TORONTO, Nov. 1, 2022
/CNW/ - Toromont Industries Ltd. (TSX: TIH) today reported its
financial results for the third quarter ended
September 30, 2022.
|
Three months ended
September 30
|
Nine months
ended September 30
|
($ millions, except
per share amounts)
|
2022
|
2021
|
% change
|
2022
|
2021
|
% change
|
Revenues
|
$
1,139.6
|
$
997.2
|
14 %
|
$
3,080.6
|
$
2,930.5
|
5 %
|
Operating
income
|
169.1
|
134.4
|
26 %
|
411.7
|
327.2
|
26 %
|
Net earnings
|
123.1
|
93.8
|
31 %
|
294.3
|
227.1
|
30 %
|
Basic earnings per
share ("EPS")
|
1.50
|
1.13
|
33 %
|
3.57
|
2.75
|
30 %
|
"The team delivered solid operating and financial performance in
the third quarter. The persistent supply constraint pressures,
market and economic variables continue to contribute to a fluid and
complex operating environment," stated Scott J. Medhurst, President and Chief Executive
Officer of Toromont Industries Ltd. "The Equipment Group reported
good utilization activity in rental and positive product support
demand, while uncertainties persist in timing of equipment and
parts deliveries. CIMCO revenues improved in the quarter on project
construction and higher product support activity. Across the
organization, we remain committed to our operating disciplines,
after-market strategies and customer solutions, as we manage
through these uncertain conditions."
HIGHLIGHTS:
Consolidated Results
- Revenues increased $142.4 million
or 14% in the third quarter. Equipment sales were up 11% compared
to prior year, with the Equipment Group up 10% and CIMCO package
revenues up 19%, however both groups continue to experience delays
in project construction and deliveries due to supply chain
constraints in the current year. Product support revenues were 19%
higher on increased demand, while rental revenues grew 13% on a
larger fleet and higher utilization.
- Revenues increased $150.1 million
(5%) to $3.1 billion for the
year-to-date period, as the improved activity in rentals (up 19%)
and product support (up 14%) offset reductions in equipment and
package revenues (down 5%) against a tough comparable last year,
coupled with continuing supply chain issues.
- Operating income(1) increased 26% in the quarter on
higher revenues, a favourable sales mix (higher percentage of
rentals and product support revenues to total revenues) and
improved gross margins. Expense levels were up 13% reflecting
planned increases and higher activity levels, as well as certain
inflationary impacts.
- Operating income increased 26% in the year-to-date period, and
was 13.4% of revenues compared to 11.2% in the similar period last
year, reflecting the continued favourable sales mix and improved
gross margins, offset by a higher expense ratio.
- Net earnings increased $29.4
million or 31% in the quarter versus a year ago to
$123.1 million or $1.50 EPS (basic).
- For the year-to-date period, net earnings increased
$67.2 million or 30% to $294.3 million, or $3.57 EPS (basic).
- Bookings(1) for the third quarter decreased 23%
compared to last year and decreased 24% on a year‑to‑date basis.
Both the Equipment Group and CIMCO reported strong bookings in
2021, after a period of lower activity stemming from pandemic
restrictions.
- Backlogs(1) were $1.4
billion at September 30, 2022,
compared to $1.1 billion at
September 30, 2021, reflecting strong
order activity over the past year coupled with ongoing supply
constraints.
Equipment Group
- Revenues were up $131.1 million
or 14% to $1.0 billion for the
quarter with higher activity in new equipment sales, rental and
product support, slightly offset by lower used equipment sales due
to decreased rental dispositions and power generation sales.
- Revenues were up $167.0 million
or 6% to $2.8 billion for the
year-to-date period with lower equipment sales, offset by higher
activity in both rental and product support.
- Operating income increased $33.3
million or 26% in the third quarter, reflecting the
favourable sales mix (higher proportion of rental and product
support revenues to total revenues), coupled with improved gross
margins.
- Operating income increased $83.5
million or 26% to $399.1
million in the year-to-date period, generally on the same
factors as noted above. Operating income margin increased 220 bps
to 14.1%.
- Bookings in the third quarter were $381.1 million, a decrease of 29%. Year-to-date
bookings were $1.3 billion, a
decrease of 28%. Strong mining and construction sector orders in
the comparable periods last year make 2021 a stronger
comparable.
- Backlogs of $1.2 billion at the
end of September 2022 were up
$277.6 million or 31% from the end of
September 2021 across all sectors.
Approximately 40% of the backlog is expected to be delivered this
year, subject to timing of delivery of equipment from
suppliers.
CIMCO
- Revenues of $94.1 million
increased $11.3 million or 14%
compared to the third quarter last year, due to higher package
revenues (up 19%) on the progression of construction schedules,
coupled with higher product support revenue (up 9%) on stronger
market activity. The timing of construction schedules has been
impacted by pandemic restrictions and supply chain constraints,
affecting the comparability of reported package revenues between
periods.
- Revenues decreased $16.9 million
or 6% to $255.3 million for the
year-to-date period on lower package revenues (down 23%) more than
offsetting higher product support sales (up 17%). Prior period
revenues benefited from certain large industrial projects, making
it a tough comparable. Recreational market activity has been
stronger in the current year where pandemic restrictions have been
easing after a prolonged period of time.
- Operating income increased $1.3
million or 26% for the quarter reflecting the higher
revenues and improved gross margins.
- Operating income was up $1.1
million or 9% to $12.6 million
for the year-to-date period, reflecting a favourable sales mix and
improved gross margins. Operating income margin increased to 4.9%
(2021 – 4.2%) largely reflecting the favourable sales mix.
- Bookings increased 50% in the third quarter ($24.2 million to $72.7
million) and 22% for the year-to-date period (increased
$29.0 million to $161.5 million). Industrial orders were higher in
both Canada and the US for both
the quarter and year-to-date, while recreational orders were up in
Canada, offset by a decrease in
the US for the quarter, and down in both regions year-to-date.
- Backlogs of $202.6 million at
September 30, 2022 were up
$48.8 million or 32% from
September 30, 2021, on higher current
year bookings (noted above) and supply chain challenges.
Approximately 30% of the backlog is estimated to be realized as
revenue this year, however this is subject to construction
schedules and potential changes stemming from supply chain
constraints.
Financial Position
- Toromont's share price of $96.16
at the end of September 2022,
translates to a market capitalization(1) of $7.9 billion and a total enterprise
value(1) of $7.8
billion.
- The Company maintained a strong financial position. Leverage as
represented by the net debt to total capitalization(1)
ratio was -6% at the end of September
2022, compared to -16% at the end of December 2021 and -5% at the end of September 2021.
- The Company renewed its Normal Course Issuer Bid in
September 2022. Under the previous
bid, the Company purchased 473,100 common shares for $48.5 million (average cost of $102.52 per share, including transaction costs)
in the nine-month period ended September 30,
2022.
- The Board of Directors approved a quarterly dividend of
$0.39 cents per share, payable on
January 5, 2023 to shareholders on
record on December 8, 2022.
- The Company's return on equity(1) was 21.7% at the
end of September 2022, on a trailing
twelve-month basis, compared to 19.6% at the end of December 2021 and 19.3% at the end of
September 2021. Trailing twelve month
pre‑tax return on capital employed(1) was 30.1% at the
end of September 2022, compared to
26.6% at the end of December 2021 and
25.3% at the end of September
2021.
"Across our organization, our team remains committed to the
disciplined execution of our operational model, adapting to changes
in the business environment, while remaining focused on executing
customer deliverables," noted Mr. Medhurst. "Activity remained
sound with favourable backlog levels, but supply chains continue to
be challenged. Pandemic challenges remain and we continue to
measure inflationary pressures and supply-demand dynamics as the
economic environment continues to evolve and change. Technician
hiring remains a priority, in order to support our after-market and
value-added product offering to meet and exceed client needs. The
diversity of our geographic landscape and markets served, extensive
product and service offerings, technology investments and financial
strength, together with our disciplined operating culture, continue
to position us well."
FINANCIAL AND OPERATING RESULTS
All comparative figures in this press release are for the three
and nine months ended September 30, 2022 compared to the
three and nine months ended September 30, 2021. All
financial information presented in this press release has been
prepared in accordance with International Financial Reporting
Standards ("IFRS"), except as noted below, and are reported in
Canadian dollars. This press release contains only selected
financial and operational highlights and should be read in
conjunction with Toromont's unaudited interim condensed
consolidated financial statements and related notes and
Management's Discussion and Analysis ("MD&A"), as at and for
the three and nine months ended September 30, 2022, which
are available on SEDAR at www.sedar.com and on the Company's
website at www.toromont.com.
Additional information is contained in the Company's filings
with Canadian securities regulators, including the 2021 Annual
Report and 2022 Annual Information Form, which are available on
SEDAR and the Company's website.
QUARTERLY CONFERENCE CALL AND WEBCAST
Interested parties are invited to join the quarterly conference
call with investment analysts, in listen-only mode, on Wednesday,
November 2, 2022 at 8:00 a.m.
(EDT). The call may be accessed by telephone at 888‑664‑6383
(North American toll free) or 416-764-8650 (Toronto area) and quoting participant passcode
77043670. A replay of the conference call will be available until
Wednesday, November 9, 2022 by calling 1‑888‑390‑0541 (North
American toll free) or 416-764-8677 (Toronto area) and quoting passcode 043670.
Presentation materials to accompany the call will be available
on our investor page on our website.
NON-GAAP AND OTHER FINANCIAL MEASURES
Management believes that providing certain non-GAAP measures
provides users of the Company's unaudited interim condensed
consolidated financial statements and MD&A with important
information regarding the operational performance and related
trends of the Company's business. By considering these measures in
combination with the comparable IFRS measures set out below,
management believes that users are provided a better overall
understanding of the Company's business and its financial
performance during the relevant period than if they simply
considered the IFRS measures alone.
The non-GAAP measures used by management do not have any
standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other issuers.
Accordingly, these measures should not be considered as a
substitute or alternative for net income or cash flow, in each case
as determined in accordance with IFRS.
Management also uses key performance indicators to enable
consistent measurement of performance across the organization.
These KPIs are non-GAAP financial measures, do not have a
standardized meaning under IFRS and may not be comparable to
similar measures presented by other issuers.
Gross Profit / Gross Profit Margin
Gross Profit is defined as total revenues less cost of goods
sold.
Gross Profit Margin is defined as gross profit (defined above)
divided by total revenues.
Operating Income / Operating Income
Margin
Operating income is defined as net earnings before interest
expense, interest and investment income and income taxes and is
used by management to assess and evaluate the financial performance
of its operating segments. Financing and related interest charges
cannot be attributed to business segments on a meaningful basis
that is comparable to other companies. Business segments do not
correspond to income tax jurisdictions and it is believed that the
allocation of income taxes distorts the historical comparability of
the performance of the business segments.
Operating income margin is defined as operating income (defined
above) divided by total revenues.
|
Three months
ended
|
Nine months
ended
|
|
September 30
|
September 30
|
($
thousands)
|
2022
|
2021
|
2022
|
2021
|
Net earnings
|
$
123,123
|
$
93,764
|
$
294,336
|
$
227,120
|
plus:
Interest expense
|
7,009
|
7,093
|
20,552
|
21,272
|
less:
Interest and investment income
|
(6,928)
|
(1,936)
|
(13,433)
|
(6,200)
|
plus:
Income taxes
|
45,877
|
35,522
|
110,232
|
84,975
|
Operating
income
|
$
169,081
|
$
134,443
|
$
411,687
|
$
327,167
|
|
|
|
|
|
Total
revenues
|
$ 1,139,599
|
$
997,198
|
$ 3,080,639
|
$ 2,930,502
|
Operating income
margin
|
14.8 %
|
13.5 %
|
13.4 %
|
11.2 %
|
Net Debt to Total Capitalization/Equity
Net debt to total capitalization/equity are calculated as net
debt divided by total capitalization and shareholders' equity,
respectively, as defined below, and are used by management as
measures of the Company's financial leverage.
Net debt is calculated as long-term debt plus current portion of
long-term debt less cash. Total capitalization is calculated as
shareholders' equity plus net debt.
The calculations are as follows:
|
September
30
|
December
31
|
September
30
|
($
thousands)
|
2022
|
2021
|
2021
|
Long-term
debt
|
$
646,879
|
$
646,337
|
$
647,099
|
less:
Cash
|
770,944
|
916,830
|
732,551
|
Net debt
|
(124,065)
|
(270,493)
|
(85,452)
|
|
|
|
|
Shareholders'
equity
|
2,204,889
|
1,953,329
|
1,875,154
|
Total
capitalization
|
$
2,080,824
|
$
1,682,836
|
$
1,789,702
|
|
|
|
|
Net debt to total
capitalization
|
(6) %
|
(16) %
|
(5) %
|
Net debt to
equity
|
(0.06) :1
|
(0.14) :1
|
(0.05) :1
|
Market Capitalization & Total Enterprise Value
Market capitalization represents the total market value of the
Company's equity. It is calculated by multiplying the market price
of the Company's common shares by the total number of common shares
outstanding.
Total enterprise value represents the total value of the Company
and is often used as a more comprehensive alternative to market
capitalization. It is calculated by adding net debt (defined above)
to market capitalization.
The calculations are as follows:
|
September
30
|
December
31
|
September
30
|
($ thousands, except
for shares and share price)
|
2022
|
2021
|
2021
|
Outstanding common
shares
|
82,246,807
|
82,443,968
|
82,567,774
|
times:
Ending share price
|
$
96.16
|
$
114.36
|
$
105.73
|
Market
capitalization
|
$
7,908,853
|
$
9,428,292
|
$
8,729,891
|
|
|
|
|
Long-term
debt
|
$
646,879
|
$
646,337
|
$
647,099
|
less:
Cash
|
770,944
|
916,830
|
732,551
|
Net
debt
|
$
(124,065)
|
$
(270,493)
|
$
(85,452)
|
|
|
|
|
Total enterprise
value
|
$
7,784,788
|
$
9,157,799
|
$
8,644,439
|
Order Bookings and Backlogs
Order bookings represent the retail value of firm equipment or
project orders received during a period. Backlogs are defined as
the retail value of equipment units ordered by customers with
future delivery, and the remaining retail value of package/project
orders remaining to be recognized in revenues under the percentage
of completion method. Management uses order backlog as a measure of
projecting future equipment and project deliveries. There are no
directly comparable IFRS measures for order bookings or
backlog.
Return on Capital Employed ("ROCE")
ROCE is utilized to assess both current operating performance
and prospective investments. The adjusted earnings numerator used
for the calculation is income before income taxes, interest expense
and interest income (excluding interest on rental conversions). The
denominator in the calculation is the monthly average capital
employed, which is defined as net debt plus shareholders' equity,
also referred to as total capitalization.
|
Trailing twelve
months ended
|
|
September
30
|
December
31
|
September
30
|
($
thousands)
|
2022
|
2021
|
2021
|
Net earnings
|
$
399,926
|
$
332,710
|
$
316,070
|
plus:
Interest expense
|
27,441
|
28,161
|
28,558
|
less:
Interest and investment income
|
(16,260)
|
(9,027)
|
(9,275)
|
plus:
Interest income - rental conversions
|
4,502
|
2,635
|
3,482
|
plus:
Income taxes
|
149,350
|
124,093
|
118,996
|
Adjusted net
earnings
|
$
564,959
|
$
478,572
|
$
457,831
|
|
|
|
|
Average capital
employed
|
$
1,874,914
|
$
1,796,703
|
$
1,812,402
|
|
|
|
|
Return on capital
employed
|
30.1 %
|
26.6 %
|
25.3 %
|
Return on Equity ("ROE")
ROE is monitored to assess profitability and is calculated by
dividing net earnings by opening shareholders' equity (adjusted for
shares issued and shares repurchased and cancelled during the
period), both calculated on a trailing twelve month period.
|
Trailing twelve
months ended
|
|
September
30
|
December
31
|
September
30
|
($
thousands)
|
2022
|
2021
|
2021
|
Net earnings
|
$
399,926
|
$
332,710
|
$
316,070
|
|
|
|
|
Opening shareholder's
equity (net of adjustments)
|
$
1,845,257
|
$
1,695,008
|
$
1,639,080
|
|
|
|
|
Return on
equity
|
21.7 %
|
19.6 %
|
19.3 %
|
ADVISORY
Information in this press release that is not a historical fact
is "forward-looking information". Words such as "plans", "intends",
"outlook", "expects", "anticipates", "estimates", "believes",
"likely", "should", "could", "will", "may" and similar expressions
are intended to identify statements containing forward-looking
information. Forward-looking information in this press release
reflects current estimates, beliefs, and assumptions, which are
based on Toromont's perception of historical trends, current
conditions and expected future developments, as well as other
factors management believes are appropriate in the circumstances.
Toromont's estimates, beliefs and assumptions are inherently
subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and as
such, are subject to change. Toromont can give no assurance that
such estimates, beliefs and assumptions will prove to be correct.
This press release also contains forward-looking statements about
the recently acquired businesses.
Numerous risks and uncertainties could cause the actual results
to differ materially from the estimates, beliefs and assumptions
expressed or implied in the forward-looking statements, including,
but not limited to: business cycles, including general economic
conditions in the countries in which Toromont operates; commodity
price changes, including changes in the price of precious and base
metals; inflationary pressures; potential risks and uncertainties
relating to the novel COVID-19 global pandemic, including an
economic downturn, reduction or disruption in supply or demand for
our products and services, or adverse impacts on our workforce,
capital resources, or share trading price or liquidity; increased
regulation of or restrictions placed on our businesses as a result
of COVID-19; changes in foreign exchange rates, including the
Cdn$/US$ exchange rate; the termination of distribution or original
equipment manufacturer agreements; equipment product acceptance and
availability of supply; increased competition; credit of third
parties; additional costs associated with warranties and
maintenance contracts; changes in interest rates; the availability
of financing; potential environmental liabilities and changes to
environmental regulation; information technology failures,
including data or cyber security breaches; failure to attract and
retain key employees; damage to the reputation of Caterpillar,
product quality and product safety risks which could expose
Toromont to product liability claims and negative publicity; new,
or changes to current, federal and provincial laws, rules and
regulations including changes in infrastructure spending; any
requirement to make contributions or other payments in respect
of registered defined benefit pension plans or postemployment
benefit plans in excess of those currently contemplated; and
increased insurance premiums. Readers are cautioned that the
foregoing list of factors is not exhaustive.
Any of the above mentioned risks and uncertainties could cause
or contribute to actual results that are materially different from
those expressed or implied in the forward-looking information and
statements included in this press release. For a further
description of certain risks and uncertainties and other factors
that could cause or contribute to actual results that are
materially different, see the risks and uncertainties set out in
the "Risks and Risk Management" and "Outlook" sections of
Toromont's most recent annual Management Discussion and Analysis,
as filed with Canadian securities regulators at
www.sedar.com or at our website www.toromont.com Other
factors, risks and uncertainties not presently known to Toromont or
that Toromont currently believes are not material could also cause
actual results or events to differ materially from those expressed
or implied by statements containing forward-looking
information.
Readers are cautioned not to place undue reliance on statements
containing forward-looking information, which reflect Toromont's
expectations only as of the date of this press release, and not to
use such information for anything other than their intended
purpose. Toromont disclaims any obligation to update or revise any
forward‑looking information, whether as a result of new
information, future events or otherwise, except as required by
law.
ABOUT TOROMONT
Toromont Industries Ltd. operates through two business segments:
the Equipment Group and CIMCO. The Equipment Group includes one of
the larger Caterpillar dealerships by revenue and geographic
territory, spanning the Canadian provinces of Newfoundland and Labrador, Nova
Scotia, New Brunswick,
Prince Edward Island, Québec,
Ontario and Manitoba, in addition to most of the territory
of Nunavut. The Equipment Group
includes industry-leading rental operations, a complementary
material handling business and an agricultural equipment business.
CIMCO is a market leader in the design, engineering, fabrication
and installation of industrial and recreational refrigeration
systems. Both segments offer comprehensive product support
capabilities. This press release and more information about
Toromont Industries Ltd. can be found at www.toromont.com.
FOOTNOTE
- These financial metrics do not have a standardized meaning
under International Financial Reporting Standards (IFRS), which are
also referred to herein as Generally Accepted Accounting Principles
(GAAP), and may not be comparable to similar measures used by other
issuers. These measurements are presented for information purposes
only. The Company's Management's Discussion and Analysis (MD&A)
includes additional information regarding these financial metrics,
including definitions and a reconciliation to the most directly
comparable GAAP measures, under the headings "Additional GAAP
Measures", "Non-GAAP Measures" and "Key Performance
Indicators."
TOROMONT INDUSTRIES LTD.
INTERIM CONDENSED CONSOLIDATED
INCOME STATEMENTS
(Unaudited)
|
Three months
ended
|
Nine months
ended
|
|
September 30
|
September 30
|
($ thousands, except
share amount)
|
2022
|
2021
|
2022
|
2021
|
Revenues
|
$
1,139,599
|
$
997,198
|
$
3,080,639
|
$
2,930,502
|
Cost of goods
sold
|
830,603
|
738,764
|
2,271,125
|
2,229,984
|
Gross profit
|
308,996
|
258,434
|
809,514
|
700,518
|
Selling and
administrative expenses
|
139,915
|
123,991
|
397,827
|
373,351
|
Operating
income
|
169,081
|
134,443
|
411,687
|
327,167
|
Interest
expense
|
7,009
|
7,093
|
20,552
|
21,272
|
Interest and investment
income
|
(6,928)
|
(1,936)
|
(13,433)
|
(6,200)
|
Income before income
taxes
|
169,000
|
129,286
|
404,568
|
312,095
|
Income taxes
|
45,877
|
35,522
|
110,232
|
84,975
|
Net
earnings
|
$
123,123
|
$
93,764
|
$
294,336
|
$
227,120
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
Basic
|
$
1.50
|
$
1.13
|
$
3.57
|
$
2.75
|
Diluted
|
$
1.49
|
$
1.12
|
$
3.54
|
$
2.73
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
|
|
|
|
Basic
|
82,182,632
|
82,704,637
|
82,359,832
|
82,597,423
|
Diluted
|
82,810,246
|
83,522,761
|
83,039,302
|
83,346,677
|
SOURCE Toromont Industries Ltd.