Expanded Relationship with Hitachi, Continued Growth in Industrial Parts and Engineered Repair Services, Drive 8.3% Year-Over-Year Revenue Increase and 24.4% Increase in Adjusted Net Earnings(1)
TORONTO, Nov. 6, 2023 /CNW/ - Wajax Corporation ("Wajax" or the "Corporation") today announced its 2023 third quarter results. All monetary amounts are in Canadian dollars unless otherwise noted.
Selected Highlights for the Third Quarter
- Third quarter revenue of $509.7 million, up 8.3% over 2022;
- Third quarter adjusted EBITDA of $50.0 million, up 28.0% over 2022;
- Third quarter adjusted net earnings of $20.7 million, up 24.4% over 2022; and
- Ended the quarter with record backlog of $599.2 million, up $48.0 million from June 30, 2023.(1)
"We continued to execute clearly against our core strategic priorities during the third quarter, and this drove strong financial performance," said Iggy Domagalski, President and Chief Executive Officer. "Top line growth was supported by sustained customer demand across all regions, including continued positive momentum in central Canada. Solid year-over-year growth in product support sales was complemented by even greater strength in industrial parts revenue. Improved operating leverage saw year-to-date adjusted basic earnings per share grow 25.8% versus 2022, to $3.06. Our record backlog of $599.2 million, up $48.0 million sequentially from the second quarter due largely to mining orders, as well as solid fundamentals across many of Wajax's key markets, supports confidence in our prospects as we advance into the fourth quarter and beyond."(1)
"We also continued to execute our industrial parts and engineered repair services growth strategy during the quarter, adding sought-after technical capabilities and expanding the services we offer to customers across the country. We acquired Calgary-based Polyphase Engineered Controls, and Sault Ste. Marie-based Beta Fluid Power and Beta Industrial, increasing our custom electrical, hydraulic and pneumatic capabilities in key regions. Becoming an increasingly valuable partner, with a fully integrated service offering is critical to gaining market share, driving improved margins and offering a top-notch customer service experience. The acquisitions of Polyphase, Beta Fluid Power and Beta Industrial, as well as our strategic investments in inventory during the year, resulted in our leverage ratio increasing to 2.16 times during the quarter, slightly above our target range of 1.5 to 2.0 times. Our strong financial results and balance sheet give us the flexibility to further invest in our expanded Hitachi relationship, additional organic initiatives and acquisition opportunities to help drive future growth."(1)
| (Dollars in millions, except per share data) | Three Months Ended
September 30 | Nine Months Ended
September 30 |
| | 2023 | 2022 | % change | 2023 | 2022 | % change |
| CONSOLIDATED RESULTS | | | | | | |
| Revenue | $509.7 | $470.8 | 8.3 % | $1,612.0 | $1,421.5 | 13.4 % |
| Equipment sales | $126.0 | $136.9 | (8.0 %) | $448.6 | $426.3 | 5.2 % |
| Product support | $135.1 | $118.8 | 13.7 % | $410.4 | $365.6 | 12.3 % |
| Industrial parts | $160.9 | $134.7 | 19.4 % | $469.1 | $397.9 | 17.9 % |
| Engineered repair services (ERS) | $76.7 | $70.1 | 9.4 % | $250.6 | $202.9 | 23.5 % |
| Equipment rental | $11.1 | $10.3 | 7.7 % | $33.2 | $28.9 | 15.1 % |
| | | | | | | |
| Net earnings | $23.4 | $18.0 | 30.1 % | $69.9 | $55.8 | 25.3 % |
| Basic earnings per share(2) | $1.09 | $0.84 | 29.6 % | $3.25 | $2.60 | 24.9 % |
| | | | | | | |
| Adjusted net earnings(1)(3) | $20.7 | $16.7 | 24.4 % | $65.7 | $52.0 | 26.2 % |
| Adjusted basic earnings per share(1)(2)(3) | $0.96 | $0.78 | 23.8 % | $3.06 | $2.43 | 25.8 % |
| | | | | | | |
| Adjusted EBITDA(1) | $50.0 | $39.1 | 28.0 % | $150.2 | $123.6 | 21.6 % |
Outlook
After the first nine months of 2023, Wajax continues to see solid fundamentals in many of the markets it serves - particularly mining, energy and construction - supported by relatively elevated key commodity prices and sustained customer budgeting for capital projects. The Corporation's record backlog also continues to support management's confidence as Wajax advances into the last quarter of the year.(1) In addition to expected growth in its heavy equipment business, Wajax continues to anticipate further strong demand in its less cyclical industrial parts and engineered repair services ("ERS") businesses. For the balance of 2023, Wajax continues to expect challenges associated with supply chain volatility, although additional improvements are anticipated. Higher interest rates, wage and price inflation, and a tight labour market are also expected to remain challenges, and management continues to monitor market dynamics and customer sentiment for signs of possible weakness.
The Corporation's core strategic priorities remain unchanged and Wajax is focused on continuing to invest in its people and their overall health and well-being, leveraging its enhanced relationship with Hitachi, delivering exceptional customer value, organically growing its business, transacting on its robust acquisition pipeline, prudently managing its balance sheet, deploying its ERP system, and entrenching sustainability into the business.
Dividend
The Corporation has declared a dividend of $0.33 per share for the fourth quarter of 2023, payable on January 3, 2024, to shareholders of record on December 15, 2023.
Third Quarter Highlights
- Revenue in the third quarter of 2023 increased $39.0 million, or 8.3%, to $509.7 million, from $470.8 million in the third quarter of 2022. Regionally:
-
- Revenue in western Canada of $232.9 million increased 3.8% from the prior year due to strong industrial parts sales, material handling sales, and product support revenue in the mining category. These increases were offset partially by lower equipment sales in the construction and forestry, and mining categories.
-
- Revenue in central Canada of $92.0 million increased 29.7% from the prior year due primarily to higher equipment sales in the material handling, and construction and forestry categories, as well as higher product support revenue in all categories, and strong industrial parts and ERS sales.
-
- Revenue in eastern Canada of $184.8 million increased 5.3% from the prior year due primarily to higher industrial parts and ERS sales, offset partially by lower equipment sales in the power systems category.
- Gross profit margin of 22.2% in the third quarter of 2023 increased 180 basis points ("bps") compared with gross profit margin of 20.3% in the same period of 2022.(1) The increase was driven primarily by higher product support, equipment and ERS margins, as well as a higher proportion of industrial parts sales. These increases were offset partially by lower industrial parts margins.
- Selling and administrative expenses as a percentage of revenue decreased to 14.5% in the third quarter of 2023 from 14.7% in the third quarter of 2022, driven by the 8.3% increase in revenue.(1) Selling and administrative expenses in the third quarter of 2023 increased $5.0 million compared with the third quarter of 2022 due primarily to higher personnel costs as the volume of business increased over the prior year.
- EBIT increased $12.3 million, or 46.3%, to $39.0 million in the third quarter of 2023 versus $26.7 million in the same period of 2022. The year-over-year increase in EBIT resulted primarily from higher sales volumes and higher product support margins, offset partially by higher selling and administrative expenses.
- The Corporation generated net earnings of $23.4 million, or $1.09 per share, in the third quarter of 2023 versus $18.0 million, or $0.84 per share, in the same period of 2022. The Corporation generated adjusted net earnings of $20.7 million, or $0.96 per share, in the third quarter of 2023 versus $16.7 million, or $0.78 per share, in the same period of 2022. Adjusted net earnings in the third quarter of 2023 excludes non-cash gains on mark to market of derivative instruments of $2.5 million after-tax, or $0.12 per share (2022 – gains of $1.3 million, or $0.06 per share), and a gain recorded on the sale of properties of $0.1 million after tax, or less than $0.01 per share (2022 - nil).(1)
- Adjusted EBITDA margin increased to 9.8% in the third quarter of 2023 from 8.3% in the third quarter of 2022.(1)
- The Corporation's backlog at September 30, 2023 of $599.2 million increased $48.0 million, or 8.7%, compared with June 30, 2023 backlog of $551.2 million due primarily to higher mining orders, offset partially by lower ERS and industrial parts orders. The Corporation's backlog at September 30, 2023 of $599.2 million increased $40.5 million, or 7.2%, compared to September 30, 2022 due to higher mining, ERS and material handling orders, offset partially by lower construction and forestry, industrial parts, and power systems orders.(1)
- Working capital of $591.4 million at September 30, 2023 increased $110.8 million from June 30, 2023 due primarily to higher inventory and lower accounts payable and accrued liabilities. Working capital efficiency was 21.4%, an increase of 250 bps from June 30, 2023, due to the higher trailing four quarter average working capital.(1)
- Cash flows used in operating activities amounted to $62.0 million in the third quarter of 2023, compared with cash flows used in operating activities of $3.4 million in the same quarter of the previous year. The decrease in cash flows generated from operating activities of $58.6 million was mainly attributable to a decrease in accounts payable and accrued liabilities of $69.4 million during the quarter driven largely by timing of inventory payments, compared to an increase of $41.7 million in the same quarter of the prior year. This decrease in cash generated was offset partially by a decrease in trade and other receivables of $2.7 million during the quarter compared to an increase of $36.2 million in the prior year, and by an increase in net earnings excluding items not affecting cash flow of $11.2 million.
- The Corporation's leverage ratio increased to 2.16 times at September 30, 2023, compared with 1.76 times at June 30, 2023. The increase in leverage ratio was due to the higher debt level in the current period, driven largely by the Corporation's investment in inventory, timing on repayment of accounts payable and accrued liabilities, and cash paid for business acquisitions in the quarter. The Corporation's senior secured leverage ratio was 1.82 times at September 30, 2023, compared with 1.38 times at June 30, 2023.(1)
- On July 4, 2023, the Corporation acquired all of the issued and outstanding shares of Polyphase Engineered Controls (1977) Ltd. ("Polyphase"). The shares of Polyphase were acquired for an estimated aggregate purchase price of approximately $26.9 million, subject to normal post-closing adjustments and the results of a three-year performance-based earnout. Polyphase's trailing twelve-month revenue at the time of acquisition was approximately $25.8 million.
- On September 1, 2023, the Corporation acquired all of the issued and outstanding shares of Beta Fluid Power Ltd. and Beta Industrial Ltd. (together, "Beta") for an estimated aggregate purchase price of approximately $8.5 million, subject to normal post-closing adjustments and the results of a three-year performance-based earnout. Beta's trailing twelve-month revenue at the time of acquisition was approximately $16.7 million.
- On November 6, 2023, Wajax announced the retirement of Steve Deck, Chief Operating Officer, and Senior Vice President, Heavy Equipment, to be effective January 1, 2024. Since joining the Corporation in 2014 to lead its industrial components business, Mr. Deck has held a number of senior executive roles and played a significant role in executing the "One Wajax" strategy, building the vision for Wajax's industrial parts and ERS business, and developing Wajax's relationship with Hitachi. Succession planning remains underway, and additional information will be provided in due course. Mr. Deck will remain active in his role until his retirement date, and will support the orderly transition of his responsibilities.
Conference Call Details
Wajax will webcast its Third Quarter Financial Results Conference Call. You are invited to listen to the live webcast on Tuesday, November 7, 2023 at 2:00 p.m. EDT. To access the webcast, please visit our website wajax.com, under "Investor Relations", "Events and Presentations", "Q3 2023 Financial Results" and click on the "Webcast" link. An archive of the webcast will be available following the live presentation.
About Wajax Corporation
Founded in 1858, Wajax (TSX: WJX) is one of Canada's longest-standing and most diversified industrial products and services providers. The Corporation operates an integrated distribution system providing sales, parts and services to a broad range of customers in diverse sectors of the Canadian economy, including: construction, forestry, mining, industrial and commercial, oil sands, transportation, metal processing, government and utilities, and oil and gas.
The Corporation's goal is to be Canada's leading industrial products and services provider, distinguished through its three core capabilities: sales force excellence, the breadth and efficiency of repair and maintenance operations, and the ability to work closely with existing and new vendor partners to constantly expand its product offering to customers. The Corporation believes that achieving excellence in these three areas will position it to create value for its customers, employees, vendors and shareholders.
Notes:
| (1) | "Adjusted net earnings", "Adjusted basic earnings per share", "Adjusted EBITDA", "Adjusted EBITDA margin", "Backlog", "Leverage ratio", "Senior secured leverage ratio", "Working capital", "Working capital efficiency", "Gross profit margin", and "Selling and administrative expenses as a percentage of revenue" do not have standardized meanings prescribed by generally accepted accounting principles ("GAAP"). See the Non-GAAP and Other Financial Measures section later in this press release. |
| (2) | Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the three months ended September 30, 2023 was 21,489,982 (2022 – 21,399,694) and 22,243,361 (2022 – 22,217,478), respectively. |
| | Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the nine months ended September 30, 2023 was 21,488,776 (2022 - 21,412,993) and 22,198,036 (2022 - 22,186,152), respectively. |
| (3) | Net earnings excluding the following: |
| | a. | after-tax gain recorded on the sale of properties of $0.1 million (2022 – nil), or basic and diluted earnings per share of less than $0.01 (2022 – nil) for the three months ended September 30, 2023. |
| | b. | after-tax gain recorded on the sale of properties of $0.1 million (2022 – nil), or basic and diluted earnings per share of less than $0.01 (2022 – nil) for the nine months ended September 30, 2023. |
| | c. | after-tax non-cash gains on mark to market of derivative instruments of $2.5 million (2022 – gains of $1.3 million), or basic and diluted earnings per share of $0.12 and $0.11, respectively (2022 – $0.06 earnings per share) for the three months ended September 30, 2023. |
| | d. | after-tax non-cash gains on mark to market of derivative instruments of $4.1 million (2022 – gains of $3.7 million), or basic and diluted earnings per share of $0.19 (2022 – earnings per share of $0.17) for the nine months ended September 30, 2023. |
Non-GAAP and Other Financial Measures
The press release contains certain non-GAAP and other financial measures that do not have a standardized meaning prescribed by GAAP. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that these measures should not be construed as an alternative to net earnings or to cash flow from operating, investing, and financing activities determined in accordance with GAAP as indicators of the Corporation's performance. The Corporation's management believes that:
| (i) | these measures are commonly reported and widely used by investors and management; |
| (ii) | the non-GAAP measures are commonly used as an indicator of a company's cash operating performance, profitability and ability to raise and service debt; |
| (iii) | "Adjusted net earnings", "Adjusted basic earnings per share" and "Adjusted diluted earnings per share" provide indications of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings and basic and diluted earnings per share allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities and the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price; |
| (iv) | "Adjusted EBITDA" provides an indication of the results by the Corporation's principal business activities prior to recognizing non-recurring costs (recoveries) and non-cash losses (gains) on mark to market of derivative instruments. These adjustments to net earnings allow the Corporation's management to consistently compare periods by removing infrequent charges incurred outside of the Corporation's principal business activities, the impact of unrealized losses (gains) resulting from fluctuations in interest rates and the Corporation's share price, the impact of fluctuations in finance costs related to the Corporation's capital structure, the impact of tax rates, and the impact of depreciation and amortization of long-term assets; and |
| (v) | "Pro-forma adjusted EBITDA" provides the same utility as Adjusted EBITDA described above, however pursuant to the terms of the bank credit facility, is adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period, and for the deduction of payments of lease liabilities. Pro-forma adjusted EBITDA is used in calculating the Leverage ratio and Senior secured leverage ratio. |
| Non-GAAP financial measures are identified and defined below: |
| Funded net debt | Funded net debt includes bank indebtedness, debentures and total long-term debt, net of cash. Funded net debt is relevant in calculating the Corporation's funded net debt to total capital, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
| | |
| Debt | Debt is funded net debt plus letters of credit. Debt is relevant in calculating the Corporation's leverage ratio, which is a non-GAAP ratio commonly used as an indicator of a company's ability to raise and service debt. |
| | |
| Total capital | Total capital is shareholders' equity plus funded net debt. |
| | |
| EBITDA | Net earnings (loss) before finance costs, income tax expense, depreciation and amortization. |
| | |
| Adjusted net earnings (loss) | Net earnings (loss) before any gains/losses recorded on the sale of properties, restructuring and other related costs, non-cash gains/losses on mark to market of derivative instruments, and acquisition-related transaction costs. |
| | |
| Adjusted basic earnings (loss) per share and adjusted diluted earnings (loss)per share | Basic and diluted earnings (loss) per share before any gains/losses recorded on the sale of properties, restructuring and other related costs, non-cash gains/losses on mark to market of derivative instruments, and acquisition-related transaction costs. |
| | |
| Adjusted EBIT | EBIT before any gains/losses recorded on the sale of properties, restructuring and other related costs, non-cash gains/losses on mark to market of derivative instruments, and acquisition-related transaction costs. |
| | |
| Adjusted EBITDA | EBITDA before any gains/losses recorded on the sale of properties, restructuring and other related costs, non-cash gains/losses on mark to market of derivative instruments, and acquisition-related transaction costs. |
| | |
| Pro-forma adjusted EBITDA | Defined as adjusted EBITDA adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility and the deduction of payments of lease liabilities. Pro-forma adjusted EBITDA is used in calculating the Leverage ratio and Senior secured leverage ratio. |
| | |
| Working capital | Defined as current assets less current liabilities, as presented in the condensed consolidated interim statements of financial position. |
| Other working capital amounts | Defined as working capital less trade and other receivables and inventory plus accounts payable and accrued liabilities, as presented in the condensed consolidated interim statements of financial position. |
| | |
| | |
| Non-GAAP ratios are identified and defined below: |
| EBITDA margin | Defined as EBITDA (defined above) divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
| Adjusted EBITDA margin | Defined as adjusted EBITDA (defined above) divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
| | |
| Leverage ratio | The leverage ratio is defined as debt (defined above) at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). The Corporation's objective is to maintain this ratio between 1.5 times and 2.0 times. |
| | |
| Senior secured leverage ratio | The senior secured leverage ratio is defined as debt (defined above) excluding debentures at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA (defined above). |
| | |
| Funded net debt to total capital | Defined as funded net debt (defined above) divided by total capital (defined above). |
| | |
| Working capital efficiency | Defined as trailing four-quarter average working capital (defined above) as a percentage of the trailing 12-month revenue. |
| | |
| | |
| Supplementary financial measures are identified and defined below: |
| EBIT margin | Defined as EBIT divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
| | |
| Backlog | Backlog is a management measure which includes the total sales value of customer purchase commitments for future delivery or commissioning of equipment, parts and related services, including ERS projects. There is no directly comparable GAAP financial measure for Backlog. |
| | |
| Gross profit margin | Defined as gross profit divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
| | |
| Selling and administrative expenses as a percentage of revenue | Defined as selling and administrative expenses divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
Reconciliation of the Corporation's net earnings to adjusted net earnings, adjusted basic earnings per share and adjusted diluted earnings per share is as follows:
| | Three months ended | Nine months ended |
| | September 30 | September 30 |
| | 2023 | 2022 | 2023 | 2022 |
| Net earnings | $ 23.4 | $ 18.0 | $ 69.9 | $ 55.8 |
| Gain recorded on the sale of properties, after-tax | (0.1) | — | (0.1) | — |
| Non-cash gains on mark to market of derivative instruments, after-tax | (2.5) | (1.3) | (4.1) | (3.7) |
| Adjusted net earnings | $ 20.7 | $ 16.7 | $ 65.7 | $ 52.0 |
| Adjusted basic earnings per share(1) | $ 0.96 | $ 0.78 | $ 3.06 | $ 2.43 |
| Adjusted diluted earnings per share(1) | $ 0.93 | $ 0.75 | $ 2.96 | $ 2.34 |
| (1) | For the three months ended September 30, 2023, the number of weighted average basic and diluted shares outstanding were 21,489,982 and 22,243,361, respectively (2022 - 21,399,694 and 22,217,478, respectively). |
| | For the nine months ended September 30, 2023, the number of weighted average basic and diluted shares outstanding were 21,488,776 and 22,198,036, respectively (2022 - 21,412,993 and 22,186,152, respectively). |
Reconciliation of the Corporation's EBIT to EBITDA, Adjusted EBIT, Adjusted EBITDA and Pro-forma adjusted EBITDA is as follows:
| | Three months ended | Nine months ended | Twelve months ended |
| | September 30
2023 | September 30
2022 | September 30
2023 | September 30
2022 | September 30
2023 | June 30
2023 | December 31
2022 |
| EBIT | $ 39.0 | $ 26.7 | $ 112.9 | $ 87.1 | $ 139.6 | $ 127.3 | $ 113.9 |
| Depreciation and amortization | 14.6 | 14.2 | 43.0 | 41.4 | 57.1 | 56.7 | 55.5 |
| EBITDA | $ 53.6 | $ 40.8 | $ 155.9 | $ 128.5 | $ 196.7 | $ 184.0 | $ 169.3 |
| | | | | | | | |
| EBIT | $ 39.0 | $ 26.7 | $ 112.9 | $ 87.1 | $ 139.6 | $ 127.3 | $ 113.9 |
| Gain recorded on the sale of properties | (0.1) | — | (0.1) | — | (0.1) | — | — |
| Non-cash gains on mark to market of derivative instruments(1) | (3.4) | (1.7) | (5.6) | (5.0) | (4.1) | (2.3) | (3.5) |
| Adjusted EBIT | $ 35.4 | $ 25.0 | $ 107.2 | $ 82.2 | $ 135.4 | $ 125.0 | $ 110.4 |
| Depreciation and amortization | 14.6 | 14.2 | 43.0 | 41.4 | 57.1 | 56.7 | 55.5 |
| Adjusted EBITDA | $ 50.0 | $ 39.1 | $ 150.2 | $ 123.6 | $ 192.6 | $ 181.6 | $ 165.9 |
| Payment of lease liabilities(2) | | | | | (32.0) | (33.7) | (32.0) |
| Polyphase acquisition pro-forma EBITDA(3) | | | | | 4.9 | — | — |
| Beta acquisition pro-forma EBITDA(3) | | | | | 2.0 | — | — |
| Pro-forma adjusted EBITDA | | | | | $ 167.4 | $ 147.9 | $ 133.9 |
| (1) | Non-cash losses (gains) on mark to market of non-hedged derivative instruments. |
| (2) | Effective with the reporting period beginning on January 1, 2019 and the adoption of IFRS 16, the Corporation amended the definition of Funded net debt to exclude lease liabilities not considered part of debt. As a result, the corresponding lease costs must also be deducted from EBITDA for the purpose of calculating the leverage ratio. |
| (3) | Pro-forma EBITDA for business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility, for the purpose of calculating the leverage ratio. |
| | |
Calculation of the Corporation's funded net debt, debt, leverage ratio and senior secured leverage ratio is as follows:
| | September 30
2023 | June 30
2023 | December 31
2022 |
| Bank indebtedness | $ (3.9) | $ 4.4 | $ 5.2 |
| Debentures | 56.2 | 56.0 | 55.8 |
| Long-term debt | 304.7 | 195.9 | 83.6 |
| Funded net debt | $ 356.9 | $ 256.4 | $ 144.6 |
| Letters of credit | 4.4 | 4.4 | 6.2 |
| Debt | $ 361.3 | $ 260.8 | $ 150.8 |
| Pro-forma adjusted EBITDA(1) | $ 167.4 | $ 147.9 | $ 133.9 |
| Leverage ratio(2) | 2.16 | 1.76 | 1.13 |
| Senior secured leverage ratio(3) | 1.82 | 1.38 | 0.71 |
| (1) | For the twelve months ended September 30, 2023, June 30, 2023, and December 31, 2022. |
| (2) | Calculation uses debt divided by the trailing four-quarter Pro-forma adjusted EBITDA. This leverage ratio is calculated for purposes of monitoring the Corporation's objective target leverage ratio of between 1.5 times and 2.0 times, and is different from the leverage ratio calculated under the Corporation's bank credit facility agreement. |
| (3) | Calculation uses debt excluding debentures divided by the trailing four-quarter Pro-forma adjusted EBITDA. While the calculation contains some differences from the leverage ratio calculated under the Corporation's bank credit facility agreement, the resulting leverage ratio under the bank credit facility agreement is not significantly different. |
Calculation of total capital and funded net debt to total capital is as follows:
| | September 30
2023 | June 30
2023 | December 31
2022 |
| Shareholders' equity | $ 494.2 | $ 475.9 | $ 449.8 |
| Funded net debt | 356.9 | 256.4 | 144.6 |
| Total capital | $ 851.1 | $ 732.3 | $ 594.4 |
| Funded net debt to total capital | 41.9 % | 35.0 % | 24.3 % |
Calculation of the Corporation's working capital and other working capital amounts is as follows:
| | September 30
2023 | June 30
2023 | December 31
2022 |
| Total current assets | $ 1,092.3 | $ 1,042.9 | $ 860.1 |
| Total current liabilities | 500.9 | 562.2 | 514.1 |
| Working capital | $ 591.4 | $ 480.6 | $ 346.0 |
| Trade and other receivables | (313.9) | (308.4) | (307.1) |
| Inventory | (659.0) | (625.1) | (462.2) |
| Accounts payable and accrued liabilities | 428.2 | 487.3 | 423.8 |
| Other working capital amounts | $ 46.7 | $ 34.4 | $ 0.7 |
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. To the extent any forward-looking information in this news release constitutes future-oriented financial information or financial outlook within the meaning of applicable securities law, such information is being provided to demonstrate the potential of the Corporation and readers are cautioned that this information may not be appropriate for any other purpose. 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 belief that our record backlog, as well as solid fundamentals across many of our key markets, supports confidence in our prospects as we advance into the fourth quarter and beyond; our belief that our strong financial results and balance sheet give us the flexibility to continue to invest in our expanded Hitachi relationship, additional organic initiatives and acquisition opportunities to help drive future growth; our outlook after nine months of 2023, including our continued view that solid fundamentals persist in many of the markets Wajax serves – particularly mining, energy and construction, and that our strong backlog also continues to support our confidence as Wajax advances into the last quarter of the year; our continued expectation of growth in our heavy equipment business, and our anticipation of further strong demand in our less cyclical industrial parts and ERS businesses; our continued expectation that, for the balance of 2023, we will experience challenges associated with supply chain volatility, although additional improvements are anticipated; our expectation that higher interest rates, inflation, and a tight labour market will also remain challenges, and our continued monitoring of market dynamics and customer sentiment for signs of possible weakness; our core strategic priorities, including our continued focus on investing in Wajax's people and their overall health and well-being, leveraging our enhanced relationship with Hitachi, delivering exceptional customer value, organically growing our business, transacting on our robust acquisition pipeline, prudently managing our balance sheet, deploying our ERP system, and entrenching sustainability into our business; our objective of managing our working capital and normal-course capital investment programs within a leverage range of 1.5 – 2.0 times; and our goal of being Canada's leading industrial products and services provider, distinguished by our sales force excellence, the breadth and efficiency of our repair and maintenance operations, and our ability to work closely with existing and new vendor partners to constantly expand our product offering to customers, together with our belief that achieving excellence in these three areas will position us to create value for our customers, employees, vendors and shareholders. These statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding: the absence of significant negative changes to general business and economic conditions; limited negative fluctuations in the supply and demand for, and the level and volatility of prices for, oil, natural gas and other commodities; the stability of financial market conditions, including interest rates; the ability of Hitachi and Wajax to develop and execute successful sales, marketing and other plans related to the expanded direct distribution relationship which took effect on March 1, 2022; our continued ability to execute our One Wajax strategy, including our ability to execute on our organic growth priorities, complete and effectively integrate acquisitions, such as Polyphase and Beta, and successfully implement new information technology platforms, systems and software, such as our ERP system; the receding effects of the COVID-19 pandemic and actions taken by governments, public authorities, suppliers and customers in response to the COVID-19 virus and its variants; the future financial performance of the Corporation; limited fluctuations in our costs; the level of market competition; our continued ability to attract and retain skilled staff; our continued ability to procure quality products and inventory; and our ongoing maintenance of strong relationships 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 continued or prolonged deterioration in general business and economic conditions, including as a result of new COVID-19 variants or armed conflicts between nations; negative fluctuations in the supply and demand for, and the level of prices for, oil, natural gas and other commodities; a continued or prolonged decrease in the price of oil or natural gas; a decrease in levels of customer confidence and spending; supply chain disruptions and shortages related to or arising from the impacts of COVID-19 or armed conflicts between nations; fluctuations in financial market conditions, including interest rates; the impacts of new COVID-19 variants, including the duration and severity of travel, business and other restrictions imposed by governments and public authorities in response to such variants; actions taken by our suppliers and customers in relation to new COVID-19 variants, including slowing, reducing or halting operations; the inability of Hitachi and Wajax to develop and execute successful sales, marketing and other plans related to the expanded direct distribution relationship which took effect on March 1, 2022; the level of demand for, and prices of, the products and services we offer; decreased market acceptance of the products we offer; the 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, our inability to reduce costs in response to slow-downs in market activity, unavailability of quality products or inventory, supply disruptions (including those caused by or related to new COVID-19 variants), job action and unanticipated events related to health, safety and environmental matters); our inability to attract and retain skilled staff and our inability to maintain strong relationships with our 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 our MD&A for the year-ended December 31, 2022 (the "2022 MD&A"), which has been filed under the Corporation's profile on SEDAR+ at www.sedarplus.ca, under the heading "Risk Management and Uncertainties". 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.
Readers are cautioned that the risks described in the 2022 MD&A are not the only risks that could impact the Corporation. Risks and uncertainties not currently known to the Corporation, or currently deemed to be immaterial, may have a material effect on the Corporation's business, financial condition or results of operations.
Additional information, including Wajax's Annual Report, is available under the Corporation's profile on SEDAR+ at www.sedarplus.ca.
SOURCE Wajax Corporation