Gross profit margin was 25.5% in 2012 compared with 25.3% in 2011. Gross profit margins in the Equipment Group were up largely due to sales mix, with a higher proportion of product support in the current year offset somewhat by competitive market conditions and additional project costs incurred in the Power Systems Group. Product support gross margins improved with volumes and better execution in many operations. CIMCO gross profit margins were down from 2011 on lower average quoted margins while project execution remained very positive.
Selling and administrative expenses increased 6% from 2011, in part reflecting the 9% increase in revenues. Compensation was $7.1 million (5%) higher in 2012 compared to 2011 on increased headcount, annual salary increases and higher annual performance incentives expense. The remaining increase related largely to higher freight, training and travel costs, reflecting increased business levels.
Operating income increased on higher revenues, reduced expense levels and improved gross margins due to mix.
Interest expense increased on higher average debt balances carried to support increased inventories and rental fleet. Interest income increased reflecting higher levels of interest on conversion of rental equipment.
The reduced effective income tax rate for 2012 reflects lower statutory rates.
Net earnings in 2012 were $120.6 million and basic earnings per share ("EPS") were $1.57 per share. This was 17% and 18% higher respectively, than 2011 on a continuing operations basis.
Earnings from discontinued operations in 2011 included $10.6 million from Enerflex. In addition, a net gain of $133.2 million, $1.73 per share basic, was recorded on the spinoff. Including these elements, net earnings in 2011 were $246.5 million, or $3.20 basic EPS.
Comprehensive income in 2012 was $115.7 million, comprised of net earnings of $120.6 million and other comprehensive loss of $4.8 million. Other comprehensive loss included actuarial loss on employee pension plans of $4.2 million after tax.
BUSINESS SEGMENT OPERATING RESULTS
The accounting policies of the segments are the same as those of the consolidated entity. Management evaluates overall business segment performance based on revenue growth and operating income relative to revenues. Corporate expenses are allocated based on each segment's revenue. Interest expense and interest and investment income are not allocated.
Equipment Group
Twelve months ended December 31($ thousands) 2012 2011 $ change % change----------------------------------------------------------------------------Equipment sales and rentals New $ 564,435 $ 515,046 $ 49,389 10% Used 144,367 153,326 (8,959) (6%) Rental 183,777 164,953 18,824 11%----------------------------------------------------------------------------Total equipment sales and rentals 892,579 833,325 59,254 7%Power generation 11,435 12,085 (650) (5%)Product support 405,880 350,977 54,903 16%----------------------------------------------------------------------------Total revenues $1,309,894 $1,196,387 $ 113,507 9%--------------------------------------------------------------------------------------------------------------------------------------------------------Operating income $ 156,021 $ 134,314 $ 21,707 16%--------------------------------------------------------------------------------------------------------------------------------------------------------Capital expenditures $ 99,871 $ 82,287 $ 17,585 21%--------------------------------------------------------------------------------------------------------------------------------------------------------Key ratios:Product support revenues as a % of total revenues 31.0% 29.3%Group total revenues as a % of consolidated revenues 86.9% 86.6%Operating income as a % of revenues 11.9% 11.2%
