TSX Symbol: WJX
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(Dollars in millions, except per share data)
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Three Months Ended September 30
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Nine Months Ended September 30
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2014
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2013
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2014
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2013
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CONSOLIDATED RESULTS
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Revenue
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$359.5
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$338.5
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$1,065.2
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$1,036.8
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Net earnings
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$11.1
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$11.5
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$30.0
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$35.5
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Basic earnings per share
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$0.66
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$0.69
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$1.79
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$2.12
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Adjusted net earnings (1)
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$13.3
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$11.5
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32.2
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$35.5
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Basic adjusted earnings per share (1)(4)
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$0.79
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$0.69
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1.92
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$2.12
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SEGMENTS
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Revenue
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- Equipment
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$179.3
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$171.6
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$528.0
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$516.7
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- Power Systems
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$78.2
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$69.2
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$237.3
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$218.6
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- Industrial Components
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$103.2
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$98.9
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$304.4
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$304.6
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Earnings
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- Equipment (2)
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$12.2
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$11.3
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$36.5
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$32.0
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% margin
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6.8%
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6.6%
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6.9%
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6.2%
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- Power Systems (2)
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$5.4
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$3.7
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$13.1
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$11.1
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% margin
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6.9%
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5.4%
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5.5%
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5.1%
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- Industrial Components (2)
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$3.6
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$4.8
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$9.4
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$16.4
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% margin
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3.5%
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4.9%
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3.1%
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5.4%
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Earnings before restructuring costs (3)
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- Industrial Components
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$6.6
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$4.8
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$12.4
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$16.4
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% margin
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6.4%
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4.9%
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4.1%
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5.4%
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This press release contains the following Non-GAAP and Additional GAAP
measures that do not have standardized meanings prescribed by generally
accepted accounting principles ("GAAP"): Funded net debt; Adjusted net
earnings; Basic and diluted adjusted net earnings; Segment earnings
before restructuring costs and Backlog. See the accompanying
Management Discussion and Analysis for the third quarter of 2014 ("Q3
2014 MD&A") Non-GAAP and Additional GAAP Measures section.
(1)
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Net earnings excluding $2.2 million, or $0.13 per share, of after-tax
restructuring costs.
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(2)
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Segment earnings before finance costs and income taxes.
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(3)
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Segment earnings before restructuring costs, finance costs and income
taxes.
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(4)
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At September 30, 2014 the numbers of basic and diluted shares
outstanding were 16,778,883 and 17,040,949, respectively for the three
months ended and 16,770,709 and 17,030,686, respectively for the nine
months ended.
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TORONTO, Nov. 4, 2014 /CNW/ - Wajax Corporation ("Wajax" or the
"Corporation") today announced its 2014 third quarter results.
Third Quarter Highlights
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Consolidated third quarter revenue of $359.5 million increased $21.0
million, or 6%, compared to last year on increased sales in all three
segments. Higher mining and forestry equipment sales in the Equipment
segment offset reduced mining related parts and service volumes,
resulting in a 4% increase in revenue. Revenue in the Power System
segment increased 13% on higher volumes to oil and gas and on-highway
customers and the Industrial Components segment sales increased 4% on
improved bearing and power transmission parts sales in all regions.
-
Net earnings for the quarter were $11.1 million, or $0.66 per share,
compared to $11.5 million, or $0.69 per share in 2013. Included in
current year's earnings is $3.1 million of pre-tax restructuring costs
recorded in the Industrial Components segment related to the
restructuring of the sales force and branch management organization.
This restructuring is expected to result in improved sales team
effectiveness and annual pre-tax cost savings in excess of $5.0
million.
-
Excluding the after-tax restructuring costs, adjusted net earnings for
the quarter were $13.3 million, or $0.79 per share, compared to $11.5
million, or $0.69 per share recorded in 2013. Equipment segment
earnings increased $0.9 million, or 9%, on higher equipment sales and
higher margins. Power Systems segment earnings increased $1.7 million,
or 44%, as a result of increased volumes to oil and gas and on-highway
customers. Industrial Components segment earnings before restructuring
costs increased $1.8 million, or 38%, on higher revenues and gross
profit margins and lower selling and administrative costs.
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Consolidated backlog of $208.0 million at September 30, 2014 decreased
$16.5 million compared to June 30, 2014 on declines in the Equipment
segment, which were partially offset by increases in the Power Systems
and Industrial Components segments.
-
Funded net debt of $224.7 million at September 30, 2014 increased $6.5
million compared to $218.2 million at the end of June 2014, mainly as a
result of an increase in non-cash operating working capital in the
quarter.
Effective November 4, 2014, Stuart Auld was appointed Senior Vice
President, Information Systems. Stuart has extensive IT, operations
and finance experience from large multi-divisional and multi-branch
organizations.
During the quarter the corporation amended its bank credit facility,
extending the maturity a further three years to August 12, 2019 on more
favourable terms than its previous agreement. The new terms include
the allowance for dividend payments as long as the Corporation's
leverage ratio, as defined in the agreement, is less than 3.25x, which
is 0.25x higher than the previous agreement and equal to the level in
the senior notes agreement.
The Corporation declared monthly dividends of $0.20 per share ($2.40
annualized) for the months of November and December, 2014 and January
and February, 2015.
Outlook
Commenting on the third quarter results and the outlook for the
remainder of 2014, Mark Foote, President and CEO, stated:
"We are pleased with our team's performance in the third quarter.
Revenue and adjusted net earnings were higher than the previous year on
strength in all three segments. In spite of lower mining parts and
service volumes, the Equipment segment recorded increased earnings on
higher equipment sales and improved margins. The Power Systems segment
benefitted from improved activity in the oil and gas sector and
on-highway trucking. The Industrial Components segment gained momentum
as the group began to benefit from its restructuring activities, while
at the same time increasing revenue and backlog. Planned restructuring
in Industrial Components was completed in the third quarter and we
continue to expect annual pre-tax savings to exceed $5 million as a
result of these changes.
We have adopted a more cautious outlook for the rest of 2014, given
recent and continuing weakness in commodity markets. Our expectation
regarding key market demand in Canada for the remainder of the year is
mixed. Capital goods purchases and certain aspects of maintenance
spending by mining and oil sands customers may be constrained,
adversely impacting the Equipment segment and, to a lesser degree, the
Power Systems segment. However, the Power Systems segment continues to
expect some improvement in the conventional oil and gas sector relative
to last year. The Industrial Components segment continues to build
backlog in a number of market sectors and, coupled with the lower cost
base, the group is expected to outperform results posted in the fourth
quarter of last year. Our expectation for full year net earnings
continues to support our current dividend of $0.20 per share which we
have confirmed for November and December of 2014 and January and
February of 2015."
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 121 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 Third Quarter Financial Results Conference Call.
You are invited to listen to the live Webcast on Tuesday, November 4,
2014 at 2:30 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, the expected cost savings from the restructuring of our
Industrial Components segment, our outlook for the remainder of 2014,
including our expectations for demand in several of our key markets,
including mining and oil sands and conventional oil and gas, and the
anticipated effect on Equipment and Power Systems segments, our fourth
quarter outlook for the Industrial Components segment, and our outlook
for full year net earnings continuing to support our current dividend
level. 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 - Q3 2014
The following management's discussion and analysis ("MD&A") discusses
the consolidated financial condition and results of operations of Wajax
Corporation ("Wajax" or the "Corporation") for the quarter ended
September 30, 2014. This MD&A should be read in conjunction with the
information contained in the unaudited Condensed Consolidated Financial
Statements and accompanying notes for the quarter ended September 30,
2014, the annual audited Consolidated Financial Statements and
accompanying notes for the year ended December 31, 2013 and the
associated MD&A. Information contained in this MD&A is based on
information available to management as of November 4, 2014.
Unless otherwise indicated, all financial information within this MD&A
is in millions of Canadian dollars, except ratio calculations, share,
share rights and per share data. Additional information, including
Wajax's Annual Report and Annual Information Form, are available on
SEDAR at www.sedar.com.
Responsibility of Management and the Board of Directors
Management is responsible for the information disclosed in this MD&A and
the unaudited Condensed Consolidated Financial Statements and
accompanying notes, and has in place appropriate information systems,
procedures and controls to ensure that information used internally by
management and disclosed externally is materially complete and
reliable. Wajax's Board of Directors has approved this MD&A and the
unaudited Condensed Consolidated Financial Statements and accompanying
notes. In addition, Wajax's Audit Committee, on behalf of the Board of
Directors, provides an oversight role with respect to all public
financial disclosures made by Wajax, and has reviewed this MD&A and the
unaudited Condensed Consolidated Financial Statements and accompanying
notes.
Disclosure Controls and Procedures and Internal Control over Financial
Reporting
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 September 30, 2014, 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 September 30, 2014, 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.
There was no change in Wajax's ICFR that occurred during the three
months ended September 30, 2014 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, our objective with respect to the future payment of
dividends, our financing and capital requirements, as well as our
capital structure and leverage ratio, the expected benefits and cost
savings from the restructuring of our Industrial Components segment,
our outlook for the remainder of 2014, including our expectations for
demand in several of our key markets, including mining and oil sands
and conventional oil and gas, and the anticipated effect on the
Equipment and Power Systems segments, our fourth quarter outlook for
the Industrial Components segment and our outlook for full year net
earnings continuing to support our current dividend level. 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 121 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 expected 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 prudent capital structure.
Consolidated Results
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Three months
ended
September 30
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Nine months
ended
September 30
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2014
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2013
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2014
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2013
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Revenue
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$
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359.5
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$
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338.5
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$
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1,065.2
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$
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1,036.8
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Gross profit
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$
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72.8
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$
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68.7
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$
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217.7
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$
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210.3
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Selling and administrative expenses
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$
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51.2
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$
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50.9
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$
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163.7
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$
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156.3
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Restructuring costs
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$
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3.1
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$
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-
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$
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3.1
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$
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-
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Earnings before finance costs and income taxes (1)
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$
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18.5
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$
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17.9
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$
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51.0
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$
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54.0
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Finance costs
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$
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3.3
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$
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2.1
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$
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9.7
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$
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5.9
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Earnings before income taxes (1)
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$
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15.2
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$
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15.7
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$
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41.2
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$
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48.1
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Income tax expense
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$
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4.1
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$
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4.2
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$
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11.2
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$
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12.7
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Net earnings
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$
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11.1
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$
|
11.5
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$
|
30.0
|
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$
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35.5
|
|
|
|
|
|
|
|
|
|
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|
|
- Basic earnings per share
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$
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0.66
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$
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0.69
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$
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1.79
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$
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2.12
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- Diluted earnings per share
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$
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0.65
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$
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0.68
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$
|
1.76
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$
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2.09
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Adjusted net earnings (1) (2)
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$
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13.3
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$
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11.5
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$
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32.2
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$
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35.5
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|
|
|
|
|
|
|
|
|
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- Basic adjusted earnings per share (1) (2)
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$
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0.79
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$
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0.69
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$
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1.92
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$
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2.12
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- Diluted adjusted earnings per share (1) (2)
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$
|
0.78
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$
|
0.68
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$
|
1.89
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$
|
2.09
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(1)
|
These amounts do not have a standardized meaning prescribed by generally
accepted accounting principles ("GAAP"). See the Non-GAAP and
Additional GAAP Measures section.
|
(2)
|
Net earnings excluding $2.2 million, or $0.13 per share, of after-tax
restructuring costs.
|
Overall market conditions in the quarter were mixed. Oil and gas sector
activity in western Canada was somewhat stronger with increases in the
Power Systems segment's equipment and parts and service sales and
higher bearings and transmission parts volumes in the Industrial
Components segment. However, the Industrial Components segment
experienced a decline in oil and gas related fluid power and process
equipment product and service revenues.
Although mining parts and service sales in the Equipment segment,
including those in the oil sands market, remained soft as customers
deferred spending, mining equipment sales improved with additional
deliveries compared to last year.
The Equipment segment was positively impacted in the quarter by
increased demand for forestry equipment, however overall market demand
in Canada for large excavators was down slightly, quarter-over-quarter.
Revenue
Revenue in the third quarter of 2014 increased 6%, or $21.0 million,
from $338.5 million in 2013. Equipment segment's revenue increased 4%,
or $7.7 million, as increases in mining and forestry equipment volumes
offset lower mining parts and service sales. Power Systems segment
revenue increased 13%, or $9.0 million, due mainly to higher volumes in
western Canada, and Industrial Components segment revenue increased 4%,
or $4.3 million, driven by stronger bearings and power transmission
sales in all regions.
For the nine months ended September 30, 2014, revenue increased 3%, or
$28.5 million, over the same period last year.
Gross profit
Higher volumes in all three segments were the primary contributors to
the $4.1 million, or 6%, increase in gross profit in the third quarter
of 2014 compared to last year. The gross profit margin percentage of
20.3% remained the same compared to 2013.
For the nine months ended September 30, 2014, gross profit increased
$7.4 million due mainly to higher volumes compared to the same period
last year. The gross profit margin percentage of 20.4% increased
slightly from 20.3% in 2013.
Selling and administrative expenses
Selling and administrative expenses increased $0.3 million in the third
quarter of 2014, compared to the same quarter last year. Selling and
administrative expenses as a percentage of revenue decreased to 14.3%
in 2014 from 15.0% in 2013.
For the nine months ended September 30, 2014, selling and administrative
expenses increased $7.4 million compared to the same period last year.
The increase was due mainly to higher personnel related costs,
including higher annual employee incentive accruals. Selling and
administrative expenses as a percentage of revenue increased to 15.4%
in 2014 from 15.1% in 2013.
Restructuring costs
Restructuring costs of $3.1 million were recorded in the third quarter
of 2014 in the Industrial Components segment to improve the
effectiveness and to simplify the sales force and branch management
organization. The restructuring plan has been completed and, in
addition to the improvements noted, is expected to result in annual
pre-tax cost savings in excess of $5.0 million.
Finance costs
Quarterly finance costs of $3.3 million increased $1.2 million compared
to 2013 due primarily to the higher cost of borrowing resulting from
the Corporation's issuance of $125 million of senior notes on October
23, 2013. See the Liquidity and Capital Resources section.
For the nine months ended September 30, 2014, finance costs of $9.7
million increased $3.8 million compared to the same period in 2013.
The increase was due primarily to the higher cost of borrowing
resulting from the issuance of the senior notes.
Income tax expense
The Corporation's effective income tax rate of 27.1% for the quarter
increased from 26.5% in the previous year due to the reversal of
certain tax accruals in 2013.
For the nine months ended September 30, 2014, the effective income tax
rate of 27.1% increased slightly from 26.3% in the previous year due to
the reversal of certain tax accruals in 2013.
Net earnings
Quarterly net earnings decreased $0.4 million to $11.1 million, or $0.66
per share, from $11.5 million, or $0.69 per share, in the same quarter
of 2013. The decrease in net earnings resulted primarily from the $3.1
million restructuring costs and increased finance costs, which was
partially offset by the positive impact of higher volumes compared to
the same period last year.
For the nine months ended September 30, 2014, net earnings decreased
$5.5 million to $30.0 million, or $1.79 per share, from $35.5 million,
or $2.12 per share, in the same period in 2013. The decrease in net
earnings resulted primarily from additional selling and administrative
expenses, the $3.1 million restructuring provision and increased
finance costs. These decreases in earnings more than offset the
positive impact of higher volumes compared to the same periods last
year.
Adjusted net earnings (See the Non-GAAP and Additional GAAP Measures
section)
For both the quarter and nine months ended September 30, 2014, adjusted
net earnings excludes $2.2 million, or $0.13 per share, of after-tax
restructuring costs recorded in the Industrial Components segment.
As such, quarterly adjusted net earnings increased $1.8 million to $13.3
million, or $0.79 per share, from $11.5 million, or $0.69 per share, in
the same quarter of 2013. The increase in adjusted net earnings
resulted primarily from the positive impact of higher volumes partially
offset by increased finance costs compared to the same period last
year.
For the nine months ended September 30, 2014, adjusted net earnings
decreased $3.3 million to $32.2 million, or $1.92 per share, from $35.5
million, or $2.12 per share, in the same period in 2013. The decrease
in adjusted net earnings resulted primarily from additional selling and
administrative expenses and increased finance costs that more than
offset the positive impact of higher volumes compared to the same
period last year.
Comprehensive income
Total comprehensive income of $11.7 million in the third quarter of 2014
included net earnings of $11.1 million and other comprehensive income
of $0.6 million.
For the nine months ended September 30, 2014, total comprehensive income
of $30.3 million included net earnings of $30.0 million and other
comprehensive income of $0.3 million.
Funded net debt (See the Non-GAAP and Additional GAAP Measures section)
Funded net debt of $224.7 million at September 30, 2014 increased $6.5
million compared to $218.2 million at June 30, 2014. During the
period, cash generated from operating activities of $5.8 million was
more than offset by dividends paid of $10.1 million, investing
activities of $1.7 million and finance lease payments of $0.8 million.
Wajax's leverage ratio of 2.33 times at September 30, 2014 decreased
slightly from the June 30, 2014 ratio of 2.35 times. See the
Consolidated Financial Condition section.
Funded net debt of $224.7 million at September 30, 2014 increased $19.7
million compared to December 31, 2013. Cash generated from operating
activities during the period of $16.1 million was offset by dividends
paid of $30.2 million, investing activities of $3.8 million and finance
lease payments of $2.7 million.
On August 6, 2014, the Corporation amended its bank credit facility on
more favorable terms, including a three year extension of the maturity
date from August 12, 2016 to August 12, 2019. The Corporation's
restriction from declaring dividends in the event the Corporation's
leverage ratio, as defined in the bank credit facility agreement,
exceeds 3.0 times has been amended to restrict the declaration of
dividends in the event the leverage ratio exceeds 3.25 times. In
addition, the fully secured facility of $250 million is now comprised
of a $30 million non-revolving term portion and a $220 million
revolving term portion. The $0.7 million cost of amending the facility
has been capitalized and will be amortized over the remaining term of
the facility. See the Liquidity and Capital Resources section.
Dividends
For the third quarter ended September 30, 2014, monthly dividends
declared totaled $0.60 per share. For the third quarter ended
September 30, 2013, monthly dividends declared totaled $0.60 per share.
For the nine months ended September 30, 2014 monthly dividends declared
totaled $1.80 per share. For the nine months ended September 30, 2013
monthly dividends declared totaled $2.08 per share.
On August 6, 2014, Wajax announced a monthly dividend of $0.20 per share
($2.40 annualized) for the month of October payable on November 20,
2014 to shareholders of record on October 31, 2014. On November 4,
2014, Wajax announced monthly dividends of $0.20 per share ($2.40
annualized) for each of the months of November and December, 2014 and
January and February, 2015 payable on December 22, 2014, January 20,
2015, February 20, 2015 and March 20, 2015 to shareholders of record on
November 28, 2014, December 31, 2014, January 30, 2015 and February 27,
2015, respectively. See the Strategic Direction and Outlook section.
Backlog (See the Non-GAAP and Additional GAAP Measures section)
Consolidated backlog at September 30, 2014 of $208.0 million decreased
$16.5 million, or 7%, from $224.5 million at June 30, 2014 as a
decrease in the Equipment segment was partially offset by increases in
the Power Systems and Industrial Components segments. Consolidated
backlog increased $3.2 million, or 2%, compared to September 30, 2013.
Backlog includes the total sales value of customer purchase commitments
for future delivery or commissioning. See the Results of Operations
section for further backlog detail by segment.
Comparative information
During the second quarter of 2014, accountability for the oil sands
based rotating products group was transferred from the Equipment
segment to the Industrial Components segment. As a result, the rotating
products group's results for 2014, along with comparative information,
have been reclassified from the Equipment segment to the Industrial
Components segment.
Senior Vice President, Information Systems
Effective November 4, 2014, Stuart Auld was appointed Senior Vice
President, Information Systems. Stuart has extensive IT, operations and
finance experience from large multi-divisional and multi-branch
organizations.
Results of Operations
Equipment
|
|
|
|
|
|
|
Three months ended
September 30
|
|
|
|
Nine months ended
September 30
|
|
|
2014
|
|
|
2013
|
|
|
|
|
2014
|
|
2013
|
Equipment(1)
|
$
|
120.8
|
|
$
|
104.8
|
|
|
|
$
|
331.3
|
$
|
322.8
|
Parts and service
|
$
|
58.5
|
|
$
|
66.8
|
|
|
|
$
|
196.7
|
$
|
193.9
|
Segment revenue
|
$
|
179.3
|
|
$
|
171.6
|
|
|
|
$
|
528.0
|
$
|
516.7
|
Segment earnings(2)
|
$
|
12.2
|
|
$
|
11.3
|
|
|
|
$
|
36.5
|
$
|
32.0
|
Segment earnings margin
|
|
6.8%
|
|
|
6.6%
|
|
|
|
|
6.9%
|
|
6.2%
|
(1)
|
Includes rental and other revenue.
|
(2)
|
Earnings before finance costs and income taxes.
|
Revenue in the third quarter of 2014 increased $7.7 million, to $179.3
million, from $171.6 million in the same quarter of 2013. Segment
earnings for the quarter increased $0.9 million, to $12.2 million,
compared to the same quarter in the previous year. The following
factors contributed to the Equipment segment's quarter-over-quarter
results:
-
Equipment revenue for the third quarter increased $16.0 million compared
to the same quarter last year with specific variances as follows:
-
Mining equipment sales increased $10.6 million, mainly as a result of
higher Hitachi mining equipment deliveries in western Canada.
-
Forestry equipment revenue increased $9.3 million as strength in the
lumber market led to higher market demand for Tigercat equipment in all
regions and Hitachi equipment in western Canada.
-
Crane and utility equipment revenue increased $1.1 million as a result
of sales to utility customers in central Canada.
-
Material handling equipment revenue decreased $3.6 million, due
primarily to sales in 2013 of higher dollar value units in eastern
Canada which were not repeated in 2014.
-
Construction equipment revenue decreased $1.4 million attributable
primarily to decreases in JCB equipment volumes offset partially by
increased Bell ADT equipment deliveries in western Canada.
-
Parts and service volumes for the third quarter decreased $8.3 million
compared to the same quarter last year. The decrease was primarily
attributable to lower mining sector volumes in western Canada,
resulting from lower rebuild volumes, offset partially by higher
forestry sector sales in all regions.
-
Segment earnings for the third quarter increased $0.9 million compared
to the same quarter last year. The impact of higher volumes and margins
more than offset a $0.2 million increase in selling and administrative
expenses.
Backlog of $114.1 million at September 30, 2014 decreased $23.5 million
compared to June 30, 2014, due mainly to lower mining sector and crane
and utility sector backlog. Backlog increased $14.0 million compared
to September 30, 2013 due mainly to increases material handling, crane
and utility and mining sector backlog.
Power Systems
|
Three months ended
|
Nine months ended
|
|
September 30
|
September 30
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Equipment(1)
|
$
|
26.8
|
$
|
21.6
|
$
|
80.3
|
$
|
69.3
|
Parts and service
|
$
|
51.4
|
$
|
47.6
|
$
|
157.0
|
$
|
149.3
|
Segment revenue
|
$
|
78.2
|
$
|
69.2
|
$
|
237.3
|
$
|
218.6
|
Segment earnings(2)
|
$
|
5.4
|
$
|
3.7
|
$
|
13.1
|
$
|
11.1
|
Segment earnings margin
|
|
6.9%
|
|
5.4%
|
|
5.5%
|
|
5.1%
|
(1)
|
Includes rental and other revenue.
|
(2)
|
Earnings before finance costs and income taxes.
|
|
|
Revenue in the third quarter of 2014 increased $9.0 million, or 13%, to
$78.2 million compared to $69.2 million in the same quarter of 2013.
Segment earnings increased $1.7 million to $5.4 million in the third
quarter compared to the same quarter in the previous year. The
following factors impacted quarter-over-quarter revenue and earnings:
-
Equipment revenue increased $5.2 million due mainly to higher
off-highway equipment sales to oil and gas customers in western Canada
and mining customers in eastern Canada. In addition, higher power
generation and rental volumes contributed to the increase.
-
Parts and service volumes increased $3.8 million compared to the same
quarter last year as a result of increased sales to on-highway
customers in all regions and higher sales to off-highway oil and gas
customers in western Canada.
-
Segment earnings increased $1.7 million compared to the same quarter
last year as the impact of increased sales activity and a $0.1 million
reduction in selling and administrative expenses was partially offset
by lower rental gross margins. In addition, a $0.8 million equipment
inventory obsolescence provision taken in the quarter was offset by
other provisions released into income.
Backlog of $47.3 million as of September 30, 2014 increased $3.6 million
compared to June 30, 2014 driven by increases in power generation
orders. Backlog decreased $15.6 million compared to September 30, 2013
as the impact of lower power generation orders in all regions was
partially offset by an increase in off-highway backlog in western
Canada.
Industrial Components
|
Three months ended
|
Nine months ended
|
|
September 30
|
September 30
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Segment revenue
|
$
|
103.2
|
$
|
98.9
|
$
|
304.4
|
$
|
304.6
|
Segment earnings before restructuring costs(1)
|
$
|
6.6
|
$
|
4.8
|
$
|
12.4
|
$
|
16.4
|
Restructuring costs
|
$
|
(3.1)
|
$
|
-
|
$
|
(3.1)
|
$
|
-
|
Segment earnings(2)
|
$
|
3.6
|
$
|
4.8
|
$
|
9.4
|
$
|
16.4
|
Segment earnings margin before restructuring costs(1)
|
|
6.4%
|
|
4.9%
|
|
4.1%
|
|
5.4%
|
Restructuring costs
|
|
(2.9%)
|
|
-
|
|
(1.0%)
|
|
-
|
Segment earnings margin
|
|
3.5%
|
|
4.9%
|
|
3.1%
|
|
5.4%
|
(1)
|
Earnings before restructuring costs, finance costs and income taxes.
See the Non-GAAP and Additional GAAP Measures section.
|
(2)
|
Earnings before finance costs and income taxes.
|
|
|
Revenue of $103.2 million in the third quarter of 2014 increased $4.3
million, from $98.9 million in the third quarter of 2013. Segment
earnings decreased $1.2 million to $3.6 million in the third quarter of
2014 compared to the same quarter in the previous year. Segment
earnings before restructuring costs increased $1.8 million to $6.6
million in the quarter compared to last year. See the Non-GAAP and
Additional GAAP Measures section. The following factors contributed to
the segment's quarter-over-quarter results:
-
Bearings and power transmission parts sales increased $6.0 million, or
12%, with higher sales in all regions driven by strength in the mining,
metal processing, industrial, oil and gas and forestry sectors.
-
Fluid power and process equipment products and service revenue,
including the rotating products group, in the third quarter of 2014
decreased $1.7 million, or 4%, compared to the same quarter last year.
The decrease was due mainly to reduced oil and gas, mining and
transportation sector sales. These decreases were partially offset by
higher sales of rotating product to oil sands customers.
-
Segment earnings in the third quarter of 2014 decreased $1.2 million
compared to the same quarter last year. The positive impact of higher
volumes, slightly higher gross profit margins and a $0.5 million
decrease in selling and administrative expenses was more than offset by
$3.1 million of restructuring costs consisting primarily of severance
costs. Segment earnings before restructuring costs increased $1.8
million. See the Non-GAAP and Additional GAAP Measures section.
The Industrial Components segment restructuring is expected to improve
the effectiveness and to simplify the sales force and branch management
organization. The restructuring plan has been completed and, in
addition to the improvements noted, is expected to result in annual
pre-tax cost savings in excess of $5.0 million.
Backlog of $46.6 million as of September 30, 2014 increased $3.4 million
compared to June 30, 2014, driven by higher orders in western and
eastern Canada. Backlog increased $4.8 million compared to September
30, 2013, driven by higher orders in all regions.
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.
|
|
2014
|
|
|
|
2013
|
2012
|
|
|
Q3
|
|
|
|
Q2
|
|
|
|
Q1
|
|
|
|
Q4
|
|
|
|
Q3
|
|
|
|
Q2
|
|
|
|
Q1
|
|
|
Q4
|
Revenue
|
$
|
359.5
|
|
|
$
|
374.4
|
|
|
$
|
331.4
|
|
|
$
|
391.7
|
|
|
$
|
338.5
|
|
|
$
|
362.0
|
|
|
$
|
336.3
|
|
$
|
364.9
|
Net earnings
|
$
|
11.1
|
|
|
$
|
12.3
|
|
|
$
|
6.7
|
|
|
$
|
12.2
|
|
|
$
|
11.5
|
|
|
$
|
13.5
|
|
|
$
|
10.4
|
|
$
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
$
|
0.66
|
|
|
$
|
0.73
|
|
|
$
|
0.40
|
|
|
$
|
0.73
|
|
|
$
|
0.69
|
|
|
$
|
0.81
|
|
|
$
|
0.62
|
|
$
|
0.85
|
|
- Diluted
|
$
|
0.65
|
|
|
$
|
0.72
|
|
|
$
|
0.39
|
|
|
$
|
0.72
|
|
|
$
|
0.68
|
|
|
$
|
0.80
|
|
|
$
|
0.61
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
September 30
2014
|
June 30
2014
|
December 31
2013
|
Shareholders' equity
|
$
|
247.9
|
$
|
246.1
|
$
|
247.2
|
Funded net debt(1)
|
|
224.7
|
|
218.2
|
|
205.0
|
Total capital
|
$
|
472.6
|
$
|
464.3
|
$
|
452.2
|
Funded net debt to total capital(1)
|
|
47.5%
|
|
47.0%
|
|
45.3%
|
Leverage ratio(1)
|
|
2.33
|
|
2.35
|
|
2.15
|
(1)
|
See the Non-GAAP and Additional GAAP Measures section.
|
|
|
The Corporation's objective is to manage the capital structure 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.
In addition, the Corporation's tolerance to interest rate risk
decreases/increases as the Corporation's leverage ratio
increases/decreases. At September 30, 2014, $125 million of the
Corporation's funded net debt, or 56%, 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 September 30, 2014 of $247.9
million increased $1.8 million from June 30, 2014, as earnings exceeded
dividends declared during the quarter. For the nine months ending
September 30, 2014 the Corporation's shareholder's equity increased
$0.7 million, as earnings and share-based compensation expense charged
to contributed surplus exceeded dividends declared during the period.
The Corporation's share capital, included in shareholders' equity on the
balance sheet, consists of:
Issued and fully paid common shares as at September 30, 2014
|
|
Number
|
|
|
Amount
|
Balance at the beginning and end of the quarter
|
|
16,778,883
|
|
|
$
|
107.5
|
|
|
|
|
|
|
|
At the date of this MD&A, the Corporation had 16,778,883 common shares
outstanding.
At September 30, 2014, Wajax had five share-based compensation plans;
the Wajax Share Ownership Plan ("SOP"), the Directors' Deferred Share
Unit Plan ("DDSUP"), the Mid-Term Incentive Plan for Senior Executives
("MTIP"), the Deferred Share Unit Plan ("DSUP") and the Deferred Share
Program ("DSP"). During the first quarter of 2014 all of the
outstanding DSP rights were settled. 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 September 30, 2014, there were
277,052 (2013 - 280,967) 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 $0.4 million for the quarter (2013 - $0.3
million) and $1.1 million for the nine months ended (2013 - $0.7
million) in respect of these plans.
Funded Net Debt (See the Non-GAAP and Additional GAAP Measures section)
|
|
September 30
2014
|
|
June 30
2014
|
|
December 31
2013
|
Bank indebtedness (cash)
|
$
|
5.1
|
$
|
4.6
|
$
|
(4.2)
|
Obligations under finance lease
|
|
11.9
|
|
12.3
|
|
13.3
|
Long-term debt
|
|
207.7
|
|
201.3
|
|
195.9
|
Funded net debt(1)
|
$
|
224.7
|
$
|
218.2
|
$
|
205.0
|
(1)
|
See the Non-GAAP and Additional GAAP Measures section.
|
|
|
Funded net debt of $224.7 million at September 30, 2014 increased $6.5
million compared to June 30, 2014. During the quarter, $5.8 million of
cash generated from operating activities was more than offset by
dividends paid of $10.1 million, cash used in investing activities of
$1.7 million and finance lease payments of $0.8 million. The $5.8
million of cash generated from operating activities included increases
in non-cash working capital of $10.9 million and rental fleet additions
of $2.1 million.
Funded net debt of $224.7 million at September 30, 2014 increased $19.7
million compared to December 31, 2013. Cash generated from operating
activities during the period of $16.1 million was offset by dividends
paid of $30.2 million, investing activities of $3.8 million and finance
lease payments of $2.7 million. The cash generated from operating
activities of $16.1 million included increases in non-cash working
capital of $21.1 million and rental fleet additions of $14.5 million.
The Corporation's ratio of funded net debt to capital increased slightly
to 47.5% at September 30, 2014 from 47.0% at June 30, 2014.
The Corporation's leverage ratio of 2.33 times at September 30, 2014
decreased from the June 30, 2014 ratio of 2.35 times.
See the Liquidity and Capital Resources section.
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
September 30, 2014, Wajax had contracts outstanding to buy U.S. $38.2
million (December 31, 2013 - to buy U.S. $31.1 million, September 30,
2013 - to buy U.S. $26.8 million). The U.S. dollar contracts expire
between October 2014 and December 2015, with a weighted average
U.S./Canadian dollar rate of 1.0938.
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 or inventory. 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. A change in foreign currency, relative to the Canadian
dollar, on transactions with customers that include unhedged foreign
currency exposures is not expected to have a material impact on the
Corporation's results of operations or financial condition.
Wajax is exposed to the risk of non-performance by counterparties to
short-term currency forward contracts. These counterparties are large
financial institutions and although they recently experienced an
outlook downgrade to "Negative" by Standard & Poor's, they maintain
high short-term and long-term credit ratings. 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
There have been no material changes to the Corporation's contractual
obligations since December 31, 2013 except for the amendment of the
bank credit agreement. See the Liquidity and Capital Resources
section.
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. There have been no material
changes to the Corporation's total obligations for all operating leases
since December 31, 2013. See the Contractual Obligations section.
Although Wajax's consolidated contractual annual lease commitments
decline year-by-year, it is anticipated that existing leases will
either be renewed or replaced, resulting in lease commitments being
sustained at current levels. In the alternative, Wajax may incur
capital expenditures to acquire equivalent capacity.
The Equipment segment had $79.1 million (2013 - $104.2 million) of
consigned inventory on-hand from a major manufacturer at September 30,
2014. 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.
Liquidity and Capital Resources
The Corporation's liquidity is maintained through various sources,
including bank and non-bank credit facilities, senior notes and cash
generated from operations.
Bank and Non-bank Credit Facilities and Senior Notes
On August 6, 2014, the Corporation amended its bank credit facility on
more favourable terms including a three year extension of the maturity
date from August 12, 2016 to August 12, 2019. The Corporation's
restriction from declaring dividends in the event the Corporation's
leverage ratio, as defined in the bank credit facility agreement,
exceeds 3.0 times has been amended to restrict the declaration of
dividends in the event the leverage ratio exceeds 3.25 times, which is
the same level as under the senior note agreement. In addition, the
fully secured facility of $250 million is now comprised of a $30
million non-revolving term portion and a $220 million revolving term
portion. The reduction in the term portion of the facility from $60
million to $30 million provides additional flexibility regarding the
Corporation's debt levels. The $0.7 million cost of amending the
facility has been capitalized and will be amortized over the remaining
term of the facility.
At September 30, 2014, Wajax had borrowed $87.0 million and issued $5.5
million of letters of credit for a total utilization of $92.5 million
of its $250 million bank credit facility. In addition, Wajax had $125
million of senior notes outstanding bearing an interest rate of 6.125%
per annum, payable semi-annually, maturing on October 23, 2020.
Borrowing capacity under the bank credit facility is dependent on the
level of inventories on-hand and outstanding trade accounts
receivables. At September 30, 2014, borrowing capacity under the bank
credit facility was equal to $250 million.
The bank credit 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
September 30, 2014. 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 3.25 times.
The senior notes are unsecured and contain customary incurrence based
covenants that, although different from those under the bank credit
facility described above, are not expected to be any more restrictive
than under the bank credit facility. All covenants were met as at
September 30, 2014.
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 September 30, 2014 Wajax had no utilization
of the interest bearing equipment financing facilities.
As of November 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.
Credit Rating
In October 2014, Dominion Bond Rating Service completed its six month
review of the Corporation's credit rating which resulted in an
unchanged corporate credit rating of BB (high).
Cash Flow
The following table highlights the major components of cash flow as
reflected in the Consolidated Statements of Cash Flows for the three
and nine months ended September 30, 2014 and September 30, 2013.
|
Three months ended
|
Nine months ended
|
|
September 30
|
September 30
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net earnings
|
$
|
11.1
|
$
|
11.5
|
$
|
30.0
|
$
|
35.5
|
Items not affecting cash flow
|
|
12.5
|
|
12.8
|
|
38.3
|
|
34.8
|
Net change in non-cash operating working capital
|
|
(10.9)
|
|
(3.4)
|
|
(21.1)
|
|
0.9
|
Income taxes paid
|
|
(3.2)
|
|
(4.2)
|
|
(10.8)
|
|
(57.6)
|
Other cash items(1)
|
|
(3.7)
|
|
(7.0)
|
|
(20.3)
|
|
(22.1)
|
Cash generated from (used in) operating activities
|
$
|
5.8
|
$
|
9.7
|
$
|
16.1
|
$
|
(8.5)
|
Cash used in investing activities
|
$
|
(1.7)
|
$
|
(1.6)
|
$
|
(3.8)
|
$
|
(3.8)
|
Cash (used in) generated from financing activities
|
$
|
(4.6)
|
$
|
(6.9)
|
$
|
(21.5)
|
$
|
21.9
|
(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
Cash generated from operating activities amounted to $5.8 million in the
third quarter of 2014, compared to $9.7 million in the same quarter of
the previous year. The reduction of $3.9 million was mainly attributed
to an increase in cash used for non-cash working capital of $7.5
million, offset mostly by a decrease in cash used in other items of
$3.3 million related primarily to lower rental fleet additions.
For the nine months ended September 30, 2014, cash generated from
operating activities amounted to $16.1 million, compared to $8.5
million of cash used in operating activities for the same period in the
previous year. The $24.6 million increase in cash generated from
operating activities was mainly attributable to lower income taxes paid
in the period of $46.8 million partially offset by a use of working
capital of $21.1 million in 2014 compared to $0.9 million of cash
generated from changes in non-cash working capital in 2013.
Other cash items for the nine months ended September 30, 2014 include
rental equipment additions of $14.5 million (2013 - $14.4 million)
related to lift trucks in the Equipment segment and power generation
equipment in the Power Systems segment.
Significant components of non-cash operating working capital, along with
changes for the three and nine months ended September 30, 2014 and
September 30, 2013 include the following:
Changes in Non-cash Operating
Working Capital(1)
|
Three months ended
|
Nine months ended
|
|
September 30
2014
|
|
September 30
2013
|
|
September 30
2014
|
|
September 30
2013
|
Trade and other receivables
|
$
|
(13.8)
|
$
|
(1.3)
|
$
|
(14.1)
|
$
|
9.2
|
Contract revenue recognized in advance of billings
|
|
6.1
|
|
-
|
|
(5.4)
|
|
-
|
Inventories
|
|
(18.8)
|
|
(12.7)
|
|
(30.9)
|
|
(16.5)
|
Prepaid expenses
|
|
(1.4)
|
|
0.9
|
|
(2.2)
|
|
1.0
|
Accounts payable and accrued liabilities
|
|
16.8
|
|
9.9
|
|
33.5
|
|
8.6
|
Provisions
|
|
0.2
|
|
(0.2)
|
|
(2.0)
|
|
(1.4)
|
Total Changes in Non-cash
Operating Working Capital
|
$
|
(10.9)
|
$
|
(3.4)
|
$
|
(21.1)
|
$
|
0.9
|
(1)
|
Increase (decrease) in cash flow
|
|
|
Significant components of the changes in non-cash operating working
capital for the quarter ended September 30, 2014 compared to the
quarter ended September 30, 2013 are as follows:
-
Trade and other receivables increased $13.8 million in 2014 compared to
an increase of $1.3 million in 2013. The increase in 2014 was mainly
attributable to billings related to power generation project revenue
recognized in prior periods in the Power Systems segment and higher
sales activity in the Industrial Components segment.
-
Contract revenue recognized in advance of billings declined by $6.1
million in 2014 due mainly to billings related to power generation
projects in the Power Systems segment.
-
Inventories increased $18.8 million in 2014 compared to an increase of
$12.7 million in 2013. The increase in 2014 was primarily related to
higher mining and material handling inventory in the Equipment segment.
The increase in 2013 was due mainly to higher mining and forestry
equipment inventory in the Equipment segment.
-
Accounts payable and accrued liabilities increased $16.8 million in 2014
compared to an increase of $9.9 million in 2013. The increase in 2014
resulted primarily from higher inventory trade payables in the
Equipment segment. The increase in 2013 resulted primarily from higher
inventory trade payables in the Equipment and Power Systems segments.
Significant components of the changes in non-cash operating working
capital for the nine months ended September 30, 2014 compared to the
nine months ended September 30, 2013 are as follows:
-
Trade and other receivables increased $14.1 million in 2014 compared to
a decrease of $9.2 million in 2013. The increase in 2014 resulted
primarily from higher sales activity in the Equipment and Power Systems
segments. The decrease in 2013 resulted primarily from lower sales
activity in all segments and the collection of a large mining equipment
receivable in the Equipment segment.
-
Contract revenue recognized in advance of billings increased by $5.4
million in 2014 due to power generation project revenue recognized in
the Power Systems segment.
-
Inventories increased $30.9 million in 2014 compared to an increase of
$16.5 million in 2013. The increase in 2014 was primarily related to
higher construction, material handling and forestry inventory in the
Equipment segment. The increase in 2013 resulted primarily from higher
mining and construction equipment inventory in the Equipment segment.
-
Accounts payable and accrued liabilities increased $33.5 million in 2014
compared to an increase of $8.6 million in 2013. The increase in 2014
resulted primarily from higher trade payables in the Equipment segment
reduced somewhat by lower trade payables in the Power Systems and
Industrial Components segments. The increase in 2013 resulted primarily
from higher inventory trade payables in the Equipment and Power Systems
segments.
Investing Activities
During the third quarter of 2014, Wajax invested $1.7 million in
property, plant and equipment additions, net of disposals, compared to
$1.6 million in the third quarter of 2013.
For the nine months ended September 30, 2014 and September 30, 2013,
Wajax invested $3.8 million in property, plant and equipment additions,
net of disposals.
Financing Activities
The Corporation used $4.6 million of cash from financing activities in
the third quarter of 2014 compared to $6.9 million used in the same
quarter of 2013. Financing activities for the three months ended
September 30, 2014 included a net bank credit facility drawdown of $7.0
million (2013 - $4.0 million), for general corporate purposes, offset
by dividends paid to shareholders totaling $10.1 million (2013 - $10.0
million) and finance lease payments of $0.8 million (2013 - $0.6
million).
For the nine months ended September 30, 2014, the Corporation used $21.5
million of cash from financing activities compared to generating $21.9
million cash from financing activities in the same period of 2013.
Financing activities for the nine months ended September 30, 2014
included a net bank credit facility drawdown of $12.0 million (2013 -
$60.0 million), for general corporate purposes, offset by dividends
paid to shareholders totaling $30.2 million (2013 - $36.0 million), and
finance lease payments of $2.7 million (2013 - $1.9 million).
Dividends
Dividends to shareholders were declared as follows:
Record Date
|
Payment Date
|
|
Per Share
|
|
Amount
|
July 31, 2014
|
August 20, 2014
|
|
$
|
0.20
|
|
$
|
3.4
|
August 29, 2014
|
September 22, 2014
|
|
0.20
|
|
3.4
|
September 30, 2014
|
October 20, 2014
|
|
0.20
|
|
3.4
|
Three months ended September 30, 2014
|
|
|
$
|
0.60
|
|
$
|
10.1
|
|
|
|
|
|
|
|
|
On August 6, 2014, Wajax announced a monthly dividend of $0.20 per share
($2.40 annualized) for the month of October payable on November 20,
2014 to shareholders of record on October 31, 2014.
On November 4, 2014 Wajax announced monthly dividends of $0.20 per share
($2.40 annualized) for each of the months of November and December,
2014 and January and February, 2015 payable on December 22, 2014,
January 20, 2015, February 20, 2015 and March 20, 2015 to shareholders
of record on November 28, 2014, December 31, 2014, January 30, 2015 and
February 27, 2015, respectively. See the Strategic Direction and
Outlook section.
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, profitability and ability to raise and
service debt;
|
(iii)
|
the additional GAAP measures are commonly used to assess a company's
earnings performance excluding its capital, tax structures and
restructuring costs;, and
|
(iv)
|
"Adjusted net earnings" and "segment earnings before restructuring
costs" provide indications of the results by our principal business
activities prior to recognizing restructuring costs that are outside
our normal course of business. "Adjusted EBITDA" used in calculating
the Leverage Ratio excludes the restructuring costs which is consistent
with the leverage ratio calculations under the Corporation's bank
credit and senior note agreements. The restructuring costs are
attributable to the restructuring plan completed in the Industrial
Components segment to improve the effectiveness and to simplify the
sales force and branch management organization.
|
|
|
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.
|
|
|
Adjusted net earnings
|
Net earnings before restructuring costs.
|
|
|
Basic and diluted
adjusted net earnings
per share
|
Basic and diluted earnings per share before after-tax restructuring
costs.
|
|
|
EBITDA
|
Net earnings before finance costs, income tax expense, depreciation and
amortization.
|
|
|
Adjusted EBITDA
|
EBITDA before restructuring costs.
|
|
|
Leverage ratio
|
The leverage ratio is defined as funded net debt at the end of a
particular quarter divided by trailing 12-month Adjusted EBITDA.
|
|
|
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.
|
|
|
Backlog
|
Backlog includes the total sales value of customer purchase commitments
for future delivery or commissioning.
|
|
|
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.
|
Segment earnings before
restructuring costs
|
Segment earnings before restructuring costs, finance costs and income
taxes.
|
Segment earnings margin
before restructuring costs
|
Segment earnings before restructuring costs, finance costs and income
taxes divided by segment revenue.
|
|
|
|
|
Reconciliation of the Corporation's net earnings to EBT, EBIT, EBITDA
and Adjusted EBITDA is as follows:
|
For the twelve
months ended
September 30
|
For the twelve
months ended
June 30
|
For the twelve
months ended
December 31
|
|
2014
|
2014
|
2013
|
Net earnings
|
$
|
42.3
|
$
|
42.7
|
$
|
47.7
|
Income tax expense
|
15.5
|
15.6
|
17.0
|
EBT
|
57.8
|
58.3
|
64.7
|
Finance costs
|
12.8
|
11.6
|
9.0
|
EBIT
|
70.6
|
69.9
|
73.7
|
Depreciation and amortization
|
22.9
|
22.7
|
21.6
|
EBITDA
|
|
93.5
|
|
92.7
|
|
95.3
|
Restructuring costs
|
|
3.1
|
|
-
|
|
-
|
Adjusted EBITDA
|
$
|
96.6
|
$
|
92.7
|
$
|
95.3
|
Reconciliation of the Corporation's net earnings to adjusted net
earnings and basic and diluted adjusted earnings per share is as
follows:
|
Three months ended
|
Nine months ended
|
|
September 30
|
September 30
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net earnings
|
$
|
11.1
|
$
|
11.5
|
$
|
30.0
|
$
|
35.5
|
Restructuring costs, after-tax
|
|
2.2
|
|
-
|
|
2.2
|
|
-
|
Adjusted net earnings
|
$
|
13.3
|
$
|
11.5
|
$
|
32.2
|
$
|
35.5
|
Basic adjusted earnings per share (1)
|
$
|
0.79
|
$
|
0.69
|
$
|
1.92
|
$
|
2.12
|
Diluted adjusted earnings per share (1)
|
$
|
0.78
|
$
|
0.68
|
$
|
1.89
|
$
|
2.09
|
(1)
|
At September 30, 2014 the numbers of basic and diluted shares
outstanding were 16,778,883 and 17,040,949, respectively for the three
months ended and 16,770,709 and 17,030,686, respectively for the nine
months ended.
|
|
|
Calculation of the Corporations funded net debt and leverage ratio is as
follows:
|
September 30
|
June 30
|
December 31
|
|
2014
|
2014
|
2013
|
Bank indebtedness (cash)
|
$
|
5.1
|
$
|
4.6
|
$
|
(4.2)
|
Obligations under finance leases
|
11.9
|
12.3
|
13.3
|
Long-term debt
|
207.7
|
201.3
|
195.9
|
Funded net debt
|
$
|
224.7
|
$
|
218.2
|
$
|
205.0
|
Leverage ratio(1)
|
2.33
|
2.35
|
2.15
|
(1)
|
Calculation uses trailing four-quarter adjusted 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.
The Corporation bases its estimates on historical experience and
various other assumptions that are believed to be reasonable in the
circumstances.
The areas where significant judgements and assumptions are used to
determine the amounts recognized in the financial statements include
the allowance for doubtful accounts, inventory obsolescence and the
valuation of goodwill and intangible assets. In preparing the financial
statements for the quarter ended September 30, 2014, the significant
judgments made by management in applying the Corporation's accounting
policies and the key sources of estimation uncertainty are the same as
those applied in the audited consolidated financial statements for the
year ended December 31, 2013 which can be found on SEDAR at www.sedar.com.
Changes in Accounting Policies
The following new standards have been adopted in the current year:
On January 1, 2014, the Corporation adopted the amendments to IAS 32
Offsetting Financial Assets and Liabilities ("IAS 32"), which clarifies
when an entity has a right to set-off and when a settlement mechanism
provides for net settlement or gross settlement. The impact on the
current year's condensed consolidated financial statements from
adopting IAS 32 was not material.
On January 1, 2014, the Corporation adopted IFRS Interpretations
Committee 21 Levies ("IFRIC 21"), which provides guidance on accounting
for levies in accordance with the requirements of IAS 37 Provisions,
Contingent Liabilities and Contingent Assets. The impact on the current
year's condensed consolidated financial statements from adopting IFRIC
21 was not material.
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, 2014 and have not been applied in preparing
these consolidated financial statements.
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 been tentatively set at January 1, 2018.
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. Additional changes to the new standard will align hedge
accounting more closely with risk management. The Corporation is
currently assessing the impact of this standard on its consolidated
financial statements.
The Corporation will be required to adopt IFRS 15 Revenue from Contracts
with Customers effective January 1, 2017. The standard contains a
single model that applies to contracts with customers and two
approaches to recognizing revenue: at a point in time or over time. The
model features a contract-based five-step analysis of transactions to
determine whether, how much and when revenue is recognized. New
estimates and judgmental thresholds have been introduced, which may
affect the amount and/or timing of revenue recognized. 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. There are
however, a number of risks that deserve particular comment which are
discussed in detail in the MD&A for the year ended December 31, 2013
which can be found on SEDAR at www.sedar.com. There have been no
material changes to the business of Wajax that require an update to the
discussion of the applicable risks discussed in the MD&A for the year
ended December 31, 2013.
Strategic Direction and Outlook
Management is pleased with the Corporation's performance in the third
quarter. Revenue and adjusted net earnings were higher than the
previous year on strength in all three segments. See the Non-GAAP and
Additional GAAP Measures section. In spite of lower mining parts and
service volumes, the Equipment segment recorded increased earnings on
higher equipment sales and improved margins. The Power Systems segment
benefitted from improved activity in the oil and gas sector and
on-highway trucking. The Industrial Components segment gained momentum
as the group began to benefit from its restructuring activities, while
at the same time increasing revenue and backlog. Planned restructuring
in Industrial Components was completed in the third quarter and
management continues to expect annual pre-tax savings to exceed $5
million as a result of these changes.
Management has adopted a more cautious outlook for the rest of 2014,
given recent and continuing weakness in commodity markets. Management's
expectation regarding key market demand in Canada for the remainder of
the year is mixed. Capital goods purchases and certain aspects of
maintenance spending by mining and oil sands customers may be
constrained, adversely impacting the Equipment segment and, to a lesser
degree, the Power Systems segment. However, the Power Systems segment
continues to expect some improvement in the conventional oil and gas
sector relative to last year. The Industrial Components segment
continues to build backlog in a number of market sectors and, coupled
with the lower cost base, the group is expected to outperform results
posted in the fourth quarter of last year. Management's expectation for
full year net earnings continues to support the Corporation's current
monthly dividend of $0.20 per share which has been declared for
November and December of 2014 and January and February of 2015.
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 nine months ended September 30, 2014
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
|
|
|
September
30, 2014
|
|
December
31, 2013
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
-
|
$
|
4,153
|
Trade and other receivables
|
|
|
|
|
202,113
|
|
187,974
|
Contract revenue recognized in advance of billings
|
|
|
|
|
5,632
|
|
236
|
Inventories
|
|
|
|
|
322,837
|
|
289,299
|
Income taxes receivable
|
|
|
|
|
1,290
|
|
203
|
Prepaid expenses
|
|
|
|
|
8,144
|
|
5,980
|
Derivative instruments
|
|
|
|
|
1,018
|
|
323
|
|
|
|
|
|
541,034
|
|
488,168
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
Rental equipment
|
|
4
|
|
|
55,344
|
|
52,285
|
Property, plant and equipment
|
|
5
|
|
|
48,114
|
|
49,716
|
Intangible assets
|
|
|
|
|
84,720
|
|
85,944
|
Deferred taxes
|
|
|
|
|
-
|
|
1,076
|
|
|
|
|
|
188,178
|
|
189,021
|
|
|
|
|
$
|
729,212
|
$
|
677,189
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
|
$
|
5,131
|
$
|
-
|
Accounts payable and accrued liabilities
|
|
|
|
|
236,757
|
|
201,358
|
Provisions
|
|
|
|
|
5,033
|
|
7,011
|
Dividends payable
|
|
8
|
|
|
3,356
|
|
3,349
|
Obligations under finance leases
|
|
|
|
|
3,944
|
|
4,053
|
|
|
|
|
|
254,221
|
|
215,771
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
Provisions
|
|
|
|
|
4,206
|
|
2,939
|
Deferred taxes
|
|
10
|
|
|
473
|
|
-
|
Employee benefits
|
|
|
|
|
5,883
|
|
5,549
|
Other liabilities
|
|
|
|
|
848
|
|
624
|
Obligations under finance leases
|
|
|
|
|
7,904
|
|
9,208
|
Long-term debt
|
|
6
|
|
|
207,739
|
|
195,906
|
|
|
|
|
|
227,053
|
|
214,226
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Share capital
|
|
7
|
|
|
107,454
|
|
106,704
|
Contributed surplus
|
|
|
|
|
4,933
|
|
5,058
|
Retained earnings
|
|
|
|
|
135,171
|
|
135,317
|
Accumulated other comprehensive income
|
|
|
|
|
380
|
|
113
|
Total shareholders' equity
|
|
|
|
|
247,938
|
|
247,192
|
|
|
|
|
$
|
729,212
|
$
|
677,189
|
|
|
|
|
|
|
|
|
These condensed consolidated financial statements were approved by the
Board of Directors on November 4, 2014.
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited, in thousands of Canadian dollars,
except per share data)
|
Note
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
359,461
|
$
|
338,475
|
|
$
|
1,065,227
|
$
|
1,036,769
|
Cost of sales
|
|
|
286,668
|
|
269,742
|
|
|
847,495
|
|
826,442
|
Gross profit
|
|
|
72,793
|
|
68,733
|
|
|
217,732
|
|
210,327
|
Selling and administrative expenses
|
|
|
51,219
|
|
50,882
|
|
|
163,692
|
|
156,294
|
Restructuring costs
|
14
|
|
3,078
|
|
-
|
|
|
3,078
|
|
-
|
Earnings before finance costs and income taxes
|
|
|
18,496
|
|
17,851
|
|
|
50,962
|
|
54,033
|
Finance costs
|
|
|
3,303
|
|
2,146
|
|
|
9,733
|
|
5,891
|
Earnings before income taxes
|
|
|
15,193
|
|
15,705
|
|
|
41,229
|
|
48,142
|
Income tax expense
|
10
|
|
4,120
|
|
4,160
|
|
|
11,188
|
|
12,671
|
Net earnings
|
|
$
|
11,073
|
$
|
11,545
|
|
$
|
30,041
|
$
|
35,471
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
11
|
$
|
0.66
|
$
|
0.69
|
|
$
|
1.79
|
$
|
2.12
|
Diluted earnings per share
|
11
|
$
|
0.65
|
$
|
0.68
|
|
$
|
1.76
|
$
|
2.09
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
(unaudited, in thousands of Canadian dollars)
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
11,073
|
$
|
11,545
|
|
$
|
30,041
|
$
|
35,471
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to income
Losses (gains) on derivative instruments designated
as cash flow hedges in prior periods reclassified to
cost of inventory during the period, net of tax recovery of $52 (2013 -
expense of $51)
and year to date, net of tax expense of $30 (2013 - $73)
|
|
148
|
|
(145)
|
|
|
(84)
|
|
(206)
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative instruments outstanding at the end of the
period designated
as cash flow hedges, net of tax expense of $155 (2013 - recovery of $16)
and year to date,
net of tax expense of $124 (2013 - $104)
|
|
438
|
|
(46)
|
|
|
351
|
|
292
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
586
|
|
(191)
|
|
|
267
|
|
86
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
$
|
11,659
|
$
|
11,354
|
|
$
|
30,308
|
$
|
35,557
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
income ("AOCI")
|
|
|
For the nine months ended September 30, 2014
(unaudited, in thousands of Canadian dollars)
|
Note
|
|
Share
capital
|
Contributed
surplus
|
|
Retained
earnings
|
Cash flow
hedges
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2014
|
|
$
|
106,704
|
5,058
|
|
135,317
|
113
|
|
$
|
247,192
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
-
|
-
|
|
30,041
|
-
|
|
|
30,041
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
-
|
-
|
|
-
|
267
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
-
|
-
|
|
30,041
|
267
|
|
|
30,308
|
Shares issued to settle share-based compensation plans
|
9
|
|
750
|
(750)
|
|
-
|
-
|
|
|
-
|
Dividends
|
8
|
|
-
|
-
|
|
(30,187)
|
-
|
|
|
(30,187)
|
Share-based compensation expense
|
9
|
|
-
|
625
|
|
-
|
-
|
|
|
625
|
September 30, 2014
|
|
$
|
107,454
|
4,933
|
|
135,171
|
380
|
|
$
|
247,938
|
|
|
|
|
|
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI
|
|
|
|
|
For the nine months ended September 30, 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
|
|
|
-
|
-
|
|
|
35,471
|
-
|
|
|
|
35,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
-
|
-
|
|
|
-
|
86
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
-
|
-
|
|
|
35,471
|
86
|
|
|
|
35,557
|
Dividends
|
8
|
|
-
|
-
|
|
|
(34,812)
|
-
|
|
|
|
(34,812)
|
Share-based compensation expense
|
9
|
|
-
|
560
|
|
|
-
|
-
|
|
|
|
560
|
September 30, 2013
|
|
$
|
106,651
|
4,906
|
|
|
131,603
|
30
|
|
|
$
|
243,190
|
|
|
|
|
WAJAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30
|
|
|
Nine months ended
September 30
|
(unaudited, in thousands of Canadian dollars)
|
Note
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
11,073
|
$
|
11,545
|
$
|
30,041
|
$
|
35,471
|
|
Items not affecting cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment
|
|
|
3,113
|
|
2,613
|
|
8,829
|
|
7,194
|
|
|
|
Property, plant and equipment
|
|
|
2,178
|
|
2,449
|
|
6,616
|
|
6,851
|
|
|
|
Intangible assets
|
|
|
379
|
|
458
|
|
1,264
|
|
1,387
|
|
|
Loss (gain) on disposal of property, plant and equipment
|
5
|
|
47
|
|
(22)
|
|
20
|
|
(29)
|
|
|
Share-based compensation expense
|
9
|
|
224
|
|
185
|
|
625
|
|
560
|
|
|
Non-cash rental expense
|
|
|
13
|
|
18
|
|
40
|
|
(162)
|
|
|
Employee benefits expense, net of payments
|
|
|
113
|
|
154
|
|
334
|
|
459
|
|
|
Unrealized (gain) loss derivative instruments
|
|
|
(903)
|
|
643
|
|
(334)
|
|
(2)
|
|
|
Finance costs
|
|
|
3,303
|
|
2,146
|
|
9,733
|
|
5,891
|
|
|
Income tax expense
|
10
|
|
4,120
|
|
4,160
|
|
11,188
|
|
12,671
|
|
|
|
23,660
|
|
24,349
|
|
68,356
|
|
70,291
|
|
Changes in non-cash operating working capital
|
12
|
|
(10,932)
|
|
(3,415)
|
|
(21,131)
|
|
871
|
|
Rental equipment additions
|
4
|
|
(2,127)
|
|
(4,846)
|
|
(14,509)
|
|
(14,425)
|
|
Other non-current liabilities
|
|
|
514
|
|
(164)
|
|
1,491
|
|
(1,900)
|
|
Finance costs paid
|
|
|
(2,136)
|
|
(2,011)
|
|
(7,305)
|
|
(5,735)
|
|
Income taxes paid
|
|
|
(3,165)
|
|
(4,174)
|
|
(10,832)
|
|
(57,608)
|
|
Cash generated from (used in) operating activities
|
|
|
5,814
|
|
9,739
|
|
16,070
|
|
(8,506)
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions
|
5
|
|
(1,795)
|
|
(1,684)
|
|
(4,039)
|
|
(3,974)
|
|
Proceeds on disposal of property, plant and equipment
|
5
|
|
120
|
|
58
|
|
253
|
|
214
|
|
Intangible assets additions
|
|
|
(21)
|
|
-
|
|
(40)
|
|
(30)
|
|
Cash used in investing activities
|
|
|
(1,696)
|
|
(1,626)
|
|
(3,826)
|
|
(3,790)
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net increase in bank debt
|
|
|
7,000
|
|
4,000
|
|
12,000
|
|
60,000
|
|
Deferred financing costs
|
6
|
|
(688)
|
|
(275)
|
|
(688)
|
|
(275)
|
|
Finance lease payments
|
|
|
(847)
|
|
(553)
|
|
(2,660)
|
|
(1,881)
|
|
Dividends paid
|
|
|
(10,067)
|
|
(10,042)
|
|
(30,180)
|
|
(35,984)
|
|
Cash (used in) generated from financing activities
|
|
|
(4,602)
|
|
(6,870)
|
|
(21,528)
|
|
21,860
|
Change in (bank indebtedness) cash
|
|
|
(484)
|
|
1,243
|
|
(9,284)
|
|
9,564
|
(Bank indebtedness) cash - beginning of period
|
|
|
(4,647)
|
|
(1,874)
|
|
4,153
|
|
(10,195)
|
Bank indebtedness - end of period
|
|
$
|
(5,131)
|
$
|
(631)
|
$
|
(5,131)
|
$
|
(631)
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(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 121 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 ("IAS") 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 the Corporation for
the year ended December 31, 2013. 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
These 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 has been adopted in the current year:
On January 1, 2014, the Corporation adopted the amendments to IAS 32 Offsetting Financial Assets and Liabilities ("IAS 32"), which clarifies when an entity has a right to set-off and
when a settlement mechanism provides for net settlement or gross
settlement. The impact on the current year's condensed consolidated
financial statements from adopting IAS 32 was not material.
On January 1, 2014, the Corporation adopted IFRS Interpretations
Committee ("IFRIC") 21 Levies ("IFRIC 21"), which provides guidance on accounting for levies in
accordance with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The impact on the current year's condensed consolidated financial
statements from adopting IFRIC 21 was not material.
4. RENTAL EQUIPMENT
The Corporation acquired rental equipment with a cost of $2,127 during
the quarter (2013 - $4,846) and $14,509 year to date (2013 - $14,425).
Rental equipment with a carrying amount of $1,037 during the quarter
(2013 - $596) and $2,621 year to date (2013 - $1,576) 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
$1,795 during the quarter (2013 - $1,684) and $4,039 year to date (2013
- $3,974). Assets with a carrying amount of $167 during the quarter
(2013 - $36) and $273 year to date (2013 - $185) were disposed of,
resulting in a loss on disposal of $47 during the quarter (2013 - gain
of $22) and $20 year to date (2013 - gain of $29).
6. LONG-TERM DEBT
On August 6, 2014, the Corporation amended its bank credit facility on
more favorable terms including a three year extension of the maturity
date from August 12, 2016 to August 12, 2019. The Corporation's
restriction from declaring dividends in the event the Corporation's
leverage ratio, as defined in the bank credit facility agreement,
exceeds 3.0 times has been amended to restrict the declaration of
dividends in the event the leverage ratio exceeds 3.25 times, which is
the same level as under the senior note agreement. In addition, the
fully secured facility of $250,000 is now comprised of a $30,000
non-revolving term portion and a $220,000 revolving term portion. The
reduction in the term portion of the facility from $60,000 to $30,000
provides additional flexibility regarding the Corporation's debt
levels. The $688 cost of amending the facility has been capitalized
and will be amortized over the remaining term of the facility.
7. SHARE CAPITAL
|
Note
|
Number of
Common Shares
|
|
Amount
|
Balance, December 31, 2013
|
|
16,743,520
|
$
|
106,704
|
Common shares issued to settle share-based compensation plans
|
9
|
35,363
|
|
750
|
Balance, September 30, 2014
|
|
16,778,883
|
$
|
107,454
|
8. DIVIDENDS DECLARED
During the quarter, the Corporation declared cash dividends of $0.60 per
share or $10,067 (2013 - dividends of $0.60 per share or $10,042).
Year to date, the Corporation declared cash dividends of $1.80 per share
or $30,187 (2013 - dividends of $2.08 per share or $34,812).
The Corporation has declared dividends of $0.20 per share or $3,356 for
each of October, November, December 2014, and January 2015.
9. SHARE-BASED COMPENSATION PLANS
The Corporation has five share-based compensation plans: the Wajax Share
Ownership Plan, the Deferred Share Program ("DSP"), the Directors'
Deferred Share Unit Plan, 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 $224 for the quarter (2013
- $185) and $625 for the year to date (2013 - $560) in respect of these
plans.
|
Nine months ended
September 30, 2014
|
Nine months ended
September 30, 2013
|
|
Number of
rights
|
|
Fair value at
time of grant
|
Number of
rights
|
|
Fair value at
time of grant
|
Outstanding at beginning of year
|
282,573
|
$
|
5,403
|
254,952
|
$
|
4,932
|
Granted in the period - new grants
|
16,438
|
|
600
|
10,759
|
|
253
|
- dividend equivalents
|
13,404
|
|
-
|
15,256
|
|
-
|
Settled in the period
|
(35,363)
|
|
(750)
|
-
|
|
-
|
Outstanding at end of period
|
277,052
|
$
|
5,253
|
280,967
|
$
|
5,185
|
During the year the Corporation settled all 35,363 DSP rights
outstanding.
At September 30, 2014, 255,025 share rights were vested (September 30,
2013 - 265,239).
b) Cash-settled rights plans
The Corporation recorded compensation cost of $216 for the quarter (2013
- $159) and $512 for the year to date (2013 - $155) in respect of the
share-based portion of the MTIP and DSUP. At September 30, 2014, the
carrying amount of the share-based portion of these liabilities was
$669 (September 30, 2013 - $1,140).
10. INCOME TAXES
Income tax expense comprises current and deferred tax as follows:
For the nine months ended September 30
|
|
2014
|
|
2013
|
Current
|
$
|
9,735
|
$
|
11,720
|
Deferred - Origination and reversal of temporary differences
|
|
1,453
|
|
951
|
Income tax expense
|
$
|
11,188
|
$
|
12,671
|
The calculation of current tax is based on a combined federal and
provincial statutory income tax rate of 26.1% (2013 - 26.1%). 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:
|
|
2014
|
|
2013
|
Combined statutory income tax rate
|
|
26.1%
|
|
26.1%
|
Expected income tax expense at statutory rates
|
$
|
10,761
|
$
|
12,565
|
Non-deductible expenses
|
|
446
|
|
422
|
Other
|
|
(19)
|
|
(316)
|
Income tax expense
|
$
|
11,188
|
$
|
12,671
|
11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
|
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
- net earnings
|
$
|
11,073
|
$
|
11,545
|
$
|
30,041
|
$
|
35,471
|
Denominator for basic earnings per share:
- weighted average shares
|
|
16,778,883
|
|
16,736,447
|
|
16,770,709
|
|
16,736,447
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
|
|
|
- weighted average shares
|
|
16,778,883
|
|
16,736,447
|
|
16,770,709
|
|
16,736,447
|
- effect of dilutive share rights
|
|
262,066
|
|
263,682
|
|
259,977
|
|
255,118
|
Denominator for diluted earnings per share
|
|
17,040,949
|
|
17,000,129
|
|
17,030,686
|
|
16,991,565
|
Basic earnings per share
|
$
|
0.66
|
$
|
0.69
|
$
|
1.79
|
$
|
2.12
|
Diluted earnings per share
|
$
|
0.65
|
$
|
0.68
|
$
|
1.76
|
$
|
2.09
|
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
September 30
|
|
|
Nine months ended
September 30
|
|
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
|
Trade and other receivables
|
$
|
(13,834)
|
$
|
(1,335)
|
|
|
$
|
(14,139)
|
$
|
9,235
|
|
Contract revenue recognized in advance of billings
|
|
6,053
|
|
-
|
|
|
|
(5,396)
|
|
-
|
|
Inventories
|
|
(18,826)
|
|
(12,718)
|
|
|
|
(30,917)
|
|
(16,512)
|
|
Prepaid expenses
|
|
(1,354)
|
|
877
|
|
|
|
(2,164)
|
|
1,016
|
|
Accounts payable and accrued liabilities
|
|
16,803
|
|
9,919
|
|
|
|
33,463
|
|
8,570
|
|
Provisions
|
|
226
|
|
(158)
|
|
|
|
(1,978)
|
|
(1,438)
|
Total
|
$
|
(10,932)
|
$
|
(3,415)
|
|
|
$
|
(21,131)
|
$
|
871
|
13. OPERATING SEGMENTS
The Corporation operates through a network of 121 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
September 30, 2014
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Equipment
|
|
$
|
108,557
|
$
|
24,508
|
$
|
-
|
$
|
-
|
$
|
133,065
|
Parts
|
|
|
38,927
|
|
34,142
|
|
93,785
|
|
-
|
|
166,854
|
Service
|
|
|
19,519
|
|
17,236
|
|
9,402
|
|
-
|
|
46,157
|
Rental and other
|
|
|
12,295
|
|
2,304
|
|
-
|
|
(1,214)
|
|
13,385
|
Revenue
|
|
$
|
179,298
|
$
|
78,190
|
$
|
103,187
|
$
|
(1,214)
|
$
|
359,461
|
Earnings before restructuring costs, finance costs and income taxes
|
|
$
|
12,223
|
$
|
5,387
|
$
|
6,644
|
$
|
(2,680)
|
$
|
21,574
|
Restructuring costs
|
|
|
-
|
|
-
|
|
3,078
|
|
-
|
|
3,078
|
Earnings before finance costs and income taxes
|
|
$
|
12,223
|
$
|
5,387
|
$
|
3,566
|
$
|
(2,680)
|
$
|
18,496
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
3,303
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
4,120
|
Net earnings
|
|
|
|
|
|
|
|
|
|
$
|
11,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
September 30, 2014
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Equipment
|
|
$
|
298,365
|
$
|
73,570
|
$
|
-
|
$
|
-
|
$
|
371,935
|
Parts
|
|
|
134,024
|
|
105,068
|
|
278,085
|
|
-
|
|
517,177
|
Service
|
|
|
62,688
|
|
51,990
|
|
26,355
|
|
-
|
|
141,033
|
Rental and other
|
|
|
32,927
|
|
6,692
|
|
-
|
|
(4,537)
|
|
35,082
|
Revenue
|
|
$
|
528,004
|
$
|
237,320
|
$
|
304,440
|
$
|
(4,537)
|
$
|
1,065,227
|
Earnings before restructuring costs, finance costs and income taxes
|
|
$
|
36,511
|
$
|
13,066
|
$
|
12,432
|
$
|
(7,969)
|
$
|
54,040
|
Restructuring costs
|
|
|
-
|
|
-
|
|
3,078
|
|
-
|
|
3,078
|
Earnings before finance costs and income taxes
|
|
$
|
36,511
|
$
|
13,066
|
$
|
9,354
|
$
|
(7,969)
|
$
|
50,962
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
9,733
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
11,188
|
Net earnings
|
|
|
|
|
|
|
|
|
|
$
|
30,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2014
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Segment assets excluding intangible assets
|
|
$
|
335,633
|
$
|
164,539
|
$
|
141,966
|
$
|
-
|
$
|
642,138
|
Intangible assets
|
|
|
21,557
|
|
14,025
|
|
49,047
|
|
91
|
|
84,720
|
Corporate and other assets
|
|
|
-
|
|
-
|
|
-
|
|
2,354
|
|
2,354
|
Total assets
|
|
$
|
357,190
|
$
|
178,564
|
$
|
191,013
|
$
|
2,445
|
$
|
729,212
|
Segment liabilities
|
|
$
|
144,677
|
$
|
44,494
|
$
|
63,679
|
$
|
-
|
$
|
252,850
|
Corporate and other liabilities
|
|
|
-
|
|
-
|
|
-
|
|
228,424
|
|
228,424
|
Total liabilities
|
|
$
|
144,677
|
$
|
44,494
|
$
|
63,679
|
$
|
228,424
|
$
|
481,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
September 30, 2013
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Equipment
|
|
$
|
93,961
|
$
|
19,548
|
$
|
-
|
$
|
-
|
$
|
113,509
|
Parts
|
|
|
46,031
|
|
32,074
|
|
87,899
|
|
-
|
|
166,004
|
Service
|
|
|
20,740
|
|
15,504
|
|
11,045
|
|
-
|
|
47,289
|
Rental and other
|
|
|
10,899
|
|
2,077
|
|
-
|
|
(1,303)
|
|
11,673
|
Revenue
|
|
$
|
171,631
|
$
|
69,203
|
$
|
98,944
|
$
|
(1,303)
|
$
|
338,475
|
Earnings before finance costs and income taxes
|
|
$
|
11,250
|
$
|
3,740
|
$
|
4,827
|
$
|
(1,966)
|
$
|
17,851
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
2,146
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
4,160
|
Net earnings
|
|
|
|
|
|
|
|
|
|
$
|
11,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
September 30, 2013
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Equipment
|
|
$
|
288,968
|
$
|
63,369
|
$
|
-
|
$
|
-
|
$
|
352,337
|
Parts
|
|
|
130,037
|
|
100,737
|
|
273,636
|
|
-
|
|
504,410
|
Service
|
|
|
63,851
|
|
48,579
|
|
30,982
|
|
-
|
|
143,412
|
Rental and other
|
|
|
33,834
|
|
5,883
|
|
-
|
|
(3,107)
|
|
36,610
|
Revenue
|
|
$
|
516,690
|
$
|
218,568
|
$
|
304,618
|
$
|
(3,107)
|
$
|
1,036,769
|
Earnings before finance costs and income taxes
|
|
$
|
32,001
|
$
|
11,098
|
$
|
16,436
|
$
|
(5,502)
|
$
|
54,033
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
5,891
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
12,671
|
Net earnings
|
|
|
|
|
|
|
|
|
|
$
|
35,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2013
|
|
|
Equipment
|
|
Power
Systems
|
|
Industrial
Components
|
|
Segment
Eliminations
|
|
Total
|
Segment assets excluding intangible assets
|
|
$
|
312,918
|
$
|
144,752
|
$
|
136,190
|
$
|
-
|
$
|
593,860
|
Intangible assets
|
|
|
21,689
|
|
14,287
|
|
50,303
|
|
-
|
|
86,279
|
Corporate and other assets
|
|
|
-
|
|
-
|
|
-
|
|
4,451
|
|
4,451
|
Total assets
|
|
$
|
334,607
|
$
|
159,039
|
$
|
186,493
|
$
|
4,451
|
$
|
684,590
|
Segment liabilities
|
|
$
|
120,973
|
$
|
43,392
|
$
|
51,739
|
$
|
-
|
$
|
216,104
|
Corporate and other liabilities
|
|
|
-
|
|
-
|
|
-
|
|
225,296
|
|
225,296
|
Total liabilities
|
|
$
|
120,973
|
$
|
43,392
|
$
|
51,739
|
$
|
225,296
|
$
|
441,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment eliminations include costs, assets and liabilities related to
the corporate office. Corporate office assets and liabilities include
deferred financing costs, income taxes, bank indebtedness, bank debt,
employee benefits, and dividends payable.
During the year, the Rotating Equipment business has been moved from the
Equipment to the Industrial Components segment due to a change in
operational reporting structure. Segment information for comparative
periods has been reclassified to reflect the change.
14. RESTRUCTURING COSTS
Restructuring costs of $3,078 were recorded in the Industrial Components
segment to improve the effectiveness and to simplify the sales force
and branch management organization. The current restructuring plan has
been completed.
15. COMPARATIVE INFORMATION
Certain comparative information have been reclassified to conform to the
current year's presentation.
SOURCE Wajax Corporation