MONTREAL, QUEBEC -- (Marketwire) -- 03/22/13 -- Stella-Jones Inc. (TSX: SJ) today announced financial results for its fourth quarter and fiscal year ended December 31, 2012.
"2012 represented another record year for Stella-Jones in terms of sales and net income. It also marked our twelfth consecutive year of growth in net income, driven by constant efforts to further enhance operating efficiency and a methodical execution of our continental expansion strategy. These achievements reflect solid demand for our products, the strength of our business model, rigorous adherence to our core competencies and the dedication of the Stella-Jones team," said Brian McManus, President and Chief Executive Officer.
----------------------------------------------------------------------------Financial highlights Quarters ended Dec. 31, Years ended Dec. 31,(in thousands of Canadian dollars, except per share data) 2012 2011 2012 2011----------------------------------------------------------------------------Sales 159,345 147,520 717,494 640,148Operating income 21,127 20,399 109,596 87,968Net income for the period 16,546 13,369 73,070 55,709 Per share - basic ($) 1.01 0.84 4.54 3.49 Per share - diluted ($) 1.00 0.83 4.53 3.48Cash flow from operations(1) 22,363 24,760 120,797 99,627Weighted average shares outstanding (basic, in '000s) 16,387 15,953 16,078 15,946----------------------------------------------------------------------------
(1) Before changes in non-cash working capital components and interest and income tax paid.
Sales reached $717.5 million, up 12.1% from $640.1 million a year earlier. The operating facilities acquired from McFarland Cascade Holdings, Inc. ("McFarland") on November 30, 2012 contributed sales of $15.9 million over a one-month period, while the Russellville, Arkansas operating facility acquired from Thompson Industries in December 2011 ("Russellville facility") contributed additional sales of $43.9 million in 2012. The conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, increased the value of U.S. dollar denominated sales by about $8.6 million when compared with the previous year. Excluding these factors, 2012 sales increased approximately $9.0 million.
Railway tie sales amounted to $404.5 million in 2012, up 19.4% over sales of $338.8 million in 2011. This increase is attributable to solid market demand and additional tie sales of approximately $43.4 million from the Russellville facility. Utility pole sales reached $218.5 million in 2012, up 12.2% from $194.8 million in 2011. The increase reflects one month sales of $13.6 million from the McFarland operations and higher sales of distribution poles from solid maintenance demand, partially offset by slightly lower sales of transmission poles due to the year-over-year timing differences in orders. Industrial product sales were $59.0 million in 2012, versus $78.9 million in 2011. This decline is mainly due to an anticipated reduction in the tie recycling business, while demand held steady for the Company's other principal products in this category. Residential lumber sales totalled $35.5 million in 2012, up from $27.7 million a year earlier, as a result of stronger demand in Western Canada and sales of $2.3 million from the McFarland operations in the U.S. Northwest.
Operating income amounted to $109.6 million, or 15.3% of sales, versus $88.0 million, or 13.7% of sales a year earlier. The increase in absolute dollars reflects higher business activity and acquisitions, while the increase as a percentage of sales is due to a better absorption of fixed costs from increased volume and greater efficiencies throughout Stella-Jones' network. Results for 2012 include approximately $4.1 million in acquisition costs, of which $3.0 million are related to the McFarland transaction. Last year's results included an asset impairment charge of $2.2 million and acquisition costs of $423,000 related to the purchase of the Russellville facility.
Net income for 2012 totalled $73.1 million, or $4.53 per share, fully diluted, versus $55.7 million, or $3.48 per share, fully diluted, in 2011, representing a year-over-year increase of 31.2%. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid rose 21.2% to $120.8 million.
FOURTH QUARTER RESULTS
Sales totalled $159.3 million, up 8.0% from last year's fourth-quarter sales of $147.5 million. This increase is attributable to a $15.9 million contribution from the McFarland operations and to an additional contribution of $12.0 million from the Russellville facility. The conversion effect from year-over-year fluctuations in the value of the Canadian dollar, versus the U.S. dollar, reduce the value of U.S. dollar denominated sales by $2.5 million. Excluding these factors, sales decreased approximately $13.6 million due to lower advanced railway tie deliveries in the fourth quarter of 2012, compared with last year, and to a reduction in the tie recycling business.
Fourth quarter sales of railway ties reached $73.7 million in 2012, versus $74.4 million in 2011. This slight decrease reflects lower year-over-year advanced deliveries, partially offset by the additional contribution from the Russellville facility. Utility pole sales rose $18.9 million to $70.2 million due to a $13.6 million contribution from the McFarland operations and higher sales of distribution poles. Industrial product sales were $10.4 million, versus $19.9 million a year ago, as a result of a planned reduction in the tie recycling business. Residential lumber sales reached $5.1 million, up from $2.0 million last year, mainly due to additional sales of $2.3 million from the McFarland operations.
Operating income was $21.1 million, or 13.3% of sales, compared with $20.4 million, or 13.8% of sales, last year. Results for the fourth quarter of 2012 include acquisition costs of $2.4 million related to the McFarland transaction, while results for the fourth quarter of 2011 included an asset impairment charge of $2.2 million and acquisition costs of $423,000 related to the purchase of the Russellville facility. Excluding these elements, operating income for the fourth quarter of 2012 was $23.5 million, or 14.8% of sales, compared with $23.0 million, or 15.6% of sales, a year earlier. The reduction as a percentage of sales mainly stems from lower margins at the McFarland operations.
Net income for the period reached $16.5 million, or $1.00 per share, fully diluted, up from $13.4 million, or $0.83 per share, fully diluted, last year. The Company's effective tax rate for the fourth quarter of 2012 was reduced by tax benefits resulting from the donation to local economic development authorities of land located in Stanton, Kentucky and by the deductibility of acquisition costs related to the McFarland transaction. Cash flow from operating activities before changes in non-cash working capital components and interest and income tax paid was $22.4 million, compared with $24.8 million a year ago.
SOUND FINANCIAL POSITION
As at December 31, 2012, the Company's financial position remained healthy with total debt of $363.6 million, including the increased draw-down of $152.6 million on the committed revolving credit facility to partially finance the acquisition of McFarland. At that same date, the ratio of total debt to total capitalization was 0.44:1, versus 0.35:1 twelve months earlier.
Reflecting the acquisition of McFarland, working capital stood at $444.8 million as at December 31, 2012, up from $273.2 million a year earlier. Excluding McFarland, accounts receivable declined as a result of lower business activity in the fourth quarter of 2012, compared with the same period in 2011, while inventories increased following a planned increase of air-dried wood, both to improve future treating cycles and meet anticipated sales growth.
QUARTERLY DIVIDEND OF $0.20 PER SHARE
On March 21, 2013, the Board of Directors declared a quarterly dividend of $0.20 per common share payable on April 30, 2013 to shareholders of record at the close of business on April 2, 2013.
"We continue to expect healthy demand for our core products in 2013. North American railroad operators continue to upgrade and expand their infrastructure to maintain optimal efficiency, while demand is expected to hold in the utility pole market. In the short-term, our main priority is to integrate the McFarland operations and benefit from greater market penetration, synergies and additional operating efficiencies from a larger network. We will also focus on cash flow generation in order to reduce debt, invest in initiatives that further enhance our network and maintain an optimal dividend policy to the benefit of our shareholders," concluded Mr. McManus.
Stella-Jones will hold a conference call to discuss these results on Friday, March 22, 2013, at 10:00 AM Eastern Time. Interested parties can join the call by dialling 647-427-7450 (Toronto or overseas) or 1-888-231-8191 (elsewhere in North America). Parties unable to call in at this time may access a tape recording of the meeting by calling 1-855-859-2056 and entering the passcode 90531951. This tape recording will be available on Friday, March 22, 2013 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, March 29, 2013.
NON-IFRS FINANCIAL MEASURES
Operating income and cash flow from operations are financial measures not prescribed by IFRS and are not likely to be comparable to similar measures presented by other issuers. Management considers these measures to be useful information to assist knowledgeable investors in evaluating the cash generating capabilities of the Company.
Stella-Jones Inc. (TSX: SJ) is a leading producer and marketer of pressure treated wood products. The Company supplies North America's railroad operators with railway ties, timbers and recycling services; and the continent's electrical utilities and telecommunications companies with utility poles. Stella-Jones also provides industrial products and services for construction and marine applications, as well as residential lumber to retailers and wholesalers for outdoor applications. The Company's common shares are listed on the Toronto Stock Exchange.
Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, the ability of the Company to raise the capital required for acquisitions, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.
Note to readers: Complete unaudited fourth-quarter and year-end financial statements are available on Stella-Jones' website at www.stella-jones.com
Eric Vachon, CPA, CA
Senior Vice-President and Chief Financial Officer
Tel.: (514) 940-3903
Martin Goulet, CFA
Tel.: (514) 731-0000