MONTREAL, QUEBEC -- (Marketwired) -- 11/08/13 -- Stella-Jones Inc. (TSX: SJ) ("Stella-Jones" or the "Company") today announced financial results for its third quarter ended September 30, 2013. In this press release, all references to common shares issued and outstanding, as well as per share data, reflect a 4-for-1 share split that took the form of a share dividend whereby shareholders received three additional common shares for each common share held. The payment date for the share dividend was October 25, 2013.
"Stella-Jones' focus on improving operating efficiency across its network produced solid operating results in the third quarter. A strong performance by the McFarland Cascade Holdings, Inc. ("McFarland") operations led to greater penetration of the utility pole market in the United States. Meanwhile, the transition of a Class 1 railroad customer from a "treating services only" program to a "black-tie" program, whereby the customer purchases an integrated product and service offering from Stella-Jones, created a lag in shipments resulting in lower year-over-year railway tie sales. Finally, we are pleased with the on-schedule start of wood treatment operations at our new facility in Cordele, Georgia, which contributed sales of approximately $2.3 million," said Brian McManus, President and Chief Executive Officer.
---------------------------------------------------------------------------- Financial highlights Quarters ended Sept. Nine months ended 30, Sept. 30, (in thousands of Canadian dollars, except per share data) 2013 2012 2013 2012 ---------------------------------------------------------------------------- Sales 268,087 195,435 758,287 558,149 Operating income 38,550 31,799 109,180 88,469 Net income for the period 27,663 20,683 72,846 56,524 Per share - basic ($) 0.40 0.32 1.06 0.88 Per share - diluted ($) 0.40 0.32 1.05 0.88 Cash flow from operations (1) 43,514 35,291 126,024 98,434 Weighted average shares outstanding (basic, in '000s) 68,687 63,957 68,681 63,899 ---------------------------------------------------------------------------- (1) Before changes in non-cash working capital components and interest and income taxes paid.
THIRD QUARTER RESULTS
Sales for the quarter ended September 30, 2013 totalled $268.1 million, up 37.2% over last year's sales of $195.4 million. The operating facilities acquired from McFarland on November 30, 2012 contributed sales of approximately $86.2 million, while the conversion effect from fluctuations in the value of the Canadian dollar, Stella-Jones' reporting currency, versus the U.S. dollar, had a positive impact of $4.7 million on the value of U.S. dollar denominated sales when compared with the previous year's third quarter.
Railway tie sales reached $99.4 million, compared with $114.7 million last year, mainly reflecting the aforementioned transition of a Class 1 railroad customer to a "black-tie" program. Sales of utility poles amounted to $112.8 million, up from $53.1 million in the corresponding period in 2012. This increase is mainly attributable to utility pole sales of $59.9 million from the McFarland operations. Sales of residential lumber reached $39.3 million, up from $12.3 million a year earlier as a result of additional residential lumber sales of $25.0 million from the McFarland operations and unexpected strong demand in southern Alberta subsequent to flooding earlier in the year. Finally, industrial product sales totalled $16.5 million, compared with $15.4 million a year earlier, mainly reflecting a $1.3 million contribution from the McFarland operations.
Operating income rose 21.2% to $38.6 million, or 14.4% of sales, versus $31.8 million, or 16.3% of sales, last year. While the increase in monetary terms mainly reflects the addition of the McFarland operations, the reduction as a percentage of sales stems from a less favourable product mix and higher shipping cost due to the unexpected strong demand for residential lumber in southern Alberta, as greater shipments were made from Stella-Jones' eastern Canada facilities to adequately meet customer requirements.
Net income for the period increased 33.7% to $27.7 million or $0.40 per share, fully diluted, compared with $20.7 million or $0.32 per share, fully diluted, in the third quarter of 2012. Cash flow from operating activities before changes in non-cash working capital components and interest and income taxes paid rose 23.3% to $43.5 million.
For the nine-month period ended September 30, 2013, sales reached $758.3 million, up 35.9% from the same period a year earlier. The McFarland operations contributed sales of approximately $226.1 million while the year-over-year conversion effect from fluctuations in the value of the Canadian dollar, versus the U.S. dollar, increased the value of U.S. dollar denominated sales by $7.1 million.
Operating income was $109.2 million or 14.4% of sales, compared with $88.5 million or 15.9% of sales last year. Net income for the period reached $72.8 million or $1.05 per share, fully diluted, up 28.9% from $56.5 million or $0.88 per share, fully diluted, a year earlier. Cash flow from operating activities before changes in non-cash working capital components and interest and income taxes paid rose 28.0% to $126.0 million.
LONG-TERM DEBT REDUCTION OF $55.3 MILLION
As at September 30, 2013, the Company's long-term debt, including the current portion, stood at $318.4 million, down $55.3 million from $373.7 million three months ago. The decrease essentially reflects lower working capital requirements in the third quarter of 2013. As a result, the ratio of total debt to total capitalization was 0.37:1 as at September 30, 2013, down from 0.41:1 three months earlier.
During the third quarter of 2013, Stella-Jones invested $6.9 million in purchases of property, plant and equipment, primarily for the addition of various equipment upgrades and incremental capacity in anticipation of strong demand. This amount includes $2.0 million to complete the construction of the Cordele, Georgia facility and an amount of $0.9 million for a new treating cylinder at the New Westminster, British Columbia facility.
QUARTERLY DIVIDEND OF $0.05 PER SHARE
On November 7, 2013, the Board of Directors declared a quarterly dividend of $0.05 per common share payable on December 20, 2013 to shareholders of record at the close of business on December 2, 2013.
"Demand for Stella-Jones' products and services should remain healthy for the upcoming quarters, as fundamentals in our core markets remain favourable. While the transition to a "black tie" program will create a short-term lag effect on sales to one of our customers until the first quarter of 2014, we are pleased with this opportunity to demonstrate our ability to provide this customer with a comprehensive product and service offering. Over the long-term, our strategy focused on continental expansion remains intact, as evidenced by the proposed acquisition of three wood treating facilities in Oregon, Nevada and Arizona. Should this transaction be completed, Stella-Jones would benefit from greater market penetration, synergies and additional operating efficiencies from a larger network," concluded Mr. McManus.
Stella-Jones will hold a conference call to discuss these results on November 8, 2013, at 10:00 AM Eastern Time. Interested parties can join the call by dialing 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 74539942. This tape recording will be available on Friday, November 8, 2013 as of 1:00 PM Eastern Time until 11:59 PM Eastern Time on Friday, November 15, 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 and timbers, and the continent's electrical utilities and telecommunication companies with utility poles. Stella-Jones also provides residential lumber to retailers and wholesalers for outdoor applications, as well as industrial products for construction and marine 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: Condensed interim unaudited consolidated financial statements for the third quarter are available on Stella-Jones' website at www.stella-jones.com
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