VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 16, 2012) - Finning International Inc. (TSX:FTT) -
Q4 2011 HIGHLIGHTS
Finning International Inc. (TSX:FTT) reported record quarterly revenues of $1.8 billion, a 35% increase over Q4 2010. Earnings before interest and income taxes (EBIT)(1) rose by 28% to $107 million, and EBIT margin was 5.9% compared to 6.2% in Q4 2010. Basic earnings per share (EPS) was $0.41, up 28% from $0.32 in Q4 2010.
For the full year 2011, from continuing operations, Finning achieved record revenues of $5.9 billion, a 29% increase over 2010. New equipment sales grew by 50%, while product support revenues climbed by 13% to $2.4 billion, the highest level in the Company's history. Annual EBIT increased by 33% to a new record of $380 million, and EBIT margin improved to 6.4% from 6.2% in 2010. Basic EPS grew by 42% to $1.51.
"We had numerous record setting achievements in the fourth quarter, including best-ever new equipment sales and total revenues from each of our operations. Our strong finish to 2011 capped a year of considerable progress for Finning," said Mike Waites, president and CEO of Finning International. "Our robust results, together with continued strong market conditions, provide us with significant momentum heading into 2012. We look forward to capitalizing on our tremendous growth opportunities, particularly with the addition of the former Bucyrus distribution business which provides us with an unparalleled solution portfolio for mining customers that truly sets Finning apart in our marketplace."
"Our focus in 2012 is squarely on consistently delivering on our Company's great potential. Our priorities are to improve profitability in our Canadian operations, successfully integrate the former Bucyrus business, and maintain a strong balance sheet," added Mr. Waites. "We fully intend to drive operating efficiencies, deliver strong earnings growth in 2012, and achieve steady progress towards our 9-10 percent EBIT margin target in 2013."
Q4 2011 FINANCIAL SUMMARY
Beginning with Q1 2011, the Company's financial results are reported under IFRS (International Financial Reporting Standards)(2).
C$ millions, except per share amounts (unaudited) | Three months ended Dec 31 | ||
2011 | 2010 | % change | |
Revenue | 1,811 | 1,347 | 35 |
Earnings before interest and income taxes (EBIT)(1) | 107 | 84 | 28 |
Net income | 71 | 55 | 27 |
Basic EPS | 0.41 | 0.32 | 28 |
Earnings before interest, income taxes, depreciation and amortization (EBITDA)(1) | 156 |
126 |
24 |
Free cash flow(1)(3) | 281 | 122 | 130 |
Q4 2011 HIGHLIGHTS BY OPERATIONS
Canada
South America
United Kingdom and Ireland
CORPORATE AND BUSINESS DEVELOPMENTS
Dividend
The Board of Directors approved a quarterly dividend of $0.13 per share; payable on March 16, 2012 to shareholders of record on March 2, 2012.This dividend will be considered an eligible dividend for Canadian income tax purposes.
Acquisition of Portion of Bucyrus Distribution Business from Caterpillar
On January 18, 2012, Finning and Caterpillar announced that the companies had reached an agreement for Finning to acquire from Caterpillar the distribution and support business formerly operated by Bucyrus in Finning's dealership territories in Canada, South America and the U.K. The transaction is valued at approximately USD $465 million. Finning expects to fund the transaction through the issuance of U.S. and Canadian dollar denominated term debt. The transaction is expected to be accretive to Finning's 2012 earnings.
The acquired distribution and support business, which generated about USD $600 million in revenue in 2011, includes facilities and inventory primarily in South America and Canada, as well as approximately 900 former Bucyrus employees who are expected to transition to Finning upon closing of the acquisition. Subject to customary closing conditions, it is anticipated that the transaction will close in two phases: first in the Company's operations in South America and U.K. and Ireland, and subsequently in the Canadian operations. Both closings are expected to occur in the second quarter of 2012. After closing, Finning expects to begin providing sales, service and support for former Bucyrus mining products in all of Finning's dealership territories.
Following the announcement, Standard &Poor's and Dominion Bond Rating Service confirmed Finning's credit ratings of BBB+ and A (low) respectively.
Issuance of US $200 Million of Notes in the US Private Placement Market
On January 19, 2012, Finning announced that it completed a US private placement of US $200 million aggregate principal amount of senior unsecured notes which will rank pari passu with Finning's existing senior unsecured obligations. Proceeds will be used to repay debt including outstanding commercial paper borrowings and for general corporate purposes.
Acquisition of Damar Group Ltd in the U.K.
On February 3, 2012, the Company acquired 100% of the shares of Damar Group Ltd, an engineering company specializing in the water utility sector in the U.K. The acquired business provides opportunities for Finning to increase market share in the U.K. and Ireland water industries. It also increases Finning's mechanical, electrical and civil engineering capability to deliver a wide range of projects within its target power systems markets, which is a key strategic objective of the Company's U.K. and Ireland operations. Cash consideration of £5.7 million was paid at the time of acquisition, which may be subject to customary closing adjustments. Further contingent consideration (with a possible range of £nil-£9.5 million) may be paid on an annual basis after acquisition, contingent upon the acquired business's performance over the next three years.
Finning Canada and Alberta Union Sign Memorandum of Agreement to Extend Current Contract
On February 9, 2012, Finning Canada and the IAM - Local Lodge 99 representing approximately 1,700 hourly employees in Alberta and the Northwest Territories have reached a memorandum of agreement on a one-year extension to the current collective agreement. The agreement is subject to a ratification vote by the Union membership, which is expected to be concluded within one month. The Union Committee is recommending that its members accept the agreement. The current collective agreement is set to expire on April 30, 2012.
SELECTED CONSOLIDATED FINANCIAL INFORMATION |
(from continuing operations unless otherwise stated, C$millions, except per share amounts) |
Three months ended Dec 31 | Twelve months ended Dec 31 | |||||||||||||
Revenue | 2011 | 2010 | % change | 2011 | 2010 | % change | ||||||||
New equipment | 990.0 | 627.3 | 58 | 2,889.0 | 1,928.6 | 50 | ||||||||
Used equipment | 78.5 | 55.2 | 42 | 253.4 | 253.5 | 0 | ||||||||
Equipment rental | 97.5 | 77.4 | 26 | 345.5 | 274.7 | 26 | ||||||||
Product support | 642.6 | 583.1 | 10 | 2,395.6 | 2,117.7 | 13 | ||||||||
Other | 2.0 | 3.5 | (43 | ) | 11.4 | 10.1 | 13 | |||||||
Total revenue | 1,810.6 | 1,346.5 | 35 | 5,894.9 | 4,584.6 | 29 | ||||||||
Gross profit | 474.5 | 394.0 | 20 | 1,679.7 | 1,377.8 | 22 | ||||||||
Gross profit margin(4) | 26.2 | % | 29.3 | % | 28.5 | % | 30.1 | % | ||||||
SG&A | (367.0 | ) | (298.8 | ) | (23 | ) | (1,279.3 | ) | (1,057.5 | ) | (21 | ) | ||
SG&A as a percentage of revenue | (20.3 | )% | (22.2 | )% | (21.7 | )% | (23.1 | )% | ||||||
Equity earnings | 3.0 | 3.1 | 6.7 | 5.6 | ||||||||||
Other expenses | (3.2 | ) | (14.5 | ) | (27.4 | ) | (40.6 | ) | ||||||
EBIT(2) | 107.3 | 83.8 | 28 | 379.7 | 285.3 | 33 | ||||||||
EBIT margin(5) | 5.9 | % | 6.2 | % | 6.4 | % | 6.2 | % | ||||||
Income from continuing operations | 70.6 | 55.5 | 27 | 259.4 | 181.1 | 43 | ||||||||
Loss from discontinued operations, net of tax | - | - | - | (125.0 | ) | |||||||||
Net income (loss) | 70.6 | 55.5 | 259.4 | 56.1 | ||||||||||
Basic earnings (loss) per share (EPS) | ||||||||||||||
from continuing operations | 0.41 | 0.32 | 28 | 1.51 | 1.06 | 42 | ||||||||
from discontinued operations | - | - | - | (0.73 | ) | |||||||||
Total basic earnings per share | 0.41 | 0.32 | 1.51 | 0.33 | ||||||||||
EBITDA(2) | 155.7 | 125.9 | 24 | 553.8 | 441.8 | 25 | ||||||||
Free Cash Flow*(2)( 3) | 281.0 | 122.3 | 130 | (220.8 | ) | 262.5 | n/m | |||||||
Dec 31, 11 | Dec 31, 10 | |||||||||||||
Total assets | 4,085.4 | 3,429.7 | ||||||||||||
Total shareholders' equity | 1,345.0 | 1,203.0 | ||||||||||||
Net debt to total capital(6) | 42.0 | % | 35.3 | % |
* Free cash flow from Hewden Stuart Limited has been included in the figures for periods prior to its sale. |
To download Finning's complete Q4 and annual 2011 results in PDF, please open the following link: http://media3.marketwire.com/docs/FinningQ411results.pdf
To download the CEO and CFO certification letters once they have been filed on SEDAR, please open the following link: http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00001068
Q4 2011 RESULTS INVESTOR CALL
Management will hold an investor conference call on Thursday, February 16 at 11:00 am Eastern Time. Dial-in numbers: 1-866-223-7781 (anywhere within Canada and the U.S.) or (416) 340-8018 (for participants dialing from Toronto and overseas).
The call will be webcast live and subsequently archived at www.finning.com. Playback recording will be available at 1-800-408-3053 from 1:00 pm Eastern Time on February 16 until February 23. The pass code to access the playback recording is 1052651 followed by the number sign.
ABOUT FINNING
Finning International Inc. (TSX:FTT) is the world's largest Caterpillar equipment dealer delivering unrivalled service to customers since 1933. Finning sells, rents and services equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in western Canada, Chile, Argentina, Bolivia, Uruguay, as well as in the United Kingdom and Ireland.
Footnotes
Forward-Looking Disclaimer
This report contains statements about the Company's business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement Finning makes is forward-looking when it uses what the Company knows and expects today to make a statement about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to the economy and associated impact on the Company's financial results; expected revenue and SG&A levels and EBIT growth; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; the expected target range of Debt Ratio; the impact of new and revised IFRS that have been issued but are not yet effective; the expected timetable for completion of the proposed transaction between the Company and Caterpillar to acquire the distribution and support business formerly operated by Bucyrus in Finning's dealership territories (the Bucyrus transaction); growth prospects for the former Bucyrus business being acquired by the Company and the competitive advantages of the business being acquired; expected future financial and operating results generated from the Bucyrus transaction; anticipated benefits and synergies of the Bucyrus transaction; the expected financing structure for the Bucyrus transaction; and the expected impact of the Bucyrus transaction on Finning's earnings. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.
Unless otherwise indicated by us, forward-looking statements in this report describe Finning's expectations at February 15, 2012. Except as may be required by Canadian securities laws, Finning does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from the expectations expressed in or implied by such forward-looking statements and that Finning's business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, Finning cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by these forward-looking statements include: general economic and market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, Finning's products and services; Finning's dependence on the continued market acceptance of Caterpillar's products and Caterpillar's timely supply of parts and equipment; Finning's ability to continue to improve productivity and operational efficiencies while continuing to maintain customer service; Finning's ability to manage cost pressures as growth in revenues occur; Finning's ability to attract sufficient skilled labour resources to meet growing product support demand; Finning's ability to negotiate and renew collective bargaining agreements with satisfactory terms for Finning's employees and the Company; the intensity of competitive activity; Finning's ability to successfully integrate the distribution and support business formerly operated by Bucyrus after that transaction closes; Finning's ability to raise the capital needed to implement its business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations; the integrity, reliability, and availability of information technology and the data processed by that technology; operational benefits from the new ERP system. Forward-looking statements are provided in this report for the purpose of giving information about management's current expectations and plans and allowing investors and others to get a better understanding of Finning's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this report are based on a number of assumptions that Finning believed were reasonable on the day the Company made the forward-looking statements. Refer in particular to the Outlook section of the MD&A. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in the Company's current Annual Information Form (AIF) in Section 4.
Finning cautions readers that the risks described in the AIF are not the only ones that could impact the Company. Additional risks and uncertainties not currently known to the Company or that are currently deemed to be immaterial may also have a material adverse effect on Finning's business, financial condition, or results of operations.
Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. Finning therefore cannot describe the expected impact in a meaningful way or in the same way Finning presents known risks affecting its business.
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