.
12. COMPARATIVE INFORMATION
Certain comparative amounts have been reclassified to conform with the current
period presentation.
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