TSX Symbol: WJX
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share data)
|
Three Months Ended December 31
|
|
Year Ended December 31
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
CONSOLIDATED RESULTS
|
|
|
|
|
|
|
|
|
Revenue
|
$391.7
|
|
$364.9
|
|
$1,428.5
|
|
$1,466.0
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$12.2
|
|
$14.2
|
|
$47.7
|
|
$65.9
|
|
Basic earnings per share
|
$0.73
|
|
$0.85
|
|
$2.85
|
|
$3.95
|
|
|
|
|
|
|
|
|
|
|
SEGMENTS
|
|
|
|
|
|
|
|
|
Revenue
|
- Equipment
|
$218.0
|
|
$201.6
|
|
$763.5
|
|
$778.5
|
|
|
- Power Systems
|
$85.4
|
|
$79.0
|
|
$304.0
|
|
$332.3
|
|
|
- Industrial Components
|
$89.1
|
|
$85.3
|
|
$364.9
|
|
$360.0
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
- Equipment(1)
|
$13.4
|
|
$14.0
|
|
$49.0
|
|
$56.1
|
|
|
|
% margin
|
6.2%
|
|
6.9%
|
|
6.4%
|
|
7.2%
|
|
|
- Power Systems(1)
|
$6.0
|
|
$5.0
|
|
$17.1
|
|
$26.1
|
|
|
|
% margin
|
7.0%
|
|
6.3%
|
|
5.6%
|
|
7.9%
|
|
|
- Industrial Components(1)
|
$2.1
|
|
$3.6
|
|
$15.0
|
|
$22.1
|
|
|
|
% margin
|
2.4%
|
|
4.2%
|
|
4.1%
|
|
6.1%
|
(1) Segment earnings before finance costs and income taxes.
TORONTO, March 4, 2014 /CNW/ - Wajax Corporation ("Wajax" or the
"Corporation") today announced its 2013 fourth quarter earnings.
Fourth Quarter Highlights
-
Consolidated fourth quarter revenue of $391.7 million increased $26.8
million, or 7%, compared to last year, on gains in all three segments.
The Equipment segment's revenue increased 8%, particularly on stronger
forestry and construction equipment sales. Power Systems segment
revenue increased 8% on higher power generation equipment and
on-highway parts and service volume. A 4% increase in Industrial
Components segment revenue was attributable to the Kaman Canada
acquisition completed at the end of last year.
-
Net earnings for the quarter were $12.2 million, or $0.73 per share,
compared to $14.2 million, or $0.85 per share, recorded in 2012.
Equipment segment earnings decreased slightly, due primarily to a lower
gross margin percentage related to sales mix that more than offset
higher revenue and lower selling and administrative expenses. Power
Systems segment earnings increased $1.0 million, attributable to higher
revenue and Industrial Components segment earnings decreased $1.5
million, mainly as a result of lower gross margins due to sales mix and
competitive pricing pressures.
-
Consolidated backlog of $155.1 million at December 31, 2013 decreased
$49.7 million compared to September 30, 2013. The majority of the
decline relates to the fourth quarter delivery of four Hitachi mining
trucks and a number of power generation packages by the Equipment and
Power Systems segments respectively.
-
Funded net debt at December 31, 2013 of $205.0 million decreased $20.3
million compared to September 30, 2013, primarily as a result of a
$16.8 million reduction in non-cash operating working capital.
Effective March 3, 2014, Steve Deck was appointed to the position of
Senior Vice President, Wajax Industrial Components subsequent to the
departure of Adrian Trotman. Prior to his appointment Mr. Deck spent
the last seven years in senior positions at a mining drilling products
and services company. He also has 21 years of experience in industrial
distribution in Canada.
On October 23, 2013 the Corporation issued $125 million of senior
unsecured notes. The notes, which bear an interest rate of 6.125% per
annum, will mature on October 23, 2020. The net proceeds of the notes
were used to repay borrowings under the Corporation's senior secured
bank credit facility, which in turn may be redrawn for general
corporate purposes. Effective upon the closing of the note offering,
the Corporation reduced the total available committed amount of the
bank credit facility from $300 million to $250 million. The issuance of
the notes introduces a longer term fixed rate layer of debt into
Wajax's capital structure at a time when interest rates remain
historically low.
The Corporation declared monthly dividends of $0.20 per share ($2.40
annualized) for the months of March and April, 2014.
Outlook
Revenue associated with the oil and gas sector in western Canada began
to decline in the second half of 2012 and continued to be soft
throughout 2013. This primarily affected the Power Systems and
Industrial Components segments as customers continued to limit capital
and maintenance spending for exploration and well servicing equipment.
Mining activity, including the oil sands, was weak for all three
segments as customers reduced spending in the face of generally weaker
commodity prices. The Equipment segment partially mitigated lower
mining related volumes, which included the impact of the loss of
LeTourneau equipment distribution rights in 2012, with a strong
performance in parts and service, which increased 10% from the prior
year. A major factor in this was a 16% increase in mining related parts
and service volume in the segment during 2013, driven by gains in
Hitachi product support and rotating products. Most other end markets
showed relative stability year-over-year compared to oil and gas and
mining. Consequently, the $20.4 million decline in consolidated 2013
earnings before finance costs and income taxes is approximately equal
to the year-over-year reduction related to softness in the important
oil and gas and mining sectors.
Year-end 2013 backlog of $155.1 million was reduced from the prior year
and the prior quarter primarily due to the delivery of four Hitachi
mining trucks and a number of power generation packages in the fourth
quarter. In the current economic environment customers continue to
take a cautious approach in making commitments to buy equipment.
Looking forward to 2014, Mark Foote, President and CEO, commented, "Our
expectation is that market conditions in 2014 will be similar to those
encountered in 2013 and the continuing weakness in the oil and gas and
mining markets is expected to create challenges for growth in 2014. In
particular, we anticipate earnings in the first quarter to be lower
than last year. Despite these market conditions, our focus is to
continue to invest in our strategic initiatives that focus on organic
growth and continued expansion of our aftermarket business. At the same
time, we are cautiously managing total costs, our asset base and
leverage".
Wajax Corporation
Wajax is a leading Canadian distributor engaged in the sale, rental and
after-sale parts and service support of equipment, power systems and
industrial components, through a network of 125 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.
Wajax will Webcast its Fourth Quarter Financial Results Conference
Call. You are invited to listen to the live Webcast on Tuesday, March
4, 2014 at 3:00 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 2014 outlook regarding market conditions, including the oil
and gas and mining markets, some of the challenges to our growth in
2014 and our earnings outlook for the first quarter of 2014, our
investment in our strategic and growth initiatives, including the
expansion of our aftermarket business, and the management of our total
costs, asset base and leverage. 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, 2013, filed on SEDAR.
Management's Discussion and Analysis - 2013
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 year ended December
31, 2013. This MD&A should be read in conjunction with the information
contained in the Corporation's Consolidated Financial Statements and
accompanying notes for the year ended December 31, 2013. Information
contained in this MD&A is based on information available to management
as of March 4, 2014.
Unless otherwise indicated, all financial information within this MD&A
is in millions of Canadian 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 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 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 Consolidated Financial Statements
and accompanying notes.
Disclosure Controls and Procedures and Internal Control over Financial
Reporting
Wajax's management, under the supervision of its Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), is responsible for
establishing and maintaining disclosure controls and procedures
("DC&P") and internal control over financial reporting ("ICFR").
As at December 31, 2013, Wajax's management, under the supervision of
its CEO and CFO, had designed 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 applicable
securities legislation is recorded, processed, summarized and reported
within the time periods specified in such 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 applicable 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 December 31, 2013, 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 its 1992 version of 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 year, Wajax's management, under the supervision of its CEO
and CFO, evaluated the effectiveness and operation of its DC&P and
ICFR. This evaluation included a risk evaluation, documentation of key
processes and tests of effectiveness conducted on a sample basis
throughout the year. Due to the inherent limitations in all control
systems, an evaluation of the DC&P and ICFR can only provide reasonable
assurance over the effectiveness of the controls. As a result, DC&P and
ICFR are not expected to prevent and detect all misstatements due to
error or fraud. The CEO and CFO have concluded that Wajax's DC&P and
ICFR were effective as at December 31, 2013.
There was no change in Wajax's ICFR that occurred during the three
months ended December 31, 2013 that has materially affected, or is
reasonably likely to materially affect, Wajax's ICFR.
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 plans for revenue and
earnings growth, including planned business and strategic initiatives
and their intended outcomes, our objective with respect to the future
payment of dividends, our financing and capital requirements, as well
as our capital structure, our 2014 outlook regarding market conditions,
including the oil and gas and mining markets, some of the challenges to
our growth in 2014 and our earnings outlook for the first quarter of
2014, our investment in our strategic and growth initiatives, including
the expansion of our aftermarket business, and the management of our
total costs, asset base and leverage. 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, 2013, 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.
Wajax Corporation Overview
Wajax's core distribution businesses are engaged in the sale, rental and
after-sale parts and service support of mobile equipment, power systems
and industrial components through a network of 125 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 grow earnings in all segments through organic
growth and tuck-under acquisitions while maintaining a dividend payout
ratio of at least 75% of current year net earnings. Planned organic
growth initiatives include those that are achieved within the normal
scope, resources and markets of each core business, and other growth
opportunities that are seen as significant, requiring more effort,
planning and resources to achieve. Wajax expects to ensure sufficient
capital is available to meet its growth requirements within a
conservative capital structure.
Annual Consolidated Results
|
For the year ended December 31
|
|
|
2013
|
|
|
2012
|
|
Revenue
|
|
$
|
1,428.5
|
|
$
|
1,466.0
|
Gross profit
Selling and administrative expenses
|
|
$
$
|
285.4
211.7
|
|
$
$
|
301.8
207.7
|
|
Earnings before finance costs and income taxes(1)
|
|
$
|
73.7
|
|
$
|
94.1
|
|
Finance costs
|
|
$
|
9.0
|
|
$
|
4.4
|
|
Earnings before income taxes(1)
|
|
$
|
64.7
|
|
$
|
89.7
|
|
Income tax expense
|
|
$
|
17.0
|
|
$
|
23.8
|
|
Net earnings
|
|
$
|
47.7
|
|
$
|
65.9
|
Basic earnings per share
Diluted earnings per share
|
|
$
$
|
2.85
2.81
|
|
$
$
|
3.95
3.89
|
|
(1)
|
See the Non-GAAP and Additional GAAP Measures section.
|
|
Revenue by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Western Canada
|
|
|
|
|
|
53%
|
|
|
|
54%
|
|
Eastern Canada *
|
|
|
|
|
|
27%
|
|
|
|
27%
|
|
Central Canada
|
|
|
|
|
|
20%
|
|
|
|
19%
|
|
* Includes Quebec and the Atlantic provinces.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Equipment
|
|
|
|
|
|
53%
|
|
|
|
53%
|
|
Power Systems
|
|
|
|
|
|
21%
|
|
|
|
23%
|
|
Industrial Components
|
|
|
|
|
|
26%
|
|
|
|
24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Equipment
|
|
|
|
|
|
60%
|
|
|
|
54%
|
|
Power Systems
|
|
|
|
|
|
21%
|
|
|
|
25%
|
|
Industrial Components
|
|
|
|
|
|
19%
|
|
|
|
21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Construction
|
|
|
|
|
|
18%
|
|
|
|
17%
|
|
Industrial/Commercial
|
|
|
|
|
|
17%
|
|
|
|
15%
|
|
Transportation
|
|
|
|
|
|
12%
|
|
|
|
11%
|
|
Oil Sands
|
|
|
|
|
|
10%
|
|
|
|
10%
|
|
Forestry
|
|
|
|
|
|
9%
|
|
|
|
8%
|
|
Oil and Gas
|
|
|
|
|
|
8%
|
|
|
|
10%
|
|
Metal Processing
|
|
|
|
|
|
8%
|
|
|
|
8%
|
|
Mining
|
|
|
|
|
|
7%
|
|
|
|
11%
|
|
Government & Utilities
|
|
|
|
|
|
6%
|
|
|
|
6%
|
|
Other
|
|
|
|
|
|
5%
|
|
|
|
4%
|
Weakness in oil and gas sector activity in western Canada, which started
in the third quarter of 2012, continued throughout 2013 as lower new
equipment and service requirements resulted in a decline in customer
spending. This decline primarily affected the Power Systems and
Industrial Components segments in 2013.
Mining activity, including the oil sands market, was softer than last
year as lower commodity prices combined with a lack of financing for
new mines influenced customers to take a more cautious approach in
making commitments to buy equipment. This factor, coupled with the
loss of the LeTourneau mining equipment distribution rights in
mid-2012, resulted in lower annual mining equipment revenue in the
Equipment segment. In addition, mining sector related revenue was
lower in the Power Systems and Industrial Components segments.
Partially mitigating this was meaningful mining parts and service
growth in the Equipment segment during the year, driven by its
installed base of Hitachi hydraulic mining shovels and growth from its
rotating products initiative in the oil sands market.
Net earnings before finance costs and income taxes in 2013 declined
$20.4 million compared to last year mainly as a result of an
approximately $20.0 million reduction related to the oil and gas and
mining markets. Approximately $8.5 million of the decline was
attributable to the loss of the LeTourneau product distribution
rights. See the Non-GAAP and Additional GAAP Measures section.
Revenue
Revenue in 2013 of $1,428.5 million decreased 3%, or $37.5 million, from
$1,466.0 million in 2012 and included $21.1 million in revenue from ACE
Hydraulic and Kaman Canada, two businesses acquired by the Industrial
Components segment in the fourth quarter of 2012. Equipment segment
revenue decreased 2%, or $15.0 million, as lower demand for mining
equipment was somewhat offset by strength in the construction and
forestry sectors and increased parts and service volumes in western
Canada. Power Systems' segment revenue decreased 9%, or $28.3 million,
due primarily to lower volumes to off-highway oil and gas customers
attributable to lower industry activity in western Canada. Segment
revenue in Industrial Components increased 1%, or $4.9 million, as the
additional revenue contributed by the two businesses acquired in late
2012 was offset somewhat by lower sales in the oil and gas sector in
western Canada.
Gross profit
Lower volumes and gross profit margins were the primary contributors to
the $16.4 million, or 5%, decline in gross profit. The gross profit
margin percentage decrease to 20.0% from 20.6% last year was mainly
attributable to lower parts and service margins partially offset by the
positive sales mix impact from a lower proportion of equipment revenues
compared to last year.
Selling and administrative expenses
Selling and administrative expenses increased $4.0 million in the year.
Increases included higher costs in the Equipment segment's western
Canada operations, operating costs in the Industrial Components segment
related to the ACE Hydraulic and Kaman Canada acquisitions in the
fourth quarter of 2012 and higher severance costs compared to last
year. These increases were somewhat offset by lower annual and
mid-term incentive accruals compared to last year. Selling and
administrative expenses as a percentage of revenue increased to 14.8%
in 2013 from 14.2% in 2012.
Finance costs
Finance costs of $9.0 million increased $4.6 million compared to 2012
due to the cost of higher funded debt levels outstanding and the higher
cost of borrowing during the year. The higher cost of borrowing was
due to the increased cost of borrowing under the bank credit facility
and the Corporation's issuance of $125 million in seven year senior
unsecured notes on October 23, 2013. See the Funded net debt section
below.
Income tax expense
The Corporation's effective income tax rate of 26.3% in 2013 decreased
slightly from 26.5% in 2012.
Net earnings
Net earnings for the year ended December 31, 2013 decreased $18.2
million to $47.7 million, or $2.85 per share, from $65.9 million, or
$3.95 per share, in 2012. The decrease in net earnings resulted
primarily from lower volumes, reduced gross profit margins and higher
selling and administrative expenses and finance costs compared to last
year.
Comprehensive income
Comprehensive income of $49.4 million for the year ended December 31,
2013 included net earnings of $47.7 million and other comprehensive
income of $1.7 million. The other comprehensive income was mainly
attributable to actuarial gains on pension plans of $1.5 million. For
the year ended December 31, 2012, comprehensive income of $65.4 million
included net earnings of $65.9 million, offset partially by an other
comprehensive loss of $0.5 million.
Funded net debt
Funded net debt of $205.0 million at December 31, 2013 increased $31.3
million compared to $173.7 million at December 31, 2012. The increase
during the year was mainly due to $24.1 million of cash generated from
operating activities being less than dividends paid of $46.0 million,
investing activities of $4.0 million and finance lease payments of $3.5
million. The cash generated from operating activities of $24.1 million
was negatively impacted by $44.6 million of income taxes paid relating
to 2011 and 2012.
On October 23, 2013, the Corporation issued $125 million of senior
unsecured notes (the "senior notes") bearing an annual interest rate of
6.125%, payable semi-annually, and maturing on October 23, 2020. The
net proceeds of the senior notes were used to repay borrowings under
the Corporation's senior secured bank credit facility (the "bank credit
facility") which in turn may be redrawn for general corporate
purposes. Effective upon the closing of the senior note offering, the
Corporation reduced the total available committed amount of the bank
credit facility from $300 million to $250 million. The issuance of the
senior notes introduces a longer term fixed rate layer of debt into
Wajax's capital structure at a time when interest rates remain
historically low. See the Liquidity and Capital Resources section.
Dividends
For the twelve months ended December 31, 2013 monthly dividends declared
totaled $2.68 per share. For the twelve months ended December 31, 2012
monthly dividends declared totaled $3.10 per share.
Backlog
Consolidated backlog at December 31, 2013 of $155.1 million decreased
$29.0 million, or 16%, from $184.1 million at December 31, 2012 on
reductions in all segments. The decrease was driven by lower
off-highway orders in the Power Systems segment, reduction in oil and
gas related orders in the Industrial Components segment and reduced
mining related orders in the Equipment segment. Backlog includes the
total sales value of customer purchase commitments for future delivery
or commissioning. See the Annual Results of Operations section below
for further backlog detail by segment.
Annual Results of Operations
Equipment
|
For the year ended December 31
|
|
2013
|
|
|
|
2012
|
|
Equipment(1)
|
$
|
472.3
|
|
|
$
|
514.1
|
|
Parts and service
|
$
|
291.2
|
|
|
$
|
264.4
|
|
Segment revenue
|
$
|
763.5
|
|
|
$
|
778.5
|
|
Segment earnings(2)
|
$
|
49.0
|
|
|
$
|
56.1
|
|
Segment earnings margin
|
|
6.4%
|
|
|
|
7.2%
|
|
(1)
|
Includes rental and other revenue.
|
|
(2)
|
Earnings before finance costs and income taxes.
|
|
Revenue by Product Type 2013 versus 2012
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Construction
|
|
|
|
|
|
38%
|
|
|
|
35%
|
|
Mining/Oil sands
|
|
|
|
|
|
24%
|
|
|
|
30%
|
|
Material Handling
|
|
|
|
|
|
16%
|
|
|
|
16%
|
|
Forestry
|
|
|
|
|
|
15%
|
|
|
|
12%
|
|
Crane & Utility
|
|
|
|
|
|
7%
|
|
|
|
7%
|
Revenue decreased 2%, or $15.0 million, to $763.5 million in 2013 from
$778.5 million in 2012. Segment earnings decreased $7.1 million, to
$49.0 million in 2013, compared to $56.1 million in 2012. The
following factors contributed to the Equipment segment's 2013 results
compared to 2012:
-
Equipment revenue decreased $41.8 million with specific year-over-year
variances as follows:
-
Forestry equipment revenue increased $16.4 million as strength in the
lumber market led to higher market demand for Tigercat and Hitachi
forestry equipment in all regions.
-
Construction equipment revenue increased $12.3 million mainly as a
result of an increase in JCB equipment volumes in eastern Canada and
higher Hitachi excavator and Bell articulated dump truck ("ADT")
volumes in western Canada. These increases were partially offset by
decreases in Hitachi excavator sales in central Canada due to lower
demand and competitive market pressures.
-
Material handling equipment revenue increased $4.1 million mainly as a
result of higher lift truck revenues in western and eastern Canada and
the sale of higher dollar value reach stacker units in eastern Canada.
-
Crane and utility equipment revenue decreased $3.6 million attributable
to lower crane sales in eastern Canada offset somewhat by higher
equipment sales to utility customers in central Canada.
-
Mining equipment sales decreased $71.0 million. Excluding the impact of
the loss of the LeTourneau product distribution rights, for which
distribution rights were discontinued in mid-2012, mining sales
decreased $45.2 million on fewer Hitachi hydraulic mining shovel
deliveries. This decrease was offset somewhat by the sale of four
Hitachi EH5000 320 ton mining trucks in 2013.
-
Parts and service volumes increased $26.8 million, or 10%, compared to
last year. Excluding the effect of the discontinued LeTourneau product
distribution rights, parts and service volumes for the year increased
$39.3 million, or 15%. The increase was led by higher non-LeTourneau
related mining sector volumes in western Canada, driven by the
segment's installed base of Hitachi mining equipment and growth in
rotating products, and additional construction and forestry sector
volumes.
-
Segment earnings decreased $7.1 million to $49.0 million compared to
last year. This was due mainly to the negative impact of the
discontinued LeTourneau product distribution rights, on both volumes
and gross profit margins, and an increase in selling and administrative
expenses. These declines were partially offset by the positive impact
on earnings of increased non-LeTourneau parts and service volumes. For
the year ended December 31, 2012, the LeTourneau product distribution
rights contributed approximately $8.5 million to the segment's
earnings. Selling and administrative expenses increased $3.2 million
compared to last year as higher operating costs in western Canada,
driven in part by growth in the segment's rotating products group,
offset personnel cost reductions in eastern Canada.
Backlog of $76.0 million at December 31, 2013 decreased $6.2 million
compared to December 31, 2012, due mainly to decreases in mining and
material handling backlog offset partially by an increase in crane and
utility backlog.
The Equipment segment's primary strategic initiatives continue to be
centered around leveraging opportunities to grow its Rotating Products
group and expanding its mining operations by building on its high
quality Hitachi mining hydraulic shovel and truck product line. In
addition, the segment will continue to focus on increasing the market
share of existing key product lines, improving its aftermarket
capabilities across all lines of business and growing its revenue
through selected product line extensions, including the Bell ADT line
introduced in 2012.
In 2013, the segment realized an 82% increase in revenue over 2012 from
its Rotating Products group in the oil sands. The segment continued
to build the necessary infrastructure and organization to sell and
service its expanding mining product offering, including the recently
expanded Hitachi mining truck line. In 2013 it had initial success in
selling four Hitachi 320 ton mining trucks for a commercial trial in
the oil sands. In addition, the segment strengthened its sales
organization to better support its market share growth objectives and
service operations through the execution of targeted marketing plans
and the provision of management training and sales execution tools.
The focus going forward to further drive the segment's strategy will
include the following key initiatives:
-
The Rotating Products group in Fort McMurray will continue to develop
its oil sands market and leverage opportunities where it can strengthen
its market presence. The segment's main focus is on providing field
service labour and marketing high quality and cost effective process,
slurry and dewatering system products, parts and services through sole
vendor relationships in order to assist and improve customers'
operations.
-
As the rotating business provides a high proportion of parts and service
sales, it is expected to be a more stable source of revenue for the
segment in the future. While currently built around the oil sands
market in Fort McMurray, the segment expects to establish combined
efforts with the Industrial Components segment to begin to capture
other opportunities in the mining, conventional oil and gas and
municipal markets across Canada.
-
The segment's mining strategy is to continue to be a leader in the sales
and service of Hitachi hydraulic mining shovels and to expand its
presence in the 170 to 320 ton range of mining trucks with Hitachi's
electric drive trucks. The segment will continue to expand its mining
operations through enhancement of its sales and service structure in
Canada to support new opportunities and the existing installed base of
Hitachi equipment.
-
The Equipment segment will continue to focus on growing its aftermarket
product support revenue and earnings by improving shop and field
operations through investments in training, systems and operational
productivity measures. The segment will also work towards increasing
its market share in key product lines through the implementation of a
structured sales process to identify additional opportunities with
existing and new customers.
|
Power Systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31
|
|
|
|
|
|
|
2013
|
|
|
|
|
2012
|
|
Equipment(1)
|
|
|
|
|
|
$
|
105.2
|
|
|
|
$
|
129.0
|
|
Parts and service
|
|
|
|
|
|
$
|
198.8
|
|
|
|
$
|
203.3
|
|
Segment revenue
|
|
|
|
|
|
$
|
304.0
|
|
|
|
$
|
332.3
|
|
Segment earnings(2)
|
|
|
|
|
|
$
|
17.1
|
|
|
|
$
|
26.1
|
|
Segment earnings margin
|
|
|
|
|
|
|
5.6%
|
|
|
|
|
7.9%
|
|
(1)
|
Includes rental and other revenue.
|
|
(2)
|
Earnings before finance costs and income taxes.
|
|
Revenue by Market 2013 versus 2012
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
On-highway Transportation
|
|
|
|
|
|
32%
|
|
|
|
27%
|
|
Industrial/Commercial
|
|
|
|
|
|
21%
|
|
|
|
18%
|
|
Oil & Gas
|
|
|
|
|
|
19%
|
|
|
|
26%
|
|
Oil Sands
|
|
|
|
|
|
8%
|
|
|
|
7%
|
|
Mining
|
|
|
|
|
|
6%
|
|
|
|
9%
|
|
Other
|
|
|
|
|
|
14%
|
|
|
|
13%
|
Revenue decreased $28.3 million, or 9%, to $304.0 million in 2013 from
$332.3 million in 2012. Segment earnings decreased $9.0 million to
$17.1 million in 2013 from $26.1 million in 2012. The following factors
impacted year-over-year revenue and earnings:
-
Equipment revenue decreased $23.8 million, due mainly to lower
off-highway sales to oil and gas customers as a result of reduced
industry activity in western Canada. In eastern and central Canada,
reduced off-highway sales to mining customers and the military also
contributed to the revenue decline. The decrease in revenue was
somewhat offset by higher rental volumes in all regions.
-
Parts and service volumes decreased $4.5 million compared to last year
as a result of lower sales to off-highway customers on decreased
activity in western and central Canada. These decreases were partially
offset by increased sales to on-highway customers, primarily in western
and central Canada.
-
Segment earnings decreased $9.0 million compared to last year due to the
impact of reduced sales activity and higher selling and administrative
expenses. Selling and administrative expenses increased $0.7 million
due principally to higher occupancy costs and professional fees.
Backlog of $45.6 million as of December 31, 2013 decreased $14.8 million
compared to December 31, 2012 due primarily to a reduction in
off-highway related orders.
The Power Systems segment segregates its business into three different
categories; On-Highway, Electric Power Generation ("EPG") and
Off-Highway. The On-Highway category includes revenue from the repair
and service of on-highway trucks, specialty vehicles and coach, school
and transit buses. EPG includes revenue from the distribution,
servicing, rental and custom assembly of diesel and gas generators used
as standby and prime power in commercial and natural resource
applications. The Off-Highway category accounts for the remainder of
the business with the majority of revenue derived from the distribution
and servicing of mechanical drive systems for oil & gas drilling,
fracturing and well servicing and engine sales and service to OEMs and
other end use customers.
The segment's strategic initiatives are to establish Wajax Power Systems
as one of Canada's leaders in commercial EPG and expansion of the
segment's success in off-highway mechanical drive systems while
maintaining its position in the on-highway parts and service market.
Specifics of these initiatives going forward include the following:
-
The primary growth focus of the Power Systems segment is to establish
Wajax as one of Canada's leaders in commercial EPG systems through a
broad range of available products, services and project engineering
capabilities to meet customer requirements from small standby systems
to large prime power projects and cogeneration. Customer markets
include commercial, data center, health care, marine, defense and
resource. During 2013, the segment built a strong national team of
EPG professionals with a wide spectrum of skills that improve the
segment's management and executional capabilities. In addition, a new
68,000 square foot EPG engineering and fabrication facility near
Drummondville, Quebec provides a platform for national product
integration.
-
The segment's off-highway business will expand its aftermarket
capabilities through new products and the introduction of an expanded
range of maintenance and repair services that will focus on leveraging
the joint capabilities of the Power Systems and Industrial Components
segments in the oil and gas sector.
-
The segment will begin to augment its on-highway engine and transmission
business by leveraging its Canada-wide footprint and relationship with
"Wheel Time", an association of North American distributors. "Wheel
Time" provides the segment with purchasing efficiencies and access to
an expanded range of "all makes" parts for a wide range of on-highway
vehicles, expanded marketing and training for additional vehicle
services and fleet customer marketing.
Industrial Components
|
|
|
|
|
|
|
|
|
For the year ended December 31
|
|
|
2013
|
|
|
2012
|
|
Segment revenue
|
|
$
|
364.9
|
|
$
|
360.0
|
|
Segment earnings(1)
|
|
$
|
15.0
|
|
$
|
22.1
|
|
Segment earnings margin
|
|
|
4.1%
|
|
|
6.1%
|
|
(1)
|
Earnings before finance costs and income taxes.
|
|
Revenue by Market 2013 versus 2012
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
2013
|
|
|
|
2012
|
|
Industrial/Manufacturing
|
|
|
|
17%
|
|
|
|
16%
|
|
Mining
|
|
|
|
14%
|
|
|
|
15%
|
|
Forestry
|
|
|
|
14%
|
|
|
|
13%
|
|
Metal Processing
|
|
|
|
11%
|
|
|
|
12%
|
|
Oil & Gas
|
|
|
|
10%
|
|
|
|
13%
|
|
Construction
|
|
|
|
6%
|
|
|
|
6%
|
|
Food & Beverage
|
|
|
|
6%
|
|
|
|
5%
|
|
Transportation
|
|
|
|
5%
|
|
|
|
4%
|
|
Other
|
|
|
|
17%
|
|
|
|
16%
|
Revenue increased $4.9 million, or 1%, to $364.9 million in 2013 from
$360.0 million in 2012. 2013 revenue included $21.1 million of revenue
from the ACE Hydraulic and Kaman Canada businesses acquired in the
fourth quarter of 2012. Segment earnings decreased $7.1 million, to
$15.0 million, compared to $22.1 million in the previous year. The
year-over-year changes in revenue and earnings were a result of the
following factors:
-
Bearings and power transmission parts sales increased $9.5 million, or
5%. This was more than accounted for by the Kaman Canada acquisition
and increased sales to industrial sector customers in eastern Canada.
This increase was offset somewhat by lower sales to mining and metal
processing customers in eastern and central Canada and reduced oil and
gas sector volumes in western Canada.
-
Fluid power and process equipment products and service revenue decreased
$4.6 million, or 3%. The decrease was due mainly to reduced oil and
gas sector sales in western Canada offset somewhat by higher
construction sector sales in western Canada, transportation sector
sales in eastern Canada and revenue from the ACE Hydraulic business.
-
Segment earnings decreased $7.1 million. The positive impact of higher
volumes was offset by lower gross profit margins and a $2.8 million
increase in selling and administrative expenses. The decline in gross
profit margin resulted mainly from product mix and competitive market
pressures, primarily in western Canada. The increase in selling and
administrative expenses was attributed mainly to operating costs
related to the ACE Hydraulic and Kaman Canada acquisitions and higher
bad debt and occupancy expenses compared to last year. These increases
were offset partially by lower annual incentive accruals compared to
last year.
Backlog of $33.5 million as of December 31, 2013 decreased $8.1 million
compared to December 31, 2012, due mainly to lower fluid power and
process equipment related orders in western Canada.
Effective March 3, 2014, Steve Deck was appointed to the position of
Senior Vice President, Wajax Industrial Components subsequent to the
departure of Adrian Trotman. Prior to his appointment Mr. Deck spent
the last seven years in senior positions at a mining drilling products
and services company. He also has 21 years of experience in industrial
distribution in Canada.
The primary strategy in the Industrial Components segment is to further
expand its engineering and repair services business, including the
development of joint opportunities with the Power Systems segment in
the oil and gas sector. In addition, the segment will continue to
focus on operational efficiencies. Specific initiatives include:
-
The segment will strengthen its position in hydraulics related services
and introduce expanded engineering and repair services related to
bearings and power transmission parts, process pumps and
instrumentation. These value added services are expected to increase
revenue, improve margins and create a stronger customer loyalty.
Tuck-under acquisitions are expected to play a role given the generally
fragmented nature of the industry.
-
Wajax will introduce an expanded range of maintenance and repair
services that focus on the oil and gas industry and leverage the joint
capabilities of the Power Systems and Industrial Components segments.
The Industrial Components segment provides hydraulic and process
systems that play an important role in the manufacturing and operation
of a wide range of oil and gas equipment. The Power Systems segment
provides engines and transmissions that power drilling rigs, mud pumps
and fracturing equipment. Increased aftermarket revenue from the oil
and gas industry is expected to lower Wajax's sensitivity to new
equipment cycles in the future.
-
The segment will also continue to build on operational efficiencies
achieved in 2013, including inventory management and supply chain
improvements to reduce product procurement and freight costs and lower
inventory levels.
Selected Annual Information
The following selected annual information is audited and has been
prepared on the same basis as the 2013 annual audited Consolidated
Financial Statements.
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Revenue
|
|
$
|
1,428.5
|
|
$
|
1,466.0
|
|
$
|
1,377.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
47.7
|
|
$
|
65.9
|
|
$
|
63.8
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
Diluted earnings per share
|
|
$
$
|
2.85
2.81
|
|
$
$
|
3.95
3.89
|
|
$
$
|
3.84
3.77
|
|
Total assets
|
|
$
|
677.0
|
|
$
|
671.9
|
|
$
|
589.9
|
|
Non-current liabilities
|
|
$
|
214.2
|
|
$
|
173.2
|
|
$
|
99.9
|
|
Dividends declared per share
|
|
$
|
2.68
|
|
$
|
3.10
|
|
$
|
2.14
|
Revenue in 2013 of $1,428.5 million decreased $37.5 million compared to
2012. Decreased equipment revenue in the Equipment and Power Systems
segments more than offset an increase in parts and service revenue in
the Equipment segment and $21.1 million of revenue from the ACE
Hydraulic and Kaman Canada acquisitions in the Industrial Components
segment. Revenue in 2012 of $1,466.0 million increased $88.9 million
compared to 2011 and included $12.6 million of additional revenue from
the Harper acquisition completed in May 2011. The remaining $76.3
million increase in 2012 over 2011 was due to increased equipment and
parts and service revenue in the Equipment and Industrial Components
segments that more than offset declines in the Power Systems segment.
Net earnings decreased $16.1 million, or $0.99 per share, from 2011 to
2013. The positive impact of higher revenues from 2011 to 2013 was
more than offset by lower margins, due to product mix and heightened
price competition, increased selling and administrative expenses and
higher finance costs driven by higher debt levels and increased costs
of borrowing.
The $87.1 million increase in total assets between December 31, 2011 and
December 31, 2013 included $12.5 million resulting from the
acquisitions of ACE Hydraulic and Kaman Canada in 2012. The remaining
increase is mainly attributable to higher working capital and rental
fleet additions in the Equipment segment. The higher working capital
investment was to support higher sales activity and inventory to better
penetrate the mining and construction markets.
Non-current liabilities at December 31, 2013 of $214.2 million increased
$114.3 million from December 31, 2011. The primarily factor for the
increase was a $139.4 million increase in long-term debt to fund
working capital requirements, rental fleet additions and the ACE
Hydraulic and Kaman Canada acquisitions. This increase was partially
offset by an $18.8 million reduction in deferred taxes payable.
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 2013 annual audited Consolidated Financial Statements.
|
|
2013
|
|
|
2012
|
|
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Revenue
|
$
|
391.7
|
$
|
338.5
|
$
|
362.0
|
$
|
336.3
|
|
|
$
|
364.9
|
$
|
356.4
|
$
|
386.6
|
$
|
358.1
|
|
Net earnings
|
$
|
12.2
|
$
|
11.6
|
$
|
13.5
|
$
|
10.4
|
|
|
$
|
14.2
|
$
|
16.2
|
$
|
18.5
|
$
|
17.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
$
|
0.73
|
$
|
0.69
|
$
|
0.81
|
$
|
0.62
|
|
|
$
|
0.85
|
$
|
0.97
|
$
|
1.11
|
$
|
1.03
|
|
|
- Diluted
|
$
|
0.72
|
$
|
0.68
|
$
|
0.80
|
$
|
0.61
|
|
|
$
|
0.84
|
$
|
0.95
|
$
|
1.09
|
$
|
1.01
|
Quarterly fluctuations in revenue and net earnings are difficult to
predict. A normally weaker first quarter for the Equipment segment can
be offset by seasonally stronger activity in the oil and gas sector,
primarily affecting the Power Systems and Industrial Components
segments. As well, large deliveries of mining trucks and shovels and
power generation packages can shift the revenue and net earnings
throughout the year.
A discussion of Wajax's previous quarterly results can be found in
Wajax's quarterly MD&A available on SEDAR at www.sedar.com.
Consolidated Financial Condition
Capital Structure and Key Financial Condition Measures
|
($millions, except ratio calculations)
|
December 31
2013
|
December 31
2012
|
|
Shareholders' equity
|
$
|
247.2
|
$
|
241.9
|
|
Funded net debt(1)
|
|
205.0
|
|
173.7
|
|
Total capital
|
$
|
452.2
|
$
|
415.6
|
|
Funded net debt to total capital(1)
|
|
45.3%
|
|
41.8%
|
|
Leverage ratio(1)
|
|
2.15
|
|
1.55
|
|
(1) See the Non-GAAP and Additional GAAP Measures section.
|
The Corporation's capital structure is managed such that it maintains a
relatively low leverage ratio as the Corporation pays dividends to
shareholders equal to a significant portion of its earnings. The
Corporation's objective is to maintain a leverage ratio between 1.5
times and 2.0 times. However, there may be instances where the
Corporation is willing to maintain a leverage ratio outside the range
to either support key growth initiatives or fluctuations in working
capital levels during changes in economic cycles. See the Funded Net
Debt section below.
In addition, the Corporation's tolerance to interest rate risk
decreases/increases as the Corporation's leverage ratio
increases/decreases. At December 31, 2013, $125 million of the
Corporation's funded net debt, or 61%, was at a fixed interest rate
which is within the Corporation's interest rate risk policy. See the
Liquidity and Capital Resources section.
Shareholders' Equity
The Corporation's shareholders' equity at December 31, 2013 of $247.2
million increased $5.3 million from December 31, 2012 as earnings
exceeded dividends declared during the year.
The Corporation's share capital, included in shareholders' equity on the
balance sheet, consists of:
|
Issued and fully paid common shares as at December 31, 2013
|
|
Number
|
|
|
|
|
Amount
|
|
Balance at the beginning of the year
|
|
16,736,447
|
|
|
|
$
|
106.7
|
|
Rights exercised
|
|
7,073
|
|
|
|
|
0.0
|
|
Balance at the end of the year
|
|
16,743,520
|
|
|
|
$
|
106.7
|
|
|
|
|
|
|
|
|
|
At the date of this MD&A, the Corporation had 16,743,520 common shares
outstanding.
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 on a one-for-one basis. As
of December 31, 2013, there were 282,573 (2012 - 254,952) SOP, DSP and
DDSUP rights outstanding. 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 $0.6 million for the year (2012 - $3.4 million) in respect of these
plans.
Funded Net Debt
|
($millions)
|
|
|
December 31
2013
|
|
|
|
December 31
2012
|
|
(Cash) bank indebtedness
|
|
$
|
(4.2)
|
|
|
$
|
10.2
|
|
Obligations under finance leases
|
|
|
13.3
|
|
|
|
11.8
|
|
Long-term debt
|
|
|
195.9
|
|
|
|
151.7
|
|
Funded net debt
|
|
$
|
205.0
|
|
|
$
|
173.7
|
|
|
|
|
|
|
|
|
|
Funded net debt of $205.0 million at December 31, 2013 increased $31.3
million compared to December 31, 2012. The increase during the year
was due to $24.1 million of cash generated from operating activities
being less than: dividends paid of $46.0 million, investing activities
of $4.0 million, deferred financing costs of $3.2 million relating to
the issuance of the $125 million in senior notes and finance lease
payments of $3.5 million. The cash generated from operating activities
of $24.1 million was negatively impacted by income taxes paid of $60.3
million comprised of $44.6 million relating to 2011 and 2012 and 2013
income tax installments of $15.7 million.
The Corporation's ratio of funded net debt to capital increased to 45.3%
at December 31, 2013 from 41.8% at December 31, 2012 driven by the
higher funded net debt level.
The Corporation's leverage ratio of 2.15 times at December 31, 2013
increased from the December 31, 2012 ratio of 1.55 times due to the
combined impact of lower EBITDA for the year and higher funded net debt
outstanding. See the Liquidity and Capital Resources and the Non-GAAP
and Additional GAAP Measures sections.
Financial Instruments
Wajax uses derivative financial instruments in the management of its
foreign currency and interest rate exposures. Wajax's policy restricts
the use of derivative financial instruments for trading or speculative
purposes. Significant derivative financial instruments outstanding at
the end of the period were as follows:
-
Wajax enters into short-term currency forward contracts to hedge the
exchange risk associated with the cost of certain inbound inventory and
certain foreign currency-denominated sales to customers along with the
associated receivables as part of its normal course of business. As at
December 31, 2013, Wajax had contracts outstanding to buy U.S. $31.1
million (December 31, 2012 - to buy U.S. $26.5 million and to sell U.S.
$11.1 million). The U.S. dollar contracts expire between January 2014
and February 2015, with a weighted average U.S./Canadian dollar rate of
1.0562.
Wajax measures derivative instruments not accounted for as hedging items
at fair value with subsequent changes in fair value being recorded in
earnings. Derivatives designated as effective hedges are measured at
fair value with subsequent changes in fair value being recorded in
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. The impact of a change in foreign currency relative to the
Canadian dollar on the Corporation's financial statements of unhedged
foreign currency-denominated sales to customers along with the
associated receivables and purchases from vendors along with associated
payables is not expected to be material.
Wajax is exposed to the risk of 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.
Contractual Obligations
|
Contractual Obligations
|
|
|
|
Total
|
|
|
|
<1 year
|
|
|
1 - 5 years
|
|
|
After
5 years
|
|
Bank debt
|
|
|
$
|
75.0
|
|
$
|
|
-
|
|
$
|
75.0
|
|
$
|
-
|
|
Senior notes
|
|
|
$
|
125.0
|
|
$
|
|
-
|
|
$
|
-
|
|
$
|
125.0
|
|
Operating leases
|
|
|
$
|
101.3
|
|
$
|
|
16.8
|
|
$
|
59.5
|
|
$
|
25.0
|
|
Obligations under finance leases
|
|
|
$
|
13.3
|
|
$
|
|
4.1
|
|
$
|
9.2
|
|
$
|
-
|
|
Total
|
|
|
$
|
314.6
|
|
$
|
|
20.9
|
|
$
|
143.7
|
|
$
|
150.0
|
The $75.0 million bank debt obligation relates to the long-term portion
of the bank credit facility and excludes current bank indebtedness and
letters of credit.
The senior notes obligation relates to the Corporation's issuance on
October 23, 2013 of $125.0 million in senior notes bearing an annual
interest rate of 6.125% per annum, payable semi-annually, maturing on
October 23, 2020.
The operating leases relate primarily to contracts entered into for
facilities and office equipment. See the Off Balance Sheet Financing
section for additional information.
The obligations under finance leases relate to certain leased vehicles
that have a minimum one year term and are extended on a monthly basis
thereafter until termination.
Wajax also has contingent contractual obligations where Wajax has
guaranteed the resale value of equipment sold ("guaranteed residual
value contracts") or has guaranteed a portion of customer lease
payments ("recourse contracts"). These contracts are subject to
certain conditions being met by the customer. As at December 31, 2013,
Wajax had guaranteed $0.6 million of contracts (2012 - $1.2 million)
with commitments arising in 2014. The commitments made by Wajax in
these contracts reflect the estimated future value of the equipment,
based on the judgment and experience of management. Wajax has recorded
a nominal provision in 2013 (2012 - $0.1 million) as an estimate of the
financial loss likely to result from such commitments.
The above table does not include obligations to fund pension benefits.
Wajax sponsors certain defined benefit plans that cover executive
employees, a small group of inactive employees and certain employees on
long-term disability benefits. The defined benefit plans are subject
to actuarial valuations in 2014 and 2015. Management does not expect
future cash contribution requirements to change materially from the
2013 contribution level of $0.4 million as a result of these valuations
or any declines in the fair value of the defined benefit plans' assets.
Off Balance Sheet Financing
Off balance sheet financing arrangements include operating lease
contracts for facilities with various landlords and other equipment
related mainly to office equipment. The total obligations for all
operating leases are detailed in the Contractual Obligations section.
At December 31, 2013, the non-discounted operating lease commitments
for facilities totaled $100.6 million and for other equipment $0.7
million.
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 $68.9 million (2012 - $97.2 million) of
consigned inventory on-hand from a major manufacturer at December 31,
2013. 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 reduce
dividends to accommodate any shortfalls in Wajax's credit facilities.
See the Liquidity and Capital Resources section.
Liquidity and Capital Resources
The Corporation's liquidity is maintained through various sources,
including bank and non-bank credit facilities, the senior notes and
cash generated from operations.
Bank and Non-bank Credit Facilities and Senior Notes
On October 23, 2013, the Corporation issued $125 million of senior notes
bearing an interest rate of 6.125% per annum, payable semi-annually,
maturing on October 23, 2020. The senior notes are unsecured and
contain customary incurrence based covenants that, although different
from those under the bank credit facility described below, are not
expected to be any more restrictive than under the bank credit
facility. All covenants were met as at December 31, 2013. The issuance
of the senior notes introduced a longer term fixed rate layer of debt
into Wajax's capital structure at a time when interest rates remain
historically low. The cost of issuing the senior notes, approximately
$3.2 million, is being amortized over the seven year term of the senior
notes using the effective interest rate method.
Upon the closing of the senior note offering, the Corporation reduced
the total available committed amount of the bank credit facility from
$300 million to $250 million. The terms of the $250 million bank credit
facility include the following:
-
The facility is fully secured, expiring August 12, 2016, and is made up
of a $60 million non-revolving term portion and a $190 million
revolving term portion.
-
Borrowing capacity is dependent upon the level of inventories on-hand
and the outstanding trade accounts receivable.
-
The facility contains customary restrictive covenants including
limitations on the payment of cash dividends and the maintenance of
certain financial ratios all of which were met as at December 31, 2013.
Wajax is restricted from the declaration of monthly dividends in the
event the Corporation's leverage ratio, as defined in the bank credit
facility agreement, exceeds three times.
-
Borrowings bear floating rates of interest at margins over Canadian
dollar bankers' acceptance yields, U.S. dollar LIBOR rates or prime.
Margins on the facility depend on Wajax's leverage ratio at the time of
borrowing and range between 1.5% and 3.0% for Canadian dollar bankers'
acceptances and U.S. dollar LIBOR borrowings, and 0.5% and 2.0% for
prime rate borrowings.
At December 31, 2013, Wajax had borrowed $75.0 million and issued $6.7
million of letters of credit for a total utilization of $81.7 million
of its $250 million bank credit facility. Borrowing capacity under the
bank credit facility is dependent on the level of inventories on-hand
and outstanding trade accounts receivables. At December 31, 2013,
borrowing capacity under the bank credit facility was equal to $250
million.
Under the terms of the bank credit facility, Wajax is permitted to have
additional interest bearing debt of $15 million. As such, Wajax has up
to $15 million of demand inventory equipment financing capacity with
three non-bank lenders. At December 31, 2013 Wajax had no utilization
of the interest bearing equipment financing facilities.
As of March 4, 2014, Wajax's $250 million bank credit facility, along
with the additional $15 million of capacity permitted under the bank
credit facility should be sufficient to meet Wajax's short-term normal
course working capital and maintenance capital requirements. However,
Wajax may be required to access the equity or debt markets or reduce
dividends in order to fund significant acquisitions and growth related
working capital and capital expenditures.
Cash Flow
The following table highlights the major components of cash flow as
reflected in the Consolidated Statements of Cash Flows for the years
ended December 31, 2013 and December 31, 2012.
|
For the year ended December 31
|
|
|
2013
|
|
|
2012
|
|
|
Change
|
|
Net earnings
|
|
$
|
47.7
|
|
$
|
65.9
|
|
$
|
(18.2)
|
|
Items not affecting cash flow
|
|
|
48.5
|
|
|
44.7
|
|
|
3.8
|
|
Net change in non-cash operating working capital
|
|
|
17.7
|
|
|
(114.3)
|
|
|
132.0
|
|
Income taxes paid
|
|
|
(60.3)
|
|
|
(2.4)
|
|
|
(57.9)
|
|
Other cash items(1)
|
|
|
(29.5)
|
|
|
(33.0)
|
|
|
3.5
|
|
Cash generated from (used in) operating activities
|
|
$
|
24.1
|
|
$
|
(39.1)
|
|
$
|
63.2
|
|
Cash used in investing activities
|
|
$
|
(4.0)
|
|
$
|
(16.0)
|
|
$
|
12.0
|
|
Cash (used in) generated from financing activities
|
|
$
|
(5.7)
|
|
$
|
39.3
|
|
$
|
(45.0)
|
|
(1)
|
Other cash items includes rental equipment additions, changes in other
non-current liabilities and finance costs paid
|
Cash Generated From (Used In) Operating Activities
The $63.2 million year over year increase in cash flows generated from
operating activities was mainly attributable to an increase in cash
generated from changes in non-cash working capital of $17.7 million in
2013 as compared to a use of working capital of $114.3 million in 2012,
offset mostly by significantly higher income taxes paid of $57.9
million and reduced earnings of $18.2 million. (Income taxes paid
during the year of $60.3 million were comprised of $44.6 million
related to 2011 and 2012 income taxes and 2013 income tax installments
of $15.7 million.)
Significant components of non-cash operating working capital, along with
changes for the years ended December 31, 2013 and December 31, 2012
include the following:
|
For the year ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Non-cash Operating Working Capital(1)
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Trade and other receivables
|
|
|
|
$
|
6.6
|
|
|
$
|
(17.1)
|
|
Inventories
|
|
|
|
|
(2.8)
|
|
|
|
(39.0)
|
|
Prepaid expenses
|
|
|
|
|
1.1
|
|
|
|
1.0
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
13.3
|
|
|
|
(58.9)
|
|
Provisions
|
|
|
|
|
(0.5)
|
|
|
|
(0.3)
|
|
Total Changes in Non-cash Operating Working Capital
|
|
|
|
$
|
17.7
|
|
|
$
|
(114.3)
|
|
(1) Increase (decrease) in cash flow
|
Significant components of the changes in non-cash operating working
capital for the year ended December 31, 2013 compared to the year ended
December 31, 2012 are as follows:
-
Trade and other receivables decreased $6.6 million in 2013 compared to
an increase of $17.1 million in 2012. The decrease in 2013 was mainly
attributable to the collection of a large mining equipment receivable
in the Equipment segment partially offset by an increase in the Power
Systems segment due principally to a large power generation
receivable. The increase in 2012 was attributable to a significant
increase in the Equipment segment, related to a large mining equipment
delivery and increased sales activity. This increase was partially
offset by reductions in the Power Systems and Industrial Components
segments due to lower sales activity in the fourth quarter of 2012.
-
Inventories increased $2.8 million in 2013 compared to an increase of
$39.0 million in 2012. The increase in 2012 was due principally to a
$35.4 million increase in mining equipment (trucks and shovels) in the
Equipment segment.
-
Accounts payable and accrued liabilities increased $13.3 million in 2013
compared to a decrease of $58.9 million in 2012. The increase in 2013
resulted primarily from higher trade payables in the Industrial
Components segment. The decrease last year was due primarily to
reductions in the Equipment segment, attributable to lower trade
payables and customer deposits related to mining equipment, and lower
deferred income and inventory related trade payables in the Power
Systems segment. Reductions in annual and mid-term incentive accruals
also contributed to the decrease in 2012.
Investing Activities
For the year ended December 31, 2013, Wajax invested $3.9 million in
property, plant and equipment additions, net of disposals, and $0.1
million in intangible asset additions, compared to $5.7 million and
$0.2 million for the year ended December 31, 2012, respectively. In
addition, the Industrial Components segment invested a total of $10.1
million during 2012 for the acquisition of the shares of ACE Hydraulic
on October 22, 2012 and the assets of Kaman Canada on December 31,
2012.
Financing Activities
The Corporation used $5.7 million of cash from financing activities in
2013 compared to $39.3 million of cash generated in 2012. Financing
activities in the year included senior note proceeds of $125.0 million
offset by bank credit facility repayments of $78.0 million, dividends
paid to shareholders totaling $46.0 million, finance lease payments of
$3.5 million and deferred financing costs of $3.2 million related to
the issuance of the senior notes. The net proceeds of the senior notes
were used to repay borrowings under the Corporation's senior secured
bank credit facility.
Dividends
Dividends to shareholders for the periods January 1, 2013 to December
31, 2013 and January 1, 2012 to December 31, 2012 were declared as
follows:
|
|
|
|
|
2013
|
|
|
2012
|
|
Month (1)
|
|
|
|
Per Share
|
|
|
Amount
|
|
|
Per Share
|
|
|
Amount
|
|
January
|
|
|
$
|
0.27
|
|
$
|
4.5
|
|
$
|
0.20
|
|
$
|
3.3
|
|
February
|
|
|
|
0.27
|
|
|
4.5
|
|
|
0.20
|
|
|
3.3
|
|
March
|
|
|
|
0.27
|
|
|
4.5
|
|
|
0.27
|
|
|
4.5
|
|
April
|
|
|
|
0.27
|
|
|
4.5
|
|
|
0.27
|
|
|
4.5
|
|
May
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
June
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
July
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
August
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
September
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
October
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
November
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
|
December
|
|
|
|
0.20
|
|
|
3.3
|
|
|
0.27
|
|
|
4.5
|
Total dividends
for the years ended December 31
|
|
|
$
|
2.68
|
|
$
|
44.9
|
|
$
|
3.10
|
|
$
|
51.8
|
|
(1)
|
|
The Corporation's monthly dividends were generally payable to
shareholders of record on the last business day of each calendar month
and were paid on or about the 20th day of the following month.
|
For the year ending December 31, 2013, Wajax declared dividends to
shareholders totaling $2.68 per share. For the year ending December
31, 2012, Wajax declared dividends to shareholders totaling $3.10 per
share.
Dividends declared in 2013 of $44.9 million exceeded cash generated from
operating activities of $24.1 million due to $44.6 million of income
taxes paid in 2013 relating to 2011 and 2012.
The Corporation declared monthly dividends of $0.20 per share, or $3.3
million, for January, February, March and April of 2014.
Fourth Quarter Consolidated Results
|
For the three months ended December 31
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
Revenue
|
|
|
|
$
|
|
391.7
|
|
|
|
$
|
|
364.9
|
|
Gross profit
|
|
|
|
$
|
|
73.2
|
|
|
|
$
|
|
73.6
|
|
Selling and administrative expenses
|
|
|
|
$
|
|
53.6
|
|
|
|
$
|
|
53.0
|
|
Earnings before finance costs and income taxes(1)
|
|
|
|
$
|
|
19.6
|
|
|
|
$
|
|
20.6
|
|
Finance costs
|
|
|
|
$
|
|
3.1
|
|
|
|
$
|
|
1.3
|
|
Earnings before income taxes(1)
|
|
|
|
$
|
|
16.6
|
|
|
|
$
|
|
19.3
|
|
Income tax expense
|
|
|
|
$
|
|
4.4
|
|
|
|
$
|
|
5.1
|
|
Net earnings
|
|
|
|
$
|
|
12.2
|
|
|
|
$
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
$
|
|
0.73
|
|
|
|
$
|
|
0.85
|
|
Diluted earnings per share
|
|
|
|
$
|
|
0.72
|
|
|
|
$
|
|
0.84
|
|
(1)
|
|
See the Non-GAAP and Additional GAAP Measures section.
|
The Equipment segment was positively impacted in the quarter by
increased demand for forestry equipment, particularly in British
Columbia, attributable to higher lumber prices. The Equipment segment
also benefitted from a somewhat stronger construction market in the
quarter compared to last year. Weakness in oil and gas sector activity
in western Canada, which started in the third quarter of 2012,
continued in the fourth quarter as declines in customer spending
primarily affected the Power Systems and Industrial Components
segments. Although mining activity including the oil sands market
remained soft, mining sector sales were comparable to last year.
Revenue
Revenue in the fourth quarter of 2013 increased 7%, or $26.8 million, to
$391.7 million, from $364.9 million in the fourth quarter of 2012 and
included $4.5 million of revenue from the Kaman Canada business
acquired by the Industrial Components segment on December 31, 2012.
Segment revenue increased 4% in the Industrial Components segment and
8% in each of the Equipment and Power Systems segments on higher
equipment volumes.
Gross profit
Gross profit in the fourth quarter of 2013 decreased $0.4 million as the
positive impact of higher volumes was more than offset by a lower gross
profit margin percentage compared to the fourth quarter last year. The
gross profit margin percentage for the quarter of 18.7% declined from
20.2% in the fourth quarter of 2012 due mainly to lower parts and
service margins and a negative sales mix impact from a higher
proportion of equipment revenues compared to last year.
Selling and administrative expenses
Selling and administrative expenses increased $0.6 million in the fourth
quarter of 2013 compared to the same quarter last year due mainly to
increases in the Industrial Components segment related to the Kaman
Canada operations. Selling and administrative expenses as a percentage
of revenue decreased to 13.7% in the fourth quarter of 2013 from 14.5%
compared to the same quarter of 2012.
Finance costs
Quarterly finance costs of $3.1 million increased $1.8 million compared
to the same quarter last year due to the cost of higher funded debt
levels outstanding and the higher cost of borrowing during the
quarter. The higher cost of borrowing was due to the Corporation's
issuance of the senior notes on October 23, 2013 and an increased cost
of borrowing under the bank credit facilities.
Income tax expense
The Corporation's effective income tax rate of 26.3% for the quarter was
essentially unchanged from the previous year.
Net earnings
Quarterly net earnings decreased $2.0 million to $12.2 million, or $0.73
per share, from $14.2 million, or $0.85 per share, in the same quarter
of 2012. The positive impact of higher volumes was more than offset by
higher finance costs, a lower gross profit margin percentage and higher
selling and administrative expenses.
Comprehensive income
Total comprehensive income of $13.8 million in the fourth quarter of
2013 comprised of net earnings of $12.2 million and other comprehensive
income of $1.6 million. The other comprehensive income was mainly
attributable to actuarial gains on pension plans of $1.5 million.
Funded net debt
Funded net debt of $205.0 million at December 31, 2013 decreased $20.3
million compared to September 30, 2013. The decrease during the
quarter was due to $32.6 million of cash generated from operating
activities exceeding dividends paid of $10.0 million, deferred
financing costs of $3.0 million relating to the issuance of the senior
notes and finance lease payments of $1.6 million. See the Fourth
Quarter Cash Flows and Liquidity and Capital Resources sections.
Dividends
For the fourth quarter ended December 31, 2013 monthly dividends
declared totaled $0.60 per share. For the fourth quarter ended
December 31, 2012 monthly dividends declared were $0.81 per share.
Backlog
Consolidated backlog at December 31, 2013 of $155.1 million decreased
$49.7 million, or 24%, compared to September 30, 2013 with reductions
in all segments. Backlog includes the total retail value of customer
purchase orders for future delivery or commissioning. See the Fourth
Quarter Results of Operations section for further backlog detail by
segment.
Fourth Quarter Results of Operations
Equipment
|
For the three months ended December 31
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
Equipment(1)
|
|
|
|
$
|
|
145.6
|
|
|
|
$
|
|
130.9
|
|
Parts and service
|
|
|
|
$
|
|
72.4
|
|
|
|
$
|
|
70.7
|
|
Segment revenue
|
|
|
|
$
|
|
218.0
|
|
|
|
$
|
|
201.6
|
|
Segment earnings(2)
|
|
|
|
$
|
|
13.4
|
|
|
|
$
|
|
14.0
|
|
Segment earnings margin
|
|
|
|
|
|
6.2%
|
|
|
|
|
|
6.9%
|
|
(1)
|
|
Includes rental and other revenue.
|
|
(2)
|
|
Earnings before finance costs and income taxes.
|
Revenue in the fourth quarter of 2013 increased $16.4 million, or 8%, to
$218.0 million, from $201.6 million in the fourth quarter of 2012.
Segment earnings for the quarter decreased $0.6 million, to $13.4
million, compared to the fourth quarter of 2012. The following factors
contributed to the Equipment segment's fourth quarter results compared
to the fourth quarter of 2012:
-
Equipment revenue for the fourth quarter increased $14.7 million or 11%
with specific year-over-year variances as follows:
-
Forestry equipment revenue increased $10.0 million driven by higher
Tigercat equipment volumes in all regions.
-
Construction equipment revenue increased $7.0 million mainly as a result
of higher Hitachi excavator volumes, primarily in western Canada, and
an increase in JCB equipment volumes in eastern Canada.
-
Mining equipment sales increased $0.8 million. The sale of four Hitachi
EH5000 320 ton mining trucks and increased rotating equipment volumes
in western Canada was mostly offset by a decline in Hitachi hydraulic
mining shovel sales.
-
Crane and utility equipment revenue increased $0.5 million.
-
Material handling equipment revenue decreased $3.6 million due
principally to declines in eastern and central Canada.
-
Parts and service volumes increased $1.7 million or 2%. The increase
was led by higher forestry sector volumes in all regions, higher mining
sector volumes in western Canada and gains in crane and utility
revenue.
-
Segment earnings for the fourth quarter decreased $0.6 million to $13.4
million. The positive impact of higher volumes and a $0.7 million
reduction in selling and administrative expenses was more than offset
by a lower gross margin percentage due to product mix variances
compared to last year.
Backlog of $76.0 million at December 31, 2013 decreased $26.6 million
compared to September 30, 2013 due primarily to reductions in mining
equipment backlog as a result of the delivery of four mining trucks
during the quarter. In addition, increases in crane and utility
backlog were offset by reductions in construction and forestry backlog
during the quarter.
Power Systems
|
For the three months ended December 31
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
Equipment(1)
|
|
|
|
$
|
|
35.9
|
|
|
|
$
|
|
31.5
|
|
Parts and service
|
|
|
|
$
|
|
49.5
|
|
|
|
$
|
|
47.5
|
|
Segment revenue
|
|
|
|
$
|
|
85.4
|
|
|
|
$
|
|
79.0
|
|
Segment earnings(2)
|
|
|
|
$
|
|
6.0
|
|
|
|
$
|
|
5.0
|
|
Segment earnings margin
|
|
|
|
|
|
7.0%
|
|
|
|
|
|
6.3%
|
|
(1)
|
|
Includes rental and other revenue.
|
|
(2)
|
|
Earnings before finance costs and income taxes.
|
Revenue in the fourth quarter of 2013 increased $6.4 million, or 8%, to
$85.4 million, compared to $79.0 million in the fourth quarter of 2012.
Segment earnings for the quarter increased $1.0 million to $6.0
million. The following factors impacted quarterly revenue and earnings
compared to last year:
-
Equipment revenue increased $4.4 million, due to higher power generation
sales in all regions offset somewhat by lower off-highway sales to oil
and gas customers in western Canada and mining customers in central
Canada.
-
Parts and service volumes increased $2.0 million compared to last year,
mainly attributable to higher sales to on-highway customers in western
and central Canada.
-
Segment earnings in the fourth quarter of 2013 increased $1.0 million
compared to the same quarter last year as the positive impact of higher
volumes was partially offset by a $0.5 million increase in selling and
administrative expenses.
Backlog of $45.6 million as of December 31, 2013 decreased $17.3 million
compared to September 30, 2013 due primarily to a decrease in power
generation backlog.
Industrial Components
|
For the three months ended December 31
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
Segment revenue
|
|
|
|
$
|
|
89.1
|
|
|
|
$
|
|
85.3
|
|
Segment earnings(1)
|
|
|
|
$
|
|
2.1
|
|
|
|
$
|
|
3.6
|
|
Segment earnings margin
|
|
|
|
|
|
2.4%
|
|
|
|
|
|
4.2%
|
|
(1)
|
|
Earnings before finance costs and income taxes.
|
Revenue of $89.1 million in the fourth quarter of 2013 increased $3.8
million, or 4%, from $85.3 million in the fourth quarter of 2012 and
included $4.5 million of revenue from the Kaman Canada business
acquired on December 31, 2012. Segment earnings for the quarter
decreased $1.5 million, to $2.1 million. The following factors
contributed to the segment's fourth quarter year-over-year results:
-
Bearings and power transmission parts sales increased $3.3 million or 7%
which was more than accounted for by the Kaman Canada acquisition.
This increase was somewhat offset by reduced volumes to construction
customers.
-
Fluid power and process equipment products and service revenue in the
fourth quarter of 2013 increased $0.5 million.
-
Segment earnings decreased $1.5 million as the positive impact of higher
volumes was offset by lower gross profit margins and a $0.8 million
increase in selling and administrative expenses. The decline in gross
profit margin resulted mainly from an unfavorable product mix and
competitive market pressures primarily in western Canada. The increase
in selling and administrative expenses resulted primarily from
operating costs related to the Kaman Canada acquisition.
Backlog of $33.5 million as of December 31, 2013 decreased $5.8 million
compared to September 30, 2013 with most of the reduction related to
western and central Canada.
Fourth Quarter Cash Flows
Cash Flow
The following table highlights the major components of cash flow as
reflected in the Consolidated Statements of Cash Flows for the quarters
ended December 31, 2013 and December 31, 2012.
|
For the quarter ended December 31
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
|
|
|
|
Change
|
|
Net earnings
|
|
|
|
$
|
|
12.2
|
|
|
|
$
|
|
14.2
|
|
|
|
$
|
|
(2.0)
|
|
Items not affecting cash flow
|
|
|
|
|
|
13.7
|
|
|
|
|
|
9.8
|
|
|
|
|
|
3.9
|
|
Net change in non-cash operating working capital
|
|
|
|
|
|
16.8
|
|
|
|
|
|
(25.4)
|
|
|
|
|
|
42.2
|
|
Income taxes paid
|
|
|
|
|
|
(2.7)
|
|
|
|
|
|
(1.9)
|
|
|
|
|
|
(0.8)
|
|
Other cash items(1)
|
|
|
|
|
|
(7.4)
|
|
|
|
|
|
(5.5)
|
|
|
|
|
|
(1.9)
|
|
Cash generated from (used in) operating activities
|
|
|
|
$
|
|
32.6
|
|
|
|
$
|
|
(8.8)
|
|
|
|
$
|
|
41.4
|
|
Cash used in investing activities
|
|
|
|
$
|
|
(0.2)
|
|
|
|
$
|
|
(10.7)
|
|
|
|
$
|
|
10.5
|
|
Cash (used in) generated from financing activities
|
|
|
|
$
|
|
(27.6)
|
|
|
|
$
|
|
15.3
|
|
|
|
$
|
|
42.9
|
|
(1)
|
|
Other cash items includes rental equipment additions, changes in other
non-current liabilities and finance costs paid
|
Cash Generated From (Used In) Operating Activities
The $41.4 million increase in cash flows generated from operating
activities was mainly attributable to an increase in cash generated
from changes in non-cash working capital of $16.8 million in 2013 as
compared to a use of cash of $25.4 million in 2012.
Significant components of non-cash operating working capital, along with
changes for the quarters ended December 31, 2013 and December 31, 2012
include the following:
|
For the quarter ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Non-cash Operating Working Capital(1)
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
Trade and other receivables
|
|
|
|
$
|
|
(2.6)
|
|
|
|
$
|
|
(6.9)
|
|
Inventories
|
|
|
|
|
|
13.7
|
|
|
|
|
|
8.9
|
|
Prepaid expenses
|
|
|
|
|
|
0.1
|
|
|
|
|
|
(0.7)
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
4.7
|
|
|
|
|
|
(29.6)
|
|
Provisions
|
|
|
|
|
|
0.9
|
|
|
|
|
|
2.9
|
|
Total Changes in Non-cash Operating Working Capital
|
|
|
|
$
|
|
16.8
|
|
|
|
$
|
|
(25.4)
|
|
(1)
|
|
Increase (decrease) in cash flow
|
Significant components of the changes in non-cash operating working
capital for the quarter ended December 31, 2013 compared to the quarter
ended December 31, 2012 are as follows:
-
Trade and other receivables increased $2.6 million in 2013 compared to
an increase of $6.9 million in 2012. The increase in 2012 was due to
higher sales activity in the Equipment segment reduced somewhat by
lower accounts receivable in the Industrial Components on lower sales
activity.
-
Inventories decreased $13.7 million in the current year, due to
reductions in inventory in the Equipment segment. This compared to a
decrease of $8.9 million in 2012 due mainly to decreases in the
Equipment segment's inventory and lower stocking levels in Industrial
Components.
-
Accounts payable and accrued liabilities increased $4.7 million in 2013
compared to a decrease of $29.6 million in 2012. The increase in 2013
resulted primarily from higher inventory trade payables in the
Industrial Components segment, offset somewhat by lower inventory trade
payables in the Equipment segment. The decrease last year was
attributable to lower mining inventory trade payables in the Equipment
segment, offset somewhat by higher inventory related trade payables in
the Industrial Components segment.
Investing Activities
During the fourth quarter of 2013, Wajax invested $0.1 million on
property, plant and equipment additions, net of disposals, compared to
$0.6 million in the fourth quarter of 2012. In addition, the Industrial
Components segment invested a total of $10.1 million in the fourth
quarter of 2012 for the acquisition of the shares of ACE Hydraulic on
October 22, 2012 and the assets of Kaman Canada on December 31, 2012.
Financing Activities
The Corporation used $27.6 million of cash in financing activities in
the fourth quarter of 2013 compared to $15.3 million of cash generated
in the same quarter of 2012. Financing activities in the quarter
included proceeds on the issuance of senior notes of $125.0 million,
offset by bank credit facility repayments of $138.0 million, dividends
paid to shareholders totaling $10.0 million, deferred financing costs
of $3.0 million related to the issuance of the senior notes and finance
lease payments of $1.6 million. The net proceeds of the senior notes
were used to repay borrowings under the Corporation's senior secured
bank credit facility.
Non-GAAP and Additional GAAP Measures
The MD&A contains certain non-GAAP and additional GAAP 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,
|
|
|
|
(ii)
|
|
|
the non-GAAP measures are commonly used as an indicator of a company's
cash operating performance and ability to raise and service debt, and
|
|
|
|
(iii)
|
|
|
the additional GAAP measures are commonly used to assess a company's
earnings performance excluding its capital and tax structures.
|
|
|
|
|
|
|
Non-GAAP financial measures are identified and defined below:
|
|
|
|
|
|
|
Funded net debt
|
|
|
Funded net debt includes bank indebtedness, long-term debt and
obligations under finance leases, net of cash.
|
|
|
|
|
|
|
EBITDA
|
|
|
Net earnings before finance costs, income tax expense, depreciation and
amortization.
|
|
|
|
|
|
|
Leverage ratio
|
|
|
The leverage ratio is defined as funded net debt at the end of a
particular quarter divided by trailing 12-month EBITDA. The
Corporation's objective is to maintain this ratio between 1.5 times and
2.0 times.
|
|
|
|
|
|
|
Funded net debt to total capital
|
|
|
Defined as funded net debt divided by total capital. Total capital is
the funded net debt plus shareholder's equity.
|
|
|
|
|
|
|
Additional GAAP measures are identified and defined below:
|
|
|
|
|
|
|
Earnings before finance costs and income taxes (EBIT)
|
|
|
Earnings before finance costs and income taxes, as presented on the
Consolidated Statements of Earnings
|
|
|
|
|
|
|
Earnings before income taxes (EBT)
|
|
|
Earnings before income taxes, as presented on the Consolidated
Statements of Earnings.
|
Reconciliation of the Corporation's net earnings to EBT, EBIT and EBITDA
is as follows:
|
|
|
|
For the twelve
months ended
December 31
|
|
|
For the twelve
months ended
September 30
|
|
|
For the twelve
months ended
December 31
|
|
|
|
|
|
2013
|
|
|
|
2013
|
|
|
|
2012
|
|
Net earnings
|
|
|
$
|
47.7
|
|
|
$
|
49.7
|
|
|
$
|
65.9
|
|
Income tax expense
|
|
|
|
17.0
|
|
|
|
17.7
|
|
|
|
23.8
|
|
EBT
|
|
|
|
64.7
|
|
|
|
67.4
|
|
|
|
89.7
|
|
Finance costs
|
|
|
|
9.0
|
|
|
|
7.2
|
|
|
|
4.4
|
|
EBIT
|
|
|
|
73.7
|
|
|
|
74.6
|
|
|
|
94.1
|
|
Depreciation and amortization
|
|
|
|
21.6
|
|
|
|
20.5
|
|
|
|
17.8
|
|
EBITDA
|
|
|
$
|
95.3
|
|
|
$
|
95.1
|
|
|
$
|
112.0
|
Calculation of the Corporations funded net debt and leverage ratio is as
follows:
|
|
|
|
|
December 31
|
|
|
|
September 30
|
|
|
|
December 31
|
|
|
|
|
|
|
2013
|
|
|
|
|
2013
|
|
|
|
|
2012
|
|
Bank indebtedness
|
|
|
|
$
|
(4.2)
|
|
|
|
$
|
0.6
|
|
|
|
$
|
10.2
|
|
Obligations under finance leases
|
|
|
|
|
13.3
|
|
|
|
|
13.0
|
|
|
|
|
11.8
|
|
Long-term debt
|
|
|
|
|
195.9
|
|
|
|
|
211.7
|
|
|
|
|
151.7
|
|
Funded net debt(1)
|
|
|
|
$
|
205.0
|
|
|
|
$
|
225.3
|
|
|
|
$
|
173.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage ratio(1)(2)
|
|
|
|
|
2.15
|
|
|
|
|
2.37
|
|
|
|
|
1.55
|
|
(1)
|
|
See the Non-GAAP and Additional GAAP Measures section.
|
|
(2)
|
|
Calculation uses trailing four-quarter EBITDA and finance costs.
|
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity
with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those judgements, estimates and assumptions.
Note 3 to the annual Consolidated Financial Statements describes the
significant accounting policies and methods used in preparation of the
annual Consolidated Financial Statements. The Corporation bases its
estimates on historical experience and various other assumptions that
are believed to be reasonable in the circumstances.
The key assumptions concerning the future and other key sources of
estimation uncertainty that have a significant risk of resulting in a
material adjustment to the carrying amount of assets and liabilities
within the next fiscal year are as follows:
Allowance for doubtful accounts
The Corporation is exposed to credit risk with respect to its trade and
other receivables. However, this is somewhat minimized by the
Corporation's large customer base which covers most business sectors
across Canada. The Corporation follows a program of credit evaluations
of customers and limits the amount of credit extended when deemed
necessary. The Corporation maintains provisions for possible credit
losses, and any such losses to date have been within management's
expectations. The provision for doubtful accounts is determined on an
account-by-account basis. The $1.7 million provision for doubtful
accounts at December 31, 2013 decreased $0.8 million from $2.5 million
in 2012 primarily due to a reduction in the Equipment segment. As
conditions change, actual results could differ from those estimates.
Inventory obsolescence
The value of the Corporation's new and used equipment is evaluated by
management throughout the year, on a unit-by-unit basis. When
required, provisions are recorded to ensure that the book value of
equipment is valued at the lower of cost or estimated net realizable
value. The Corporation performs an aging analysis to identify slow
moving or obsolete parts inventories and estimates appropriate
obsolescence provisions related thereto. The Corporation takes
advantage of supplier programs that allow for the return of eligible
parts for credit within specified time periods. The inventory
obsolescence charged to earnings for 2013 was $2.1 million compared to
$1.9 million in 2012.
Goodwill and intangible assets
The value in use of goodwill and intangible assets has been estimated
using the forecasts prepared by management for the next three years.
The key assumptions for the estimate are those regarding revenue
growth, gross margin and the level of working capital required to
support the business. These estimates are based on past experience and
management's expectations of future changes in the market and
forecasted growth initiatives. To prepare the value in use
calculations, the forecasts are extrapolated beyond the three year
period at the estimated long-term inflation rate (2%) and discounted
back to present value. The discount rate is based on the Corporation's
pre-tax weighted average cost of capital of approximately 11% to
reflect a market participant's view of the cash-generating unit.
During the year, the Corporation performed impairment tests, based on
value in use, of its goodwill and intangible assets with an indefinite
life and concluded that no impairment existed in either the goodwill
associated with any of Wajax's cash-generating units ("CGUs") or the
intangible assets with an indefinite life.
Changes in Accounting Policies
The following new standards have been adopted in the current year:
On January 1, 2013, the Corporation adopted the amendments to IFRS 7
Offsetting Financial Assets and Liabilities, which contains new
disclosure requirements for financial assets and liabilities that are
offset in the statement of financial position or are subject to master
netting arrangements or similar arrangements. The impact on the
disclosures in the consolidated financial statements from adopting IFRS
7 was not material.
On January 1, 2013, the Corporation adopted IFRS 10 Consolidated
Financial Statements, which establishes principles for the preparation
and presentation of consolidated financial statements when an entity
controls one or more other entities. There was no impact on the
consolidated financial statements from adopting IFRS 10.
On January 1, 2013, the Corporation adopted IFRS 13 Fair Value
Measurement, which defines fair value and sets out a framework for
measuring fair value when fair value measurements are required or
permitted by other standards. It also requires disclosure of the
valuation techniques and inputs for financial instruments measured at
fair value. The impact on the disclosures in the consolidated financial
statements from adopting IFRS 13 was not material.
On January 1, 2013, the Corporation retrospectively adopted IAS 19R
Employee Benefits, which requires recognition of actuarial gains and
losses immediately in other comprehensive income, the full recognition
of past service costs immediately in profit or loss, recognition of the
expected return on plan assets in profit or loss to be calculated based
on the rate used to discount the defined benefit obligation, and
certain additional disclosures. No adjustment to prior years' financial
statements was necessary. The impact on the current year's consolidated
financial statements from adopting IAS 19R was not material.
Effective January 1, 2013, the Corporation early adopted Amendments to
IAS 36 Impairment of Assets issued by the IASB in May 2013. The
amendments impacted certain disclosure requirements only and did not
have a material impact on the consolidated financial statements.
New standards and interpretations not yet adopted
The new standards or amendments to existing standards that may be
significant to the Corporation set out below are not yet effective for
the year ended December 31, 2013 and have not been applied in preparing
these consolidated financial statements.
As of January 1, 2014, the Corporation will be required to adopt the
amendments to IAS 32 Offsetting Financial Assets and Liabilities, which
clarifies when an entity has a right to set-off and when a settlement
mechanism provides for net settlement or gross settlement. The extent
of the impact of adoption of the amendment has not yet been determined.
It is currently anticipated that the Corporation will be required to
adopt IFRS 9 Financial Instruments, which is the result of the first
phase of the IASB's project to replace IAS 39 Financial Instruments:
Recognition and Measurement. The mandatory effective date has not been
determined. The new standard replaces the current multiple
classification and measurement models for financial assets and
liabilities with a single model that has only two classification
categories: amortized cost and fair value. The Corporation is currently
assessing the impact of this standard on its consolidated 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.
The following are a number of risks that deserve particular comment:
Manufacturer relationships and product access
Wajax seeks to distribute leading product lines in each of its regional
markets and its success is dependent upon continuing relations with the
manufacturers it represents. Wajax endeavours to align itself in
long-term relationships with manufacturers that are committed to
achieving a competitive advantage and long-term market leadership in
their targeted market segments. In the Equipment and Power Systems
segments, and in certain cases in the hydraulics and process pumps
portion of the Industrial Components segment, manufacturer
relationships are governed through effectively exclusive distribution
agreements. Distribution agreements are for the most part open-ended,
but are cancellable within a relatively short notification period
specified in each agreement. Although Wajax enjoys good relationships
with its major manufacturers and seeks to develop additional strong
long-term partnerships, a loss of a major product line without a
comparable replacement would have a significantly adverse effect on
Wajax's results of operations or cash flow.
There is a continuing consolidation trend among industrial equipment and
component manufacturers. Consolidation may impact the products
distributed by Wajax, in either a favourable or unfavourable manner.
Consolidation of manufacturers may have a negative impact on the
results of operations or cash flow if product lines Wajax distributes
become unavailable as a result of the consolidation.
Suppliers generally have the ability to unilaterally change distribution
terms and conditions or limit supply of product in times of intense
market demand. Supplier changes in the area of product pricing and
availability can have a negative or positive effect on Wajax's revenue
and margins. As well, from time to time suppliers make changes to
payment terms for distributors. This may affect Wajax's interest-free
payment period or consignment terms, which may have a materially
negative or positive impact on working capital balances such as cash,
inventories, trade and other payables and bank debt.
Economic conditions/Business cyclicality
Wajax's customer base consists of businesses operating in the natural
resources, construction, transportation, manufacturing, industrial
processing and utilities industries. These industries can be capital
intensive and cyclical in nature, and as a result, customer demand for
Wajax's products and services may be affected by economic conditions at
both a global or local level. Changes in interest rates, consumer and
business confidence, corporate profits, credit conditions, foreign
exchange, commodity prices and the level of government infrastructure
spending may influence Wajax's customers' operating, maintenance and
capital spending, and therefore Wajax's sales and results of
operations. Although Wajax has attempted to address its exposure to
business and industry cyclicality by diversifying its operations by
geography, product offerings and customer base, there can be no
assurance that Wajax's results of operations or cash flows will not be
adversely affected by changes in economic conditions.
Commodity prices
Many of Wajax's customers are directly and indirectly affected by
fluctuations in commodity prices in the forestry, metals and minerals
and petroleum and natural gas industries, and as a result Wajax is also
indirectly affected by fluctuations in these prices. In particular,
each of Wajax's businesses is exposed to fluctuations in the price of
oil and natural gas. A downward change in commodity prices, and
particularly in the price of oil and natural gas, could therefore
adversely affect Wajax's results of operations or cash flows.
Growth initiatives, integration of acquisitions and project execution
As part of its long-term strategy, Wajax intends to continue growing its
business through a combination of organic growth and strategic
acquisitions. Wajax's ability to successfully grow its business through
organic growth will be dependent on the segments' achieving their
individual growth initiatives. Wajax's ability to successfully grow
its business through acquisitions will be dependent on a number of
factors including: identification of accretive new business or
acquisition opportunities; negotiation of purchase agreements on
satisfactory terms and prices; prior approval of acquisitions by third
parties, including regulatory authorities; securing attractive
financing arrangements; and integration of newly acquired operations
into the existing business. All of these activities associated with
growing the business, may be more difficult to implement or may take
longer to execute than management anticipates. Further, any significant
expansion of the business may increase the operating complexity of
Wajax, and divert management away from regular business activities. Any
failure of Wajax to manage its growth strategy, including acquisitions,
successfully could have a material adverse impact on Wajax's business,
results of operations or financial condition.
Key personnel
The success of Wajax is largely dependent on the abilities and
experience of its senior management team and other key personnel. Its
future performance will also depend on its ability to attract, develop
and retain highly qualified employees in all areas of its business.
Competition for skilled management, sales and technical personnel is
intense, particularly in certain markets where Wajax competes. Wajax
continuously reviews and makes adjustments to its hiring, training and
compensation practices in an effort to attract and retain a highly
competent workforce. However, there can be no assurance that Wajax will
be successful in its efforts and a loss of key employees, or failure to
attract and retain new talent as needed, may have an adverse impact on
Wajax's current operations or future prospects.
Leverage, credit availability and restrictive covenants
Wajax has a $250 million bank credit facility which expires August 12,
2016 comprised of a $60 million non-revolving term portion and a $190
million revolving term portion. Wajax also has $125 million of senior
notes outstanding bearing an annual interest rate of 6.125%, payable
semi-annually, and maturing on October 23, 2020. The bank credit
facility and senior notes contain restrictive covenants which place
restrictions on, among other things, the ability of Wajax to encumber
or dispose of its assets, the amount of interest cost incurred and
dividends declared relative to earnings and certain reporting
obligations. A failure to comply with the obligations of the facility
or senior notes could result in an event of default which, if not cured
or waived, could require an accelerated repayment of the facility or
senior notes. There can be no assurance that Wajax's assets would be
sufficient to repay the facility or senior notes in full.
Wajax's short-term normal course working capital requirements can swing
widely quarter-to-quarter due to 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 2012. Conversely, as Wajax experiences economic
slowdowns working capital reduces reflecting the lower activity levels
as was the case in 2009. While management believes the bank credit
facility will be adequate to meet the Corporation's normal course
working capital requirements, there can be no assurance that additional
credit will become available if required, or that an appropriate amount
of credit with comparable terms and conditions will be available when
the bank credit facility and senior notes mature.
Wajax may be required to access the equity or debt markets or reduce
dividends in order to fund significant acquisitions and growth related
working capital and capital expenditures.
The amount of debt service obligations under the bank credit facility
will be dependent on the level of borrowings and fluctuations in
interest rates to the extent the rate is unhedged. As a result,
fluctuations in debt servicing costs may have a detrimental effect on
future earnings or cash flow.
Wajax also has credit lines available with other financial institutions
for purposes of financing inventory. These facilities are not
committed lines and their future availability cannot be assured, which
may have a negative impact on cash available for dividends and future
growth opportunities.
Quality of products distributed
The ability of Wajax to maintain and expand its customer base is
dependent upon the ability of the manufacturers represented by Wajax to
improve and sustain the quality of their products. The quality and
reputation of such products are not within Wajax's control, and there
can be no assurance that manufacturers will be successful in meeting
these goals. The failure of these manufacturers to maintain a market
presence could adversely affect Wajax's results of operations or cash
flow.
Government regulation
Wajax's business is subject to evolving laws and government regulations,
particularly in the areas of taxation, the environment, and health and
safety. Changes to such laws and regulations may impose additional
costs on Wajax and may adversely affect its business in other ways,
including requiring additional compliance measures by Wajax.
Insurance
Wajax maintains a program of insurance coverage that is ordinarily
maintained by similar businesses, including property insurance and
general liability insurance. Although the limits and deductibles of
such insurance have been established through risk analysis and the
recommendation of professional advisors, there can be no assurance that
such insurance will remain available to Wajax at commercially
reasonable rates or that the amount of such coverage will be adequate
to cover all liability incurred by Wajax. If Wajax is held liable for
amounts exceeding the limits of its insurance coverage or for claims
outside the scope of that coverage, its business, results of operations
or financial condition could be adversely affected.
Inventory obsolescence
Wajax maintains substantial amounts of inventories in all three core
businesses. While Wajax believes it has appropriate inventory
management systems in place, variations in market demand for the
products it sells can result in certain items of inventory becoming
obsolete. This could result in a requirement for Wajax to take a
material write down of its inventory balance resulting in Wajax not
being able to realize expected revenue and cash flows from its
inventory, which would negatively affect results from operations or
cash flow.
Information systems and technology
Information systems are an integral part of Wajax's business processes,
including marketing of equipment and support services, inventory and
logistics, and finance. Some of these systems are integrated with
certain suppliers' core processes and systems. Any disruptions to these
systems due, for example, to the upgrade or conversion thereof, or the
failure of these systems to operate as expected could, depending on the
magnitude of the problem, adversely affect Wajax's operating results by
limiting the ability to effectively monitor and control Wajax's
operations.
Credit risk
Wajax extends credit to its customers, generally on an unsecured basis.
Although Wajax is not substantially dependent on any one customer and
it has a system of credit management in place, the loss of a large
receivable would have an adverse effect on Wajax's profitability.
Labour relations
Wajax has approximately 2,766 employees. Wajax is a party to thirteen
collective agreements covering a total of approximately 339 employees.
Of these, two collective agreements covering 56 employees have expired
on or before December 31, 2013 and are currently being re-negotiated.
Of the remaining eleven collective agreements, four expire in 2014,
four expire in 2015, two expire in 2016, and one expires in 2017.
Overall, Wajax believes its labour relations to be satisfactory and
does not anticipate it will be unable to renew the collective
agreements. If Wajax is unable to renew or negotiate collective
agreements from time to time, it could result in work stoppages and
other labour disturbances. The failure to renew collective agreements
upon satisfactory terms could have a material adverse impact on Wajax's
businesses, results of operations or financial condition.
Foreign exchange exposure
Wajax's operating results are reported in Canadian dollars. While the
majority of Wajax's sales are in Canadian dollars, significant portions
of its purchases are in U.S. dollars. Changes in the U.S. dollar
exchange rate can have a negative or positive impact on Wajax's
revenue, margins and working capital balances. Wajax mitigates certain
exchange rate risks by entering into short-term foreign currency
forward contracts to fix the cost of certain inbound inventory and to
hedge certain foreign-currency denominated sales to customers. In
addition, Wajax will periodically institute price increases to offset
the negative impact of foreign exchange rate increases on imported
goods. The inability of Wajax to mitigate exchange rate risks or
increase prices to offset foreign exchange rate increases, including
sudden and volatile changes in the U.S. dollar exchange rate, may have
a material adverse effect on the results of operations or financial
condition of Wajax.
A declining U.S. dollar relative to the Canadian dollar can have a
negative effect on Wajax's revenue and cash flows as a result of
certain products being imported from the U.S. In some cases market
conditions require Wajax to lower its selling prices as the U.S. dollar
declines. As well, many of Wajax's customers export products to the
U.S., and a strengthening Canadian dollar can negatively impact their
overall competitiveness and demand for their products, which in turn
may reduce product purchases from Wajax.
A strengthening U.S. dollar relative to the Canadian dollar can have a
positive effect on Wajax's revenue as a result of certain products
being imported from the U.S. Wajax will periodically institute price
increases to offset the negative impact of foreign exchange rate
increases and volatility on imported goods to ensure margins are not
eroded.
Wajax maintains a hedging policy whereby significant transactional
currency risks are identified and hedged.
Competition
The equipment, power systems and industrial components distribution
industries in which Wajax competes are highly competitive. In the
Equipment segment, Wajax primarily competes against regional equipment
distributors that tend to handle a dedicated product line, such as
those offered by John Deere, Komatsu and Caterpillar. There can be no
assurance that Wajax will be able to continue to compete on the basis
of product quality and price of product lines, distribution and
servicing capabilities as well as proximity of its distribution sites
to customers.
The Power Systems business competes with other major diesel engine
distributors representing such products as Cummins and Caterpillar.
Competition is based primarily on product quality, pricing and the
ability to service the product after the sale.
In terms of the Industrial Components segment, the hydraulics and
process equipment branches compete with other distributors of
hydraulics components and process equipment on the basis of quality and
price of the product lines, the capacity to provide custom-engineered
solutions and high service standards. The bearings and power
transmission product branches compete with a number of distributors
representing the same or competing product lines and rely primarily on
high service standards, price and value added services to gain market
advantage.
There can be no assurance that Wajax will be able to continue to
effectively compete. Increased competitive pressures or the inability
of Wajax to maintain the factors which have enhanced its competitive
position could adversely affect its results of operations or cash flow.
Litigation and product liability claims
In the ordinary course of its business, Wajax may be party to various
legal actions, the outcome of which cannot be predicted with certainty.
One category of potential legal actions is product liability claims.
Wajax carries product liability insurance, and management believes that
this insurance is adequate to protect against potential product
liability claims. Not all risks, however, are covered by insurance, and
no assurance can be given that insurance will be consistently
available, or will be consistently available on an economically
feasible basis, or that the amounts of insurance will at all times be
sufficient to cover each and every loss or claim that may occur
involving Wajax's assets or operations.
Guaranteed residual value, recourse and buy-back contracts
In some circumstances Wajax makes certain guarantees to finance
providers on behalf of its customers. These guarantees can take the
form of assuring the resale value of equipment, guaranteeing a portion
of customer lease payments, or agreeing to buy back the equipment at a
specified price. These contracts are subject to certain conditions
being met by the customer, such as maintaining the equipment in good
working condition. Historically, Wajax has not incurred substantial
losses on these types of contracts, however, there can be no assurance
that losses will not be incurred in the future. See the Contractual
Obligations section.
Future warranty claims
Wajax provides manufacturers' and/or dealer warranties for most of the
product it sells. In some cases, the product warranty claim risk is
shared jointly with the manufacturer. In addition, Wajax provides
limited warranties for workmanship on services provided. Accordingly,
Wajax has some liability for warranty claims. There is a risk that a
possible product quality erosion or a lack of a skilled workforce could
increase warranty claims in the future, or may be greater than
management anticipates. If Wajax's liability in respect of such claims
is greater than anticipated, it may have a material adverse impact on
Wajax's business, results of operations or financial condition.
Maintenance and repair contracts
Wajax frequently enters into long-term maintenance and repair contracts
with its customers, whereby Wajax is obligated to maintain certain
fleets of equipment at various negotiated performance levels. The
length of these contracts varies significantly, often ranging up to
five or more years. The contracts are generally fixed price, although
many contracts have additional provisions for inflationary adjustments.
Due to the long-term nature of these contracts, there is a risk that
significant cost overruns may be incurred. If Wajax has miscalculated
the extent of maintenance work required, or if actual parts and service
costs increase beyond the contracted inflationary adjustments, the
contract profitability will be adversely affected. In order to mitigate
this risk, Wajax closely monitors the contracts for early warning signs
of cost overruns. In addition, the manufacturer may, in certain
circumstances, share in the cost overruns if profitability falls below
a certain threshold. Any failure by Wajax to effectively price and
manage these contracts could have a material adverse impact on Wajax's
business, results of operations or financial condition.
Environmental factors
From time to time, Wajax experiences environmental incidents, emissions
or spills in the course of its normal business activities. With the
assistance of environmental consultants, Wajax has established
environmental compliance and monitoring programs which management
believes are appropriate for its operations. To date, these
environmental incidents, emissions and spills have not resulted in any
material liabilities to the Corporation, however, there can be no
assurance that any future incidents, emissions or spills will not
result in a material adverse effect on Wajax's results of operations or
cash flows.
Strategic Direction and Outlook
Revenue associated with the oil and gas sector in western Canada began
to decline in the second half of 2012 and continued to be soft
throughout 2013. This primarily affected the Power Systems and
Industrial Components segments as customers continued to limit capital
and maintenance spending for exploration and well servicing equipment.
Mining activity, including the oil sands, was weak for all three
segments as customers reduced spending in the face of generally weaker
commodity prices. The Equipment segment partially mitigated lower
mining related volumes, which included the impact of the loss of
LeTourneau equipment distribution rights in 2012, with a strong
performance in parts and service, which increased 10% from the prior
year. A major factor in this was a 16% increase in mining related parts
and service volume in the segment during 2013, driven by gains in
Hitachi product support and rotating products. Most other end markets
showed relative stability year-over-year compared to oil and gas and
mining. Consequently, the $20.4 million decline in consolidated 2013
earnings before finance costs and income taxes is approximately equal
to the year-over-year reduction related to softness in the important
oil and gas and mining sectors.
Year-end 2013 backlog of $155.1 million was reduced from the prior year
and the prior quarter primarily due to the delivery of four Hitachi
mining trucks and a number of power generation packages in the fourth
quarter. In the current economic environment customers continue to
take a cautious approach in making commitments to buy equipment.
Looking forward to 2014, management's expectation is that market
conditions in 2014 will be similar to those encountered in 2013 and the
continuing weakness in the oil and gas and mining markets is expected
to create challenges for growth in 2014. In particular, management
anticipates earnings in the first quarter to be lower than last year.
Despite these market conditions, the focus is to continue to invest in
strategic initiatives that focus on organic growth and continued
expansion of the Corporation's aftermarket business. At the same time,
management is cautiously managing total costs, the asset base and
leverage.
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 twelve months ended December 31, 2013
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
(unaudited, in thousands of Canadian dollars)
|
|
|
Note
|
|
|
|
December
31, 2013
|
|
|
|
December
31, 2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
4,153
|
|
|
$
|
-
|
|
Trade and other receivables
|
|
|
|
|
|
|
187,974
|
|
|
|
194,567
|
|
Inventories
|
|
|
|
|
|
|
289,299
|
|
|
|
285,185
|
|
Income taxes receivable
|
|
|
|
|
|
|
203
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
|
|
|
|
5,980
|
|
|
|
7,089
|
|
Derivative instruments
|
|
|
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
487,932
|
|
|
|
486,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment
|
|
|
4
|
|
|
|
52,285
|
|
|
|
43,731
|
|
Property, plant and equipment
|
|
|
5
|
|
|
|
49,716
|
|
|
|
50,700
|
|
Intangible assets
|
|
|
|
|
|
|
85,944
|
|
|
|
87,668
|
|
Deferred taxes
|
|
|
10
|
|
|
|
1,076
|
|
|
|
2,922
|
|
|
|
|
|
|
|
|
189,021
|
|
|
|
185,021
|
|
|
|
|
|
|
|
$
|
676,953
|
|
|
$
|
671,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
|
|
|
$
|
-
|
|
|
$
|
10,195
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
201,122
|
|
|
|
186,395
|
|
Provisions
|
|
|
|
|
|
|
7,011
|
|
|
|
7,535
|
|
Dividends payable
|
|
|
8
|
|
|
|
3,349
|
|
|
|
4,519
|
|
Income taxes payable
|
|
|
|
|
|
|
-
|
|
|
|
44,349
|
|
Obligations under finance leases
|
|
|
|
|
|
|
4,053
|
|
|
|
3,611
|
|
Derivative instruments
|
|
|
|
|
|
|
-
|
|
|
|
149
|
|
|
|
|
|
|
|
|
215,535
|
|
|
|
256,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
|
|
|
|
2,939
|
|
|
|
4,088
|
|
Employee benefits
|
|
|
|
|
|
|
5,549
|
|
|
|
7,160
|
|
Other liabilities
|
|
|
|
|
|
|
624
|
|
|
|
2,083
|
|
Obligations under finance leases
|
|
|
|
|
|
|
9,208
|
|
|
|
8,192
|
|
Long-term debt
|
|
|
6
|
|
|
|
195,906
|
|
|
|
151,701
|
|
|
|
|
|
|
|
|
214,226
|
|
|
|
173,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
7
|
|
|
|
106,704
|
|
|
|
106,651
|
|
Contributed surplus
|
|
|
|
|
|
|
5,058
|
|
|
|
4,346
|
|
Retained earnings
|
|
|
|
|
|
|
135,317
|
|
|
|
130,944
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
113
|
|
|
|
(56)
|
|
Total shareholders' equity
|
|
|
|
|
|
|
247,192
|
|
|
|
241,885
|
|
|
|
|
|
|
|
$
|
676,953
|
|
|
$
|
671,862
|
These condensed consolidated financial statements were approved by the
Board of Directors on March 4, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
|
|
|
|
(unaudited, in thousands of Canadian dollars,
|
|
|
|
|
|
|
Three months ended
December 31
|
|
|
|
Twelve months ended
December 31
|
|
except per share data)
|
|
|
Note
|
|
|
|
2013
|
|
2012
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
$
|
391,694
|
$
|
364,929
|
|
|
$
|
1,428,477
|
$
|
1,466,014
|
|
Cost of sales
|
|
|
|
|
|
|
318,492
|
|
291,319
|
|
|
|
1,143,082
|
|
1,164,199
|
|
Gross profit
|
|
|
|
|
|
|
73,202
|
|
73,610
|
|
|
|
285,395
|
|
301,815
|
|
Selling and administrative expenses
|
|
|
|
|
|
|
53,572
|
|
53,010
|
|
|
|
211,732
|
|
207,672
|
|
Earnings before finance costs and income taxes
|
|
|
|
|
|
|
19,630
|
|
20,600
|
|
|
|
73,663
|
|
94,143
|
|
Finance costs
|
|
|
|
|
|
|
3,060
|
|
1,337
|
|
|
|
8,951
|
|
4,442
|
|
Earnings before income taxes
|
|
|
|
|
|
|
16,570
|
|
19,263
|
|
|
|
64,712
|
|
89,701
|
|
Income tax expense
|
|
|
10
|
|
|
|
4,356
|
|
5,069
|
|
|
|
17,027
|
|
23,762
|
|
Net earnings
|
|
|
|
|
|
$
|
12,214
|
$
|
14,194
|
|
|
$
|
47,685
|
$
|
65,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
11
|
|
|
$
|
0.73
|
$
|
0.85
|
|
|
$
|
2.85
|
$
|
3.95
|
|
Diluted earnings per share
|
|
|
11
|
|
|
$
|
0.72
|
$
|
0.84
|
|
|
$
|
2.81
|
$
|
3.89
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31
|
|
|
|
Twelve months ended
December 31
|
|
(unaudited, in thousands of Canadian dollars)
|
|
|
|
2013
|
|
2012
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
$
|
12,214
|
$
|
14,194
|
|
|
$
|
47,685
|
$
|
65,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to income
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains (losses) on pension plans, net of tax
expense of $543 (2012 - tax recovery of $251) and
year to date, net of tax expense of $543 (2012 - tax
recovery of $251)
|
|
|
|
1,545
|
|
(683)
|
|
|
|
1,545
|
|
(683)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may subsequently be reclassified to income
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) 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 expense of $14 (2012 - tax recovery of $66)
and year to date, net of tax expense of $88 (2012 - tax
recovery of $187)
|
|
|
|
(41)
|
|
186
|
|
|
|
(247)
|
|
517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative instruments outstanding at
the end of the period designated as cash flow hedges,
net of tax expense of $44 (2012 - tax recovery of $15)
and year to date, net of tax expense of $148 (2012 - tax
recovery of $149)
|
|
|
|
124
|
|
(42)
|
|
|
|
416
|
|
(423)
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
1,628
|
|
(539)
|
|
|
|
1,714
|
|
(589)
|
|
Total comprehensive income
|
|
|
$
|
13,842
|
$
|
13,655
|
|
|
$
|
49,399
|
$
|
65,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
income (loss)
("AOCI")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the twelve months ended December 31, 2013
(unaudited, in thousands of Canadian dollars)
|
|
Note
|
|
|
Share
capital
|
|
Contributed
surplus
|
|
Retained
earnings
|
|
Cash flow
hedges
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2013
|
|
|
|
$
|
106,651
|
|
4,346
|
|
130,944
|
|
(56)
|
|
$
|
241,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
-
|
|
-
|
|
47,685
|
|
-
|
|
|
47,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
-
|
|
-
|
|
1,545
|
|
169
|
|
|
1,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
-
|
|
-
|
|
49,230
|
|
169
|
|
|
49,399
|
|
Shares issued to settle share-based compensation plans
|
|
|
|
|
53
|
|
(53)
|
|
-
|
|
-
|
|
|
-
|
|
Dividends
|
|
8
|
|
|
-
|
|
-
|
|
(44,857)
|
|
-
|
|
|
(44,857)
|
|
Share-based compensation expense
|
|
9
|
|
|
-
|
|
765
|
|
-
|
|
-
|
|
|
765
|
|
December 31, 2013
|
|
|
|
$
|
106,704
|
|
5,058
|
|
135,317
|
|
113
|
|
$
|
247,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCL
|
|
|
|
For the twelve months ended December 31, 2012
(unaudited, in thousands of Canadian dollars)
|
|
|
Note
|
|
|
Share
capital
|
|
Contributed
surplus
|
|
Retained
earnings
|
|
Cash flow
hedges
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2012
|
|
|
|
|
$
|
105,371
|
|
4,888
|
|
117,477
|
|
(150)
|
|
$
|
227,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
-
|
|
-
|
|
65,939
|
|
-
|
|
|
65,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
-
|
|
-
|
|
(683)
|
|
94
|
|
|
(589)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
-
|
|
-
|
|
65,256
|
|
94
|
|
|
65,350
|
|
Shares issued to settle share-based compensation plans
|
|
|
|
|
|
1,280
|
|
(1,280)
|
|
-
|
|
-
|
|
|
-
|
|
Dividends
|
|
|
8
|
|
|
-
|
|
-
|
|
(51,789)
|
|
-
|
|
|
(51,789)
|
|
Share-based compensation expense
|
|
|
9
|
|
|
-
|
|
738
|
|
-
|
|
-
|
|
|
738
|
|
December 31, 2012
|
|
|
|
|
$
|
106,651
|
|
4,346
|
|
130,944
|
|
(56)
|
|
$
|
241,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31
|
|
|
|
Twelve months ended
December 31
|
|
(unaudited, in thousands of Canadian dollars)
|
|
|
Note
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
$
|
12,214
|
|
$
|
14,194
|
|
|
$
|
47,685
|
|
$
|
65,939
|
|
|
Items not affecting cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment
|
|
|
|
|
|
|
2,923
|
|
|
2,404
|
|
|
|
10,117
|
|
|
7,883
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
2,810
|
|
|
2,265
|
|
|
|
9,661
|
|
|
8,467
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
|
452
|
|
|
376
|
|
|
|
1,839
|
|
|
1,466
|
|
|
|
Loss on disposal of property, plant and equipment
|
|
|
5
|
|
|
|
158
|
|
|
10
|
|
|
|
129
|
|
|
139
|
|
|
|
Share-based compensation expense
|
|
|
9
|
|
|
|
205
|
|
|
219
|
|
|
|
765
|
|
|
738
|
|
|
|
Non-cash rental expense
|
|
|
|
|
|
|
13
|
|
|
(1,024)
|
|
|
|
(149)
|
|
|
(1,687)
|
|
|
|
Employee benefits expense, net of payments
|
|
|
|
|
|
|
18
|
|
|
(633)
|
|
|
|
477
|
|
|
(618)
|
|
|
|
Unrealized (gain) loss on derivative instruments
|
|
|
|
|
|
|
(241)
|
|
|
(241)
|
|
|
|
(243)
|
|
|
72
|
|
|
|
Finance costs
|
|
|
|
|
|
|
3,060
|
|
|
1,337
|
|
|
|
8,951
|
|
|
4,442
|
|
|
|
Income tax expense
|
|
|
10
|
|
|
|
4,356
|
|
|
5,069
|
|
|
|
17,027
|
|
|
23,762
|
|
|
|
|
|
|
|
|
25,968
|
|
|
23,976
|
|
|
|
96,259
|
|
|
110,603
|
|
|
Changes in non-cash operating working capital
|
|
|
12
|
|
|
|
16,786
|
|
|
(25,362)
|
|
|
|
17,657
|
|
|
(114,347)
|
|
|
Rental equipment additions
|
|
|
4
|
|
|
|
(5,583)
|
|
|
(3,583)
|
|
|
|
(20,008)
|
|
|
(25,076)
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
(708)
|
|
|
(562)
|
|
|
|
(2,608)
|
|
|
(3,784)
|
|
|
Finance costs paid
|
|
|
|
|
|
|
(1,138)
|
|
|
(1,377)
|
|
|
|
(6,873)
|
|
|
(4,118)
|
|
|
Income taxes paid
|
|
|
|
|
|
|
(2,725)
|
|
|
(1,887)
|
|
|
|
(60,333)
|
|
|
(2,387)
|
|
|
Cash generated from (used in) operating activities
|
|
|
|
|
|
|
32,600
|
|
|
(8,795)
|
|
|
|
24,094
|
|
|
(39,109)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions
|
|
|
5
|
|
|
|
(379)
|
|
|
(586)
|
|
|
|
(4,353)
|
|
|
(6,234)
|
|
|
Proceeds on disposal of property, plant and equipment
|
|
|
5
|
|
|
|
254
|
|
|
28
|
|
|
|
468
|
|
|
523
|
|
|
Intangible assets additions
|
|
|
|
|
|
|
(85)
|
|
|
(32)
|
|
|
|
(115)
|
|
|
(237)
|
|
|
Acquisition of businesses
|
|
|
|
|
|
|
-
|
|
|
(10,078)
|
|
|
|
-
|
|
|
(10,078)
|
|
|
Cash used in investing activities
|
|
|
|
|
|
|
(210)
|
|
|
(10,668)
|
|
|
|
(4,000)
|
|
|
(16,026)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in bank debt
|
|
|
|
|
|
|
(137,998)
|
|
|
30,000
|
|
|
|
(77,998)
|
|
|
92,998
|
|
|
Issuance of senior unsecured note
|
|
|
6
|
|
|
|
125,000
|
|
|
-
|
|
|
|
125,000
|
|
|
-
|
|
|
Deferred financing costs
|
|
|
6
|
|
|
|
(2,969)
|
|
|
(343)
|
|
|
|
(3,244)
|
|
|
(568)
|
|
|
Finance lease payments
|
|
|
|
|
|
|
(1,596)
|
|
|
(819)
|
|
|
|
(3,477)
|
|
|
(2,553)
|
|
|
Dividends paid
|
|
|
|
|
|
|
(10,043)
|
|
|
(13,557)
|
|
|
|
(46,027)
|
|
|
(50,596)
|
|
|
Cash (used in) generated from financing activities
|
|
|
|
|
|
|
(27,606)
|
|
|
15,281
|
|
|
|
(5,746)
|
|
|
39,281
|
|
Change in cash (bank indebtedness)
|
|
|
|
|
|
|
4,784
|
|
|
(4,182)
|
|
|
|
14,348
|
|
|
(15,854)
|
|
(Bank indebtedness) cash - beginning of period
|
|
|
|
|
|
|
(631)
|
|
|
(6,013)
|
|
|
|
(10,195)
|
|
|
5,659
|
|
Cash (bank indebtedness) - end of period
|
|
|
|
|
|
$
|
4,153
|
|
$
|
(10,195)
|
|
|
$
|
4,153
|
|
$
|
(10,195)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 2013
(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, rental and after-sale parts and
service support of mobile equipment, power systems and industrial
components, through a network of 125 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, 2012. The significant accounting policies
follow those disclosed in the most recently reported audited
consolidated financial statements except as disclosed in Note 3.
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 defined benefit liability is
recognized as the net of the fair value of the plan assets less 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. CHANGE IN ACCOUNTING POLICIES
The following new standards have been adopted in the current year:
On January 1, 2013, the Corporation adopted the amendments to IFRS 7 Offsetting Financial Assets and Liabilities, which contains new disclosure requirements for
financial assets and liabilities that are offset in the statement of
financial position or are subject to master netting arrangements or
similar arrangements. The impact on the disclosures in the condensed
consolidated financial statements from adopting IFRS 7 was not
material.
On January 1, 2013, the Corporation adopted IFRS 10 Consolidated Financial Statements, which establishes principles for the preparation and presentation of
consolidated financial statements when an entity controls one or more
other entities. There was no impact on the condensed consolidated
financial statements from adopting IFRS 10.
On January 1, 2013, the Corporation adopted IFRS 13 Fair Value Measurement, which defines fair value and sets out a framework for measuring fair
value when fair value measurements are required or permitted by other
standards. It also requires disclosure of the valuation techniques and
inputs for financial instruments measured at fair value. The impact on
the disclosures in the condensed consolidated financial statements from
adopting IFRS 13 was not material.
On January 1, 2013, the Corporation retrospectively adopted IAS 19R Employee Benefits, which requires recognition of actuarial gains and losses immediately
in other comprehensive income, the full recognition of past service
costs immediately in profit or loss, recognition of the expected return
on plan assets in profit or loss to be calculated based on the rate
used to discount the defined benefit obligation, and certain additional
disclosures. No adjustment to prior years' financial statements was
necessary. The impact on the current year's condensed consolidated
financial statements from adopting IAS 19R was not material.
Effective January 1, 2013, the Corporation early adopted Amendments to
IAS 36 Impairment of Assets issued by the IASB in May 2013. The amendments impacted certain
disclosure requirements only and did not have a material impact on the
condensed consolidated financial statements.
4. RENTAL EQUIPMENT
The Corporation acquired rental equipment with a cost of $5,583 during
the quarter (2012 - $3,583) and $20,008 year to date (2012 - $25,076).
Rental equipment with a carrying amount of $239 during the quarter
(2012 - nil) was transferred from inventories to rental equipment. No
rental equipment during the quarter (2012 - $276) and $1,337 year to
date (2012 - $1,522) ceased to be rented and was classified as held for
sale in the normal course of business and transferred to inventories.
5. PROPERTY, PLANT AND EQUIPMENT
The Corporation acquired property, plant and equipment with a cost of
$379 during the quarter (2012 - $586) and $4,353 year to date (2012 -
$6,234). Assets with a carrying amount of $412 during the quarter (2012
- $38) and $597 year to date (2012 - $662) were disposed of, resulting
in a loss on disposal of $158 during the quarter (2012 - $10) and $129
year to date (2012 - $139).
6. LONG-TERM DEBT
On October 23, 2013 the Corporation issued $125,000 of senior unsecured
notes. The notes carry a coupon of 6.125% per annum and will mature on
October 23, 2020. Effective upon the closing of the note offering, the
Corporation reduced the total available committed amount of the bank
credit facility from $300,000 to $250,000.
|
|
|
|
2013
|
|
|
|
2012
|
|
Bank credit facility
|
|
|
|
|
|
|
|
|
|
Non-revolving term portion
|
|
$
|
60,000
|
|
|
$
|
80,000
|
|
|
Revolving term portion
|
|
|
15,000
|
|
|
|
73,000
|
|
|
|
|
75,000
|
|
|
|
153,000
|
|
Senior unsecured note
|
|
|
125,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Deferred financing costs, net of accumulated amortization of
$779 (2012 - $330)
|
|
|
(4,094)
|
|
|
|
(1,299)
|
|
Long-term debt
|
|
$
|
195,906
|
|
|
$
|
151,701
|
|
|
|
|
|
|
|
|
|
At December 31, 2013, the Corporation has estimated the fair value of
its notes to be approximately $128,750.
7. SHARE CAPITAL
|
|
|
|
Number of
Common
Shares
|
|
|
|
Amount
|
|
Balance, December 31, 2012
|
|
|
16,736,447
|
|
|
$
|
106,651
|
|
Common shares issued to settle share-based compensation plans
|
|
|
7,073
|
|
|
|
53
|
|
Balance, December 31, 2013
|
|
|
16,743,520
|
|
|
$
|
106,704
|
8. DIVIDENDS DECLARED
During the three months ended December 31, 2013, the Corporation
declared cash dividends of $0.60 per share or $10,045 (2012 - dividends
of $0.81 per share or $13,557).
Year to date, the Corporation declared cash dividends of $2.68 per share
or $44,857 (2012, $3.10 per share or $51,789).
The Corporation has declared dividends of $0.20 per share or $3,349 for
each of January, February, March and April 2014.
9. 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 $205 for the quarter (2012
- $219) and $765 for the year to date (2012 - $738) in respect of these
plans.
|
|
December 31, 2013
|
December 31, 2012
|
|
|
|
|
Number of
Rights
|
|
|
|
Fair value at
time of grant
|
|
|
Number of
Rights
|
|
|
|
Fair value at
time of grant
|
|
Outstanding at beginning of year
|
|
|
254,952
|
|
|
$
|
4,932
|
|
|
316,595
|
|
|
$
|
4,908
|
|
Granted in the period
|
- new grants
|
|
|
14,721
|
|
|
|
524
|
|
|
27,231
|
|
|
|
1,304
|
|
|
- dividend equivalents
|
|
|
19,973
|
|
|
|
-
|
|
|
18,129
|
|
|
|
-
|
|
Settled in the period
|
|
|
(7,073)
|
|
|
|
(53)
|
|
|
(107,003)
|
|
|
|
(1,280)
|
|
Outstanding at end of period
|
|
|
282,573
|
|
|
$
|
5,403
|
|
|
254,952
|
|
|
$
|
4,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013, 266,579 share rights were vested (2012 - 240,102).
b) Cash-settled rights plans
The Corporation recorded compensation recovery of $111 for the quarter
(2012 - $513) and $124 for the year to date (2012 - cost of $2,653) in
respect of the share-based portion of the MTIP and DSUP. At December
31, 2013, the carrying amount of the share-based portion of these
liabilities was $855 (2012 - $2,444).
10. INCOME TAXES
Income tax expense comprises current and deferred tax as follows:
|
For the twelve months ended December 31
|
|
|
|
2013
|
|
|
|
2012
|
|
Current
|
|
|
$
|
15,784
|
|
|
$
|
44,353
|
|
Deferred
|
- Origination and reversal of temporary difference
|
|
|
|
1,243
|
|
|
|
(20,621)
|
|
|
- Change in tax law and rates
|
|
|
|
-
|
|
|
|
30
|
|
Income tax expense
|
|
|
$
|
17,027
|
|
|
$
|
23,762
|
The calculation of current tax is based on a combined federal and
provincial statutory income tax rate of 26.1% (2012 - 26.2%). 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 rate is as follows:
|
|
|
|
|
2013
|
|
|
|
2012
|
|
Combined statutory income tax rate
|
|
|
|
26.1%
|
|
|
|
26.2%
|
|
Expected income tax expense at statutory rates
|
|
|
$
|
16,890
|
|
|
$
|
23,502
|
|
Non-deductible expenses
|
|
|
|
573
|
|
|
|
548
|
|
Deferred tax related to changes in tax law and rates
|
|
|
|
-
|
|
|
|
30
|
|
Other
|
|
|
|
(436)
|
|
|
|
(318)
|
|
Income tax expense
|
|
|
$
|
17,027
|
|
|
$
|
23,762
|
11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
|
|
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
2012
|
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- net earnings
|
|
|
$
|
12,214
|
|
|
$
|
14,194
|
|
|
$
|
47,685
|
|
|
$
|
65,939
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- weighted average shares
|
|
|
|
16,738,984
|
|
|
|
16,736,447
|
|
|
|
16,737,086
|
|
|
|
16,699,874
|
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- weighted average shares
|
|
|
|
16,738,984
|
|
|
|
16,736,447
|
|
|
|
16,737,086
|
|
|
|
16,699,874
|
|
- effect of dilutive share rights
|
|
|
|
271,045
|
|
|
|
234,518
|
|
|
|
260,390
|
|
|
|
254,236
|
|
Denominator for diluted earnings per share
|
|
|
|
17,010,029
|
|
|
|
16,970,965
|
|
|
|
16,997,476
|
|
|
|
16,954,110
|
|
Basic earnings per share
|
|
|
$
|
0.73
|
|
|
$
|
0.85
|
|
|
$
|
2.85
|
|
|
$
|
3.95
|
|
Diluted earnings per share
|
|
|
$
|
0.72
|
|
|
$
|
0.84
|
|
|
$
|
2.81
|
|
|
$
|
3.89
|
No share rights were excluded from the above calculations as none were
anti-dilutive.
12. CHANGES IN NON-CASH OPERATING WORKING CAPITAL
|
|
|
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
2012
|
|
|
Trade and other receivables
|
|
|
$
|
(2,642)
|
|
|
$
|
(6,900)
|
|
|
$
|
6,593
|
|
|
$
|
(17,139)
|
|
|
Inventories
|
|
|
|
13,735
|
|
|
|
8,854
|
|
|
|
(2,777)
|
|
|
|
(39,035)
|
|
|
Prepaid expenses
|
|
|
|
93
|
|
|
|
(680)
|
|
|
|
1,109
|
|
|
|
999
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
4,686
|
|
|
|
(29,569)
|
|
|
|
13,256
|
|
|
|
(58,856)
|
|
|
Provisions
|
|
|
|
914
|
|
|
|
2,933
|
|
|
|
(524)
|
|
|
|
(316)
|
|
Total
|
|
|
$
|
16,786
|
|
|
$
|
(25,362)
|
|
|
$
|
17,657
|
|
|
$
|
(114,347)
|
13. OPERATING SEGMENTS
The Corporation operates through a network of 125 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
December 31, 2013
|
|
|
|
Equipment
|
|
|
|
Power
Systems
|
|
|
|
Industrial
Components
|
|
|
|
Segment
Eliminations
|
|
|
|
Total
|
|
Equipment
|
|
|
$
|
133,927
|
|
|
$
|
34,307
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
168,234
|
|
Parts
|
|
|
|
45,742
|
|
|
|
33,112
|
|
|
|
80,374
|
|
|
|
-
|
|
|
|
159,228
|
|
Service
|
|
|
|
26,700
|
|
|
|
16,426
|
|
|
|
8,691
|
|
|
|
-
|
|
|
|
51,817
|
|
Rental and other
|
|
|
|
11,663
|
|
|
|
1,602
|
|
|
|
-
|
|
|
|
(850)
|
|
|
|
12,415
|
|
Revenue
|
|
|
$
|
218,032
|
|
|
$
|
85,447
|
|
|
$
|
89,065
|
|
|
$
|
(850)
|
|
|
$
|
391,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before finance costs and income taxes
|
|
|
$
|
13,435
|
|
|
$
|
6,021
|
|
|
$
|
2,149
|
|
|
$
|
(1,975)
|
|
|
$
|
19,630
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,060
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,356
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the twelve months ended
December 31, 2013
|
|
|
|
Equipment
|
|
|
|
Power
Systems
|
|
|
|
Industrial
Components
|
|
|
|
Segment
Eliminations
|
|
|
|
Total
|
|
Equipment
|
|
|
$
|
426,141
|
|
|
$
|
97,676
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
523,817
|
|
Parts
|
|
|
|
182,661
|
|
|
|
133,419
|
|
|
|
342,477
|
|
|
|
-
|
|
|
|
658,557
|
|
Service
|
|
|
|
108,584
|
|
|
|
65,434
|
|
|
|
22,416
|
|
|
|
-
|
|
|
|
196,434
|
|
Rental and other
|
|
|
|
46,139
|
|
|
|
7,485
|
|
|
|
-
|
|
|
|
(3,955)
|
|
|
|
49,669
|
|
Revenue
|
|
|
$
|
763,525
|
|
|
$
|
304,014
|
|
|
$
|
364,893
|
|
|
$
|
(3,955)
|
|
|
$
|
1,428,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before finance costs and income taxes
|
|
|
$
|
49,031
|
|
|
$
|
17,119
|
|
|
$
|
14,990
|
|
|
$
|
(7,477)
|
|
|
$
|
73,663
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,951
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,027
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets excluding intangible assets
|
|
|
$
|
317,294
|
|
|
$
|
150,019
|
|
|
$
|
117,107
|
|
|
$
|
-
|
|
|
$
|
584,420
|
|
Intangible assets
|
|
|
|
21,664
|
|
|
|
14,221
|
|
|
|
49,970
|
|
|
|
89
|
|
|
|
85,944
|
|
Corporate and other assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,589
|
|
|
|
6,589
|
|
Total assets
|
|
|
$
|
338,958
|
|
|
$
|
164,240
|
|
|
$
|
167,077
|
|
|
$
|
6,678
|
|
|
$
|
676,953
|
|
Segment liabilities
|
|
|
$
|
115,581
|
|
|
$
|
44,581
|
|
|
$
|
59,472
|
|
|
$
|
-
|
|
|
$
|
219,634
|
|
Corporate and other liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
210,127
|
|
|
|
210,127
|
|
Total liabilities
|
|
|
$
|
115,581
|
|
|
$
|
44,581
|
|
|
$
|
59,472
|
|
|
$
|
210,127
|
|
|
$
|
429,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
December 31, 2012
|
|
|
|
Equipment
|
|
|
|
Power
Systems
|
|
|
|
Industrial
Components
|
|
|
|
Segment
Eliminations
|
|
|
|
Total
|
|
Equipment
|
|
|
$
|
119,056
|
|
|
$
|
29,506
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
148,562
|
|
Parts
|
|
|
|
42,318
|
|
|
|
31,857
|
|
|
|
80,626
|
|
|
|
-
|
|
|
|
154,801
|
|
Service
|
|
|
|
28,381
|
|
|
|
15,637
|
|
|
|
4,699
|
|
|
|
-
|
|
|
|
48,717
|
|
Rental and other
|
|
|
|
11,862
|
|
|
|
2,027
|
|
|
|
-
|
|
|
|
(1,040)
|
|
|
|
12,849
|
|
Revenue
|
|
|
$
|
201,617
|
|
|
$
|
79,027
|
|
|
$
|
85,325
|
|
|
$
|
(1,040)
|
|
|
$
|
364,929
|
|
Earnings before finance costs and income taxes
|
|
|
$
|
13,995
|
|
|
$
|
5,015
|
|
|
$
|
3,607
|
|
|
$
|
(2,017)
|
|
|
$
|
20,600
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,337
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,069
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the twelve months ended
December 31, 2012
|
|
|
|
Equipment
|
|
|
|
Power
Systems
|
|
|
|
Industrial
Components
|
|
|
|
Segment
Eliminations
|
|
|
|
Total
|
|
Equipment
|
|
|
$
|
475,888
|
|
|
$
|
123,024
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
598,912
|
|
Parts
|
|
|
|
165,521
|
|
|
|
135,595
|
|
|
|
341,111
|
|
|
|
-
|
|
|
|
642,227
|
|
Service
|
|
|
|
98,874
|
|
|
|
67,724
|
|
|
|
18,938
|
|
|
|
-
|
|
|
|
185,536
|
|
Rental and other
|
|
|
|
38,199
|
|
|
|
5,951
|
|
|
|
-
|
|
|
|
(4,811)
|
|
|
|
39,339
|
|
Revenue
|
|
|
$
|
778,482
|
|
|
$
|
332,294
|
|
|
$
|
360,049
|
|
|
$
|
(4,811)
|
|
|
$
|
1,466,014
|
|
Earnings before finance costs and income taxes
|
|
|
$
|
56,130
|
|
|
$
|
26,130
|
|
|
$
|
22,130
|
|
|
$
|
(10,247)
|
|
|
$
|
94,143
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,442
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,762
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets excluding intangible assets
|
|
|
$
|
315,499
|
|
|
$
|
145,444
|
|
|
$
|
121,045
|
|
|
$
|
-
|
|
|
$
|
581,988
|
|
Intangible assets
|
|
|
|
21,845
|
|
|
|
14,488
|
|
|
|
51,333
|
|
|
|
2
|
|
|
|
87,668
|
|
Corporate and other assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,206
|
|
|
|
2,206
|
|
Total assets
|
|
|
$
|
337,344
|
|
|
$
|
159,932
|
|
|
$
|
172,378
|
|
|
$
|
2,208
|
|
|
$
|
671,862
|
|
Segment liabilities
|
|
|
$
|
110,546
|
|
|
$
|
47,663
|
|
|
$
|
48,887
|
|
|
$
|
-
|
|
|
$
|
207,096
|
|
Corporate and other liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222,881
|
|
|
|
222,881
|
|
Total liabilities
|
|
|
$
|
110,546
|
|
|
$
|
47,663
|
|
|
$
|
48,887
|
|
|
$
|
222,881
|
|
|
$
|
429,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets and liabilities do not include assets and liabilities
associated with the corporate office including deferred financing
costs, income taxes, bank indebtedness, bank debt, employee benefits,
and dividends payable.
14. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the
current year's presentation.
SOURCE Wajax Corporation
