TSX Symbol: WJX
In commenting on the Corporation's performance,
(Dollars in millions, except per share data) | Three Months Ended | Six Months Ended | ||
2022 | 2021 | 2022 | 2021 | |
CONSOLIDATED RESULTS | ||||
Revenue | ||||
Equipment sales | ||||
Product support | ||||
Industrial parts | ||||
Engineered repair services | ||||
Equipment rental | ||||
Net earnings | ||||
Basic earnings per share(1) | ||||
Adjusted net earnings(2)(3) | ||||
Adjusted basic earnings per share(1)(2)(3) |
Regarding
He concluded, "Looking ahead, we believe our strong balance sheet, ability to generate cash flow, and abundant growth opportunities will allow our business to grow meaningfully over the long term."
The Corporation also announced the declaration of a dividend of
- Revenue in the second quarter of 2022 increased
$65.1 million , or 14.6%, to$511.2 million , from$446.1 million in the second quarter of 2021. Regionally: - Revenue in western
Canada of$225.9 million increased 15.7% over the prior year due to robust construction and forestry equipment sales, and strength in engineering repair services ("ERS") and industrial parts categories attributable to strong sales fromTundra Process Solutions Ltd. ("Tundra") and higher organic bearings sales. Higher product support revenue across most categories also contributed. These increases were partially offset by lower mining equipment revenue. - Revenue in central
Canada of$83.6 million increased 4.0% over the prior year due primarily to higher industrial parts sales, offset partially by slightly lower equipment revenue in most categories. - Revenue in eastern
Canada of$201.7 million increased 18.4% over the prior year due primarily to higher equipment revenue in the construction and forestry and power systems categories, as well as higher bearings sales driving higher industrial parts revenue. - Gross profit margin of 20.1% in the second quarter of 2022 increased 0.2% compared to gross profit margin of 19.9% in the same period of 2021. Excluding the
Canada Emergency Wage Subsidy ("CEWS") recoveries in the second quarter of last year of$0.9 million , gross profit margin in the second quarter of 2022 increased 0.4% compared to the gross profit margin of 19.7% in the same period of 2021. The increase in margin was driven primarily by higher equipment and product support margins. - Selling and administrative expenses as a percentage of revenue decreased to 13.4% in the second quarter of 2022 from 13.5% in the second quarter of 2021 when excluding the CEWS recoveries of
$1.2 million . When including the CEWS recoveries, selling and administrative expenses as a percentage of revenue was 13.2% in the second quarter last year. Selling and administrative expenses in the second quarter of 2022 increased$9.8 million compared to the second quarter of 2021 due mainly to the prior year$1.2 million recovery of personnel expenses from the CEWS program without a similar recovery in the current year, and higher personnel costs as the volume of business increased over the prior year. - EBIT increased
$4.0 million , or 13.4%, to$34.1 million in the second quarter of 2022 versus$30.1 million in the same period of 2021.(2) The year-over-year increase in EBIT is primarily attributable to higher volumes, and higher equipment and product support margins. These increases were offset partially by higher selling and administrative expenses and a prior year recovery of personnel expenses from the CEWS program without a similar recovery in the current period. - The Corporation generated net earnings of
$21.7 million , or$1.01 per share, in the second quarter of 2022 versus$18.1 million , or$0.85 per share, in the same period of 2021. The Corporation generated adjusted net earnings of$19.7 million , or$0.92 per share, in the second quarter of 2022 versus$16.6 million , or$0.77 per share, in the same period of 2021.(2) - Adjusted EBITDA margin remained unchanged at 8.8% in both the second quarter of 2022 and the second quarter of 2021, excluding the CEWS recoveries in the second quarter of last year of
$2.1 million .(2) When including the CEWS recoveries, adjusted EBITDA margin was 9.3% in the second quarter of last year.(2) - The Corporation's backlog at
June 30, 2022 remained strong at$534.8 million compared to the record backlog of$540.1 million atMarch 31, 2022 .(2) Compared toJune 30, 2021 , backlog increased$218.1 million , or 68.8%, due to higher orders in most categories, most notably construction and forestry.(2) - Working capital of
$307.9 million atJune 30, 2022 decreased$11.8 million fromMarch 31, 2022 due to higher accounts payable and higher income taxes payable, offset partially by higher contract assets, higher inventory and lower contract liabilities.(2) Trailing four-quarter average working capital as a percentage of the trailing 12-month sales was 18.1%, a decrease of 1.1% fromMarch 31, 2022 , due to the combination of the lower four-quarter average working capital and the higher trailing 12-month sales.(2) - Cash flows generated from operating activities amounted to
$34.0 million in the second quarter of 2022, compared to cash flows generated from operating activities of$36.6 million in the same quarter of the previous year. - The Corporation's leverage ratio decreased to 1.10 times at
June 30, 2022 , compared to 1.24 times atMarch 31, 2022 .(2) The decrease in the leverage ratio was due to the lower debt level in the current period and a higher trailing 12-month pro-forma adjusted EBITDA.(2) The Corporation's senior secured leverage ratio was 0.65 times atJune 30, 2022 , compared to 0.78 times atMarch 31, 2022 .(2) - In
June 2022 , the Corporation fully repaid its$50.0 million non-revolving acquisition term credit facility via a drawdown from its revolving term facility. With the repayment,Wajax's bank credit facility now has a$400.0 million credit limit as atJune 30, 2022 , composed of a$50.0 million non-revolving term facility and a$350.0 million revolving term facility. The bank credit facility maturesOctober 1, 2026 . - Effective
June 30, 2022 , Tundra, a wholly owned subsidiary of the Corporation, acquired the net operating assets of anAlberta -based division ofPowell Canada Inc. ("Powell Valve") specializing in valve sales, service and support. The net operating assets of Powell Valve were acquired for total cash consideration of$5.4 million , subject to post-closing adjustments. Powell Valve's trailing twelve-month revenue at the time of acquisition was approximately$8.8 million .
Founded in 1858,
The Corporation's goal is to be
Notes: | ||||
(1) | Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the three months ended | |||
Weighted average shares, net of shares held in trust, outstanding for calculation of basic and diluted earnings per share for the six months ended | ||||
(2) | "Adjusted net earnings", "Adjusted basic earnings per share", "Adjusted EBITDA", "Adjusted EBITDA margin", "pro-forma adjusted EBITDA", "backlog", "leverage ratio" and "senior secured leverage ratio" do not have standardized meanings prescribed by generally accepted accounting principles ("GAAP"). "EBIT" and "Working capital" are additional GAAP measures. See the Non-GAAP and Additional GAAP Measures section later in this press release and in the Q2 2022 Management's Discussion and Analysis. | |||
(3) | Net earnings excluding the following: | |||
a. | after-tax gain recorded on the sale of properties of nil (2021 – | |||
b. | after-tax non-cash gains on mark to market of derivative instruments of | |||
c. | after-tax non-cash gains on mark to market of derivative instruments of | |||
d. | after-tax Tundra transaction costs of nil (2021 – |
The press release 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.
Non-GAAP financial measures are identified and defined below:
EBITDA | Net earnings (loss) before finance costs, income tax expense, depreciation and amortization. |
EBITDA margin | Defined as EBITDA divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
Adjusted net earnings (loss) | Net earnings (loss) before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Adjusted basic and diluted earnings (loss) per share | Basic and diluted earnings (loss) per share before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Adjusted EBITDA | EBITDA before (gain) loss recorded on the sale of properties, non-cash losses (gains) on mark to market of derivative instruments and Tundra transaction costs. |
Adjusted EBITDA margin | Defined as adjusted EBITDA divided by revenue, as presented in the condensed consolidated interim statements of earnings. |
Pro-forma adjusted EBITDA | Defined as adjusted EBITDA adjusted for the EBITDA of business acquisitions made during the period as if they were made at the beginning of the trailing 12-month period pursuant to the terms of the bank credit facility and the deduction of payments of lease liabilities. |
Leverage ratio | The leverage ratio is defined as debt at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA. The Corporation's objective is to maintain this ratio between 1.5 times and 2.0 times. |
Senior secured leverage ratio | The senior secured leverage ratio is defined as debt excluding debentures at the end of a particular quarter divided by trailing 12-month pro-forma adjusted EBITDA. |
Backlog | Backlog is a management measure which includes the total sales value of customer purchase commitments for future delivery or commissioning of equipment, parts and related services, including ERS projects. This differs from the remaining performance obligations as defined by IFRS 15 Revenue from Contracts with Customers. |
Additional GAAP measures are identified and defined below: | |
Earnings (loss) before finance costs and income taxes (EBIT) | Earnings (loss) before finance costs and income taxes, as presented in the condensed consolidated interim statements of earnings. |
Earnings (loss) before income taxes (EBT) | Earnings (loss) before income taxes, as presented in the condensed consolidated interim statements of earnings. |
Working capital | Defined as current assets less current liabilities, as presented in the condensed consolidated interim statements of financial position. |
Reconciliation of the Corporation's net earnings to adjusted net earnings and adjusted basic and diluted earnings per share is as follows:
Three months ended | Six months ended | |||
2022 | 2021 | 2022 | 2021 | |
Net earnings | $ 21.7 | $ 18.1 | $ 37.8 | $ 30.6 |
Gain recorded on the sale of properties, after-tax | — | (0.8) | — | (0.8) |
Non-cash gains on mark to market of derivative | (2.0) | (0.8) | (2.4) | (1.1) |
Tundra transaction costs, after-tax | — | — | — | 0.3 |
Adjusted net earnings | $ 19.7 | $ 16.6 | $ 35.4 | $ 29.0 |
Adjusted basic earnings per share(1) | $ 0.92 | $ 0.77 | $ 1.65 | $ 1.36 |
Adjusted diluted earnings per share(1) | $ 0.89 | $ 0.75 | $ 1.60 | $ 1.33 |
(1) | For the three months ended |
For the six months ended |
Reconciliation of the Corporation's net earnings to EBT, EBIT, EBITDA, Adjusted EBITDA and Pro-forma adjusted EBITDA is as follows:
Three months ended | Six months ended | Twelve months ended | |||||
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Net earnings | $ 21.7 | $ 18.1 | $ 37.8 | $ 30.6 | $ 60.4 | $ 56.9 | $ 53.2 |
Income tax expense | 7.9 | 6.8 | 13.8 | 11.6 | 22.1 | 21.1 | 19.9 |
EBT | $ 29.6 | $ 25.0 | $ 51.6 | $ 42.2 | $ 82.6 | $ 77.9 | $ 73.2 |
Finance costs | 4.4 | 5.1 | 8.9 | 10.1 | 17.9 | 18.5 | 19.1 |
EBIT | $ 34.1 | $ 30.1 | $ 60.5 | $ 52.3 | $ 100.5 | $ 96.5 | $ 92.3 |
Depreciation and amortization | 13.9 | 13.5 | 27.3 | 26.3 | 56.4 | 56.0 | 55.4 |
EBITDA | $ 48.0 | $ 43.6 | $ 87.7 | $ 78.6 | $ 156.8 | $ 152.4 | $ 147.7 |
Gain recorded on the sale of properties | — | (0.9) | — | (0.9) | (1.5) | (2.5) | (2.5) |
Non-cash gains on mark to market of derivative instruments(1) | (2.8) | (1.1) | (3.3) | (1.6) | (1.7) | — | — |
Tundra transaction costs(2) | — | — | — | 0.4 | — | — | 0.4 |
Adjusted EBITDA | $ 45.2 | $ 41.5 | $ 84.5 | $ 76.5 | $ 153.6 | $ 149.9 | $ 145.6 |
Payment of lease liabilities(3) | (7.9) | (7.3) | (15.5) | (14.1) | (30.3) | (29.8) | (28.9) |
Pro-forma adjusted EBITDA | $ 37.3 | $ 34.2 | $ 69.0 | $ 62.4 | $ 123.3 | $ 120.1 | $ 116.7 |
(1) | Non-cash gains on mark to market of non-hedged derivative instruments. |
(2) | In 2021, the Corporation incurred transaction costs relating to the Tundra acquisition. These costs were primarily for advisory services. |
(3) | Effective with the reporting period beginning on |
Calculation of the Corporation's funded net debt, debt, leverage ratio and senior secured leverage ratio is as follows:
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Cash | $ (3.5) | $ (11.4) | $ (10.0) |
Debentures | 55.5 | 55.4 | 55.2 |
Long-term debt | 77.7 | 98.4 | 98.2 |
Funded net debt | $ 129.7 | $ 142.3 | $ 143.5 |
Letters of credit | 6.3 | 6.3 | 7.3 |
Debt | $ 135.9 | $ 148.6 | $ 150.7 |
Pro-forma adjusted EBITDA(1) | $ 123.3 | $ 120.1 | $ 116.7 |
Leverage ratio(2) | 1.10 | 1.24 | 1.29 |
Senior secured leverage ratio(3) | 0.65 | 0.78 | 0.82 |
(1) | For the twelve months ended |
(2) | Calculation uses debt divided by the trailing four-quarter Pro-forma adjusted EBITDA. This leverage ratio is calculated for purposes of monitoring the Corporation's objective target leverage ratio of between |
(3) | Calculation uses debt excluding debentures divided by the trailing four-quarter Pro-forma adjusted EBITDA. While the calculation contains some differences from the leverage ratio calculated under the |
This news release contains certain forward-looking statements and forward-looking information, as defined in applicable securities laws (collectively, "forward-looking statements"). These forward-looking statements relate to future events or the Corporation's future performance. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "anticipates", "intends", "predicts", "expects", "is expected", "scheduled", "believes", "estimates", "projects" or "forecasts", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors beyond the Corporation's ability to predict or control which may cause actual results, performance and achievements to differ materially from those anticipated or implied in such forward-looking statements. To the extent any forward-looking information in this news release constitutes future-oriented financial information or financial outlook within the meaning of applicable securities law, such information is being provided to demonstrate the potential of the Corporation and readers are cautioned that this information may not be appropriate for any other purpose. There can be no assurance that any forward-looking statement will materialize. Accordingly, readers should not place undue reliance on forward looking statements. The forward-looking statements in this news release are made as of the date of this news release, reflect management's current beliefs and are based on information currently available to management. Although management believes that the expectations represented in such forward-looking statements are reasonable, there is no assurance that such expectations will prove to be correct. Specifically, this news release includes forward looking statements regarding, among other things, our view that, as we move into the second half of 2022, we are continuing to see sound fundamentals in many of our key markets, bolstered by strong commodity prices and capital spending, and that this positive view of the market is counterbalanced primarily by rising interest rates and supply chain issues; our expectation that rising interest rates and supply chain issues will be a factor throughout the year ahead, particularly in our heavy equipment business, and our plans to continue to manage these challenges through frequent dialogue with key suppliers and customers, pre-ordering new equipment, and utilizing repairs and rebuilds to extend the service life of equipment; our belief that, despite rising interest rates and supply chain issues, our improved balance sheet and strong quarter-end backlog continues to show momentum in our business; our plans to maintain such momentum and increase shareholder value by focusing on the following priorities: investing in our people and their safety, delivering exceptional customer experiences, organically growing our business, building our acquisition pipeline, supporting our closer relationship with Hitachi, prudently managing our balance sheet, deploying our ERP and remote diagnostic systems, and building sustainability into our business; our belief that our strong balance sheet, ability to generate cash flow and abundant growth opportunities will allow our business to grow meaningfully over the long-term; and our goal of being
Readers are cautioned that the risks described in the AIF, and in our annual and quarterly MD&A, are not the only risks that could impact the Corporation. We cannot accurately predict the full impact that COVID-19 will have on our business, results of operations, financial condition or the demand for our products and services due to the uncertainties related to the spread of the virus and its variants. Risks and uncertainties not currently known to the Corporation, or currently deemed to be immaterial, may have a material effect on the Corporation's business, financial condition or results of operations.
Additional information, including
SOURCE
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