TSX Symbol: WJX
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(Dollars in millions, except per share data)
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Three Months Ended June 30
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Six Months Ended June 30
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2015
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2014
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2015
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2014
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CONSOLIDATED RESULTS
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Revenue
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$340.7
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$374.4
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$658.0
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$705.8
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Net earnings (1)
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$9.0
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$12.3
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$14.7
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$19.0
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Basic earnings per share (1)
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$0.52
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$0.73
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$0.86
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$1.13
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SEGMENTS
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Revenue
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- Equipment
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$166.9
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$188.2
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$312.5
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$348.7
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- Power Systems
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$73.9
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$82.0
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$148.5
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$159.1
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- Industrial Components
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$100.8
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$105.2
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$198.7
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$201.3
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Earnings
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- Equipment (2)
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$11.7
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$13.6
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$18.5
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$24.3
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% margin
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7.0%
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7.2%
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5.9%
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7.0%
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- Power Systems (1) (2)
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$1.1
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$4.2
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$4.5
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$7.7
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% margin
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1.5%
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5.1%
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3.0%
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4.8%
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- Industrial Components (2)
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$5.4
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$4.6
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$8.8
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$5.8
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% margin
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5.4%
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4.4%
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4.4%
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2.9%
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TORONTO, Aug. 7, 2015 /CNW/ - Wajax Corporation ("Wajax" or the
"Corporation") today announced its 2015 second quarter earnings.
Second Quarter Highlights
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Consolidated second quarter revenue of $340.7 million decreased $33.7
million, or 9%, compared to last year. All three segments recorded
decreased revenue in the quarter as a result of the energy and mining
sector related slowdowns in western Canada. The Equipment, Power
Systems and Industrial Components segments reported revenue declines of
11%, 10% and 4% respectively. Revenue gains were realized in central
and eastern Canada in all three segments, particularly related to gains
in the forestry sector in the Equipment segment and in the bearing and
power transmission product category in the Industrial Components
segment.
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Net earnings for the quarter of $9.0 million, decreased $3.3 million
compared to $12.3 million, recorded in 2014. The lower earnings were
attributable to the decreased revenue and a $2.1 million pre-tax
restructuring charge recorded in the Power Systems segment. The
restructuring of the Power Systems segment is expected to realign
branch support activities, including the centralization of supply chain
management, and certain other administrative support functions. The
restructuring, combined with other cost reductions related to reduced
economic activity in western Canada, are anticipated to result in
annualized pre-tax savings of approximately $7.4 million, of which $4.2
million is expected to be achieved in 2015.
Basic earnings per share of $0.52 for the quarter decreased from $0.73
per share recorded last year. The reduction is attributable to the
reduced net earnings and a $0.02 per share dilutive effect of 3,197,000
common shares issued on June 12, 2015 in connection with the completion
of the corporation's bought deal financing announced May 26, 2015.
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Consolidated backlog(3) at June 30, 2015 of $171.2 million decreased slightly, compared to
$173.3 million on March 31, 2015.
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Funded net debt(3) of $167.3 million at June 30, 2015 decreased $84.7 million compared to
$252.0 million at March 31, 2015. This was due principally to cash
generated from operating activities of $15.5 million and net cash
proceeds of $71.4 million from the issuance of share capital, offset
partially by dividends paid of $1.4 million.
Wajax declared a quarterly dividend of $0.25 per share payable on
October 2, 2015 to shareholders of record on September 15, 2015.
Outlook
Commenting on first quarter results and the outlook for the remainder of
2015, Mark Foote, President and CEO, stated:
"As expected, weakness in the western Canada economy resulted in lower
second quarter revenue and earnings. While all three segments were
impacted by the western Canada slowdown, the effect was most
significant in the Equipment and Power Systems segments. Despite the
headwinds in western Canada, the Industrial Components segment recorded
an increase in segment earnings as a result of cost reductions
implemented last year and improved bearing and power transmission parts
sales. In addition, revenue in central and eastern Canada improved in
all three businesses.
As stated last quarter, our focus in 2015 continues to be centered on
three objectives; cost management; managing our asset base and debt
level, and; executing a prudent investment plan to support our 4 Points
of Growth strategy.
With respect to cost management, reductions in consolidated selling and
administrative costs of $2.9 million in the quarter and volume related
service personnel staffing adjustments, partially mitigated the
earnings impact of lower second quarter volumes. Our 2014
restructuring efforts in the Industrial Components segment continue to
result in a significant improvement in earnings based on both cost
reduction and improved selling effectiveness. In the Equipment segment
we have reduced our western Canada workforce by more than 10% in
response to soft market conditions. While similar reductions have been
implemented in the Power Systems segment, in the second quarter we
recorded a $2.1 million restructuring provision based on plans to
further reduce costs in this business. This restructuring combined
with the segment's volume related cost reductions are anticipated to
result in annualized savings of approximately $7.4 million.
Our debt was reduced by $84.7 million in the quarter. $71.4 million of
this was attributable to the application of the cash proceeds from the
common share offering completed in June, providing us with additional
financial flexibility to execute our 4 Points of Growth strategy. The
remainder was attributable to cash generated from operating activities,
including a reduction of working capital as we begin to reduce assets
employed in the business in response to the market conditions in
western Canada. In addition, subsequent to the second quarter we
monetized the mining trucks we had in inventory which is expected to
result in a further working capital reduction in the third quarter.
We continued to execute our 4 Points of Growth strategy with a
controlled pace in the second quarter. We are continuing to move
forward on all components of our strategy including activities related
to our core capabilities, organic growth initiatives, ERS acquisitions
and systems implementation.
With commodity markets and the western Canada economy anticipated to be
soft for the foreseeable future, we continue to expect that 2015 will
be a challenging year. Consequently we continue to expect 2015 full
year earnings to be less than the previous year. We are pleased with
the performance of our team and remain very confident that our growth
strategy and responsiveness to market conditions will result in an
improving business in the medium term and a strong growth company for
the future."
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 123 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 Second Quarter Financial Results Conference
Call. You are invited to listen to the live Webcast on Friday, August
7, 2015 at 1:00 p.m. ET. To access the Webcast, enter www.wajax.com and click on the link for the Webcast on the Investor Relations page.
Notes
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(1)
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2015 figures include a $2.1 million pre-tax restructuring charge.
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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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These financial measures do not have a standardized meaning prescribed
under generally accepted accounting principles (GAAP), and may not be
comparable to similar measures presented by other issuers. The
Corporation's Management's Discussion and Analysis (MD&A) includes
additional information regarding these financial measures, including
definitions, under the heading "Non-GAAP and Additional GAAP Measures".
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Cautionary Statement Regarding Forward Looking Information
This news release contains certain forward-looking statements and
forward-looking information, as defined in applicable securities laws
(collectively, "forward-looking statements"). These forward-looking statements relate to future events or the
Corporation's future performance. All statements other than statements
of historical fact are forward-looking statements. Often, but not
always, forward looking statements can be identified by the use of
words such as "plans", "anticipates", "intends", "predicts", "expects",
"is expected", "scheduled", "believes", "estimates", "projects" or
"forecasts", or variations of, or the negatives of, such words and
phrases or state that certain actions, events or results "may",
"could", "would", "should", "might" or "will" be taken, occur or be
achieved. Forward looking statements involve known and unknown risks,
uncertainties and other factors beyond the Corporation's ability to
predict or control which may cause actual results, performance and
achievements to differ materially from those anticipated or implied in
such forward looking statements. There can be no assurance that any
forward looking statement will materialize. Accordingly, readers
should not place undue reliance on forward looking statements. The
forward looking statements in this news release are made as of the date
of this news release, reflect management's current beliefs and are
based on information currently available to management. Although
management believes that the expectations represented in such
forward-looking statements are reasonable, there is no assurance that
such expectations will prove to be correct. Specifically, this news
release includes forward looking statements regarding, among other
things, our cost reduction measures, including restructuring activities
within our Power Systems segment and the expected benefits and cost
savings therefrom; our continued focus on cost management, managing our
asset base and debt level, and executing a prudent investment plan to
support our "4 Points of Growth" strategy; our execution of the "4
Points of Growth" strategy, including our progress on initiatives
related to our core capabilities, organic growth initiatives, ERS
acquisitions and systems implementation; our expectation that
challenging end-market conditions will remain throughout 2015; our
expectation for full year earnings; and our confidence that our growth
strategy and responsiveness to market conditions will result in an
improving business in the medium term and a strong growth company for
the future. 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, oil
and other commodities; financial market conditions, including interest
rates; our ability to execute our renewed long-term growth strategy,
including our ability to develop our core capabilities, execute on our
organic growth priorities, complete and effectively integrate
acquisitions and to successfully implement new information technology
platforms, systems and software; 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, oil and other commodities; a continued or prolonged
decrease in the price of oil; fluctuations in financial market
conditions, including interest rates; the level of demand for, and
prices of, the products and services we offer; levels of customer
confidence and spending; 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, our inability to
reduce costs in response to slow-downs in market activity,
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, 2014, filed on SEDAR.
Management's Discussion and Analysis - Q2 2015
The following management's discussion and analysis ("MD&A") discusses
the consolidated financial condition and results of operations of Wajax
Corporation ("Wajax" or the "Corporation") for the quarter ended June
30, 2015. This MD&A should be read in conjunction with the information
contained in the unaudited condensed consolidated financial statements
and accompanying notes for the quarter ended June 30, 2015, the annual
audited consolidated financial statements and accompanying notes for
the year ended December 31, 2014 and the associated MD&A. Information
contained in this MD&A is based on information available to management
as of August 7, 2015.
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 June 30, 2015, 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 June 30, 2015, 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") as published by the International Accounting
Standards Board. In completing the design, management used the
criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") in its 2013 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 June 30, 2015 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 renewed long-term growth
strategy and the goals of such strategy, including our goal of becoming
Canada's leading industrial products and services provider; our "4
Points of Growth" framework to grow the Corporation; our cost reduction
measures, including restructuring activities within our Power Systems
segment, and the expected benefits and cost-savings therefrom; our
efforts to monitor our costs and asset base, and to maintain
disciplined control over inventories and receivables; continued
investment in maintenance and repair-related strategic initiatives at
Industrial Components; our financing, working and maintenance capital
requirements, as well as our capital structure and leverage ratio; our
foreign exchange exposure; our continued focus on cost management,
managing our asset base and debt level, and executing a prudent
investment plan to support the "4 Points of Growth" strategy; our
execution of the "4 Points of Growth" strategy, including our progress
on initiatives related to our core capabilities, organic growth
initiatives, ERS acquisitions and systems implementation; our
expectation that challenging end-market conditions will remain
throughout 2015; our expectation for full year earnings; and our
confidence that our growth strategy and responsiveness to market
conditions will result in an improving business in the medium term and
a strong growth company for the future. 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, oil and other commodities; financial market conditions,
including interest rates; our ability to execute our renewed long-term
growth strategy, including our ability to develop our core
capabilities, execute on our organic growth priorities, complete and
effectively integrate acquisitions and to successfully implement new
information technology platforms, systems and software; 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, oil and
other commodities; a continued or prolonged decrease in the price of
oil; fluctuations in financial market conditions, including interest
rates; the level of demand for, and prices of, the products and
services we offer; levels of customer confidence and spending; 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, our inability to reduce costs in response to slow-downs in
market activity, 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, 2014, 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
judgements 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 is a leading Canadian distributor engaged in the sale and service
support of mobile equipment, power systems and industrial components.
Reflecting a diversified exposure to the Canadian economy, Wajax has
three distinct product divisions which operate through a network of 123
branches across Canada.
Wajax's customer base covers core sectors of the Canadian economy,
including construction, industrial and commercial, transportation, the
oil sands, forestry, oil and gas, metal processing and mining.
The Corporation's goal is to be Canada's leading industrial products and
services provider, distinguished through: sales force excellence,
breadth and efficiency of repair and maintenance operations and an
ability to work closely with existing and new vendor partners to
constantly expand its product offering to customers.
Consolidated Results
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Three months ended
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Six months ended
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June 30
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June 30
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2015
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2014
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2015
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2014
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Revenue
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$
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340.7
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$
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374.4
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$
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658.0
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$
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705.8
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Gross profit
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$
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69.4
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$
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74.6
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$
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133.4
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$
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143.5
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Selling and administrative expenses
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$
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51.6
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$
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54.5
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$
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104.3
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$
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111.1
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Restructuring costs
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$
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2.1
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$
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-
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$
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2.1
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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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15.8
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$
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20.1
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$
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27.0
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$
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32.5
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Finance costs
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$
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3.3
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$
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3.2
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$
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6.6
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$
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6.4
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Earnings before income taxes(1)
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$
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12.5
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$
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16.9
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$
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20.4
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$
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26.0
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Income tax expense
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$
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3.5
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$
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4.6
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$
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5.6
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$
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7.1
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Net earnings
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$
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9.0
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$
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12.3
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$
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14.7
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$
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19.0
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Basic earnings per share(2)
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$
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0.52
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$
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0.73
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$
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0.86
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$
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1.13
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Diluted earnings per share(2)
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$
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0.51
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$
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0.72
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$
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0.85
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$
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1.11
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(1)
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These amounts do not have a standardized meaning prescribed by generally
accepted accounting principles
("GAAP"). See the Non-GAAP and Additional GAAP Measures section.
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(2)
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On June 12, 2015, the Corporation completed an equity offering of
3,197,000 common shares. The basic
and diluted weighted average number of shares for the three months ended
June 30, 2015 was 17,446,388
(2014 - 16,778,883) and 17,750,630 (2014 - 17,029,049), respectively.
The basic and diluted weighted
average number of shares for the six months ended June 30, 2015 was
17,114,480 (2014 - 16,766,554)
and 17,409,880 (2014 - 17,023,348), respectively.
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Ongoing weakness in oil and other commodity prices had a negative effect
on Wajax customers in the construction, mining, oil and gas and oil
sands markets in western Canada. The impact was most significant in
the Equipment segment, which experienced a 42% decline in construction
equipment revenue due to lower demand and a 13% reduction in parts and
service revenues as oil sands operators and mining customers continued
to idle portions of their equipment fleets and defer maintenance. In
addition, the Power Systems segment's western Canada operations were
negatively impacted by the decline in oil and gas activity. Partly
offsetting these conditions, the Equipment and Industrial Components
segments benefited from strength in the forestry sector across Canada
and all segments improved their revenue in central and eastern Canada.
Revenue
Revenue in the second quarter of 2015 decreased 9%, or $33.7 million,
from $374.4 million in 2014. Equipment segment revenue decreased 11%,
or $21.3 million, as a result of lower construction equipment volumes
and lower mining sector parts and service volumes in western Canada,
offset partially by higher forestry equipment volumes in all regions.
Power Systems segment revenue decreased 10%, or $8.1 million, driven by
a reduction in oil and gas related revenues in western Canada. Segment
revenue in Industrial Components decreased 4%, or $4.4 million, as
higher bearing and power transmission parts sales in eastern Canada
were more than offset by lower fluid power and process equipment
product and service revenue in western Canada.
For the six months ended June 30, 2015, revenue decreased 7%, or $47.8
million, from $705.8 million in 2014. Equipment segment revenue
decreased 10%, or $36.2 million, as a result of lower construction
equipment volumes and lower mining sector volumes in western Canada,
offset partially by higher forestry equipment volumes in all regions.
Power Systems segment revenue decreased 7%, or $10.6 million, driven by
a reduction in oil and gas related off-highway revenues in western
Canada. Segment revenue in Industrial Components decreased 1%, or $2.6
million, as higher bearing and power transmission parts sales, in all
regions, were more than offset by lower fluid power and process
equipment product and service revenue in western Canada.
Gross profit
Gross profit in the second quarter of 2015 decreased 7%, or $5.2
million, mainly due to lower volumes compared to the second quarter of
2014 offset partially by higher gross profit margins. The gross profit
margin percentage of 20.4% increased from 19.9% in the prior year due
to higher product support gross profit margins.
For the six months ended June 30, 2015, gross profit decreased 7%, or
$10.1 million, due principally to lower volumes. The gross profit
margin percentage of 20.3% remained unchanged compared to 2014.
Selling and administrative expenses
Selling and administrative expenses decreased 5%, or $2.9 million in the
second quarter of 2015, compared to the same quarter last year due
mainly to workforce reductions and lower incentive accruals and sales
related expenses. Selling and administrative expenses as a percentage
of revenue increased to 15.1% in 2015 from 14.5% in 2014.
For the six months ended June 30, 2015, selling and administrative
expenses decreased 6%, or $6.8 million, compared to the same period
last year. This was due mainly to workforce reductions as well as lower
incentives accruals and sales related expenses. These decreases were
partially offset by a $1.0 million increase in bad debt expenses.
Selling and administrative expenses as a percentage of revenue
increased to 15.9% in 2015 from 15.7% in 2014.
Restructuring costs
Restructuring costs of $2.1 million, consisting of severance costs, were
recorded in the second quarter of 2015 in the Power Systems segment.
The restructuring is expected to realign branch support activities,
including the centralization of supply chain management and certain
other administrative support functions. The restructuring, combined
with cost reductions related to reduced economic activity in western
Canada, are anticipated to result in annualized savings of
approximately $7.4 million, of which approximately $4.2 million is
expected to be achieved in 2015.
Finance costs
Quarterly finance costs of $3.3 million increased $0.1 million compared
to 2014.
For the six months ended June 30, 2015, finance costs of $6.6 million
increased $0.2 million compared to the same period in 2014.
Income tax expense
The Corporation's effective income tax rate for the quarter and six
months ended June 30, 2015 of 27.8% and 27.7%, respectively, increased
from 27.2% and 27.1%, respectively, in the previous year. The
increases were a function of an increase in the statutory income tax
rate to 26.5% from 26.1% and the impact of expenses not deductible for
tax purposes representing a higher percentage of total income on lower
earnings in 2015 compared to 2014.
Net earnings
Quarterly net earnings decreased $3.3 million to $9.0 million, or $0.52
per share, from $12.3 million, or $0.73 per share, in the same quarter
of 2014. The $3.3 million decrease in net earnings resulted primarily
from lower volumes and restructuring costs, partially offset by reduced
selling and administrative expenses compared to the same period last
year. The $0.21 decrease in basic earnings per share reflects the
decrease in net earnings, as described above, combined with the impact
of the equity offering completed in the quarter, which decreased basic
earnings per share by $0.02. See the Issuance of Share Capital section
below.
For the six months ended June 30, 2015, net earnings decreased $4.3
million to $14.7 million, or $0.86 per share, from $19.0 million, or
$1.13 per share, in the same period in 2014. The decrease in net
earnings resulted primarily from lower volumes and restructuring costs,
partially offset by reduced selling and administrative expenses
compared to last year.
Issuance of share capital
On June 12, 2015, Wajax completed a "bought deal" equity offering of
3,197,000 common shares for total gross proceeds of $74.8 million.
This included 417,000 common shares issued pursuant to the exercise in
full of an over-allotment option granted to the underwriters. Issuance
costs relating to the equity offering totaled $3.4 million, $2.5
million after tax, including the underwriters' fee and other expenses.
The $71.4 million in net cash proceeds from the offering were used to
reduce outstanding borrowings under the revolving portion of the
Corporation's bank credit facility, providing Wajax with additional
financial flexibility to execute its long-term growth strategy.
Comprehensive income
Total comprehensive income of $8.5 million in the second quarter of 2015
included net earnings of $9.0 million offset by an other comprehensive
loss of $0.5 million. The other comprehensive loss of $0.5 million
includes gains reclassified to cost of inventory or finance costs
during the quarter net of gains on derivative instruments designated as
cash flow hedges outstanding at the end of the quarter.
For the six months ended June 30, 2015, total comprehensive income of
$14.6 million included net earnings of $14.7 million offset slightly by
an other comprehensive loss of $0.1 million.
Funded net debt (See the Non-GAAP and Additional GAAP Measures section)
Funded net debt of $167.3 million at June 30, 2015 decreased $84.7
million compared to $252.0 million at March 31, 2015. This was due
principally to cash generated from operating activities of $15.5
million and net proceeds from the issuance of share capital of $71.4
million offset partially by dividends paid of $1.4 million. Wajax's
leverage ratio of 1.82 times at June 30, 2015 decreased from the March
31, 2015 ratio of 2.68 times primarily as a result of the decrease in
funded net debt resulting from the issuance of share capital. See the
Issuance of Share Capital, Consolidated Financial Condition and the
Liquidity and Capital Resources sections.
Funded net debt of $167.3 million at June 30, 2015 decreased $33.7
million compared to $201.0 million at December 31, 2014. During the
period, proceeds from the issuance of share capital of $71.4 million
were offset somewhat by cash used in operating activities of $22.9
million, dividends paid of $11.5 million and finance lease payments of
$2.0 million. The cash used in operating activities of $22.9 million
included increases in non-cash working capital of $37.3 million,
primarily attributable to lower accounts payable and accrued
liabilities.
Dividends
For the second quarter ended June 30, 2015, quarterly dividends declared
totaled $0.25 per share. For the second quarter ended June 30, 2014,
monthly dividends declared totaled $0.60 per share.
For the six months ended June 30, 2015, dividends declared totaled $0.73
per share. For the six months ended June 30, 2014 monthly dividends
declared totaled $1.20 per share.
On August 7, 2015, Wajax announced a third quarter dividend of $0.25 per
share payable on October 2, 2015 to shareholders of record on September
15, 2015. See the Dividends section below.
Backlog (See the Non-GAAP and Additional GAAP Measures section)
Consolidated backlog at June 30, 2015 of $171.2 million decreased $2.1
million, or 1%, from $173.3 million at March 31, 2015 as decreases in
the Equipment and Industrial Components segments were offset partially
by an increase in the Power Systems segment. Consolidated backlog
decreased $53.3 million, or 24%, compared to June 30, 2014 on decreases
in the Equipment and Power Systems segments, offset partially by an
increase in the Industrial Components segment. See the Results of
Operations section below for further backlog detail by segment.
Results of Operations
Equipment
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
Equipment(1)
|
|
|
|
$
|
|
|
106.2
|
|
|
$
|
|
|
118.3
|
|
|
$
|
|
|
194.7
|
|
|
$
|
|
|
210.4
|
|
Parts and service
|
|
|
|
$
|
|
|
60.7
|
|
|
$
|
|
|
69.9
|
|
|
$
|
|
|
117.8
|
|
|
$
|
|
|
138.3
|
|
Segment revenue
|
|
|
|
$
|
|
|
166.9
|
|
|
$
|
|
|
188.2
|
|
|
$
|
|
|
312.5
|
|
|
$
|
|
|
348.7
|
|
Segment earnings(2)
|
|
|
|
$
|
|
|
11.7
|
|
|
$
|
|
|
13.6
|
|
|
$
|
|
|
18.5
|
|
|
$
|
|
|
24.3
|
|
Segment earnings margin
|
|
|
|
|
|
|
7.0%
|
|
|
|
|
|
7.2%
|
|
|
|
|
|
5.9%
|
|
|
|
|
|
7.0%
|
|
(1) Includes rental and other revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Earnings before finance costs and income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in the second quarter of 2015 decreased 11%, or $21.3 million,
to $166.9 million from $188.2 million in the second quarter of 2014.
Segment earnings for the quarter decreased $1.9 million, to $11.7
million, compared to the second quarter of 2014. The following factors
contributed to the Equipment segment's second quarter results:
-
Equipment revenue for the second quarter decreased $12.1 million
compared to the same quarter last year with specific
quarter-over-quarter variances as follows:
-
Construction equipment revenue decreased $24.7 million mainly as a
result of decreases in Hitachi excavator sales in western Canada due to
lower market demand and competitive market pressures.
-
Mining equipment sales decreased $0.2 million mainly as a result of
lower dollar value Hitachi mining equipment deliveries in western
Canada partially offset by higher deliveries in eastern Canada.
-
Forestry equipment revenue increased $12.9 million as strength in the
lumber market led to higher sales of Tigercat equipment across Canada.
-
Crane and utility equipment revenue decreased $2.9 million mainly as a
result of lower crane sales in western Canada and lower sales to
utility customers in central Canada.
-
Material handling equipment revenue increased $2.8 million due
principally to higher unit value sales in western Canada.
-
Parts and service volumes for the second quarter decreased $9.2 million
compared to the same quarter last year. The decrease was primarily
attributable to lower mining sector volumes in western Canada,
including the oil sands, as customers continued to idle portions of
their equipment fleet and defer maintenance due to weak oil and
commodity prices. Lower construction sector volumes in western Canada
due to slowing economic activity also contributed to the decrease in
parts and service volumes.
-
The segment earnings decrease of $1.9 million in the second quarter
compared to the same quarter last year was mainly attributable to
western Canada operations. Overall, the impact of the decline in
volumes was partially offset by slightly higher gross profit margins
and a $1.0 million reduction in selling and administrative expenses
compared to last year. Gross profit margins increased slightly due to
higher parts and service margins. Selling and administrative expenses
decreased $1.0 million attributable to reductions in the workforce and
sales related expenses.
Backlog of $91.5 million at June 30, 2015 decreased $1.8 million
compared to March 31, 2015. Backlog decreased $46.1 million compared
to June 30, 2014 due to decreases in crane and utility, mining and
material handling equipment orders.
Subsequent to the second quarter, the Equipment segment monetized six
Hitachi mining trucks in inventory, which will result in a third
quarter 2015 gain of approximately $2.8 million.
The segment will continue to monitor costs and maintain disciplined
control over inventories and receivables as market conditions and
customer demand in western Canada change.
Power Systems
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
Equipment(1)
|
|
|
|
|
$
|
|
|
24.8
|
|
|
$
|
|
|
28.1
|
|
|
$
|
|
|
46.8
|
|
|
$
|
|
|
53.4
|
|
Parts and service
|
|
|
|
|
$
|
|
|
49.1
|
|
|
$
|
|
|
53.9
|
|
|
$
|
|
|
101.7
|
|
|
$
|
|
|
105.7
|
|
Segment revenue
|
|
|
|
|
$
|
|
|
73.9
|
|
|
$
|
|
|
82.0
|
|
|
$
|
|
|
148.5
|
|
|
$
|
|
|
159.1
|
|
Segment earnings before restructuring costs(2)
|
|
|
|
|
$
|
|
|
3.2
|
|
|
$
|
|
|
4.2
|
|
|
$
|
|
|
6.6
|
|
|
$
|
|
|
7.7
|
|
Restructuring costs
|
|
|
|
|
$
|
|
|
2.1
|
|
|
$
|
|
|
-
|
|
|
$
|
|
|
2.1
|
|
|
$
|
|
|
-
|
|
Segment earnings(3)
|
|
|
|
|
$
|
|
|
1.1
|
|
|
$
|
|
|
4.2
|
|
|
$
|
|
|
4.5
|
|
|
$
|
|
|
7.7
|
|
Segment earnings margin before restructuring costs(2)
|
|
|
|
|
|
|
|
4.3%
|
|
|
|
|
|
5.1%
|
|
|
|
|
|
4.4%
|
|
|
|
|
|
4.8%
|
|
Restructuring costs
|
|
|
|
|
|
|
|
(2.8%)
|
|
|
|
|
|
-
|
|
|
|
|
|
(1.4%)
|
|
|
|
|
|
-
|
|
Segment earnings margin
|
|
|
|
|
|
|
|
1.5%
|
|
|
|
|
|
5.1%
|
|
|
|
|
|
3.0%
|
|
|
|
|
|
4.8%
|
|
(1)
|
Includes rental and other revenue.
|
|
(2)
|
Earnings before restructuring costs, finance costs and income taxes. See
the Non-GAAP and Additional
GAAP Measures section.
|
|
(3)
|
Earnings before finance costs and income taxes.
|
Revenue in the second quarter of 2015 decreased $8.1 million, or 10%, to
$73.9 million compared to $82.0 million in the same quarter of 2014.
Segment earnings decreased $3.1 million to $1.1 million in the second
quarter compared to the same quarter in the previous year. Segment
earnings before restructuring costs decreased $1.0 million to $3.2
million in the quarter compared to last year. See the Non-GAAP and
Additional GAAP Measures section. The following factors impacted
quarter-over-quarter revenue and earnings:
-
Equipment revenue decreased $3.3 million as declines in off-highway
equipment volumes to oil and gas customers in western Canada were
partially offset by stronger off-highway revenues to mining customers
in central Canada and increased power generation equipment volumes.
-
Parts and service volumes decreased $4.8 million attributable to lower
sales to on-highway and off-highway customers in western Canada
resulting from the decline in oil and gas activity. These decreases
were partially offset by higher sales to power generation customers in
all regions.
-
Segment earnings decreased $3.1 million compared to the same quarter
last year due mainly to reduced sales volumes and $2.1 million of
restructuring costs consisting of severance costs, offset partially by
a $0.2 million decrease in selling and administrative expenses.
During the quarter, the Power Systems segment began implementation of
restructuring activities to realign branch support activities,
including the centralization of supply chain management and certain
other administrative support functions. The restructuring, combined
with other cost reductions realized to date and cost reductions related
to reduced economic activity in western Canada, are anticipated to
result in annualized savings of approximately $7.4 million of which
approximately $4.2 million is expected to be achieved in 2015. In
addition, the segment continues to maintain disciplined control over
inventories and receivables.
Backlog of $33.5 million as of June 30, 2015 increased $3.8 million
compared to March 31, 2015, due mainly to higher power generation
orders. Backlog decreased $10.2 million compared to June 30, 2014,
primarily due to lower power generation backlog in western Canada and
lower off-highway backlog in western and eastern Canada.
Industrial Components
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
Segment revenue
|
|
|
|
$
|
|
|
100.8
|
|
|
$
|
|
|
105.2
|
|
|
$
|
|
|
198.7
|
|
|
$
|
|
|
201.3
|
|
Segment earnings(1)
|
|
|
|
$
|
|
|
5.4
|
|
|
$
|
|
|
4.6
|
|
|
$
|
|
|
8.8
|
|
|
$
|
|
|
5.8
|
|
Segment earnings margin
|
|
|
|
|
|
|
5.4%
|
|
|
|
|
|
4.4%
|
|
|
|
|
|
4.4%
|
|
|
|
|
|
2.9%
|
|
(1) Earnings before finance costs and income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue of $100.8 million in the second quarter of 2015 decreased $4.4
million, or 4%, from $105.2 million in the second quarter of 2014.
Segment earnings increased $0.8 million to $5.4 million in the second
quarter of 2015 compared to the same quarter in the previous year. The
following factors contributed to the segment's second quarter results:
-
Bearings and power transmission parts sales increased $1.3 million, or
2%, compared to the same quarter last year. The increase was driven by
higher sales to mining and forestry customers in all regions offset
somewhat by lower volumes to oil and gas customers in western Canada
and lower volumes to steel and metal customers in all regions.
-
Fluid power and process equipment products and service revenue in the
second quarter of 2015 decreased $5.7 million, or 12%, compared to the
same quarter last year. The decrease was due primarily to reduced
sales to oil and gas and oil sands customers in western Canada.
-
Segment earnings in the second quarter of 2015 increased $0.8 million
compared to the same quarter last year as the negative impact of lower
volumes was more than offset by the positive impact of a $1.7 million
decrease in selling and administrative expenses. The decrease in
selling and administrative expenses was mainly attributable to
restructuring activities in 2014 and lower sales related expenses.
Backlog of $46.2 million as of June 30, 2015 decreased $4.1 million
compared to March 31, 2015, due mainly to lower orders for bearings and
power transmissions in western Canada and process equipment in eastern
Canada. Backlog increased $3.0 million compared to June 30, 2014
primarily due to higher orders for process equipment in eastern Canada.
The segment's cost structure and asset base continues to be monitored
and adjusted in response to any further changes in market conditions.
However, while respecting the current economic environment, the segment
will continue to make investments in organic growth and acquisitions
that focus on growing maintenance and repair related revenues which are
viewed to be more resilient in a market downturn.
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 2014 annual audited consolidated financial statements.
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
Q2
|
|
|
|
Q1
|
|
|
|
Q4
|
|
|
|
Q3
|
|
|
|
Q2
|
|
|
|
Q1
|
|
|
|
Q4
|
|
|
|
Q3
|
|
Revenue
|
|
|
$
|
|
340.7
|
|
$
|
|
317.2
|
|
$
|
|
386.1
|
|
$
|
|
359.5
|
|
$
|
|
374.4
|
|
$
|
|
331.4
|
|
$
|
|
391.7
|
|
$
|
|
338.5
|
|
Net earnings
|
|
|
$
|
|
9.0
|
|
$
|
|
5.7
|
|
$
|
|
11.2
|
|
$
|
|
11.1
|
|
$
|
|
12.3
|
|
$
|
|
6.7
|
|
$
|
|
12.2
|
|
$
|
|
11.6
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic
|
|
|
$
|
|
0.52
|
|
$
|
|
0.34
|
|
$
|
|
0.67
|
|
$
|
|
0.66
|
|
$
|
|
0.73
|
|
$
|
|
0.40
|
|
$
|
|
0.73
|
|
$
|
|
0.69
|
|
|
- Diluted
|
|
|
$
|
|
0.51
|
|
$
|
|
0.34
|
|
$
|
|
0.66
|
|
$
|
|
0.65
|
|
$
|
|
0.72
|
|
$
|
|
0.39
|
|
$
|
|
0.72
|
|
$
|
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Although Wajax experienced weaker first quarter results in 2015 and
2014, due to various factors including reduced activity in oil and gas
and mining markets, 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
|
|
|
|
|
|
|
|
|
|
June 30
2015
|
|
|
|
|
|
March 31
2015
|
|
|
|
December 31
2014
|
|
Shareholders' equity
|
|
|
|
|
|
$
|
|
|
322.7
|
|
|
$
|
|
|
246.7
|
|
|
$
|
248.5
|
|
Funded net debt(1)
|
|
|
|
|
|
|
|
|
167.3
|
|
|
|
|
|
252.0
|
|
|
|
201.0
|
|
Total capital
|
|
|
|
|
|
$
|
|
|
490.1
|
|
|
$
|
|
|
498.7
|
|
|
$
|
449.5
|
|
Funded net debt to total capital(1)
|
|
|
|
|
|
|
|
|
34.1%
|
|
|
|
|
|
50.5%
|
|
|
|
44.7%
|
|
Leverage ratio(1)
|
|
|
|
|
|
|
|
|
1.82
|
|
|
|
|
|
2.68
|
|
|
|
2.12
|
|
(1) See the Non-GAAP and Additional GAAP Measures section.
|
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 this range
to either support key growth initiatives or fluctuations in working
capital levels during changes in economic cycles. See the Funded Net
Debt section below.
In addition, the Corporation's tolerance to interest rate risk
decreases/increases as the Corporation's leverage ratio
increases/decreases. At June 30, 2015, $125 million of the
Corporation's funded net debt, or 75%, 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 June 30, 2015 of $322.7
million increased $76.0 million from March 31, 2015 and $74.2 million
from December 31, 2014 due principally from the net proceeds from the
issuance of share capital of $72.3 million. The Corporation's share
capital, included in shareholders' equity on the balance sheet,
consists of:
|
Issued and fully paid common shares as at June 30, 2015
|
|
|
|
|
|
Number
|
|
|
|
|
Amount
|
|
Balance at the beginning of the quarter
|
|
|
|
|
|
16,778,883
|
|
|
|
$
|
107.4
|
|
Shares issued
|
|
|
|
|
|
3,197,000
|
|
|
|
|
72.3
|
|
Balance at the end of the quarter
|
|
|
|
|
|
19,975,883
|
|
|
|
$
|
179.7
|
As discussed above, on June 12, 2015, the Corporation completed an
equity offering of 3,197,000 common shares at a price of $23.40 per
common share, resulting in a $72.3 million increase in share capital.
See the Issuance of Share Capital in the Consolidated Results section.
At the date of this MD&A, the Corporation had 19,975,883 common shares
outstanding.
At June 30, 2015, Wajax had four 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") and the Deferred Share Unit Plan ("DSUP"). In the first
quarter of 2014, all of the outstanding Deferred Share Program ("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 June 30, 2015, there were 310,789 (2014 -
268,739) SOP 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
expense of $0.4 million for the quarter (2014 - $0.3 million) and $0.5
million for the six months ended (2014 - $0.7 million) in respect of
these plans.
Funded Net Debt (See the Non-GAAP and Additional GAAP Measures section)
|
|
|
|
|
|
|
|
|
|
June 30
2015
|
|
|
|
|
|
March 31
2015
|
|
|
|
December 31
2014
|
|
(Cash) bank indebtedness
|
|
|
|
|
|
$
|
|
|
(3.0)
|
|
|
$
|
|
|
4.2
|
|
|
$
|
7.7
|
|
Obligations under finance lease
|
|
|
|
|
|
|
|
|
11.1
|
|
|
|
|
|
11.7
|
|
|
|
12.3
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
159.2
|
|
|
|
|
|
236.1
|
|
|
|
180.9
|
|
Funded net debt(1)
|
|
|
|
|
|
$
|
|
|
167.3
|
|
|
$
|
|
|
252.0
|
|
|
$
|
201.0
|
|
(1) See the Non-GAAP and Additional GAAP Measures section.
|
Funded net debt of $167.3 million at June 30, 2015 decreased $84.7
million compared to March 31, 2015 due principally to cash generated
from operating activities of $15.5 million and net cash proceeds from
the issuance of share capital of $71.4 million offset partially by
dividends paid of $1.4 million. The cash generated from operating
activities of $15.5 million included decreases in non-cash working
capital of $6.6 million, rental fleet additions of $7.5 million,
finance costs paid of $5.0 million and income taxes paid of $2.5
million.
Funded net debt of $167.3 million at June 30, 2015 decreased $33.7
million compared to December 31, 2014. During the period, net cash
proceeds from the issuance of share capital of $71.4 million were
offset somewhat by cash used in operating activities of $22.9 million,
dividends paid of $11.5 million and finance lease payments of $2.0
million. The cash used in operating activities of $22.9 million
included increases in non-cash working capital of $37.3 million, rental
fleet additions of $13.6 million, finance costs paid of $6.3 million
and income taxes paid of $5.3 million.
The Corporation's ratio of funded net debt to capital decreased to 34.1%
at June 30, 2015 from 50.5% at March 31, 2015, driven by the decrease
in funded net debt resulting primarily from net cash proceeds from the
issuance of share capital of $71.4 million.
The Corporation's leverage ratio of 1.82 times at June 30, 2015
decreased from the March 31, 2015 ratio of 2.68 times, primarily due to
the lower funded net debt outstanding.
See the Issuance of Share Capital and Liquidity and Capital Resources
sections.
Financial Instruments
Wajax uses derivative financial instruments in the management of its
foreign currency and interest rate exposures. Wajax's policy restricts
the use of derivative financial instruments for trading or speculative
purposes.
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
June 30, 2015, Wajax had the following contracts outstanding:
-
to buy U.S. $35.7 million (December 31, 2014 - to buy U.S. $41.8
million, June 30, 2014 - to buy U.S. $33.0 million),
-
to buy Euro €0.1 million (December 31, 2014 - nil, June 30, 2014 - nil),
and
-
to sell U.S. $13.6 million (December 31, 2014 - nil, June 30, 2014 -
nil).
The U.S. dollar contracts expire between July 2015 and May 2016, with a
weighted average U.S./Canadian dollar rate of 1.2415.
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 will periodically institute price increases to offset the negative
impact of foreign exchange rate increases and volatility on imported
goods to ensure margins are not eroded. However, a sudden strengthening
of the U.S. dollar relative to the Canadian dollar can have a negative
impact mainly on parts margins in the short term prior to price
increases taking effect.
Wajax is exposed to the risk of non-performance by counterparties to
short-term currency forward contracts. These counterparties are large
financial institutions that 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, 2014. 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, 2014. See the Contractual Obligations section
above.
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 $88.3 million (2014 - $73.8 million) of
consigned inventory on-hand from a major manufacturer at June 30,
2015. In the normal course of business, Wajax receives inventory on
consignment from this manufacturer which is generally sold to customers
or purchased by Wajax. This consigned inventory is not included in
Wajax's inventory as the manufacturer retains title to the goods. In
the event the inventory consignment program was terminated, Wajax would
utilize interest free financing, if any, made available by the
manufacturer and/or utilize capacity under its credit facilities.
Although management currently believes Wajax has adequate debt capacity,
Wajax would have to access the equity or debt markets, or reduce
dividends to accommodate any shortfalls in Wajax's credit facilities.
See the Liquidity and Capital Resources section.
Liquidity and Capital Resources
The Corporation's liquidity is maintained through various sources,
including bank and non-bank credit facilities, senior notes and cash
generated from operations.
Bank and Non-bank Credit Facilities and Senior Notes
At June 30, 2015, Wajax had borrowed $38.0 million and issued $5.6
million of letters of credit for a total utilization of $43.6 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 June 30, 2015, 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
June 30, 2015. In particular, the Corporation is restricted from
declaring 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 June
30, 2015.
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 June 30, 2015, Wajax had no utilization of
the interest bearing equipment financing facilities.
As of August 7, 2015, Wajax's $250 million bank credit facility, of
which $206.4 million was unutilized at the end of the second quarter,
along with the additional $15 million of capacity permitted under the
bank credit facility, should be sufficient to meet Wajax's short-term
normal course working capital and maintenance capital requirements and
certain strategic investments. However, Wajax may be required to access
the equity or debt markets to fund significant acquisitions.
Cash Flow
The following table highlights the major components of cash flow as
reflected in the Consolidated Statements of Cash Flows for the three
and six months ended June 30, 2015 and June 30, 2014.
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|
|
|
June 30
|
|
|
|
|
|
|
June 30
|
|
|
|
|
|
($millions)
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
Change
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
Change
|
|
Net earnings
|
|
|
|
$
|
|
|
9.0
|
|
|
$
|
|
|
12.3
|
|
|
$
|
(3.3)
|
|
|
$
|
|
|
14.7
|
|
|
$
|
|
|
19.0
|
|
|
$
|
(4.3)
|
|
Items not affecting cash flow
|
|
|
|
|
|
|
14.4
|
|
|
|
|
|
14.5
|
|
|
|
(0.1)
|
|
|
|
|
|
25.2
|
|
|
|
|
|
25.7
|
|
|
|
(0.5)
|
|
Net change in non-cash operating working capital
|
|
|
|
|
|
|
6.6
|
|
|
|
|
|
(3.2)
|
|
|
|
9.8
|
|
|
|
|
|
(37.3)
|
|
|
|
|
|
(10.2)
|
|
|
|
(27.1)
|
|
Finance costs paid
|
|
|
|
|
|
|
(5.0)
|
|
|
|
|
|
(4.1)
|
|
|
|
(0.9)
|
|
|
|
|
|
(6.3)
|
|
|
|
|
|
(5.2)
|
|
|
|
(1.1)
|
|
Income taxes paid
|
|
|
|
|
|
|
(2.5)
|
|
|
|
|
|
(3.2)
|
|
|
|
0.7
|
|
|
|
|
|
(5.3)
|
|
|
|
|
|
(7.7)
|
|
|
|
2.4
|
|
Rental equipment additions
|
|
|
|
|
|
|
(7.5)
|
|
|
|
|
|
(5.6)
|
|
|
|
(1.9)
|
|
|
|
|
|
(13.6)
|
|
|
|
|
|
(12.4)
|
|
|
|
(1.2)
|
|
Other non-current liabilities
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
0.7
|
|
|
|
(0.2)
|
|
|
|
|
|
(0.3)
|
|
|
|
|
|
1.1
|
|
|
|
(1.4)
|
|
Cash generated from (used in) operating activities
|
|
|
|
$
|
|
|
15.5
|
|
|
$
|
|
|
11.4
|
|
|
$
|
4.1
|
|
|
$
|
|
|
(22.9)
|
|
|
$
|
|
|
10.3
|
|
|
$
|
(33.2)
|
|
Cash used in investing activities
|
|
|
|
$
|
|
|
(0.3)
|
|
|
$
|
|
|
(1.0)
|
|
|
$
|
0.7
|
|
|
$
|
|
|
(2.3)
|
|
|
$
|
|
|
(2.1)
|
|
|
$
|
(0.2)
|
|
Cash (used in) generated from financing activities
|
|
|
|
$
|
|
|
(7.9)
|
|
|
$
|
|
|
(11.1)
|
|
|
$
|
3.2
|
|
|
$
|
|
|
35.9
|
|
|
$
|
|
|
(16.9)
|
|
|
$
|
52.8
|
Cash Generated From (Used In) Operating Activities
Cash flows generated from operating activities amounted to $15.5 million
in the second quarter of 2015, compared to $11.4 million in the same
quarter of the previous year. The increase of $4.1 million was mainly
attributable to an increase in cash generated from changes in non-cash
working capital of $9.8 million, partially offset by lower earnings of
$3.3 million and higher rental equipment additions of $1.9 million.
Rental equipment additions of $7.5 million (2014 - $5.6 million) related
to lift trucks in the Equipment segment and power generation equipment
in the Power Systems segment.
For the six months ended June 30, 2015, cash flows used in operating
activities amounted to $22.9 million, compared to cash generated from
operating activities of $10.3 million for the same period in the
previous year. The $33.2 million decrease in cash flows used in
operating activities was mainly attributable to an increased use of
working capital of $27.1 million in 2015 and lower net earnings of $4.3
million.
For the six months ended June 30, 2015, rental equipment additions of
$13.6 million (2014 - $12.4 million) related to lift trucks in the
Equipment segment and power generation equipment in the Power Systems
segment.
Significant components of non-cash operating working capital, along with
changes for the three and six months ended June 30, 2015 and June 30,
2014 include the following:
|
($millions)
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
Changes in Non-cash Operating Working Capital(1)
|
|
|
|
|
|
|
June 30
2015
|
|
|
|
|
June 30
2014
|
|
|
|
|
June 30
2015
|
|
|
|
|
June 30
2014
|
|
Trade and other receivables
|
|
|
|
|
$
|
|
11.8
|
|
|
$
|
|
(7.7)
|
|
|
$
|
|
12.6
|
|
|
$
|
|
(0.3)
|
|
Contracts in progress
|
|
|
|
|
|
|
(3.6)
|
|
|
|
|
(5.5)
|
|
|
|
|
(4.6)
|
|
|
|
|
(11.4)
|
|
Inventories
|
|
|
|
|
|
|
8.0
|
|
|
|
|
(4.2)
|
|
|
|
|
(2.1)
|
|
|
|
|
(12.1)
|
|
Prepaid expenses
|
|
|
|
|
|
|
(0.5)
|
|
|
|
|
1.1
|
|
|
|
|
(1.1)
|
|
|
|
|
(0.8)
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
(9.0)
|
|
|
|
|
13.4
|
|
|
|
|
(41.5)
|
|
|
|
|
16.7
|
|
Provisions
|
|
|
|
|
|
|
(0.2)
|
|
|
|
|
(0.4)
|
|
|
|
|
(0.6)
|
|
|
|
|
(2.2)
|
|
Total Changes in Non-cash Operating Working Capital
|
|
|
|
|
$
|
|
6.6
|
|
|
$
|
|
(3.2)
|
|
|
$
|
|
(37.3)
|
|
|
$
|
|
(10.2)
|
|
(1) Increase (decrease) in cash flow
|
Significant components of the changes in non-cash operating working
capital for the quarter ended June 30, 2015 compared to the quarter
ended June 30, 2014 are as follows:
-
Trade and other receivables decreased $11.8 million in 2015 compared to
an increase of $7.7 million in 2014. The decrease in 2015 resulted
primarily from improved collections in the Equipment segment and the
collection of a large power generation receivable in the Power Systems
segment. The increase in 2014 was mainly attributable to higher sales
activity in the Power Systems and Industrial Components segments.
-
Contracts in progress increased $3.6 million in 2015 compared to an
increase of $5.5 million in 2014. The increases in both years reflect
higher contract revenue recognized in advance of billings related to
power generation projects in the Power Systems segment.
-
Inventories decreased $8.0 million in 2015 compared to an increase of
$4.2 million in 2014. The decrease in 2015 was due mainly to lower
mining and forestry equipment in the Equipment segment. The increase in
2014 was primarily related to higher inventory in the Power Systems
segment.
-
Accounts payable and accrued liabilities decreased $9.0 million in 2015
compared to an increase of $13.4 million in 2014. The decrease in 2015
resulted from lower trade payables in all segments, due in part to the
payment of equipment inventory in the Equipment segment, offset
partially by higher accrued liabilities in the Equipment and Power
Systems segments. The increase in 2014 resulted primarily from higher
inventory trade payables in all segments.
Significant components of the changes in non-cash operating working
capital for the six months ended June 30, 2015 compared to the six
months ended June 30, 2014 are as follows:
-
Trade and other receivables decreased $12.6 million in 2015 compared to
an increase of $0.3 million in 2014. The decrease in 2015 was mainly
attributable to lower sales activity and improved collection efforts in
the Power Systems and in the Industrial Components segment.
-
Contracts in progress increased $4.6 million in 2015 compared to an
increase of $11.4 million in 2014. The increases in both years reflect
higher contract revenue recognized in advance of billings related to
power generation projects in the Power Systems segment.
-
Inventories increased $2.1 million in 2015 compared to an increase of
$12.1 million in 2014. The increase in 2014 was primarily related to
higher stock levels in the Equipment segment.
-
Accounts payable and accrued liabilities decreased $41.5 million in 2015
compared to an increase of $16.7 million in 2014. The decrease in 2015
resulted from lower trade payables in all segments, due in part to the
payment of mining equipment inventory in the Equipment segment. The
increase in 2014 resulted primarily from higher trade payables and
supplier financed inventory in the Equipment segment reduced somewhat
by lower trade payables in the Industrial Components segment.
Investing Activities
During the second quarter of 2015, Wajax invested $0.3 million in
property, plant and equipment additions, net of disposals, compared to
$1.0 million in the second quarter of 2014.
For the six months ended June 30, 2015, Wajax invested $2.2 million in
property, plant and equipment additions, net of disposals, compared to
$2.1 million in the six months ended June 30, 2014.
Financing Activities
The Corporation used $7.9 million of cash from financing activities in
the second quarter of 2015 compared to $11.1 million used in the same
quarter of 2014. Financing activities in the quarter included a net
bank credit facility repayment of $77.0 million (2014 - nil), dividends
paid to shareholders totaling $1.4 million (2014 - $10.1 million) and
finance lease payments of $0.9 million (2014 - $1.0 million) offset by
proceeds from the issuance of share capital of $71.4 million (2014 -
nil).
For the six months ended June 30, 2015, the Corporation generated $35.9
million of cash from financing activities compared to a use of cash of
$16.9 million from financing activities in the same period of 2014.
Financing activities for the six months ended June 30, 2015 included
proceeds from the issuance of share capital of $71.4 million (2014 -
nil), offset by a net bank credit facility repayment of $22.0 million
(2014 - drawdown of $5.0 million), dividends paid to shareholders
totaling $11.5 million (2014 - $20.1 million), and finance lease
payments of $2.0 million (2014 - $1.8 million).
Dividends
Dividends to shareholders were declared as follows:
|
Record Date
|
|
|
|
|
|
|
Payment Date
|
|
|
|
|
Per Share
|
|
|
|
|
|
Amount
|
|
June 15, 2015
|
|
|
|
|
|
|
July 3, 2015
|
|
|
|
|
$
|
0.25
|
|
|
|
|
$
|
5.0
|
|
Three months ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
|
|
|
$
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 7, 2015, Wajax announced a third quarter dividend of $0.25 per
share ($1.00 per share annualized) payable on October 2, 2015 to
shareholders of record on September 15, 2015.
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 and
management,
|
|
(ii)
|
the non-GAAP measures are commonly used as an indicator of a company's
cash operating performance, profitability and ability to raise and
service debt, in particular "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, and
|
|
(iii)
|
the additional GAAP measures are commonly used to assess a company's
earnings performance excluding its capital, tax structures and
restructuring costs.
|
|
|
|
|
Non-GAAP financial measures are identified and defined below:
|
|
|
|
|
|
|
Funded net debt
|
|
|
Funded net debt includes bank indebtedness, long-term debt and
obligations under finance leases, net of cash.
|
|
|
|
|
|
|
EBITDA
|
|
|
Net earnings before finance costs, income tax expense, depreciation and
amortization.
|
|
|
|
|
|
|
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. The
Corporation's objective is to maintain this ratio between 1.5 times and
2.0 times.
|
|
|
|
|
|
Funded net debt to total
capital
|
|
|
Defined as funded net debt divided by total capital. Total capital is
the funded net debt plus shareholder's equity.
|
|
|
|
|
|
|
Backlog
|
|
|
Backlog includes the total sales value of customer purchase commitments
for future delivery or commissioning of equipment, parts and related
services.
|
|
|
|
|
|
|
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
June 30
|
|
|
|
For the twelve
months ended
March 31
|
|
|
|
For the twelve
months ended
December 31
|
|
|
|
|
|
|
|
2015
|
|
|
|
2015
|
|
|
|
2014
|
|
Net earnings
|
|
|
|
|
|
$
|
37.0
|
|
|
|
$
|
40.3
|
|
|
|
$
|
41.2
|
|
Income tax expense
|
|
|
|
|
|
13.9
|
|
|
|
15.0
|
|
|
|
15.3
|
|
EBT
|
|
|
|
|
|
50.9
|
|
|
|
55.3
|
|
|
|
56.5
|
|
Finance costs
|
|
|
|
|
|
13.2
|
|
|
|
13.1
|
|
|
|
13.0
|
|
EBIT
|
|
|
|
|
|
64.1
|
|
|
|
68.4
|
|
|
|
69.5
|
|
Depreciation and amortization
|
|
|
|
|
|
23.1
|
|
|
|
22.8
|
|
|
|
22.5
|
|
EBITDA
|
|
|
|
|
|
|
87.2
|
|
|
|
|
91.2
|
|
|
|
|
92.0
|
|
Restructuring costs(1)
|
|
|
|
|
|
|
4.9
|
|
|
|
|
2.8
|
|
|
|
|
2.8
|
|
Adjusted EBITDA
|
|
|
|
|
|
$
|
92.1
|
|
|
|
$
|
94.1
|
|
|
|
$
|
95.0
|
|
(1)
|
Includes the $2.1 million Power Systems segment restructuring provision
recorded in the
second quarter of 2015 and the $2.8 million Industrial Components
segment restructuring
provision recorded in 2014.
|
Calculation of the Corporations funded net debt and leverage ratio is as
follows:
|
|
|
|
|
|
|
|
|
|
June 30
|
|
|
|
|
|
March 31
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
(Cash) bank indebtedness
|
|
|
|
|
|
$
|
|
|
(3.0)
|
|
|
$
|
|
|
4.2
|
|
|
$
|
7.7
|
|
Obligations under finance leases
|
|
|
|
|
|
|
|
|
11.1
|
|
|
|
|
|
11.7
|
|
|
|
12.3
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
159.2
|
|
|
|
|
|
236.1
|
|
|
|
180.9
|
|
Funded net debt
|
|
|
|
|
|
$
|
|
|
167.3
|
|
|
$
|
|
|
252.0
|
|
|
$
|
201.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage ratio(1)
|
|
|
|
|
|
|
|
|
1.82
|
|
|
|
|
|
2.68
|
|
|
|
2.12
|
|
(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
goodwill and intangible assets. In preparing the financial statements
for the quarter ended June 30, 2015, the significant judgements made by
management in applying the Corporation's accounting policies and the
key sources of estimation uncertainty are the same as those applied in
the recently reported audited consolidated financial statements for the
year ended December 31, 2014 which can be found on SEDAR at www.sedar.com.
Changes in Accounting Policies
No new standards have been adopted in the current period.
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, 2015 and have not been applied in preparing
these consolidated financial statements.
On January 1, 2016, the Corporation will be required to adopt the
amendments to IAS 1 Presentation of Financial Statements, which will
facilitate improved financial statement disclosures. The Corporation
does not expect IAS 1 to have a material impact on its consolidated
financial statements.
On January 1, 2018, the Corporation will be required to adopt IFRS 9
Financial Instruments, which is the IASB's project to replace IAS 39
Financial Instruments: Recognition and Measurement. 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.
On January 1, 2018, the Corporation will be required to adopt IFRS 15
Revenue from Contracts with Customers. 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 judgemental 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, 2014
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, 2014.
Strategic Direction and Outlook
As expected, weakness in the western Canada economy resulted in lower
second quarter revenue and earnings. While all three segments were
impacted by the western Canada slowdown, the affect was most
significant in the Equipment and Power Systems segments. Despite the
headwinds in western Canada, the Industrial Components segment recorded
an increase in segment earnings as a result of cost reductions
implemented last year and improved bearing and power transmission parts
sales. In addition, revenue in central and eastern Canada improved in
all three businesses.
As stated last quarter, the Corporation's focus in 2015 continues to be
centered on three objectives; cost management; managing our asset base
and debt level, and; executing a prudent investment plan to support our
4 Points of Growth strategy.
With respect to cost management, reductions in consolidated selling and
administrative costs of $2.9 million in the quarter and volume related
service personnel staffing adjustments, partially mitigated the
earnings impact of lower second quarter volumes. The 2014
restructuring efforts in the Industrial Components segment continue to
result in a significant improvement in earnings based on both cost
reduction and improved selling effectiveness. The Equipment segment
reduced its western Canada workforce by more than 10% in response to
soft market conditions. While similar reductions have been implemented
in the Power Systems segment, in the second quarter a $2.1 million
restructuring provision was recorded based on plans to further reduce
costs in this business. This restructuring combined with the segment's
volume related cost reductions are anticipated to result in annualized
savings of approximately $7.4 million.
Debt was reduced by $84.7 million in the quarter. $71.4 million of this
was attributable to the common share offering completed in June
providing Wajax with additional financial flexibility to execute its 4
Points of Growth strategy. The remainder was attributable to cash
generated from operating activities, including a reduction of working
capital as the Corporation began to reduce assets employed in the
business in response to the market conditions in western Canada. In
addition, subsequent to the second quarter the Corporation monetized
the mining trucks in inventory, which is expected to result in a
further reduction in working capital in the third quarter.
Wajax continued to execute its 4 Points of Growth strategy with a
controlled pace in the second quarter. The Corporation will continue to
move forward on all components of its strategy including activities
related to core capabilities, organic growth initiatives, ERS
acquisitions and systems implementation.
With commodity markets and the western Canada economy anticipated to be
soft for the foreseeable future, management continues to expect that
2015 will be a challenging year. Consequently management continues to
expect 2015 full year earnings to be less than the previous year.
Management is pleased with the performance of its team and remains very
confident that its growth strategy and responsiveness to market
conditions will result in an improving business in the medium term and
a strong growth company for the future.
Additional information, including Wajax's Annual Report and Annual
Information Form, are available on SEDAR at www.sedar.com.
WAJAX CORPORATION
Unaudited Condensed Consolidated Financial Statements
For the three and six months ended June 30, 2015
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
(unaudited, in thousands of Canadian dollars)
|
|
|
|
|
|
Note
|
|
|
|
|
|
June 30,
2015
|
|
|
|
|
December
31, 2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
$
|
|
3,001
|
|
|
$
|
|
-
|
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
171,200
|
|
|
|
|
183,759
|
|
Contracts in progress
|
|
|
|
|
|
|
|
|
|
|
|
13,563
|
|
|
|
|
9,003
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
|
328,950
|
|
|
|
|
323,764
|
|
Income taxes receivable
|
|
|
|
|
|
|
|
|
|
|
|
235
|
|
|
|
|
31
|
|
Prepaid expenses
|
|
|
|
|
|
|
|
|
|
|
|
9,047
|
|
|
|
|
7,970
|
|
Derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
573
|
|
|
|
|
1,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
526,569
|
|
|
|
|
525,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment
|
|
|
|
|
|
3
|
|
|
|
|
|
63,536
|
|
|
|
|
59,394
|
|
Property, plant and equipment
|
|
|
|
|
|
4
|
|
|
|
|
|
47,217
|
|
|
|
|
48,665
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
83,580
|
|
|
|
|
84,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,333
|
|
|
|
|
192,373
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
720,902
|
|
|
$
|
|
718,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
|
|
|
|
|
|
|
$
|
|
-
|
|
|
$
|
|
7,713
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
205,326
|
|
|
|
|
246,714
|
|
Provisions
|
|
|
|
|
|
|
|
|
|
|
|
5,134
|
|
|
|
|
5,758
|
|
Dividends payable
|
|
|
|
|
|
6
|
|
|
|
|
|
4,994
|
|
|
|
|
3,356
|
|
Obligations under finance leases
|
|
|
|
|
|
|
|
|
|
|
|
4,056
|
|
|
|
|
4,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,510
|
|
|
|
|
267,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
|
|
|
|
|
|
|
|
|
3,804
|
|
|
|
|
4,250
|
|
Deferred taxes
|
|
|
|
|
|
8
|
|
|
|
|
|
82
|
|
|
|
|
494
|
|
Employee benefits
|
|
|
|
|
|
|
|
|
|
|
|
7,411
|
|
|
|
|
7,257
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
947
|
|
Obligations under finance leases
|
|
|
|
|
|
|
|
|
|
|
|
7,040
|
|
|
|
|
8,160
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
159,237
|
|
|
|
|
180,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,643
|
|
|
|
|
202,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
|
5
|
|
|
|
|
|
179,732
|
|
|
|
|
107,454
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
|
|
|
5,658
|
|
|
|
|
5,176
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
136,885
|
|
|
|
|
135,269
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
|
|
|
617
|
|
Total shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
322,749
|
|
|
|
|
248,516
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
720,902
|
|
|
$
|
|
718,243
|
These condensed consolidated financial statements were approved by the
Board of Directors on August 7, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited, in thousands of Canadian dollars,
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
except per share data)
|
|
|
|
Note
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
$
|
|
|
340,747
|
|
|
$
|
|
|
374,396
|
|
|
$
|
|
|
657,962
|
|
|
$
|
|
|
705,765
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
271,350
|
|
|
|
|
|
299,798
|
|
|
|
|
|
524,579
|
|
|
|
|
|
562,224
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
69,397
|
|
|
|
|
|
74,598
|
|
|
|
|
|
133,383
|
|
|
|
|
|
143,541
|
|
Selling and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
51,562
|
|
|
|
|
|
54,462
|
|
|
|
|
|
104,330
|
|
|
|
|
|
111,075
|
|
Restructuring costs
|
|
|
|
13
|
|
|
|
|
|
|
2,060
|
|
|
|
|
|
-
|
|
|
|
|
|
2,060
|
|
|
|
|
|
-
|
|
Earnings before finance costs and income taxes
|
|
|
|
|
|
|
|
|
|
|
15,775
|
|
|
|
|
|
20,136
|
|
|
|
|
|
26,993
|
|
|
|
|
|
32,466
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
3,325
|
|
|
|
|
|
3,246
|
|
|
|
|
|
6,634
|
|
|
|
|
|
6,430
|
|
Earnings before income taxes
|
|
|
|
|
|
|
|
|
|
|
12,450
|
|
|
|
|
|
16,890
|
|
|
|
|
|
20,359
|
|
|
|
|
|
26,036
|
|
Income tax expense
|
|
|
|
8
|
|
|
|
|
|
|
3,464
|
|
|
|
|
|
4,588
|
|
|
|
|
|
5,640
|
|
|
|
|
|
7,068
|
|
Net earnings
|
|
|
|
|
|
|
|
$
|
|
|
8,986
|
|
|
$
|
|
|
12,302
|
|
|
$
|
|
|
14,719
|
|
|
$
|
|
|
18,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
9
|
|
|
|
$
|
|
|
0.52
|
|
|
$
|
|
|
0.73
|
|
|
$
|
|
|
0.86
|
|
|
$
|
|
|
1.13
|
|
Diluted earnings per share
|
|
|
|
9
|
|
|
|
$
|
|
|
0.51
|
|
|
$
|
|
|
0.72
|
|
|
$
|
|
|
0.85
|
|
|
$
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
(unaudited, in thousands of Canadian dollars)
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
$
|
|
|
|
8,986
|
|
|
$
|
|
|
12,302
|
|
|
$
|
|
|
14,719
|
|
|
$
|
|
|
18,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on derivative instruments designated
as cash flow hedges in prior periods reclassified to
cost of inventory during the period, net of tax expense of
$232 (2014 - $46) and year to date, net of tax expense of
$367 (2014 - $82)
|
|
|
|
|
|
|
|
(653)
|
|
|
|
|
|
(131)
|
|
|
|
|
|
(1,035)
|
|
|
|
|
|
(232)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative instruments outstanding at the
end of the period designated as cash flow hedges, net of tax
expense of $57 (2014 - recovery of $101) and year to date,
net of tax expense of $317 (2014 - recovery of $31)
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
(285)
|
|
|
|
|
|
892
|
|
|
|
|
|
(87)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
(492)
|
|
|
|
|
|
(416)
|
|
|
|
|
|
(143)
|
|
|
|
|
|
(319)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
$
|
|
|
|
8,494
|
|
|
$
|
|
|
11,886
|
|
|
$
|
|
|
14,576
|
|
|
$
|
|
|
18,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
income
|
|
|
|
|
|
For the six months ended June 30, 2015
(unaudited, in thousands of Canadian dollars)
|
|
|
|
Note
|
|
|
|
|
|
Share
capital
|
|
|
Contributed
surplus
|
|
|
Retained
earnings
|
|
Cash flow
hedges
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2015
|
|
|
|
|
|
|
|
$
|
|
107,454
|
|
|
5,176
|
|
|
135,269
|
|
617
|
|
$
|
|
|
248,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
14,719
|
|
-
|
|
|
|
|
14,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(143)
|
|
|
|
|
(143)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
14,719
|
|
(143)
|
|
|
|
|
14,576
|
|
Issuance of common shares
|
|
|
|
5
|
|
|
|
|
|
72,278
|
|
|
-
|
|
|
-
|
|
-
|
|
|
|
|
72,278
|
|
Dividends
|
|
|
|
6
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(13,103)
|
|
-
|
|
|
|
|
(13,103)
|
|
Share-based compensation expense
|
|
|
|
7
|
|
|
|
|
|
-
|
|
|
482
|
|
|
-
|
|
-
|
|
|
|
|
482
|
|
June 30, 2015
|
|
|
|
|
|
|
|
$
|
|
179,732
|
|
|
5,658
|
|
|
136,885
|
|
474
|
|
$
|
|
|
322,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
|
|
|
For the six months ended June 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
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
18,968
|
|
-
|
|
|
|
|
18,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(319)
|
|
|
|
|
(319)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
18,968
|
|
(319)
|
|
|
|
|
18,649
|
|
Shares issued to settle share-based compensation plans
|
|
|
|
7
|
|
|
|
|
|
750
|
|
|
(750)
|
|
|
-
|
|
-
|
|
|
|
|
-
|
|
Dividends
|
|
|
|
6
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(20,120)
|
|
-
|
|
|
|
|
(20,120)
|
|
Share-based compensation expense
|
|
|
|
7
|
|
|
|
|
|
-
|
|
|
401
|
|
|
-
|
|
-
|
|
|
|
|
401
|
|
June 30, 2014
|
|
|
|
|
|
|
|
$
|
|
107,454
|
|
|
4,709
|
|
|
134,165
|
|
(206)
|
|
$
|
|
|
246,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
|
|
CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
|
|
|
Six months ended
June 30
|
|
(unaudited, in thousands of Canadian dollars)
|
|
|
|
Note
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
$
|
|
|
8,986
|
|
|
$
|
|
|
12,302
|
|
|
$
|
|
|
14,719
|
|
|
$
|
|
|
18,968
|
|
|
Items not affecting cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental equipment
|
|
|
|
|
|
|
|
|
|
|
3,443
|
|
|
|
|
|
2,890
|
|
|
|
|
|
6,437
|
|
|
|
|
|
5,716
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
2,117
|
|
|
|
|
|
2,304
|
|
|
|
|
|
4,388
|
|
|
|
|
|
4,438
|
|
|
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
396
|
|
|
|
|
|
453
|
|
|
|
|
|
785
|
|
|
|
|
|
885
|
|
|
|
Loss (gain) on disposal of property, plant and equipment
|
|
|
|
4
|
|
|
|
|
|
|
23
|
|
|
|
|
|
18
|
|
|
|
|
|
27
|
|
|
|
|
|
(27)
|
|
|
|
Share-based compensation expense
|
|
|
|
7
|
|
|
|
|
|
|
231
|
|
|
|
|
|
204
|
|
|
|
|
|
482
|
|
|
|
|
|
401
|
|
|
|
Non-cash rental expense
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
13
|
|
|
|
|
|
60
|
|
|
|
|
|
27
|
|
|
|
Employee benefits expense, net of payments
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
114
|
|
|
|
|
|
154
|
|
|
|
|
|
221
|
|
|
|
Unrealized gain on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
1,324
|
|
|
|
|
|
659
|
|
|
|
|
|
577
|
|
|
|
|
|
569
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
3,325
|
|
|
|
|
|
3,246
|
|
|
|
|
|
6,634
|
|
|
|
|
|
6,430
|
|
|
|
Income tax expense
|
|
|
|
8
|
|
|
|
|
|
|
3,464
|
|
|
|
|
|
4,588
|
|
|
|
|
|
5,640
|
|
|
|
|
|
7,068
|
|
|
|
|
|
|
|
|
|
|
|
|
23,379
|
|
|
|
|
|
26,791
|
|
|
|
|
|
39,903
|
|
|
|
|
|
44,696
|
|
|
Changes in non-cash operating working capital
|
|
|
|
10
|
|
|
|
|
|
|
6,603
|
|
|
|
|
|
(3,215)
|
|
|
|
|
|
(37,299)
|
|
|
|
|
|
(10,199)
|
|
|
Rental equipment additions
|
|
|
|
3
|
|
|
|
|
|
|
(7,508)
|
|
|
|
|
|
(5,594)
|
|
|
|
|
|
(13,649)
|
|
|
|
|
|
(12,382)
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
514
|
|
|
|
|
|
690
|
|
|
|
|
|
(324)
|
|
|
|
|
|
977
|
|
|
Finance costs paid
|
|
|
|
|
|
|
|
|
|
|
(5,043)
|
|
|
|
|
|
(4,054)
|
|
|
|
|
|
(6,267)
|
|
|
|
|
|
(5,169)
|
|
|
Income taxes paid
|
|
|
|
|
|
|
|
|
|
|
(2,493)
|
|
|
|
|
|
(3,242)
|
|
|
|
|
|
(5,293)
|
|
|
|
|
|
(7,667)
|
|
|
Cash generated from (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
15,452
|
|
|
|
|
|
11,376
|
|
|
|
|
|
(22,929)
|
|
|
|
|
|
10,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions
|
|
|
|
4
|
|
|
|
|
|
|
(501)
|
|
|
|
|
|
(996)
|
|
|
|
|
|
(2,485)
|
|
|
|
|
|
(2,244)
|
|
|
Proceeds on disposal of property, plant and equipment
|
|
|
|
4
|
|
|
|
|
|
|
172
|
|
|
|
|
|
34
|
|
|
|
|
|
283
|
|
|
|
|
|
133
|
|
|
Intangible assets additions
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
(19)
|
|
|
|
|
|
(51)
|
|
|
|
|
|
(19)
|
|
|
Cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
(332)
|
|
|
|
|
|
(981)
|
|
|
|
|
|
(2,253)
|
|
|
|
|
|
(2,130)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in bank debt
|
|
|
|
|
|
|
|
|
|
|
(77,000)
|
|
|
|
|
|
-
|
|
|
|
|
|
(22,000)
|
|
|
|
|
|
5,000
|
|
|
Proceeds from issuance of share capital
|
|
|
|
5
|
|
|
|
|
|
|
71,366
|
|
|
|
|
|
-
|
|
|
|
|
|
71,366
|
|
|
|
|
|
-
|
|
|
Finance lease payments
|
|
|
|
|
|
|
|
|
|
|
(893)
|
|
|
|
|
|
(983)
|
|
|
|
|
|
(2,005)
|
|
|
|
|
|
(1,813)
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(1,398)
|
|
|
|
|
|
(10,067)
|
|
|
|
|
|
(11,465)
|
|
|
|
|
|
(20,113)
|
|
|
Cash (used in) generated from financing activities
|
|
|
|
|
|
|
|
|
|
|
(7,925)
|
|
|
|
|
|
(11,050)
|
|
|
|
|
|
35,896
|
|
|
|
|
|
(16,926)
|
|
Change in cash (bank indebtedness)
|
|
|
|
|
|
|
|
|
|
|
7,195
|
|
|
|
|
|
(655)
|
|
|
|
|
|
10,714
|
|
|
|
|
|
(8,800)
|
|
(Bank indebtedness) cash - beginning of period
|
|
|
|
|
|
|
|
|
|
|
(4,194)
|
|
|
|
|
|
(3,992)
|
|
|
|
|
|
(7,713)
|
|
|
|
|
|
4,153
|
|
Cash (bank indebtedness) - end of period
|
|
|
|
|
|
|
|
$
|
|
|
3,001
|
|
|
$
|
|
|
(4,647)
|
|
|
$
|
|
|
3,001
|
|
|
$
|
|
|
(4,647)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAJAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2015
(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 is a leading Canadian
distributor engaged in the sale and service support of mobile
equipment, power systems and industrial components. Reflecting a
diversified exposure to the Canadian economy, the Corporation has three
distinct product divisions which operate through a network of 123
branches across Canada.
The Corporation's customer base covers core sectors of the Canadian
economy, including construction, industrial and commercial,
transportation, the oil sands, forestry, oil and gas, metal processing
and mining.
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, 2014. The significant accounting policies
follow those disclosed in the most recently reported audited
consolidated financial statements.
Basis of measurement
The condensed 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 total of the fair value of the plan assets and
the present value of the defined benefit obligation.
Functional and presentation currency
These condensed consolidated financial statements are presented in
Canadian dollars, which is the Corporation's functional currency. All
financial information presented in Canadian dollars has been rounded to
the nearest thousand, unless otherwise stated and except share and per
share data.
3. RENTAL EQUIPMENT
The Corporation acquired rental equipment with a cost of $7,508 during
the quarter (2014 - $5,594) and $13,649 year to date (2014 - $12,382).
Rental equipment with a carrying amount of $1,134 during the quarter
(2014 - $1,407) and $3,070 year to date (2014 - $1,584) ceased to be
rented and was classified as held for sale in the normal course of
business and transferred to inventories.
4. PROPERTY, PLANT AND EQUIPMENT
The Corporation acquired property, plant and equipment with a cost of
$501 during the quarter (2014 - $996) and $2,485 year to date (2014 -
$2,244). Assets with a carrying amount of $195 during the quarter (2014
- $52) and $310 year to date (2014 - $106) were disposed of, resulting
in a loss on disposal of $23 during the quarter (2014 - $18) and $27
year to date (2014 - gain of $27).
5. SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
|
Number of
Common Shares
|
|
|
|
|
|
Amount
|
|
Balance, December 31, 2014
|
|
|
|
|
|
|
|
|
|
16,778,883
|
|
|
$
|
|
|
107,454
|
|
Issuance of common shares
|
|
|
|
|
|
|
|
|
|
3,197,000
|
|
|
|
|
|
72,278
|
|
Balance, June 30, 2015
|
|
|
|
|
|
|
|
|
|
19,975,883
|
|
|
$
|
|
|
179,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 12, 2015, the Corporation completed a public offering of
3,197,000 common shares of the Corporation at a price of $23.40 per
common share, for aggregate gross proceeds of approximately $74,810.
The Corporation paid issuance costs and professional fees related to
the offering in the amount of $2,532, net of deferred tax expense of
$912.
6. DIVIDENDS DECLARED
During the quarter, the Corporation declared cash dividends of $0.25 per
share or $4,994 (2014 - dividends of $0.60 per share or $10,067).
Year to date, the Corporation declared cash dividends of $0.7333 per
share or $13,103 (2014 - dividends of $1.20 per share or $20,120).
The Corporation has declared a dividend of $0.25 per share or $4,994 for
the third quarter of 2015.
7. 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 $231 for the quarter (2014
- $204) and $482 for the year to date (2014 - $401) in respect of these
plans.
|
|
|
|
|
Six months ended
June 30, 2015
|
|
|
|
Six months ended
June 30, 2014
|
|
|
|
|
|
Number of
rights
|
|
|
|
Fair value at
time of grant
|
|
|
|
Number of
rights
|
|
|
|
Fair value at
time of grant
|
|
Outstanding at beginning of year
|
|
|
|
287,550
|
|
|
$
|
5,420
|
|
|
|
282,573
|
|
|
$
|
5,403
|
|
Granted in the period
|
- new grants
|
|
|
|
15,283
|
|
|
|
352
|
|
|
|
12,537
|
|
|
|
452
|
|
|
- dividend equivalents
|
|
|
|
7,956
|
|
|
|
-
|
|
|
|
8,992
|
|
|
|
-
|
|
Settled in the period
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,363)
|
|
|
|
(750)
|
|
Outstanding at end of period
|
|
|
|
310,789
|
|
|
$
|
5,772
|
|
|
|
268,739
|
|
|
$
|
5,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2015, 305,324 share rights were vested (June 30, 2014 -
247,068).
b) Cash-settled rights plans
The Corporation recorded compensation cost of $172 for the quarter (2014
- $129) and $40 for the year to date (2014 - $295) in respect of the
share-based portion of the MTIP and DSUP. At June 30, 2015, the
carrying amount of the share-based portion of these liabilities was
$784 (June 30, 2014 - $453).
8. INCOME TAXES
Income tax expense comprises current and deferred tax as follows:
|
For the six months ended June 30
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
Current
|
|
|
|
|
|
$
|
|
|
5,089
|
|
|
$
|
|
|
6,210
|
|
Deferred - Origination and reversal of temporary differences
|
|
|
|
|
|
|
|
|
551
|
|
|
|
|
|
858
|
|
Income tax expense
|
|
|
|
|
|
$
|
|
|
5,640
|
|
|
$
|
|
|
7,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The calculation of current tax is based on a combined federal and
provincial statutory income tax rate of 26.5% (2014 - 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 26.9% 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
Combined statutory income tax rate
|
|
|
|
|
|
|
|
|
|
|
|
26.5%
|
|
|
|
|
|
26.1%
|
|
Expected income tax expense at statutory rates
|
|
|
|
|
|
|
|
|
|
|
$
|
5,395
|
|
|
$
|
|
|
6,795
|
|
Non-deductible expenses
|
|
|
|
|
|
|
|
|
|
|
|
303
|
|
|
|
|
|
297
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
(58)
|
|
|
|
|
|
(24)
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
$
|
5,640
|
|
|
$
|
|
|
7,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
|
Six months ended
June 30
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2014
|
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- net earnings
|
|
|
|
|
|
$
|
8,986
|
|
|
$
|
12,302
|
|
|
$
|
14,719
|
|
|
$
|
18,968
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- weighted average shares
|
|
|
|
|
|
|
17,446,388
|
|
|
|
16,778,883
|
|
|
|
17,114,480
|
|
|
|
16,766,554
|
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- weighted average shares
|
|
|
|
|
|
|
17,446,388
|
|
|
|
16,778,883
|
|
|
|
17,114,480
|
|
|
|
16,766,554
|
|
- effect of dilutive share rights
|
|
|
|
|
|
|
304,242
|
|
|
|
250,166
|
|
|
|
295,400
|
|
|
|
256,794
|
|
Denominator for diluted earnings per share
|
|
|
|
|
|
|
17,750,630
|
|
|
|
17,029,049
|
|
|
|
17,409,880
|
|
|
|
17,023,348
|
|
Basic earnings per share
|
|
|
|
|
|
$
|
0.52
|
|
|
$
|
0.73
|
|
|
$
|
0.86
|
|
|
$
|
1.13
|
|
Diluted earnings per share
|
|
|
|
|
|
$
|
0.51
|
|
|
$
|
0.72
|
|
|
$
|
0.85
|
|
|
$
|
1.11
|
No share rights were excluded from the above calculations as all share
rights are dilutive.
10. CHANGES IN NON-CASH OPERATING WORKING CAPITAL
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
|
|
|
Six months ended
June 30
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
|
|
|
2015
|
|
|
|
|
|
2014
|
|
|
Trade and other receivables
|
|
|
|
|
|
$
|
|
|
11,828
|
|
|
$
|
|
|
(7,730)
|
|
|
$
|
|
|
12,559
|
|
|
$
|
|
|
(305)
|
|
|
Contracts in progress
|
|
|
|
|
|
|
|
|
(3,557)
|
|
|
|
|
|
(5,496)
|
|
|
|
|
|
(4,560)
|
|
|
|
|
|
(11,449)
|
|
|
Inventories
|
|
|
|
|
|
|
|
|
7,966
|
|
|
|
|
|
(4,186)
|
|
|
|
|
|
(2,116)
|
|
|
|
|
|
(12,091)
|
|
|
Prepaid expenses
|
|
|
|
|
|
|
|
|
(464)
|
|
|
|
|
|
1,141
|
|
|
|
|
|
(1,077)
|
|
|
|
|
|
(810)
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
|
|
(8,971)
|
|
|
|
|
|
13,414
|
|
|
|
|
|
(41,481)
|
|
|
|
|
|
16,660
|
|
|
Provisions
|
|
|
|
|
|
|
|
|
(199)
|
|
|
|
|
|
(358)
|
|
|
|
|
|
(624)
|
|
|
|
|
|
(2,204)
|
|
Total
|
|
|
|
|
|
$
|
|
|
6,603
|
|
|
$
|
|
|
(3,215)
|
|
|
$
|
|
|
(37,299)
|
|
|
$
|
|
|
(10,199)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. RELATED PARTY TRANSACTION
Certain directors and key management personnel participated in the
public offering of common shares (Note 5), purchasing a total of 42,000
common shares for consideration of $983.
12. OPERATING SEGMENTS
The Corporation operates through a network of 123 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
June 30, 2015
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
|
Equipment
|
|
|
|
$
|
95,698
|
|
$
|
22,184
|
|
$
|
-
|
|
$
|
-
|
|
$
|
|
|
|
117,882
|
|
Parts
|
|
|
|
|
41,646
|
|
|
32,765
|
|
|
97,750
|
|
|
-
|
|
|
|
|
|
172,161
|
|
Service
|
|
|
|
|
19,109
|
|
|
16,306
|
|
|
3,021
|
|
|
-
|
|
|
|
|
|
38,436
|
|
Rental and other
|
|
|
|
|
10,483
|
|
|
2,611
|
|
|
-
|
|
|
(826)
|
|
|
|
|
|
12,268
|
|
Revenue
|
|
|
|
$
|
166,936
|
|
$
|
73,866
|
|
$
|
100,771
|
|
$
|
(826)
|
|
$
|
|
|
|
340,747
|
Earnings before restructuring costs,
finance costs and income taxes
|
|
|
|
$
|
11,673
|
|
$
|
3,155
|
|
$
|
5,392
|
|
$
|
(2,385)
|
|
$
|
|
|
|
17,835
|
|
Restructuring costs
|
|
|
|
|
-
|
|
|
2,060
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,060
|
Earnings before finance costs and
income taxes
|
|
|
|
$
|
11,673
|
|
$
|
1,095
|
|
$
|
5,392
|
|
$
|
(2,385)
|
|
$
|
|
|
|
15,775
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,325
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,464
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
8,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
June 30, 2015
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
|
Equipment
|
|
|
|
$
|
173,639
|
|
$
|
41,256
|
|
$
|
-
|
|
$
|
-
|
|
$
|
|
|
|
214,895
|
|
Parts
|
|
|
|
|
80,993
|
|
|
67,888
|
|
|
193,100
|
|
|
-
|
|
|
|
|
|
341,981
|
|
Service
|
|
|
|
|
36,785
|
|
|
33,832
|
|
|
5,620
|
|
|
-
|
|
|
|
|
|
76,237
|
|
Rental and other
|
|
|
|
|
21,112
|
|
|
5,474
|
|
|
-
|
|
|
(1,737)
|
|
|
|
|
|
24,849
|
|
Revenue
|
|
|
|
$
|
312,529
|
|
$
|
148,450
|
|
$
|
198,720
|
|
$
|
(1,737)
|
|
$
|
|
|
|
657,962
|
Earnings before restructuring costs,
finance costs and income taxes
|
|
|
|
$
|
18,488
|
|
$
|
6,577
|
|
$
|
8,791
|
|
$
|
(4,803)
|
|
$
|
|
|
|
29,053
|
|
Restructuring costs
|
|
|
|
|
-
|
|
|
2,060
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,060
|
Earnings before finance costs and
income taxes
|
|
|
|
$
|
18,488
|
|
$
|
4,517
|
|
$
|
8,791
|
|
$
|
(4,803)
|
|
$
|
|
|
|
26,993
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,634
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,640
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
14,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2015
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
Segment assets excluding
intangible assets
|
|
|
|
$
|
325,377
|
|
$
|
166,773
|
|
$
|
142,256
|
|
$
|
-
|
|
$
|
|
|
|
634,406
|
|
Intangible assets
|
|
|
|
|
21,549
|
|
|
13,828
|
|
|
48,112
|
|
|
91
|
|
|
|
|
|
83,580
|
|
Corporate and other assets
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,916
|
|
|
|
|
|
2,916
|
|
Total assets
|
|
|
|
$
|
346,926
|
|
$
|
180,601
|
|
$
|
190,368
|
|
$
|
3,007
|
|
$
|
|
|
|
720,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities
|
|
|
|
$
|
125,513
|
|
$
|
40,036
|
|
$
|
59,834
|
|
$
|
-
|
|
$
|
|
|
|
225,383
|
|
Corporate and other liabilities
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
172,770
|
|
|
|
|
|
172,770
|
|
Total liabilities
|
|
|
|
$
|
125,513
|
|
$
|
40,036
|
|
$
|
59,834
|
|
$
|
172,770
|
|
$
|
|
|
|
398,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
June 30, 2014
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
|
Equipment
|
|
|
|
$
|
107,472
|
|
$
|
25,678
|
|
$
|
-
|
|
$
|
-
|
|
$
|
|
|
|
133,150
|
|
Parts
|
|
|
|
|
47,893
|
|
|
36,405
|
|
|
99,782
|
|
|
-
|
|
|
|
|
|
184,080
|
|
Service
|
|
|
|
|
21,969
|
|
|
17,495
|
|
|
5,423
|
|
|
-
|
|
|
|
|
|
44,887
|
|
Rental and other
|
|
|
|
|
10,835
|
|
|
2,428
|
|
|
-
|
|
|
(984)
|
|
|
|
|
|
12,279
|
|
Revenue
|
|
|
|
$
|
188,169
|
|
$
|
82,006
|
|
$
|
105,205
|
|
$
|
(984)
|
|
$
|
|
|
|
374,396
|
Earnings before finance costs and
income taxes
|
|
|
|
$
|
13,571
|
|
$
|
4,172
|
|
$
|
4,623
|
|
$
|
(2,230)
|
|
$
|
|
|
|
20,136
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,246
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,588
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
12,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
June 30, 2014
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
|
Equipment
|
|
|
|
$
|
189,808
|
|
$
|
49,062
|
|
$
|
-
|
|
$
|
-
|
|
$
|
|
|
|
238,870
|
|
Parts
|
|
|
|
|
95,097
|
|
|
70,926
|
|
|
192,440
|
|
|
-
|
|
|
|
|
|
358,463
|
|
Service
|
|
|
|
|
43,169
|
|
|
34,754
|
|
|
8,813
|
|
|
-
|
|
|
|
|
|
86,736
|
|
Rental and other
|
|
|
|
|
20,632
|
|
|
4,388
|
|
|
-
|
|
|
(3,324)
|
|
|
|
|
|
21,696
|
|
Revenue
|
|
|
|
$
|
348,706
|
|
$
|
159,130
|
|
$
|
201,253
|
|
$
|
(3,324)
|
|
$
|
|
|
|
705,765
|
Earnings before finance costs and
income taxes
|
|
|
|
$
|
24,288
|
|
$
|
7,679
|
|
$
|
5,788
|
|
$
|
(5,289)
|
|
$
|
|
|
|
32,466
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,430
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,068
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
18,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2014
|
|
|
|
|
Equipment
|
|
|
Power
Systems
|
|
|
Industrial
Components
|
|
|
Segment
Eliminations
|
|
|
|
|
|
Total
|
Segment assets excluding
intangible assets
|
|
|
|
$
|
317,135
|
|
$
|
157,111
|
|
$
|
140,095
|
|
$
|
-
|
|
$
|
|
|
|
614,341
|
|
Intangible assets
|
|
|
|
|
21,560
|
|
|
14,090
|
|
|
49,350
|
|
|
78
|
|
|
|
|
|
85,078
|
|
Corporate and other assets
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,775
|
|
|
|
|
|
2,775
|
|
Total assets
|
|
|
|
$
|
338,695
|
|
$
|
171,201
|
|
$
|
189,445
|
|
$
|
2,853
|
|
$
|
|
|
|
702,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities
|
|
|
|
$
|
135,453
|
|
$
|
44,156
|
|
$
|
57,585
|
|
$
|
-
|
|
$
|
|
|
|
237,194
|
|
Corporate and other liabilities
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
218,878
|
|
|
|
|
|
218,878
|
|
Total liabilities
|
|
|
|
$
|
135,453
|
|
$
|
44,156
|
|
$
|
57,585
|
|
$
|
218,878
|
|
$
|
|
|
|
456,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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.
13. RESTRUCTURING COSTS
During the quarter, restructuring costs of $2,060 were recorded in the
Power Systems segment. The restructuring will realign branch support
activities, including the centralization of supply chain management,
and provides for initial savings related to the consolidation of the
Wajax computer platforms. It is anticipated that the restructuring will
be complete by the first quarter of 2016.
14. SUBSEQUENT EVENT
Subsequent to the second quarter, the Equipment segment monetized six
Hitachi mining trucks in inventory, which will result in a third
quarter 2015 gain of approximately $2,802.
15. COMPARATIVE INFORMATION
Certain comparative information have been reclassified to conform to the
current year's presentation.
SOURCE Wajax Corporation
