COLLECTIVE
STRENGTH
2012 Annual Report
Wajax is a leading Canadian distributor
engaged in the sale and service
support of mobile equipment, power
systems and industrial components.
Reflecting a diversified exposure to
the Canadian economy, Wajax has
three distinct business divisions,
which operate through a network of
128 branches across Canada.
Wajax’s customer base covers core
sectors of the Canadian economy –
including mining, oil and gas, forestry,
construction, manufacturing, industrial
processing, transportation and utilities.
Contents
1
Financial Highlights
2
Our Lines of Business
4
Message to Our Shareholders
6
Messages from Our Executive Team
10
Message from the Chairman
11
Management’s Discussion and Analysis
34
Management’s Responsibility for Financial Reporting
34
Independent Auditors’ Report
35
Consolidated Statements of Financial Position
36
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
36
Consolidated Statements of Changes in Shareholders’ Equity 37
38
Consolidated Statements of Cash Flows
39
Notes to Consolidated Financial Statements
58
Corporate Information
Forward-Looking Statements and Information
This Annual Report, including the accompanying
Management’s Discussion and Analysis, includes forward-
looking statements and information that is based on Wajax’s
current beliefs, expectations, estimates and assumptions
in light of information currently available. Actual results,
performance and achievements may differ materially
from those anticipated or implied in such forward-looking
statements or information. Please see page 12 for a
discussion of the risks and uncertainties related to such
statements and information.
FINANCIAL HIGHLIGHTS
23%
Power Systems
One of the largest distributors
of diesel engines and
transmissions in Canada.
(cid:31) Ontario
22%
(cid:31) Eastern Canada 24%
(cid:31) Western Canada 54%
24%
Industrial
Components
Leading distributor of industrial
products in Canada.
(cid:31) Ontario
19%
(cid:31) Eastern Canada 46%
(cid:31) Western Canada 35%
Financial Highlights
Revenue Source Distribution
53%
Equipment
The largest multi-line distributor
of mobile equipment in Canada.
(cid:31) Ontario
17%
(cid:31) Eastern Canada 21%
(cid:31) Western Canada 62%
Revenue(2) ($ millions)
1,466.0
1,377.1
1,213.5
1,110.9
1,007.2
Basic Earnings
Per Share(1)(2) ($)
3.95
3.84
3.39
2.06
Earnings Before
Income Taxes (1)(2) ($ millions)
4.57
89.7
87.5
Cash Flows from Operating
Activities Before Changes
in Non-Cash Operating
Working Capital(2) ($ millions)
77.6
110.6
105.8
53.9
32.2
87.5
73.4
45.1
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
For the years ended December 31 (in millions of Canadian dollars, except per share data)
Revenue
Earnings before income taxes
Net earnings
Cash flows from operating activities before changes in non-cash operating working capital
Current assets net of current liabilities, exclusive of funded net debt(3)
Funded net debt(3)
Shareholders’ equity
Basic earnings per share
Cash dividends declared
Leverage ratio(4)
Weighted average number of shares outstanding
(1) For years prior to 2011, Wajax was an income fund and effectively not subject to income tax.
(2) Years 2009 and 2008 reported under previous Canadian GAAP.
(3) Funded net debt includes bank debt, bank indebtedness and obligations under finance leases, net of cash.
(4) Non-IFRS measure, see Management’s Discussion and Analysis, page 27.
$
2012
2011
2010(1)
1,466.0 $
89.7
65.9
110.6
243.9
173.7
241.9
3.95
3.10
1,377.1 $
87.5
63.8
105.8
165.0
63.7
227.6
3.84
2.14
1,110.9
53.9
56.4
73.4
118.3
45.6
199.3
3.39
3.40
1.55
16,699,874
0.60
16,629,444
0.66
16,613,676
Wajax Corporation 2012 Annual Report 1
OUR LINES OF BUSINESS
Our Lines of Business
Wajax has three distinct divisions,
which operate through a network
of 128 branches across Canada.
Wajax is a multi-line distributor
and each of our divisions
represents a number of leading
worldwide manufacturers.
Our customer base is diversified,
spanning natural resources,
construction, transportation,
manufacturing, industrial
processing and utilities.
2012 Sales by Region
2012 Sales by Market
n Western Canada
n Eastern Canada
n Ontario
n Construction
n Industrial/Commercial
n Mining
n Oil Sands
n Oil and Gas
n Forestry
n Transportation
n Government and Utilities
n Metal Processing
n Other
54%
27%
19%
17%
14%
12%
11%
10%
10%
9%
6%
5%
6%
2 Wajax Corporation 2012 Annual Report
Equipment
The largest multi-line distributor of mobile
equipment in Canada.
35 branches.
999 employees.
53% of total revenue and 54% of total earnings before
finance costs, taxes and corporate costs.
BUSINESS
Distribution, rental, modification and servicing of mobile
equipment from leading manufacturers.
PRODUCTS
Excavators, lift trucks, mining trucks and shovels, forest
harvesting equipment, utility equipment, loader backhoes,
container handlers, cranes (including crawler and rough
terrain cranes), skid steer loaders, wheel loaders, articulated
dump trucks, shuttle cars and continuous miners.
MARKETS
Construction, material handling, forestry, mining,
government, oil and gas, utilities and manufacturing.
2012 Revenue by Product Type
n Construction
n Mining/Oil Sands
n Material Handling
n Forestry
n Crane and Utility
35%
30%
16%
12%
7%
OUR LINES OF BUSINESS
Power Systems
Industrial Components
One of the largest distributors of diesel engines and
transmissions in Canada.
28 branches.
964 employees.
23% of total revenue and 25% of total earnings before
finance costs, taxes and corporate costs.
A leading distributor of industrial products in Canada.
65 branches.
845 employees.
24% of total revenue and 21% of total earnings before
finance costs, taxes and corporate costs.
BUSINESS
BUSINESS
Distribution, rental and servicing of engines, transmissions
and generators for on-highway, off-highway and electric
power generation applications.
Distribution, servicing, custom design and assembly of
industrial components for in-plant customers and original
equipment manufacturers.
PRODUCTS
PRODUCTS
Diesel and natural gas engines, transmissions and
power generators.
Bearings, power transmission parts, hydraulic components
and systems, process pumps and equipment, motors,
cylinders, hoses and fittings, hoists, filters and safety supplies.
MARKETS
MARKETS
Agriculture, military, construction, mining, forestry, oil and
gas, industrial/commercial, transportation, utilities, marine.
Agriculture, metal processing, construction, mining, food
processing, oil and gas, forestry, resellers/distributors,
transportation, industrial/manufacturing.
2012 Revenue by Market
2012 Revenue by Market
n Oil and Gas
n On-Highway Transportation
n Industrial/Commercial
n Oil Sands
n Mining
n Other
26%
25%
20%
7%
5%
17%
n Industrial/Manufacturing
n Mining
n Forestry
n Oil and Gas
n Metal Processing
n Construction
n Food and Beverage
n Transportation
n Other
16%
15%
13%
13%
12%
6%
5%
4%
16%
Wajax Corporation 2012 Annual Report 3
MESSAGE TO OUR SHAREHOLDERS
Message to Our Shareholders
Mark Foote
President and
Chief Executive Officer
Our 2012 Annual Report is entitled
Collective Strength. The title reinforces
the 2011 direction to use the common
Wajax brand across each of our
businesses – Equipment, Power
Systems and Industrial Components.
Brand transitions can start with changing the signs.
However, the real work to align our organization behind a
common brand is in front of us. We are excited about the
leverage to improve customer service, the environment
we create for our team and the value we provide to our
shareholders. Collective strength starts with our leadership
team and we have adjusted the format of this year’s report to
allow our senior management group to provide individual
updates to shareholders.
Wajax had a record year in 2012.
Consolidated revenue increased 6%
and our net earnings increased 3% to
$65.9 million over a very strong 2011.
Our annual dividend increased 45%
to $3.10 per share.
Our Equipment business had a record year in sales and
segment net earnings, up 14% and 12% respectively. Sales
were strong in construction, forestry, material handling and
mining. For a portion of the year, mining results benefitted
from the sale and support of LeTourneau products which,
due to manufacturer consolidation, we ceased distributing
part way through 2012. The Equipment team continues to
develop and execute strategies to offset the negative sales and
earnings impact of the loss of the LeTourneau business. Our
thanks and congratulations go to the Equipment team for
the very strong performance they achieved in 2012.
4 Wajax Corporation 2012 Annual Report
Offsetting the positive results in Equipment was a difficult
year in Power Systems, where tough market conditions
facing western Canadian oil and gas customers were a major
factor in a sales decline of 4% and a segment net earnings
decline of 21%. Sales increases in power generation of 10%
and on-highway of 16% (helped by a full year of operations
from the 2011 acquisition of Harper Power Products) were
not sufficient to offset the decline of 21% in the oil and
gas dominated off-highway sector. We remain committed
to our strategy to nationally integrate and to grow the
Power Systems business. Our on-highway volume can be
maintained, we have significant opportunities in power
generation and we are well positioned to grow off-highway
sales as market conditions improve.
Sales growth in our Industrial Components business was
4% and segment net earnings declined 4%. Sales trends
weakened as the year progressed and our performance
was also negatively affected by the reduction of oil and
gas related volumes in the fourth quarter. We continue to
invest in Industrial Components to build management and
sales capabilities and to improve technology. Despite the
temporary weakness, we are pleased with our improving
competitive position. Two acquisitions were completed
including the December purchase of Kaman Canada.
While small from an immediate revenue standpoint, these
acquisitions play an important role in the continuing
transition of Industrial Components to higher-value
services and improved regional strength.
Our priorities are to drive growth within
each of our businesses, capture value
across them and to continue to improve
the environment for our team.
The strategic planning process conducted in 2012 with our
Board of Directors demonstrated significant organic growth
potential in each of our businesses. While acquisitions have
and will continue to be an important part of our plan, we
believe the majority of our growth will be organic.
The initiatives to drive growth are shown in the individual
divisional updates within this report. “Base Business”
initiatives are organic growth objectives that are achieved
within the normal scope, resources and markets of each
division. “New Opportunity” initiatives are (primarily)
organic growth opportunities that we see as significant,
requiring more effort, planning and resources to achieve.
The progress of each of the initiatives is monitored quarterly
by the Board of Directors.
We have stress tested the growth that we expect from these
initiatives against our current dividend objective of paying
a minimum of 75% of current year expected earnings. We
believe that sufficient financial resources are available to
execute the plan without requiring a change to our approach
to dividends.
We are ramping-up the effort to capture
opportunities that result from a common
Wajax brand for our businesses.
We are engaged in projects to improve growth, customer
support and drive new efficiencies. These projects include
an evaluation of our branch network, marketing and
customer communications, sales force management and
joint sales planning, coordinated outlooks in product and
market trends, and information systems. These projects set
important context for our future.
We expect the environment in 2013
will be challenging.
The combined effect of continuing weakness in the oil
and gas market, delays in mining investment decisions
and the loss of the LeTourneau distribution rights will
create challenges for our growth in 2013. Quoting activity
for mining remains very active in both Equipment and
Power Systems. However, we do not expect meaningful
improvement in the oil and gas market during 2013. As a
result, we anticipate a weaker first half of the year relative to
2012. Achieving full year earnings that are comparable to
2012 will depend on reasonable end market recovery in the
second half of 2013.
The environment we create for our team
of 2,833 technicians, sales professionals,
engineers and support staff is our highest
priority and a key factor in our growth.
MESSAGE TO OUR SHAREHOLDERS
We welcome Katie Hunter as our Senior Vice President
of Human Resources. Katie brings a wealth of industry
and human resources experience. Our first national
employee opinion survey achieved a 78% response rate and
demonstrated significant organizational pride. Our team has
a very strong belief in the quality of our customer service,
the products we sell and the relationship we have with our
major vendors.
Our focus in human resources is on the development
of our recruiting and on-boarding processes, employee
communications, leadership development and most
importantly, the continued strengthening of our health and
safety programs.
We are responsible to ensure each member of our team
goes home safely at the end of every day. Health and safety
practices continued to improve in 2012 as demonstrated
by a drop in our lost time injuries to 4 from the 7 we
experienced in 2011. Our health and safety practices will
further improve in 2013 with the introduction of revised
audit processes based on best practices and new monitoring
systems for on-time problem rectification when a health
and safety issue is detected. Accidents can happen in our
business and when they do, we are strongly reminded of the
importance of ensuring that the safety of our team is our
most significant responsibility.
In my first year as CEO of Wajax, my
reasons for joining the company have
been strongly reinforced.
Our company has an ingrained culture of creating value for
shareholders. There is nothing fancy about us. We measure
ourselves based on our relationship with our customers and
vendor partners, the growth of our company and on the
environment we create for our team.
I would like to thank the many team members, vendors,
customers and the Board of Directors for the assistance they
have provided me this year. It is a great privilege to be part of
Wajax and I look forward to working with the team to drive
the growth opportunities we so clearly have.
Mark Foote
President and Chief Executive Officer
Wajax Corporation 2012 Annual Report 5
MESSAGES FROM OUR EXECUTIVE TEAM
Messages from Our Executive Team
With this high dividend payout ratio, we have adopted
what we consider to be a prudent leverage ratio of debt-to-
EBITDA. Our objective is to maintain this ratio between 1.5
times and 2.0 times. However, since this range is relatively
narrow, in certain circumstances we are prepared to operate
with a ratio somewhat below or higher than this range.
In 2012, we used $39.1 million of cash in operating activities.
The biggest reason for this was a $114.3 million use of cash
for increased working capital. The vast majority of this
working capital change occurred in the Equipment division
where we made significant investments in stocking mining
and construction equipment in order to better penetrate
those markets. We are confident that these investments will
generate the desired returns going forward.
During 2012, we increased the borrowing limit of our bank
credit facility to $300 million. With $139.3 million of unused
bank debt capacity at year-end we believe we have ample
room to fund our growth capital requirements.
Lastly, an area of key focus in 2013 will be to continue to
refine the corporation’s measurement systems. While each
division currently utilizes a comprehensive set of metrics
to monitor their operating performance, we intend on
broadening those used to better understand the progress
we are making. As well, we intend on developing additional
metrics to more clearly gauge our progress with customers,
vendors and employees.
John Hamilton
Senior Vice President,
Finance and
Chief Financial Officer
I have had the privilege of being the
Chief Financial Officer of Wajax for the
last fourteen years. Over that time we
have established a corporate culture that
maintains an organizational focus on
growing earnings, maximizing cash flow
and generating acceptable returns on
invested capital.
One of the ways we reinforce this is through our annual
bonus program for senior management. This program
establishes annual shareholder value creation targets for
Wajax and each division based on the amount that actual
earnings exceed a cost of capital charge on net operating
assets employed. As a result, this program rewards
prudent management of the balance sheet as well as the
maximization of earnings. We also continually monitor
returns on invested capital for product lines distributed, new
capital spending and acquisitions.
Our results speak for themselves. I am
proud to say that our average annual
after-tax return on invested capital
for Wajax over the last five years has
approached 17%.
Maintaining our culture of cash flow maximization is crucial
given our objective of paying dividends of at least 75% of
earnings. This level of dividend payout retains more of
our earnings in the corporation than during the five and a
half years prior to 2011 when we were an income fund and
distributed 100% of earnings to unitholders.
6 Wajax Corporation 2012 Annual Report
MESSAGES FROM OUR EXECUTIVE TEAM
Revenue ($ million)
Segment Net Earnings ($ million)
778.9
685.8
635.3
555.8
502.9
56.1
50.2
50.0
38.1
30.5
Brian Dyck
Senior Vice President,
Equipment
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
We are very pleased with our 2012
results. Sales grew 14% and segment
net earnings increased 12%, reaching
a record $56.1 million. We achieved
growth in all product categories, most
significantly in construction, mining,
forestry and material handling.
Our focus in 2012 was to continue to build market share
in our construction and material handling businesses,
to expand our mining presence and improve our
aftermarket performance:
Our equipment sales in construction and material
handling grew 22% and 19%, respectively. We essentially
maintained our share of large construction excavators in
a very competitive market and gained share in material
handling, achieving our market share target.
We continued to expand our mining presence by
improving our capabilities and delivering five hydraulic
shovels in eastern Canada. We are also well positioned to
enter the large rigid frame truck market with our first six
Hitachi EH4000 240 ton trucks now in stock, and being
actively quoted to customers.
Our aftermarket sales, excluding the discontinued
LeTourneau business, increased a strong 8%.
We also made significant progress with the development of
our Rotating Products group in Fort McMurray, setting a
strong foundation for our 2013 plans for this business.
In 2013, we expect the construction, oil sands and
mining markets to be challenging and very competitive.
Nevertheless, we have a full set of growth initiatives and we
are well positioned to maintain our position in the short
term and grow the business as the markets strengthen.
OUR BASE BUSINESS GROWTH INITIATIVES:
Our market share targets in construction and material
handling will be supported by improved measurements
for our sales force and additional investments in training.
Our product range in the construction equipment market
has been improved through the addition of the Bell
articulated dump truck line that we secured late in 2012.
With product now arriving, we are excited about the
growth potential for new equipment sales and additional
parts and service revenue resulting from the estimated
Canadian installed base of 300 units.
In mining, our key objective is the successful introduction
of the Hitachi rigid frame trucks. Our participation in the
mining truck business is very important to the long run
growth of the company. We are maintaining our requisite
inventory investments in mining equipment to ensure
product is there when the opportunities arise.
Our parts and service operation will receive additional
support with the implementation of new training
programs, technology, and enhanced operational and
profitability measurement systems.
OUR NEW OPPORTUNITY IS TO ESTABLISH ROTATING
PRODUCTS AS A GROWTH PLATFORM:
With our focus primarily on our oil sands customers and
the estimated $1.8 billion pump and field labour market
in Fort McMurray, we are building the team, capabilities,
vendor and customer relationships to offer an array of
mining services with a primary focus on slurry pump
systems and selected maintenance services. We believe
that being successful in the oil sands is the right first step
prior to expansion of this new business to other mining
markets in Canada.
Wajax Corporation 2012 Annual Report 7
MESSAGES FROM OUR EXECUTIVE TEAM
Revenue ($ million)
Segment Net Earnings ($ million)
347.4
332.3
257.3
226.7
258.4
32.9
26.1
19.2
21.7
8.8
Richard Plain
Senior Vice President,
Power Systems
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
OUR BASE BUSINESS GROWTH INITIATIVES ARE:
We are intent on expanding our aftermarket capabilities
by adding sales representatives in key markets and
introducing repower programs for oil and gas fracturing
trailers and mining haul trucks. We will also have the
benefit of leveraging product technology advancements
by our major suppliers to gain market share and focus on
new market opportunities.
Our on-highway business will be diversified into other
higher value parts and service offerings by developing our
relationship with an association of other North American
distributors. We will also leverage our size and footprint to
attract national fleet accounts.
In 2013, we will begin a process of completing the
integration of our regional business units by taking steps
towards implementing a common computer system
platform across all three regions.
OUR NEW OPPORTUNITY IS TO BUILD OUR EPG BUSINESS
BY CREATING A WORLD-CLASS TEAM AND LEVERAGING OUR
NATIONAL FOOTPRINT.
The EPG market gives us exposure to high growth
sectors such as mining and remote northern community
development, but also to less cyclical sectors such as
industrial and commercial markets. The new EPG group,
supported by our new Generatrice Drummond facility will
further develop our large project capabilities and continue
to build on our success in the standby, prime diesel, rental
and gas markets.
2012 was a difficult year with revenue
and segment net earnings declining 4%
and 21%, respectively, with softness
in western Canada oil and gas activity
negatively impacting results. However,
we are energized about our future
opportunities and are establishing the
building blocks for sustained growth
going forward.
In light of difficulties in the oil and gas sector, our
concentration in 2012 was to set the stage for growth,
primarily in the Electric Power Generation (EPG) sector.
In September, we officially opened our new EPG
integration facility in Drummondville, Quebec. This
65,000 square foot facility will provide additional genset
engineering and assembly capability supporting Power
Systems on a national basis.
We continued to build a world-class EPG organization
by adding important new members with large project
experience to our team. In addition, we continued to
expand our rental fleet of skid and trailer mounted power
units in western and eastern Canada, broadening our
coverage of the resource and industrial sectors.
We also took meaningful steps to further integrate our
western, central and eastern Canada business units. We
standardized our sales, parts and service processes and
procedures, and have bolstered our sales infrastructure to
better service the on-highway market across Canada.
In 2013, we expect some of our key markets, such
as oil and gas and the oil sands, to continue to be
challenging. However, our growth initiatives are
designed to build on what we have accomplished
in 2012 and lessen our dependence on the more
cyclical oil and gas exploration sector.
8 Wajax Corporation 2012 Annual Report
Adrian Trotman
Senior Vice President,
Industrial Components
We began 2012 with solid momentum
in customer demand in most of our end
markets. As the year progressed, we began
to see growing softness in key sectors,
particularly mining and oil and gas. As a
consequence, overall results were below
expectations with revenue up 4% and
segment net earnings declining 4%.
Still, our accomplishments related to improving our market
position in 2012 were considerable.
We significantly improved our position in the bearing
and power transmission market in Canada. We had a
very successful first year with our new Nisku, Alberta
branch and on December 31 we added six new branches
in British Columbia and one in southern Ontario with the
acquisition of Kaman Canada.
Initial steps toward building our Canada-wide hydraulic
system design and repair center network were completed
with the opening of a new Saskatoon facility and the
acquisition of Ace Hydraulics in Bathurst, New Brunswick.
We made excellent progress in laying the groundwork
for further advancements in operational efficiencies in
information technology, electronic commerce with our
major vendors and inventory control.
We will continue to drive the implementation of our
strategic initiatives despite our expectation that the oil and
gas and mining markets will remain challenging in 2013.
MESSAGES FROM OUR EXECUTIVE TEAM
Revenue ($ million)
Segment Net Earnings ($ million)
360.0 347.5
302.2
281.0
322.8
23.1
22.1
20.2
12.0
4.7
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
OUR BASE BUSINESS GROWTH INITIATIVES ARE:
We intend to complete the integration of the Kaman
Canada branches and open additional bearing and power
transmission parts branches in under-represented areas in
Alberta, depending on market conditions. In addition, we
will further develop our alliance with Kaman Industrial
Technologies Corporation which will allow us to more
competitively bid on North American contract business.
Continuing to improve operational efficiencies related to
inventory management, supply chain and e-commerce
capabilities will remain a key focus. Inventory
management and supply chain process improvements are
expected to reduce product procurement, distribution and
freight costs and improve inventory turnover. We will also
complete the upgrade of our e-commerce capabilities to
meet the evolving transactional needs of our customers
and improve the efficiency of transactions with suppliers.
OUR NEW OPPORTUNITY IS RELATED TO GROWTH OF
OUR ENGINEERING AND REPAIR SERVICES (ERS):
Growing our ERS business involves leveraging our
technical expertise, product knowledge and customer
relationships. Engineering design and fabrication
services will be expanded to offer customized solutions
to customer’s operational and technical challenges.
Capabilities in key centers across the country will be
expanded to provide customers with additional service
offerings, including shop repair, field repair and reliability
services. ERS complements our core hydraulic, process
instrumentation, pumping, and bearing and power
transmission business of distributing technical products
and repair parts.
Wajax Corporation 2012 Annual Report 9
MESSAGE FROM THE CHAIRMAN
Message from the Chairman
Paul E. Gagné
Chairman of the Board
The year 2012 was eventful for Wajax,
with record revenues and earnings
before tax and the transition of the
leadership of the company from
Neil Manning to Mark Foote.
Neil retired after almost ten years in the position of
President and Chief Executive Officer, leading Wajax
through a very successful journey of transformation, higher
efficiency, growth and solid shareholder returns. Mark
succeeded Neil in March, bringing with him a wealth of
management experience and a fresh perspective and outlook
on our business. Mark has clearly spelled out his priorities
for Wajax in his message to shareholders in this Annual
Report and while the strategic direction of the Corporation
has not fundamentally changed, the Board of Directors
is confident that Mark has begun to effect the changes
necessary to launch Wajax on its next leg of growth, higher
performance and sustained shareholder returns. We look
forward to working with Mark and his management team
on the execution of Wajax’s strategic initiatives and we are
excited about the opportunities that lie ahead.
10 Wajax Corporation 2012 Annual Report
Two directors, Ms. Valerie Nielsen and Mr. Ivan Duvar,
retired from the Board at the Annual Meeting in 2012. We
had previously increased the size of the Board in anticipation
of retirements and the Board is now composed of eight
independent directors as well as Mark as President and Chief
Executive Officer. In that context, we have again assessed and
are confident that we have the necessary mix of skills and
experience on the Board to provide the required oversight of
the Corporation and its strategic direction.
We are very deliberate as a Board in
maintaining a culture of transparency and
accountability, and we are committed to
strong corporate governance practices in
the belief that such practices are critical
to the effective operation of our business.
During 2012, we again strove to refine our governance as
evidenced by the introduction of a say-on-pay advisory
vote at the upcoming Annual Meeting. We are committed
to further changes and improvements as the regulatory
framework and governance practices evolve.
On behalf of the Board of Directors, I would like to thank
our executive team and all Wajax employees for their hard
work, dedication and commitment to the success of our
organization. Thank you as well to our customers and
vendors and I personally express my appreciation to my
fellow directors for their contribution to Wajax in 2012.
Paul E. Gagné
Chairman of the Board
Management’s Discussion and Analysis
The following management’s discussion and analysis
(“MD&A”) provides a review of the consolidated financial
condition and results of operations of Wajax Corporation
(“Wajax” or the “Corporation”) for the year ended
December 31, 2012. The following discussion should be
read in conjunction with the Corporation’s Consolidated
Financial Statements and accompanying notes. Information
contained in this MD&A is based on information available
to management as of March 5, 2013.
Unless otherwise indicated, all financial information within
this MD&A is in millions of Canadian dollars, except share
and per share data. Additional information, including
Wajax’s Annual Report and Annual Information Form, are
available on SEDAR at www.sedar.com.
RESPONSIBILITY OF MANAGEMENT
AND THE BOARD OF DIRECTORS
Management is responsible for the information disclosed
in this MD&A and the Consolidated Financial Statements
and accompanying notes, and has in place appropriate
information systems, procedures and controls to ensure
that information used internally by management and
disclosed externally is materially complete and reliable.
Wajax’s Board of Directors has approved this MD&A and
the Consolidated Financial Statements and accompanying
notes. In addition, Wajax’s Audit Committee, on behalf
of the Board of Directors, provides an oversight role with
respect to all public financial disclosures made by Wajax, and
has reviewed this MD&A and the Consolidated Financial
Statements and accompanying notes.
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
Wajax’s management, under the supervision of its Chief
Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), is responsible for establishing and maintaining
disclosure controls and procedures (“DC&P”) and internal
control over financial reporting (“ICFR”).
As at December 31, 2012, Wajax’s management, under the
supervision of its CEO and CFO, had designed disclosure
controls and procedures (“DC&P”) to provide reasonable
assurance that information required to be disclosed by
Wajax in annual filings, interim filings or other reports
filed or submitted under applicable securities legislation
is recorded, processed, summarized and reported within
the time periods specified in such securities legislation.
DC&P are designed to ensure that information required to
be disclosed by Wajax in annual filings, interim filings or
other reports filed or submitted under applicable securities
legislation is accumulated and communicated to Wajax’s
management, including its CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure.
As at December 31, 2012, Wajax’s management, under the
supervision of its CEO and CFO, had designed internal
control over financial reporting (“ICFR”) to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with International Financial
Reporting Standards (“IFRS”). In completing the design,
management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control – Integrated Framework.
With regard to general controls over information
technology, management also used the set of practices of
Control Objectives for Information and related Technology
(“COBIT”) created by the IT Governance Institute.
During the year, Wajax’s management, under the supervision
of its CEO and CFO, evaluated the effectiveness and
operation of its DC&P and ICFR. This evaluation included
a risk evaluation, documentation of key processes and tests
of effectiveness conducted on a sample basis throughout the
year. Due to the inherent limitations in all control systems,
an evaluation of the DC&P and ICFR can only provide
reasonable assurance over the effectiveness of the controls.
As a result, DC&P and ICFR are not expected to prevent
and detect all misstatements due to error or fraud. The CEO
and CFO have concluded that Wajax’s DC&P and ICFR are
effective as at December 31, 2012.
There was no change in Wajax’s ICFR that occurred during
the three months ended December 31, 2012 that has
materially affected, or is reasonably likely to materially affect,
Wajax’s ICFR.
WAJAX CORPORATION OVERVIEW
Wajax’s core distribution businesses are engaged in the
sale and after-sale parts and service support of mobile
equipment, power systems and industrial components
through a network of 128 branches across Canada. Wajax
is a multi-line distributor and represents a number of
leading worldwide manufacturers in its core businesses. Its
customer base is diversified, spanning natural resources,
construction, transportation, manufacturing, industrial
processing and utilities.
Wajax’s strategy is to grow earnings in all segments
through organic growth and tuck-under acquisitions while
maintaining a dividend payout ratio of at least 75% of
earnings. Planned organic growth includes “base business”
Wajax Corporation 2012 Annual Report 11
MANAGEMENT’S DISCUSSION AND ANALYSIS initiatives that are achieved within the normal scope,
resources and markets of each core business, while “new
opportunity” initiatives are organic growth opportunities
that we see as significant, requiring more effort, planning
and resources to achieve. Wajax expects to ensure sufficient
capital is available to meet its growth requirements within a
conservative capital structure.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report and MD&A contains certain forward-
looking statements and forward-looking information,
as defined in applicable securities laws (collectively,
“forward-looking statements”). These forward-looking
statements relate to future events or the Corporation’s
future performance. All statements other than statements
of historical fact are forward-looking statements. Often, but
not always, forward-looking statements can be identified
by the use of words such as “plans”, “anticipates”, “intends”,
“predicts”, “expects”, “is expected”, “scheduled”, “believes”,
“estimates”, “projects” or “forecasts”, or variations of, or the
negatives of, such words and phrases or state that certain
actions, events or results “may”, “could”, “would”, “should”,
“might” or “will” be taken, occur or be achieved. Forward-
looking statements involve known and unknown risks,
uncertainties and other factors beyond the Corporation’s
ability to predict or control which may cause actual results,
performance and achievements to differ materially from
those anticipated or implied in such forward-looking
statements. There can be no assurance that any forward-
looking statement will materialize. Accordingly, readers
should not place undue reliance on forward-looking
statements. The forward-looking statements in this Annual
Report and MD&A are made as of the date of this MD&A,
reflect management’s current beliefs and are based on
information currently available to management. Although
management believes that the expectations represented
in such forward-looking statements are reasonable, there
is no assurance that such expectations will prove to be
correct. Specifically, this Annual Report and MD&A
includes forward-looking statements regarding, among
other things, our plans for revenue and earnings growth,
including planned marketing, strategic, operational and
growth initiatives and their intended outcomes, our plans
regarding the expansion of our businesses, our financing
and capital requirements, our outlook for certain of our key
end markets, some of the challenges we face in 2013, our
outlook with respect to our financial results for the 2013
financial year, and our objective with respect to the future
payment of dividends. These statements are based on a
number of assumptions which may prove to be incorrect,
including, but not limited to, assumptions regarding general
business and economic conditions, the supply and demand
for, and the level and volatility of prices for, commodities,
financial market conditions, including interest rates, the
future financial performance of the Corporation, our costs,
12 Wajax Corporation 2012 Annual Report
market competition, our ability to attract and retain skilled
staff, our ability to procure quality products and inventory
and our ongoing relations with suppliers, employees
and customers. The foregoing list of assumptions is not
exhaustive. Factors that may cause actual results to vary
materially include, but are not limited to, a deterioration
in general business and economic conditions, volatility
in the supply and demand for, and the level of prices for,
commodities, fluctuations in financial market conditions,
including interest rates, the level of demand for, and prices
of, the products and services we offer, market acceptance
of the products we offer, termination of distribution or
original equipment manufacturer agreements, unanticipated
operational difficulties (including failure of plant, equipment
or processes to operate in accordance with specifications
or expectations, cost escalation, unavailability of quality
products or inventory, supply disruptions, job action
and unanticipated events related to health, safety and
environmental matters), our ability to attract and retain
skilled staff and our ability to maintain our relationships
with suppliers, employees and customers. The foregoing list
of factors is not exhaustive. Further information concerning
the risks and uncertainties associated with these forward-
looking statements and the Corporation’s business may be
found in this MD&A under the heading “Risk Management
and Uncertainties” and in our Annual Information Form
for the year ended December 31, 2012, filed on SEDAR. The
forward-looking statements contained in this Annual Report
and MD&A are expressly qualified in their entirety by this
cautionary statement. The Corporation does not undertake
any obligation to publicly update such forward-looking
statements to reflect new information, subsequent events
or otherwise unless so required by applicable securities
laws. Readers are further cautioned that the preparation
of financial statements in accordance with IFRS requires
management to make certain judgments and estimates that
affect the reported amounts of assets, liabilities, revenues
and expenses. These estimates may change, having either
a negative or positive effect on net earnings as further
information becomes available, and as the economic
environment changes.
ANNUAL CONSOLIDATED RESULTS
Year ended December 31
Revenue
2012
2011
$
1,466.0 $
1,377.1
Gross profit
$
Selling and administrative expenses $
301.8 $
207.7 $
292.4
200.3
Earnings from operating activities
Finance costs
Earnings before income taxes
Income tax expense
Net earnings
Basic earnings per share
Diluted earnings per share
$
$
$
$
$
$
$
94.1 $
4.4 $
89.7 $
23.8 $
65.9 $
3.95 $
3.89 $
92.1
4.6
87.5
23.7
63.8
3.84
3.77
MANAGEMENT’S DISCUSSION AND ANALYSIS
Revenue by Geographic Region
2012
(cid:31) Western Canada
(cid:31) Eastern Canada*
(cid:31) Ontario
54%
27%
19%
* Includes Quebec and the Atlantic provinces.
Revenue by Segment
2012
(cid:31) Equipment
53%
(cid:31) Power Systems
23%
(cid:31) Industrial Components 24%
EBIT by Segment
2012
(cid:31) Equipment
54%
(cid:31) Power Systems
25%
(cid:31) Industrial Components 21%
Revenue by Market
2012
(cid:31) Construction
17%
(cid:31) Industrial/Commercial 14%
(cid:31) Mining
12%
(cid:31) Oil Sands
11%
(cid:31) Oil and Gas
10%
(cid:31) Forestry
10%
(cid:31) Transportation
9%
(cid:31) Government and Utilities 6%
(cid:31) Metal Processing
5%
(cid:31) Other
6%
2011
2011
2011
2011
(cid:31) Western Canada
(cid:31) Eastern Canada*
(cid:31) Ontario
54%
29%
17%
(cid:31) Equipment
(cid:31) Power Systems
(cid:31) Industrial Components
50%
25%
25%
(cid:31) Equipment
(cid:31) Power Systems
(cid:31) Industrial Components
47%
31%
22%
(cid:31) Construction
(cid:31) Industrial/Commercial
(cid:31) Mining
(cid:31) Oil Sands
(cid:31) Oil and Gas
(cid:31) Forestry
(cid:31) Transportation
(cid:31) Government and Utilities
(cid:31) Metal Processing
(cid:31) Other
14%
16%
11%
11%
13%
9%
9%
6%
4%
7%
In 2012, Wajax was positively impacted by strong
construction markets across the country, particularly in
western Canada, as demand for equipment sold by the
Equipment segment increased by approximately 15% year-
over-year. Oil and gas activity remained strong in the first
half of 2012 with increased sales over 2011. Oil and gas
sector activity in western Canada, however, declined in the
second half of 2012 as deteriorating industry fundamentals
in North America resulted in a decline in customer
spending. This decline primarily affected the Power Systems
and Industrial Components segments. Mining activity,
including the oil sands market, was somewhat stronger
compared to last year in all segments. Although quoting
activity remained high at year-end, the Equipment segment
saw a reduction in mining equipment backlog in the latter
part of the year as customers began to take a more cautious
approach in making commitments to buy equipment. In
2012, Wajax also benefited from stronger activity in the
forestry and metal processing sectors compared to last year.
Revenue
Revenue in 2012 of $1,466.0 million increased 6%, or $88.9
million, from $1,377.1 million in 2011. Equipment segment
revenue increased 14%, or $92.7 million, driven by stronger
market demand for equipment, primarily in the construction
and mining markets, and increased parts and service volumes
Wajax Corporation 2012 Annual Report 13
MANAGEMENT’S DISCUSSION AND ANALYSIS in the western Canadian construction market. Power
Systems’ segment revenue decreased 4%, or $15.1 million,
as lower volumes to off-highway oil and gas customers in
western Canada, attributable to lower industry activity,
more than offset increased power generation equipment
sales and the additional four months of revenue from the
former operations of Harper Power Products Inc. (“Harper”)
acquired on May 2, 2011. Segment revenue in Industrial
Components increased 4%, or $12.5 million, due primarily
to higher bearings and power transmission parts volumes in
all regions and higher fluid power and process equipment
product and service sales in eastern Canada.
Gross Profit
Gross profit increased $9.4 million, or 3%, in 2012 as the
positive impact of higher volumes compared to last year was
partially offset by the negative impact of lower gross profit
margins. The gross profit margin percentage decrease to
20.6% from 21.2% last year was mainly attributable to the
mix of equipment and parts and service sales compared to
last year.
Selling and Administrative Expenses
Selling and administrative expenses increased $7.4 million in
the year. This was due primarily to increased personnel and
sales related costs and $3.5 million of additional expenses
from the former Harper operation. These increases were
partially offset by lower annual and mid-term incentive
accruals. Selling and administrative expenses as a percentage
of revenue decreased to 14.2% in 2012 from 14.5% in 2011.
Finance Costs
Finance costs of $4.4 million decreased $0.2 million
compared to 2011. The cost of higher funded net debt levels
outstanding during the year were more than offset by the
Corporation’s lower cost of borrowing compared to last year.
Funded net debt includes bank debt, bank indebtedness and
obligations under finance leases, net of cash. See Non-IFRS
Measures section.
Income Tax Expense
The Corporation’s effective income tax rate of 26.5% in 2012
decreased from 27.1% in 2011 as a result of the impact of
reduced statutory income tax rates.
Net Earnings
Net earnings for the year ended December 31, 2012
increased $2.1 million to $65.9 million, or $3.95 per share,
from $63.8 million, or $3.84 per share, in 2011. The positive
impact of higher volumes and lower finance costs more than
compensated for the lower gross profit margin percentage
and increased selling and administrative expenses compared
to last year.
Comprehensive Income
Comprehensive income of $65.4 million for the year ended
December 31, 2012 included net earnings of $65.9 million,
offset partially by an other comprehensive loss of $0.6 million.
The other comprehensive loss was mainly attributable to
actuarial losses on pension plans of $0.7 million.
Funded Net Debt
Funded net debt of $173.7 million at December 31, 2012
increased $110.0 million compared to December 31, 2011.
Increases in non-cash operating working capital of $114.3
million resulted in negative cash flows from operating
activities of $39.1 million in 2012. Other uses of cash
included dividends paid of $50.6 million, investing activities
of $16.0 million including $10.1 million used for acquisitions
in the Industrial Components segment, finance lease
payments of $2.6 million and debt facility amendment costs
of $0.6 million. As a result, Wajax’s year-end leverage ratio of
1.55 times increased from last year’s ratio of 0.60 times. (This
leverage ratio is calculated as funded net debt-to-EBITDA.
As funded net debt and EBITDA do not have standardized
meanings prescribed by IFRS, these financial measures may
not be comparable to similar measures presented by other
companies. See Non-IFRS Measures section.)
On May 24, 2012 and December 7, 2012, Wajax amended
its bank credit facility to increase the limit of the facility by
$50 million and $75 million respectively, on substantially the
same terms and conditions as the existing facility. The fully
secured facility of $300 million, due August 12, 2016, is now
comprised of an $80 million non-revolving term portion and
a $220 million revolving term portion.
Dividends
For the twelve months ended December 31, 2012 monthly
dividends declared totaled $3.10 per share. For the twelve
months ended December 31, 2011 monthly dividends
declared totaled $2.14 per share.
Backlog
Consolidated backlog at December 31, 2012 of $184.1
million decreased $83.6 million, or 31%, from $267.7 million
at December 31, 2011 on reductions in all segments. Backlog
includes the total retail value of customer purchase orders
for future delivery or commissioning. See the Annual Results
of Operations section for further backlog detail by segment.
CEO
On March 5, 2012, Mark Foote assumed the role of President
and CEO of Wajax, and was appointed a director effective
March 6, 2012. Mark has extensive experience in distribution,
supply chain management and logistics. Most recently, he
served as the President and Chief Executive Officer of Zellers,
and prior to that, was the President and Chief Merchandising
14 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS Officer at Loblaws Companies. Mark also had a career of
more than 20 years at Canadian Tire Corporation, including
five years as President, Canadian Tire Retail.
Senior Vice President, Human Resources
On September 4, 2012, Katie Hunter was appointed Senior
Vice President, Human Resources of Wajax. Katie has
held the position of Vice President, Human Resources
at various companies in the manufacturing, mining and
health care sectors and brings extensive experience in
human resource management.
ANNUAL RESULTS OF OPERATIONS
Equipment
For the year ended December 31
Equipment*
Parts and service
Segment revenue
Segment earnings
Segment earnings margin
* Includes rental and other revenue.
$
$
$
$
2012
513.9 $
264.6 $
778.5 $
56.1 $
7.2%
Revenue by Product Type 2012 versus 2011
Market
n Construction
n Mining/Oil sands
n Material Handling
n Forestry
n Crane and Utility
2012
35%
30%
16%
12%
7%
2011
428.0
257.8
685.8
50.2
7.3%
2011
33%
31%
16%
13%
7%
Revenue increased 14%, or $92.7 million, to $778.5 million
in 2012 from $685.8 million in 2011. Segment earnings
increased $5.9 million to $56.1 million in 2012 compared to
$50.2 million in 2011. The following factors contributed to
the improved results:
Equipment revenue increased $85.9 million compared
to last year. Specific year-over-year variances included
the following:
Construction equipment revenue increased $39.4
million mainly as a result of market demand which
drove higher sales of Hitachi excavators and JCB
construction equipment, primarily in western Canada
and Ontario. Sales of Wirtgen road building equipment
in Ontario also contributed to the increase. These
increases were offset partially by declines in eastern
Canada due to competitive pressures.
Mining equipment sales increased $23.9 million due
primarily to the delivery of three additional LeTourneau
loaders. Excluding the LeTourneau product line, which
was discontinued in the second quarter of 2012, mining
sales increased $5.6 million on higher Hitachi and
rotating equipment deliveries.
Forestry equipment revenues increased $9.1 million
as strength in the lumber market led to higher market
demand for Tigercat and forestry related Hitachi
equipment.
Material handling equipment revenue increased $8.7
million as higher market demand and increased market
share resulted in higher volumes in all regions.
Crane and utility equipment revenue increased $4.8
million attributable to higher crane sales in western and
eastern Canada.
Parts and service volumes increased $6.8 million
compared to last year. Excluding the LeTourneau product
line, parts and service volumes increased $17.9 million, or
8%, owing to higher mining and construction volumes in
western Canada.
Segment earnings increased $5.9 million to $56.1 million
compared to last year. The positive impact of higher
volumes outweighed the negative impact of a slightly
lower gross profit margin and a $5.0 million increase
in selling and administrative expenses. The lower gross
profit margin resulted primarily from a higher proportion
of equipment sales compared to last year. Selling and
administrative expenses increased as higher personnel
and sales related expenses and additional environmental
remediation provisions more than offset lower bad debt
expenses compared to last year.
Backlog of $82.2 million at December 31, 2012 decreased
$64.4 million compared to December 31, 2011. Mining
equipment backlog declined on a reduction of customer
orders and the delivery of four LeTourneau loaders during
the year. In addition, construction sector related backlog is
lower as Wajax and manufacturers’ inventory levels currently
allow for timelier product shipments to customers.
Effective November 2, 2012, the Equipment segment became
the exclusive Canadian distributor of Bell articulated dump
trucks (“ADT’s”). These trucks, manufactured by Bell
Equipment Limited, are one of the world’s leading truck
lines for construction, quarry and medium duty resource
applications and are sold in 80 countries. Wajax estimates
the annual size of the Canadian ADT market to be at
least 500 units, or $225 million. Wajax also estimates the
existing Canadian installed base of trucks manufactured
by Bell to be approximately 300 units, which is expected
to yield an immediate parts and service opportunity. The
geographic scope and capability of Equipment’s Canada-
wide distribution network were central factors in securing
distribution rights to this world-class product line.
On October 17, 2011, Wajax announced it had reached
an agreement with LeTourneau Technologies, Inc.
(“LeTourneau”) providing for the dealer agreement relating
Wajax Corporation 2012 Annual Report 15
MANAGEMENT’S DISCUSSION AND ANALYSIS
to Wajax’s distribution of LeTourneau mining equipment
and parts products in Canada to be discontinued effective
April 27, 2012. LeTourneau revenue for the twelve months
ended December 31, 2012 included equipment sales of $25.8
million and parts and service volumes of $12.5 million and
contributed approximately $8.5 million to the Equipment
segment’s earnings.
Wajax Equipment’s base business strategic initiatives are
centered around a continued focus on increasing the
market share of its existing key product lines, particularly
construction and material handling equipment, and
improving its aftermarket capabilities and contribution
across all lines of business. The segment intends to grow
its mining business by building on its leadership position
in Hitachi mining shovels through expansion of its mining
operations across Canada and the introduction of the
extended Hitachi mining truck line. It will also grow its base
business through selected product line extensions and tuck-
under acquisitions. The segment’s new market opportunity is
to further develop its Rotating Product group’s opportunities
in the Canadian mining market.
During 2012, the segment strengthened its sales
organization to better support its market share target
objectives by restructuring sales staff in eastern Canada and
Ontario and through the provision of management training
and sales execution tools. Development of the Rotating
Products group and expansion of the segment’s mining
operations infrastructure into eastern Canada and Ontario
resulted in better than expected sales and provided greater
visibility into future market opportunities. New product
lines announced in 2012 included the Hitachi 240 ton mine
truck and the Bell ADT.
The focus to further drive the segment’s strategy will include
the following specific initiatives:
The segment will maintain its focus on increasing market
share in key product lines through continued sales force
effectiveness improvements including the development
of in-house training programs and by providing tools to
track sales lead generation, coverage and performance.
Expansion of the segment’s mining operations includes
the continued development of the required infrastructure
and organization to sell and service both above ground
and underground mining products in central and eastern
Canada. The segment is also actively marketing the 320
ton and new 240 ton Hitachi mine trucks across Canada
and working with the manufacturer to clearly demonstrate
the value proposition to customers including quality and
cost effectiveness. In addition, the segment is working to
introduce new underground and drilling product lines to
provide customers with an expanded product and service
offering in the future. Wajax has invested in mining
equipment inventory, including shovels and trucks, to
ensure product is available to execute this initiative.
16 Wajax Corporation 2012 Annual Report
The capacity and quality of the service operation’s delivery
structure will be enhanced through a focus on operational
effectiveness. This will include service management
training and stronger benchmarking and key performance
indicator (“KPI”) measurements to identify and market
more profitable business opportunities. The segment
intends to implement bolt-on service management system
technologies that will enhance the segment’s productivity.
The segment will actively market the Bell ADT product
line through its Canada-wide distribution network by
leveraging its current construction equipment market
position. As well, Equipment intends to capitalize on the
immediate parts and service opportunity of the existing
installed base of trucks in Canada manufactured by Bell,
which is estimated to be 300 units.
The recently formed Rotating Products group in Fort
McMurray is planned to be further developed to maximize
the significant opportunities in the oil sands market.
The main focus is on marketing high quality and cost
effective slurry system products, parts and services
through exclusive vendor relationships. The segment’s
secondary focus will include the provisioning of plant and
field service labour and engineering expertise to support
customer’s plant maintenance and field service activities.
While currently built around the oil sands market in
Fort McMurray, this business represents future growth
opportunities in other major mining market areas such as
northern Ontario and Quebec.
Power Systems
For the year ended December 31
Equipment*
Parts and service
Segment revenue
Segment earnings
Segment earnings margin
* Includes rental and other revenue.
$
$
$
$
2012
129.0 $
203.3 $
332.3 $
26.1 $
7.9%
Revenue by Market 2012 versus 2011
Market
n Oil and Gas
n On-highway
Transportation
n Industrial/
Commercial
n Oil Sands
n Mining
n Other
2012
26%
25%
20%
7%
5%
17%
2011
160.8
186.6
347.4
32.9
9.5%
2011
34%
23%
20%
6%
3%
14%
Revenue decreased $15.1 million, or 4%, to $332.3 million
in 2012 from $347.4 million in 2011. (Excluding revenue
from the former Harper operation, Power Systems revenue
decreased $27.8 million, or 9%, compared to last year.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
Segment earnings decreased $6.8 million to $26.1 million
in 2012 from $32.9 million in 2011. The following factors
impacted year-over-year revenue and earnings:
Equipment revenue decreased $31.8 million. The majority
of the decrease was caused by lower equipment volumes
to off-highway oil and gas customers, as a result of
reduced industry activity in western Canada. Lower power
generation equipment volumes in eastern Canada and
lower marine sector sales also contributed to the decline.
These decreases were partially offset by increased power
generation equipment sales in western Canada.
Parts and service volumes increased $16.7 million
compared to last year due mainly to an additional four
months of revenue in 2012 from the former Harper
operations acquired on May 2, 2011 and higher power
generation parts and service volumes.
Segment earnings decreased $6.8 million compared to
last year due to the negative impact of lower volumes
and a $3.2 million increase in selling and administrative
expenses. Gross profit margins remained flat year-over-
year. Selling and administrative expenses increased owing
to $3.5 million of additional expenses attributable to the
former Harper operation and higher personnel and sales
related costs. These increases were offset by $2.7 million of
lower annual incentive accruals.
Backlog of $60.4 million as of December 31, 2012
decreased $15.9 million compared to December 31, 2011
predominantly caused by lower oil and gas related off-
highway orders in western Canada.
The segment’s base business strategic initiatives are intended
to expand its success in off-highway mechanical drive
systems while maintaining the segment’s position in the
on-highway parts and service market. It will also complete
the Canada-wide integration of its three operating units.
The segment’s new market opportunity is to establish Power
Systems as one of Canada’s leaders in commercial electrical
power generation (“EPG”). Specifics of the initiatives going
forward will include the following:
The segment’s off-highway business will expand its
aftermarket capabilities by adding sales representatives
in key markets and introducing re-power programs for
oil and gas fracturing trailers and mining haul trucks.
The segment will also leverage product technology
advancements by its major suppliers to gain market share
and focus on marine market opportunities.
The segment’s on-highway business will diversify into other
“higher value” parts and service offerings by leveraging its
size and footprint to attract National Fleet Accounts. It will
also develop its relationship with “Wheel Time”, the North
American distributors’ association, to gain purchasing
efficiencies and access to “all makes” parts offerings.
As part of the segment’s integration of its former regional
business units, within the next three years a common
computer system platform will be implemented across
all three regions of Power Systems allowing for cost
efficiencies and standardization of processes, reporting
and KPI measurements.
The primary growth focus of Power Systems is to build
its EPG business by creating a stand-alone EPG group
with a world-class team. The group will leverage Power
Systems’ national footprint and diverse product portfolio.
The EPG market is comprised of high growth sectors such
as mining and remote northern community development,
and also has exposure to less cyclical sectors such as
industrial and commercial markets. The new EPG group
will further develop its large project capabilities and
continue its success in the standby and prime diesel, rental
and gas markets. In 2012, a new facility was opened in
Drummondville to support the Quebec EPG market and
to provide infrastructure, including engineering, for a
national integration centre.
Industrial Components
For the year ended December 31
Segment revenue
Segment earnings
Segment earnings margin
$
$
2012
360.0 $
22.1 $
6.1%
2011
347.5
23.1
6.6%
Revenue by Market 2012 versus 2011
Market
n Industrial/
Manufacturing
n Mining
n Forestry
n Oil and Gas
n Metal Processing
n Construction
n Food and Beverage
n Transportation
n Other
2012
16%
15%
13%
13%
12%
6%
5%
4%
16%
2011
17%
14%
14%
14%
11%
6%
5%
4%
15%
Revenue increased $12.5 million, or 4%, to $360.0 million
from $347.5 million in 2011. Segment earnings decreased
$1.0 million to $22.1 million compared to $23.1 million in
the previous year. The year-over-year changes in revenue and
earnings were a result of the following factors:
Bearings and power transmission parts sales increased
$10.3 million, or 6%, compared to last year led by higher
sales to mining, metal processing and construction sector
customers across all regions. Improved transportation,
food and beverage and oil and gas sector sales also
contributed to the increase. These increases were offset in
part by a decline in sales to industrial sector customers in
eastern Canada.
Wajax Corporation 2012 Annual Report 17
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fluid power and process equipment products and service
revenue increased $2.2 million, or 1%, resulting from
higher sales to metal processing, food and beverage and
agriculture sector customers. These increases were offset
somewhat by a decline in mining sector volumes.
Segment earnings decreased $1.0 million compared to
last year. The positive impact of higher volumes was more
than offset by the negative impact of a slightly lower
gross profit margin and a $3.4 million increase in selling
and administrative expenses. The increase in selling and
administrative expenses resulted primarily from higher
personnel and sales related costs, computer system upgrade
expenses and professional fees related to acquisitions.
These increases were offset by a $1.4 million reduction in
annual incentive accruals compared to last year.
Backlog of $41.6 million as of December 31, 2012 decreased
$3.2 million compared to December 31, 2011 and includes
$1 million related to the two acquisitions made in the fourth
quarter discussed below.
On October 22, 2012, Industrial Components acquired
all of the issued and outstanding shares of ACE Hydraulic
Limited (“ACE”), a hydraulic cylinder repair business
located in Bathurst, New Brunswick with annual revenues
of approximately $2.0 million. The consideration for
the business was $1.4 million, subject to post-closing
adjustments. The acquisition represents an important step
towards the segment’s strategy of expanding its engineering,
service and repair capabilities across Canada.
On December 31, 2012, Industrial Components acquired
the assets Kaman Industrial Technologies, Ltd. (“Kaman
Canada”), consisting of six branch locations in British
Columbia and one branch in Ontario. Kaman Canada is a
distributor of industrial components with annual revenues of
approximately $21.0 million. The consideration paid for the
assets was $8.7 million, subject to post-closing adjustments.
The acquisition aligns with the segment’s strategy of growing
all of its lines of business across Canada.
On February 21, 2013, Industrial Components announced
it had formed a strategic alliance with Kaman Canada’s
U.S.-based parent company, Kaman Industrial Technologies
Corporation (“Kaman U.S.”). The strategic alliance will target
North American parts-supply contracts. The alliance will
operate as Sourcepoint Industrial and will provide customers
with an alternative to country based supply agreements.
Customers of the alliance will be served through Industrial
Components’ 65 branch locations and 13 service centres
Canada-wide and Kaman U.S.’s more than 200 customer
service centers and five distribution centers across the U.S.,
Mexico and Puerto Rico.
Industrial Components’ base business strategic initiatives
relate to the expansion of its branch network through
organic growth and acquisitions and the continued steps
to maximize its operational efficiency in order to increase
margins and lower its working capital requirements. The
new market opportunity for the segment is to grow revenue
and earnings in its Engineering and Repair Services (“ERS”)
business by capitalizing on its technical and engineering
capabilities by providing engineered solutions and repair
services built around its product offering.
Particulars of these initiatives are as follows:
The segment expects to grow its base business revenues
with the recent acquisition of the Kaman Canada branches
and by opening bearing and power transmission parts
branches in under-represented areas in southern Alberta,
depending on market conditions. In addition, the recent
formation of Sourcepoint Industrial alliance with Kaman
U.S. will allow Industrial Components to jointly bid on
North American parts-supply contract business.
Industrial Components intends to improve operational
efficiencies related to its inventory management,
supply chain and e-commerce capabilities. Inventory
management and supply chain process improvements are
expected to reduce product procurement, distribution
and freight costs and lower inventory levels. During 2013,
the segment will continue to upgrade its e-commerce
capability to meet the evolving transactional needs of its
customers and improve the efficiency of its transactions
with suppliers.
The segment will continue to leverage its technical
expertise, product knowledge and customer relationships
to expand its higher margin ERS business, which
complements its core business of distributing technical
products and repair parts. Engineering design and
fabrication services will be expanded to offer customized
solutions to customers’ operational and technical
challenges. Capabilities in key centres will be expanded
to provide customers with additional service offerings
including shop repair, field repair and reliability services.
The recent acquisition of ACE, a hydraulic cylinder
repair business, represented an important step towards
developing the ERS business across Canada.
ANNUAL CASH FLOWS
Cash Flows Used In Operating Activities
For the year ended December 31, 2012, cash flows used in
operating activities amounted to $39.1 million, compared
to $61.3 million generated in the previous year. The $100.4
million decrease in operating cash flows was caused by an
increased use of non-cash operating working capital of $94.1
million, higher rental equipment additions of $4.9 million
18 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS in the Equipment and Power Systems segments, decreased
other non-current liabilities of $3.9 million, and income
taxes paid of $2.3 million. This was partially offset by higher
cash flows from operating activities before changes in non-
cash operating working capital of $4.8 million.
Changes in operating non-cash working capital in 2012
compared to 2011 include the following components:
Changes in non-cash operating working capital *
For the year ended December 31
Trade and other receivables
Inventories
Prepaid expenses
Accounts payable and
accrued liabilities
Provisions
Total
* Cash used in (generated)
2012
17.1 $
39.0 $
(1.0) $
58.4 $
0.8 $
114.3 $
2011
27.1
35.0
0.6
(39.8)
(2.5)
20.3
$
$
$
$
$
$
Significant components of the changes in non-cash operating
working capital for the twelve months ended December 31,
2012 are as follows:
Trade and other receivables increased $17.1 million. A
significant increase in the Equipment segment, related
to a large mining equipment delivery and increased sales
activity, was partially offset by reductions in the Power
Systems and Industrial Components segments due to lower
sales activity in the fourth quarter compared to last year.
Inventories increased $39.0 million due principally to a
$35.4 million increase in mining equipment (trucks and
shovels) in the Equipment segment.
Accounts payable and accrued liabilities decreased $58.4
million reflecting reductions in the Equipment and Power
Systems segments. Reductions in the Equipment segment
were attributable to lower trade payables and customer
deposits related to mining equipment. Decreases in the
Power Systems segment resulted from lower deferred
income and inventory related trade payables. Reductions
in annual and mid-term incentive accruals also
contributed to the decrease.
Overall, the majority of the $114.3 million increase in non-
cash operating working capital occurred in the Equipment
segment where significant investments were made in order
to better penetrate the mining and construction markets.
In particular, the Equipment segment increased its mining
equipment related operating working capital by approximately
$75 million attributable to higher inventory and accounts
receivable levels and reduced trade payables and customer
deposits. At December 31, 2012, the segment had increased
its investment in Hitachi mining equipment inventory to
$40.5 million, including shovels and new mining trucks.
On the consolidated statement of financial position at
December 31, 2012, Wajax had employed $243.9 million in
current assets net of current liabilities, exclusive of funded
net debt, compared to $165.0 million at December 31, 2011.
The $78.9 million increase was essentially attributable to
the $114.3 million increase in non-cash operating working
capital as detailed above and the ACE and Kaman Canada
acquisitions totaling $10.1 million. These increases were
offset by an increase of $42.0 million in income taxes payable
and $1.2 million of dividends payable. The increase in
income taxes payable relates to both the tax on partnership
income generated in 2011 which was deferred to 2012 and
current tax on 2012 income, of which $44.6 million was paid
on January 31, 2013. See Liquidity and Capital Resources
section for further detail.
Investing Activities
For the year ended December 31, 2012, Wajax invested $5.7
million in property, plant and equipment additions, net of
disposals, and $0.2 million in intangible asset additions,
compared to $5.4 million and $0.7 million for the year ended
December 31, 2011, respectively. In addition, the Industrial
Components segment invested a total of $10.1 million during
2012 for the acquisition of the shares of ACE on October 22,
2012 and the acquisition of the assets of Kaman Canada on
December 31, 2012. Investing activities for the twelve months
ended December 31, 2011 also included $23.2 million of cash
paid on the acquisition of Harper on May 2, 2011.
Financing Activities
For the year ended December 31, 2012, the Corporation
generated $39.3 million of cash from financing activities
compared to $69.3 million of cash used in financing
activities in 2011. Financing activities in the year included
bank debt borrowing of $93.0 million, offset partially by
dividends paid to shareholders totaling $50.6 million, or
$3.03 per share, finance lease payments of $2.6 million and
debt facility amendment costs of $0.6 million.
Funded net debt of $173.7 million at December 31, 2012
increased $110.0 million compared to December 31, 2011.
Increases in non-cash operating working capital of $114.3
million resulted in negative cash flows from operating
activities of $39.1 million in 2012. Other uses of cash
included dividends paid of $50.6 million, investing activities
of $16.0 million including $10.1 million used for the ACE
and Kaman Canada acquisitions, finance lease payments
of $2.6 million and debt facility amendment costs of $0.6
million. As a result, Wajax’s year-end leverage ratio of 1.55
times increased from last year’s ratio of 0.60 times. See Non-
IFRS Measures section.
Wajax Corporation 2012 Annual Report 19
MANAGEMENT’S DISCUSSION AND ANALYSIS
SELECTED ANNUAL INFORMATION
Revenue
$
1,466.0 $
1,377.1
$
1,110.9
2012
2011
2010 (1)
Earnings before
income taxes
Net earnings
Basic earnings
per share
Diluted earnings
per share
$
$
$
$
Total assets
$
Non-current liabilities $
89.7 $
65.9 $
87.5 $
63.8 $
53.9
56.4
3.95 $
3.84 $
3.39
3.89 $
671.9 $
173.2 $
3.77 $
3.34
589.9 $
99.9 $
522.5
18.9
Dividends declared
per share
Distributions declared
per unit
$
3.10 $
2.14
–
–
– $
3.40
(1) This information has been prepared on the same basis as the 2012 annual audited
Consolidated Financial Statements
Revenue in 2012 of $1,466.0 million increased $88.9 million
compared to 2011. The additional four months of revenue
in 2012 from the former Harper operation accounted for
$12.6 million of the increase. Increased equipment and
parts and service revenue in the Equipment and Industrial
Components segments more than offset the decline in
the Power Systems segment. Revenue in 2011 of $1,377.1
million increased $266.2 million compared to 2010 due to
the increased market demand for equipment and parts and
service in all segments and the Harper acquisition in May
2011 which accounted for $49.3 million of the increase.
Earnings before income taxes increased $35.8 million from
2010 to 2012. The increase was attributable to the increases
in revenue noted above, offset somewhat by the negative
impact of lower gross profit margins, increased selling and
administrative expenses and higher finance costs.
Net earnings increased $9.5 million, or $0.56 per share, from
2010 to 2012. The $35.8 million increase in earnings before
income taxes more than offset the $26.3 million increase in
income tax expense resulting from the conversion from an
income fund to a corporation effective January 1, 2011.
The $149.4 million increase in total assets between December
31, 2010 and December 31, 2012 included $12.5 million
resulting from the acquisitions of ACE and Kaman Canada
in 2012 and $32.9 million from the acquisition of Harper
in 2011. The remaining increase of $104.0 million is mainly
attributable to higher inventories, accounts receivable and
rental equipment resulting from the higher sales activity
throughout 2011 and 2012 and an increased inventory
investment in the Equipment segment to better penetrate the
mining and construction markets. These increases were offset
partially by a $43.0 million reduction in cash from 2010.
Non-current liabilities at December 31, 2012 of $173.2
million increased $73.3 million from December 31, 2011
as an increase in bank debt to fund higher working capital
requirements and the ACE and Kaman Canada acquisitions
was partially offset by a reduction in deferred taxes payable.
Non-current liabilities at December 31, 2011 of $99.9
million increased $81.0 million from December 31, 2010 due
primarily to the reclassification of bank debt to non-current
liabilities as the Corporation renewed its bank facility
to 2016, and an increase in deferred taxes payable as the
partnership income generated in 2011 was deferred and not
subject to tax until 2012.
SELECTED QUARTERLY INFORMATION
The following table summarizes unaudited quarterly
consolidated financial data for the eight most recently
completed quarters. This quarterly information is unaudited
but has been prepared on the same basis as the 2012 annual
audited Consolidated Financial Statements.
Revenue
Earnings before income taxes
Net earnings
Net earnings per share
Basic
Diluted
$
$
$
$
$
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2012
2011
364.9 $
356.4 $
386.6 $
358.1 $
377.2 $
361.9 $
334.1 $
303.9
19.3 $
14.2 $
21.8 $
16.2 $
25.2 $
18.5 $
0.85 $
0.84 $
0.97 $
0.95 $
1.11 $
1.09 $
23.3 $
17.1 $
1.03 $
1.01 $
22.5 $
16.6 $
24.6 $
17.9 $
22.4 $
16.5 $
1.00 $
0.98 $
1.08 $
1.06 $
0.99 $
0.98 $
18.0
12.8
0.77
0.76
Significant seasonal trends in quarterly revenue and earnings have not been evident over the last two years.
A discussion of Wajax’s previous quarterly results can be found in Wajax’s quarterly MD&A reports available on SEDAR at
www.sedar.com.
20 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
On May 24, 2012 and December 7, 2012, Wajax amended
its bank credit facility to increase the limit of the facility by
$50 million and $75 million respectively, to $300 million on
substantially the same terms and conditions as the existing
facility. The $0.6 million cost of amending the facility has
been capitalized and will be amortized over the remaining
term of the facility. The terms of the $300 million bank credit
facility include the following:
The facility is fully secured, expiring August 12, 2016, and
is now made up of an $80 million non-revolving term
portion and a $220 million revolving term portion.
Borrowing capacity is dependent upon the level
of inventories on-hand and the outstanding trade
accounts receivable.
The facility contains customary restrictive covenants
including limitations on the payment of cash dividends
and the maintenance of certain financial ratios all of which
were met as at December 31, 2012. Wajax is restricted
from the declaration of monthly dividends in the event the
Corporation’s leverage ratio, as defined in the bank credit
facility agreement, exceeds three times. The Corporation’s
interest coverage ratio, as defined under the bank credit
facility, must not be lower than three times.
Borrowings bear floating rates of interest at margins over
Canadian dollar bankers’ acceptance yields, U.S. dollar
LIBOR rates or prime. Margins on the facility depend on
Wajax’s leverage ratio at the time of borrowing and range
between 1.5% and 3.0% for Canadian dollar bankers’
acceptances and U.S. dollar LIBOR borrowings, and 0.5%
and 2.0% for prime rate borrowings.
At December 31, 2012, Wajax had borrowed $154.8 million
and issued $5.9 million of letters of credit for a total
utilization of $160.7 million of its $300 million bank credit
facility. At December 31, 2012, borrowing capacity under the
bank credit facility was equal to $300 million.
Under the terms of the $300 million bank credit facility,
Wajax is permitted to have additional interest bearing debt of
$15 million. As such, Wajax has up to $15 million of demand
inventory equipment financing capacity with two non-bank
lenders. The equipment notes payable under the facilities
bear floating rates of interest at margins over Canadian dollar
bankers’ acceptance yields and U.S. LIBOR rates. Principal
repayments are generally due the earlier of 12 months from
the date of financing and the date the equipment is sold. At
December 31, 2012 Wajax had no utilization of its interest
bearing equipment financing facilities.
The Corporation’s capital structure is managed such that it
maintains a relatively low leverage ratio as the Corporation
pays dividends to shareholders equal to a significant portion
of its earnings. In addition, the Corporation’s tolerance to
interest rate risk decreases/increases as the Corporation’s
leverage ratio increases/decreases. The rate of interest
on the Corporation’s funded debt is currently all floating
which is outside of the Corporation’s interest rate risk
policy. Management is willing to maintain this level of
floating rate debt given the low interest rate environment.
The Corporation’s objective is to maintain a leverage ratio
between 1.5 times and 2.0 times. However, there may be
instances where the Corporation is willing to maintain a
leverage ratio outside the range. See Non-IFRS section.
Since its conversion to a corporation on January 1, 2011,
Wajax had not made any significant income tax payments
until January 31, 2013. This is due to income tax payments
being deferred as a result of its partnership structure. On
January 31, 2013, Wajax made an income tax payment of
$44.6 million. This included approximately $23 million
of tax on partnership income generated in 2011 and the
balance representing tax on income to be included in 2012
taxable income as a result of a change in tax legislation that
has effectively removed the partnership income deferral
benefit. The Corporation also commenced making monthly
income tax installments in December 2012.
A key strategy of the Equipment segment is to grow its
mining business through expansion into eastern Canada and
the introduction of the new Hitachi mining truck. To ensure
mining equipment is available to execute its strategy, Wajax
has purchased certain mining equipment (large excavators
and trucks) that do not currently have committed purchase
orders. As such, since the beginning of the year Wajax has
increased its investment in Hitachi mining equipment
inventory by $35.4 million to $40.5 million as at December
31, 2012, of which $36.5 million is available to fill future
customer purchases. Depending on the level of economic
activity in the Canadian mining sector, Wajax may continue
to use its debt facilities to finance a portion of this and other
mining equipment scheduled to be delivered in 2013.
Wajax’s $300 million bank credit facility along with the
additional $15 million of capacity permitted under the
bank credit facility should be sufficient to meet Wajax’s
short-term normal course working capital and maintenance
capital requirements, including the additional mining
equipment inventory. However, Wajax may be required
to access the equity or debt markets in order to fund
significant acquisitions and growth related working capital
and capital expenditures.
See the Annual Cash Flows section for further detail.
Wajax Corporation 2012 Annual Report 21
MANAGEMENT’S DISCUSSION AND ANALYSIS CONTRACTUAL OBLIGATIONS
FINANCIAL INSTRUMENTS
Contractual
Obligations
Bank debt
$
Operating leases $
Obligations under
finance leases $
Total
< 1 year
1–5 years
After
5 years
153.0 $
97.0 $
– $
16.7 $
153.0 $
47.0 $
–
33.3
11.8 $
3.6 $
8.2 $
–
Total
$
261.8 $
20.3 $
208.2 $
33.3
The $153.0 million bank debt obligation relates to the long-
term portion of the term credit facility and excludes current
bank indebtedness and letters of credit.
The operating leases relate to contracts entered into for
facilities, a portion of the long-term lift truck rental fleet in
Equipment and office equipment. See the Off Balance Sheet
Financing section for additional information.
The obligations under finance leases relate to certain vehicles
financed under finance lease arrangements. The leases have
a minimum one year term and are extended on a monthly
basis thereafter until termination.
Wajax also has contingent contractual obligations where
Wajax has guaranteed the resale value of equipment sold
(“guaranteed residual value contracts”) or has guaranteed a
portion of customer lease payments (“recourse contracts”).
These contracts are subject to certain conditions being
met by the customer. As at December 31, 2012, Wajax had
guaranteed $1.2 million of contracts (2011 – $5.3 million)
with commitments arising between 2013 and 2016. The
commitments made by Wajax in these contracts reflect
the estimated future value of the equipment, based on
the judgment and experience of management. Wajax has
recorded a $0.1 million provision in 2012 (2011 – $0.1
million) as an estimate of the financial loss likely to result
from such commitments.
The above table does not include obligations to fund pension
benefits. Wajax sponsors certain defined benefit plans
that cover executive employees, a small group of inactive
employees and employees on long-term disability benefits.
The defined benefit plans are subject to actuarial valuations
in 2014 and 2015. Management does not expect future cash
contribution requirements to change materially from the
2012 contribution level of $1.3 million as a result of these
valuations or any declines in the fair value of the defined
benefit plans’ assets.
Wajax uses derivative financial instruments in the
management of its foreign currency and interest rate
exposures. Wajax’s policy is not to utilize derivative financial
instruments for trading or speculative purposes. Significant
derivative financial instruments outstanding at the end of
the year were as follows:
Wajax enters into short-term currency forward contracts
to hedge the exchange risk associated with the cost of
certain inbound inventory and certain foreign currency-
denominated sales to customers along with the associated
receivables as part of its normal course of business. As
at December 31, 2012, Wajax had contracts outstanding
to buy U.S.$26.5 million and to sell U.S.$11.1 million
(December 31, 2011 – to buy U.S.$36.0 million and €0.2
million and to sell U.S.$1.0 million). The U.S. dollar
contracts expire between January 2013 and April 2014, with
a weighted average U.S./Canadian dollar rate of 0.9959.
Wajax measures derivative instruments not accounted for as
hedging items at fair value with subsequent changes in fair
value being recorded in earnings. Derivatives designated as
effective hedges are measured at fair value with subsequent
changes in fair value being recorded in other comprehensive
income until the related hedged item is recorded and affects
income. The fair value of derivative instruments is estimated
based upon market conditions using appropriate valuation
models. The carrying values reported in the balance sheet
for financial instruments are not significantly different from
their fair values. The impact of a change in foreign currency
relative to the Canadian dollar on the Corporation’s financial
statements of unhedged foreign currency-denominated
sales to customers along with the associated receivables
and purchases from vendors along with associated payables
would be insignificant.
Wajax is exposed to the risk of non-performance by
counterparties to short-term currency forward contracts.
These counterparties are large financial institutions with
a “Stable” outlook and high short-term and long-term
credit ratings from Standard and Poor’s. To date, no such
counterparty has failed to meet its financial obligations to
Wajax. Management does not believe there is a significant
risk of non-performance by these counterparties and will
continue to monitor the credit risk of these counterparties.
OFF BALANCE SHEET FINANCING
Off balance sheet financing arrangements include operating
lease contracts entered into for facilities with various
landlords, a portion of the long-term lift truck rental fleet in
Equipment with a non-bank lender, and office equipment
with various non-bank lenders. The total obligations for all
operating leases are detailed in the Contractual Obligations
22 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
section. At December 31, 2012, the non-discounted
operating lease commitments for facilities totaled $95.6
million, rental fleet $0.8 million, office equipment $0.5
million and vehicles $0.1 million.
Although Wajax’s consolidated contractual annual lease
commitments decline year-by-year, it is anticipated that
existing leases will either be renewed or replaced, resulting
in lease commitments being sustained at current levels. In
the alternative, Wajax may incur capital expenditures to
acquire equivalent capacity.
The Equipment segment had $97.2 million (2011 – $41.5
million) of consigned inventory on-hand from a major
manufacturer at December 31, 2012. In the normal course
of business, Wajax receives inventory on consignment from
this manufacturer which is generally sold to customers
or purchased by Wajax. This consigned inventory is not
included in Wajax’s inventory as the manufacturer retains
title to the goods. In the event the inventory consignment
program was terminated, Wajax would utilize interest free
financing, if any, made available by the manufacturer and/or
utilize capacity under its credit facilities.
Although management currently believes Wajax has
adequate debt capacity, Wajax would have to access the
equity or debt markets, or temporarily reduce dividends to
accommodate any shortfalls in Wajax’s credit facilities. See
the Liquidity and Capital Resources section.
SHARE CAPITAL
The shares of Wajax issued are included in shareholders’
equity on the balance sheet as follows:
Issued and fully paid Shares
as at December 31, 2012
Number
Amount
Balance at the beginning of the year
Rights exercised
16,629,444 $
107,003
Balance at the end of the year
16,736,447 $
105.4
1.3
106.7
At the date of this MD&A, the Corporation had 16,736,447 common shares outstanding.
Wajax has five share-based compensation plans; the
Wajax Share Ownership Plan (“SOP”), the Deferred Share
Program (“DSP”), the Directors’ Deferred Share Unit
Plan (“DDSUP”), the Mid-Term Incentive Plan for Senior
Executives (“MTIP”) and the Deferred Share Unit Plan
(“DSUP”). SOP, DSP and DDSUP rights are issued to the
participants and are settled by issuing Wajax Corporation
shares. The cash-settled MTIP and DSUP consist of annual
grants that vest over three years and are subject to time
and performance vesting criteria. A portion of the MTIP
and the full amount of the DSUP grants are determined
by the price of the Corporation’s shares. Compensation
expense for the SOP, DSP and DDSUP is determined
based upon the fair value of the rights at the date of grant
and charged to earnings on a straight line basis over the
vesting period, with an offsetting adjustment to contributed
surplus. Compensation expense for the DSUP and the
share-based portion of the MTIP varies with the price of
the Corporation’s shares and is recognized over the vesting
period. Wajax recorded compensation cost of $3.4 million
for the year (2011 – $5.4 million) in respect of these plans.
At December 31, 2012, 254,952 (2011 – 316,595) rights were
outstanding under the SOP, DSP and DDSUP.
DIVIDENDS
Dividends to shareholders for the periods January 1, 2012
to December 31, 2012 and January 1, 2011 to December 31,
2011 were declared as follows:
Month (1)
January
February
March
April
May
June
July
August
September
October
November
December
2012
Per Share Amount
2011
Per Share
Amount
$
0.20 $
0.20
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27
3.3 $
3.3
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
0.15 $
0.15
0.15
0.15
0.18
0.18
0.18
0.20
0.20
0.20
0.20
0.20
2.5
2.5
2.5
2.5
3.0
3.0
3.0
3.3
3.3
3.3
3.3
3.3
Total dividends
for the years
ended
December 31 $
3.10
$
51.8 $
2.14 $
35.6
(1) The Corporation’s monthly dividends were generally payable to shareholders of record on
the last business day of each calendar month and were paid on or about the 20th day of
the following month.
For the year ending December 31, 2012, Wajax declared
dividends to shareholders totaling $3.10 per share. For the
year ending December 31, 2011, Wajax declared dividends
to shareholders totaling $2.14 per share. Dividends paid
in 2012 and 2011 were funded from cash generated from
operating activities.
The Corporation declared monthly dividends of $0.27 per
share, or $4.5 million, in January, February, March and
April of 2013.
In 2012, the Corporation established an objective of declaring
annual dividends equal to at least 75% of earnings subject to
the Corporation’s financial condition, economic outlook and
capital requirements for growth including acquisitions. The
Corporation pays dividends on a monthly basis.
Wajax Corporation 2012 Annual Report 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOURTH QUARTER CONSOLIDATED RESULTS
Selling and Administrative Expenses
For three months ended December 31
2012
Revenue
$
364.9 $
Gross profit
$
Selling and administrative expenses $
Earnings from operating activities
Finance costs
Earnings before income taxes
Income tax expense
Net earnings
Basic earnings per share
Diluted earnings per share
$
$
$
$
$
$
$
73.6 $
53.0 $
20.6 $
1.3 $
19.3 $
5.1 $
14.2 $
0.85 $
0.84 $
2011
377.2
79.3
55.7
23.6
1.2
22.5
5.9
16.6
1.00
0.98
The Equipment segment was positively impacted in the
quarter by increased demand for forestry equipment,
attributable to higher lumber prices, particularly in British
Columbia. The Equipment segment also benefitted from
a somewhat stronger construction market in the quarter
compared to last year. Weakness in oil and gas sector activity
in western Canada, which started in the third quarter of
2012, continued in the fourth quarter as deteriorating
industry fundamentals in North America resulted in a
decline in customer spending. This decline primarily
affected the Power Systems and Industrial Components
segments. Mining activity, including the oil sands market,
was somewhat flat compared to last year. Although quoting
activity remained high at year-end, the Equipment segment
saw a reduction in mining equipment backlog in the latter
part of the year as customers began to take a more cautious
approach in making commitments to buy equipment.
Revenue
Revenue in the fourth quarter of 2012 decreased 3%, or
$12.3 million, to $364.9 million, from $377.2 million in
the fourth quarter of 2011. Segment revenue increased 5%
in Equipment. Segment revenue decreased 17% in Power
Systems and decreased 5% in Industrial Components due
mainly to the lower oil and gas sector activity in western
Canada.
Gross Profit
Gross profit in the fourth quarter of 2012 decreased $5.7
million due to the decrease in volumes and a lower gross
profit margin percentage compared to the fourth quarter last
year. The gross profit margin percentage for the quarter of
20.2% declined from 21.0% in the fourth quarter of 2011 due
to lower parts and service margins offset by the impact of
lower equipment revenues compared to last year.
Selling and administrative expenses decreased $2.7 million
in the fourth quarter of 2012 compared to the same quarter
last year. Decreases resulting from lower annual and mid-
term incentive accruals were offset in part by an increase
in bad debt expense and environmental remediation
provisions compared to last year. Selling and administrative
expenses as a percentage of revenue decreased to 14.5%
in the fourth quarter of 2012 from 14.8% compared to the
same quarter of 2011.
Finance Costs
Quarterly finance costs of $1.3 million increased $0.1 million
compared to the same quarter last year as the cost of higher
funded debt levels outstanding during the quarter was
mostly offset by the Corporation’s lower cost of borrowing
compared to the same quarter last year.
Income Tax Expense
The Corporation’s effective income tax rate of 26.3% for the
quarter was unchanged from the previous year.
Net Earnings
Quarterly net earnings decreased $2.4 million to $14.2
million, or $0.85 per share, from $16.6 million, or $1.00
per share, in the same quarter of 2011. The impact of
reduced volumes, a lower gross profit margin percentage
and slightly higher finance costs more than offset the lower
selling and administrative expenses compared to the same
quarter last year.
Comprehensive Income
Total comprehensive income of $13.7 million in the fourth
quarter of 2012 included net earnings of $14.2 million, offset
partially by an other comprehensive loss of $0.5 million.
The other comprehensive loss was mainly attributable to
actuarial losses on pension plans of $0.7 million.
Funded Net Debt
Funded net debt of $173.7 million at December 31, 2012
increased $34.4 million compared to September 30, 2012.
Increases in non-cash operating working capital of $25.4
million resulted in negative cash flows from operating
activities for the quarter of $8.8 million. Other uses of cash
included dividends paid of $13.6 million, investing activities
of $10.7 million including $10.1 million used for the ACE
and Kaman Canada acquisitions, finance lease payments
of $0.8 million and debt facility amendment costs of $0.3
million. Wajax’s leverage ratio of 1.55 times at December 31,
2012 increased from the September 30, 2012 ratio of 1.22
times. See Non-IFRS Measures section.
24 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
Dividends
For the fourth quarter ended December 31, 2012 monthly
dividends declared totaled $0.81 per share. For the fourth
quarter ended December 31, 2011 monthly dividends
declared were $0.60 per share.
Backlog
Consolidated backlog at December 31, 2012 of $184.1
million decreased $18.3 million, or 9%, compared to
September 30, 2012 due to reductions in the Equipment
and Power Systems segments. Backlog includes the total
retail value of customer purchase orders for future delivery
or commissioning. See the Fourth Quarter Results of
Operations section for further backlog detail by segment.
FOURTH QUARTER RESULTS OF OPERATIONS
Equipment
For three months ended December 31
Equipment*
Parts and service
Segment revenue
Segment earnings
Segment earnings margin
* Includes rental and other revenue.
$
$
$
$
2012
130.7 $
70.9 $
201.6 $
14.0 $
6.9%
2011
125.4
66.9
192.3
14.3
7.5%
Revenue in the fourth quarter of 2012 increased $9.3
million, or 5%, to $201.6 million from $192.3 million in the
fourth quarter of 2011. Segment earnings for the quarter
decreased $0.3 million to $14.0 million compared to the
fourth quarter of 2011. The following factors contributed to
the Equipment segment’s fourth quarter results:
Forestry equipment revenues increased $9.0 million
resulting from higher Tigercat product sales in all
regions and increased sales of forestry related Hitachi
equipment in western Canada on strong market
demand in British Columbia.
Construction equipment revenue increased $3.2
million mainly as a result of market demand which
drove increased sales of Hitachi excavators in western
Canada and Ontario, offset partially by lower JCB and
other equipment sales in eastern Canada owing to lower
demand and competitive market pressures.
Crane and utility equipment revenue increased $0.7
million mainly attributable to higher new equipment
sales to utility customers.
Mining equipment sales decreased $7.3 million as
Hitachi mining equipment deliveries in western Canada
were, on average, of a smaller size with a lower per unit
sales value.
Material handling equipment revenue decreased
$0.3 million.
Parts and service volumes for the fourth quarter increased
$4.0 million compared to the same quarter last year.
Excluding the LeTourneau product line, which was
discontinued in the second quarter of this year, parts and
service volumes for the fourth quarter increased $10.2
million, or 17%. The $10.2 million increase was due
primarily to higher mining sector volumes in western
Canada driven by the installed base of Hitachi equipment
and growth in the Rotating Products Group in Fort
McMurray. Increased materials handling sector sales in
western Canada also contributed to the increase.
Segment earnings for the fourth quarter decreased $0.3
million to $14.0 million compared to the same quarter
last year. The negative impact of a $2.1 million increase
in selling and administrative expenses outweighed
the positive impact of higher volumes. Selling and
administrative expenses increased on higher personnel and
sales related expenditures and additional environmental
remediation provisions compared to last year.
Backlog of $82.2 million at December 31, 2012 decreased
$13.2 million compared to September 30, 2012 due largely to
lower mining equipment backlog.
Power Systems
For three months ended December 31
Segment earnings
Segment earnings margin
* Includes rental and other revenue.
$
$
$
$
2012
31.5 $
47.5 $
79.0 $
5.0 $
6.3%
2011
43.9
51.6
95.5
7.9
8.3%
Revenue in the fourth quarter of 2012 decreased $16.5
million, or 17%, to $79.0 million compared to $95.5 million
in the same quarter of 2011. Segment earnings decreased
$2.9 million to $5.0 million in the fourth quarter compared
to the same quarter in the previous year. The following
factors impacted quarterly revenue and earnings compared
to last year:
Wajax Corporation 2012 Annual Report 25
Equipment revenue for the fourth quarter increased $5.3
million compared to the same quarter last year. Specific
quarter-over-quarter variances included the following:
Equipment*
Parts and service
Segment revenue
MANAGEMENT’S DISCUSSION AND ANALYSIS
Equipment revenue decreased $12.4 million. The
majority of the decrease was due to lower equipment
sales to off-highway oil and gas customers as a result
of reduced industry activity in western Canada. These
decreases were partially offset by increased power
generation equipment sales.
Parts and service volumes decreased $4.1 million compared
to last year as a result of lower sales to off-highway
customers resulting from reduced activity in western
Canada’s oil and gas sector offset somewhat by higher
mining sector sales in eastern Canada. Lower power
generation parts and service volumes and reduced sales to
on-highway customers also contributed to the decline.
Fluid power and process equipment products and service
revenue in the fourth quarter of 2012 decreased $4.7
million, or 11%, due to lower oil and gas sector sales in
western Canada.
Segment earnings in the fourth quarter of 2012 decreased
$2.3 million compared to the same quarter last year due
essentially to the negative impact of lower volumes and
gross profit margins in western Canada and a nominal
increase in selling and administrative expenses.
Backlog of $41.6 million as of December 31, 2012 remain
the same compared to September 30, 2012 and includes $1
million related to the two acquisitions made in the quarter.
Segment earnings in the fourth quarter of 2012 decreased
FOURTH QUARTER CASH FLOWS
$2.9 million compared to the same quarter last year
as the impact of reduced volumes and a lower gross
profit margin was mitigated somewhat by a $2.5 million
decrease in selling and administrative expenses. The
lower gross profit margin resulted from a reduction in
both equipment and parts and service margins offset
by a higher proportion of equipment sales compared to
last year. Selling and administrative expenses decreased
due principally to lower personnel costs, including lower
annual incentive accruals, and a decline in other sales
related costs.
Backlog of $60.4 million as of December 31, 2012 decreased
$5.1 million compared to September 30, 2012 due primarily
to reductions in power generation and oil and gas sector
related backlog in western Canada.
Industrial Components
For three months ended December 31
Segment revenue
Segment earnings
Segment earnings margin
$
$
2012
85.3 $
3.6 $
4.2%
2011
90.2
5.9
6.5%
Revenue of $85.3 million in the fourth quarter of 2012
decreased $4.9 million, or 5%, from $90.2 million in the
fourth quarter of 2011. Segment earnings decreased $2.3
million to $3.6 million in the fourth quarter compared to
the same quarter in the previous year. The following factors
contributed to the segment’s fourth quarter results:
Bearings and power transmission parts sales decreased
$0.2 million compared to the same quarter last year. The
impact of a reduction in oil and gas sector sales in western
Canada and lower industrial sector volumes was partially
offset by improved sales to customers in the transportation,
construction and food and beverage sectors.
Cash Flows Used in Operating Activities
Cash flows used in operating activities amounted to $8.8
million in the fourth quarter of 2012, compared to $48.7
million generated in the same quarter of the previous year.
The $57.5 million decrease was caused by an increased use
of non-cash operating working capital of $52.0 million,
lower cash flows from operating activities before changes in
non-cash operating working capital of $3.1 million, higher
income taxes paid of $1.9 million and decreased other
non-current liabilities of $1.6 million, offset by lower rental
equipment additions of $1.4 million.
Changes in non-cash operating working capital for the
fourth quarter of 2012 compared to the same quarter in 2011
include the following components:
Changes in non-cash operating working capital*
For three months ended December 31
Trade and other receivables
Inventories
Prepaid expenses
Accounts payable and
accrued liabilities
Provisions
Total
* Cash used in (generated)
2012
6.9 $
(8.9) $
0.7 $
29.1 $
(2.4) $
25.4 $
2011
(13.8)
9.3
(1.5)
(18.8)
(1.8)
(26.7)
$
$
$
$
$
$
Significant components of the changes in non-cash operating
working capital for the quarter ended December 31, 2012 are
as follows:
Trade and other receivables increased $6.9 million due
primarily to higher sales activity in the Equipment segment
reduced somewhat by lower accounts receivable in the
Industrial Components segment on lower sales activity.
26 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
Inventories decreased $8.9 million due mainly to lower
stocking levels in Industrial Components and decreases
in the Equipment segment as reductions in construction
equipment were only partially offset by an increase in
mining equipment.
Accounts payable and accrued liabilities decreased $29.1
million resulting from lower mining inventory trade
payables in the Equipment segment. These decreases were
offset in part by higher inventory related trade payables in
the Industrial Components segments.
Included in the $25.4 million increase in non-cash operating
working capital, was the Equipment segment’s additional
investment of approximately $34.6 million in mining
equipment related operating working capital attributable to
higher inventory and reduced trade payables.
On the consolidated statement of financial position at
December 31, 2012, Wajax had employed $243.9 million of
current assets net of current liabilities, exclusive of funded
net debt, compared to $214.2 million at September 30, 2012.
The $29.7 million increase was due primarily to the $25.4
million increase in non-cash operating working capital as
detailed above, the ACE and Kaman Canada acquisitions less
a $2.0 million increase in income taxes payable. See Liquidity
and Capital Resources section for further detail.
Investing Activities
During the fourth quarter of 2012, Wajax invested $0.6
million in property, plant and equipment additions, net of
disposals, compared to $2.6 million in the fourth quarter of
2011. In addition, the Industrial Components segment paid a
total of $1.4 million for the acquisition of the shares of ACE
on October 22, 2012 and $8.7 million for the acquisition of
the assets of Kaman Canada on December 31, 2012.
Financing Activities
The Corporation generated $15.3 million of cash from
financing activities in the fourth quarter of 2012 compared
to $37.9 million of cash used in financing activities in the
same quarter of 2011. Financing activities in the quarter
included bank debt borrowings of $30.0 million, offset by
dividends paid to shareholders totaling $13.6 million, or
$0.81 per share, finance lease payments of $0.8 million and
debt facility amendment costs of $0.3 million.
NON-IFRS MEASURES
The MD&A contains certain financial measures that do
not have a standardized meaning prescribed by IFRS.
Therefore, these financial measures may not be comparable
to similar measures presented by other issuers. Investors
are cautioned that these measures should not be construed
as an alternative to profit or to cash flow from operating,
investing, and financing activities determined in accordance
with IFRS as indicators of the Corporation’s performance.
The Corporation’s management believes that these measures
are commonly reported and widely used by investors as an
indicator of a company’s cash operating performance and
ability to raise and service debt.
These financial measures are identified and defined below:
Leverage Ratio
At the end of a particular quarter, the
leverage ratio is defined as funded net
debt at the end of a particular quarter
divided by trailing 12-month EBITDA.
The Corporation’s objective is to
maintain this ratio between 1.5 times
and 2.0 times.
Funded Net Debt
Funded net debt includes bank debt,
bank indebtedness and obligations
under finance leases, net of cash.
EBITDA
Earnings before finance costs, income tax
expense, depreciation and amortization.
Reconciliation of the Corporations earnings to EBITDA is as
follows:
For the twelve
For the twelve
months ended months ended
September 30
December 31
2012
2011
2012
Earnings
Depreciation and
amortization
Finance costs
Income tax expense
$
65.9 $
63.8 $
68.3
17.8
4.4
23.8
13.5
4.6
23.7
16.6
4.3
24.6
EBITDA
$
112.0 $
105.6 $
113.8
Calculation of the Corporations funded net debt and
leverage ratio is as follows:
Bank indebtedness
(cash)
Obligations under
finance leases
Bank debt
December 31
2012
2011
September 30
2012
$
10.2 $
(5.7) $
6.0
11.8
151.7
10.3
59.0
Funded net debt
$
173.7 $
63.7 $
Leverage ratio
1.55
0.60
11.3
122.0
139.3
1.22
Wajax Corporation 2012 Annual Report 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
CRITICAL ACCOUNTING ESTIMATES
Goodwill and Intangible Assets
The preparation of the consolidated financial statements
in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported
amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those judgements, estimates and
assumptions. Note 3 to the annual Consolidated Financial
Statements describes the significant accounting policies and
methods used in preparation of the annual Consolidated
Financial Statements. The Corporation bases its estimates on
historical experience and various other assumptions that are
believed to be reasonable in the circumstances.
The key assumptions concerning the future and other key
sources of estimation uncertainty that have a significant
risk of resulting in a material adjustment to the carrying
amount of assets and liabilities within the next fiscal year
are as follows:
Allowance for Doubtful Accounts
The Corporation is exposed to credit risk with respect to
its trade and other receivables. However, this is somewhat
minimized by the Corporation’s large customer base which
covers most business sectors across Canada. Wajax follows
a program of credit evaluations of customers and limits the
amount of credit extended when deemed necessary. The
Corporation maintains provisions for possible credit losses,
and any such losses to date have been within management’s
expectations. The provision for doubtful accounts is
determined on an account-by-account basis. The $2.5
million provision for doubtful accounts at December 31,
2012 decreased $1.0 million from $3.5 million in 2011 due to
reduction in the Equipment segment. As conditions change,
actual results could differ from those estimates.
Inventory Obsolescence
The value of the Corporation’s new and used equipment is
evaluated by management throughout the year, on a unit-by-
unit basis. When required, provisions are recorded to ensure
that the book value of equipment is valued at the lower
of cost or estimated net realizable value. The Corporation
performs an aging analysis to identify slow moving or
obsolete parts inventories and estimates appropriate
obsolescence provisions related thereto. The Corporation
takes advantage of supplier programs that allow for the
return of eligible parts for credit within specified time
periods. The inventory obsolescence charged to earnings for
2012 was $1.9 million compared to $3.2 million in 2011.
The value in use of goodwill and intangible assets has been
estimated using the forecasts prepared by management
for the next three years. The key assumptions for the
estimate are those regarding revenue growth, gross margin
and the level of working capital required to support the
business. These estimates are based on past experience and
management’s expectations of future changes in the market
and forecasted growth initiatives. To prepare the value in use
calculations, the forecasts are extrapolated beyond the three
year period at the estimated long-term inflation rate (2%)
and discounted back to present value. The discount rate is
based on the Corporation’s pre-tax weighted average cost of
capital of approximately 11% to reflect a market participant’s
view of the cash-generating unit.
During the year, the Corporation performed impairment
tests, based on value in use, of its goodwill and intangible
assets with an indefinite life and concluded that no
impairment existed in either the goodwill associated with
any of Wajax’s cash-generating units (“CGUs”) or the
intangible assets with an indefinite life.
Warranty Provision
The Corporation maintains provisions for possible customer
warranty claims that may not be covered by the manufacturers’
standard warranty and limited warranties for workmanship
on services provided. The provisions are developed using
the management’s best estimate of actual warranty expense,
generally based on recent claims experience, and are regularly
reviewed and adjusted as required.
CHANGES IN ACCOUNTING POLICY
On January 1, 2012, the Corporation early adopted
amendments to International Accounting Standard (“IAS”)
1 Presentation of Financial Statements: Presentation of Items
of Other Comprehensive Income. The amendments to IAS
1 require that an entity present separately the items of other
comprehensive income that may be reclassified to profit or
loss in the future from those that would never be reclassified
to profit or loss. These amendments are to be applied
retrospectively in the first annual fiscal period beginning on
or after July 1, 2012, with early adoption permitted. This new
presentation is included in the consolidated statements of
comprehensive income.
New Standards and Interpretations Not Yet Adopted
The new standards or amendments to existing standards
that may be significant to the Corporation set out below
are not yet effective for the year ended December 31, 2012
and have not been applied in preparing these consolidated
financial statements.
28 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS As of January 1, 2013, the Corporation will be required
to adopt the amendments to IFRS 7 Offsetting Financial
Assets and Liabilities, which contains new disclosure
requirements for financial assets and liabilities that are
offset in the statement of financial position or are subject
to master netting arrangements or similar arrangements.
The Corporation does not expect IFRS 7 to have a material
impact on its consolidated financial statements.
is prepared by the Corporation’s senior management and
overseen by the Board of Directors and Committees of the
Board. The enterprise risk management framework sets out
principles and tools for identifying, evaluating, prioritizing
and managing risk effectively and consistently across Wajax.
The following are a number of risks that deserve particular
comment:
As of January 1, 2013, the Corporation will be required to
adopt IFRS 10 Consolidated Financial Statements, which
establishes principles for the preparation and presentation
of consolidated financial statements when an entity controls
one or more other entities. The Corporation does not
expect IFRS 10 to have a material impact on its consolidated
financial statements.
As of January 1, 2013, the Corporation will be required to
adopt IFRS 13 Fair Value Measurement, which defines fair
value and sets out a framework for measuring fair value when
fair value measurements are required or permitted by other
standards. The Corporation is currently assessing the impact
of this standard on its consolidated financial statements.
As of January 1, 2013, the Corporation will be required
to adopt IAS 19 Employee Benefits, which requires
recognition of actuarial gains and losses immediately in
other comprehensive income, the full recognition of past
service costs immediately in profit or loss, recognition of
the expected return on plan assets in profit or loss to be
calculated based on the rate used to discount the defined
benefit obligation, and certain additional disclosures. This
standard does not significantly impact the Corporation’s
consolidated financial statements.
As of January 1, 2015, the Corporation will be required to
adopt IFRS 9 Financial Instruments, which is the result
of the first phase of the IASB’s project to replace IAS 39
Financial Instruments: Recognition and Measurement. The
new standard replaces the current multiple classification and
measurement models for financial assets and liabilities with
a single model that has only two classification categories:
amortized cost and fair value. The Corporation is currently
assessing the impact of this standard on its consolidated
financial statements.
RISK MANAGEMENT AND UNCERTAINTIES
As with most businesses, Wajax is subject to a number of
marketplace and industry related risks and uncertainties
which could have a material impact on operating results and
Wajax’s ability to pay cash dividends to shareholders.
Wajax attempts to minimize many of these risks through
diversification of core businesses and through the geographic
diversity of its operations. In addition, Wajax has adopted
an annual enterprise risk management assessment which
Manufacturer Relationships and Product Access
Wajax seeks to distribute leading product lines in each
of its regional markets and its success is dependent upon
continuing relations with the manufacturers it represents.
Wajax endeavours to align itself in long-term relationships
with manufacturers that are committed to achieving a
competitive advantage and long-term market leadership in
their targeted market segments. In the Equipment and Power
Systems segments, and in certain cases in the hydraulics
and process pumps portion of the Industrial Components
segment, manufacturer relationships are governed through
effectively exclusive distribution agreements. Distribution
agreements are for the most part open-ended, but are
cancellable within a relatively short notification period
specified in each agreement. Although Wajax enjoys good
relationships with its major manufacturers and seeks to
develop additional strong long-term partnerships, a loss
of a major product line without a comparable replacement
would have a significantly adverse effect on Wajax’s results of
operations or cash flow.
There is a continuing consolidation trend among industrial
equipment and component manufacturers. Consolidation
may impact the products distributed by Wajax, in either
a favourable or unfavourable manner. Consolidation of
manufacturers may have a negative impact on the results of
operations or cash flow if product lines Wajax distributes
become unavailable as a result of the consolidation. This was
the case in the Equipment segment with the discontinued
distribution of the LeTourneau product line effective
April 27 2012, due to the purchase by Joy Global Inc. of
LeTourneau Technologies Inc.
Suppliers generally have the ability to unilaterally change
distribution terms and conditions or limit supply of product
in times of intense market demand. Supplier changes in the
area of product pricing and availability can have a negative
or positive effect on Wajax’s revenue and margins. As well,
from time to time suppliers make changes to payment
terms for distributors. This may affect Wajax’s interest-free
payment period or consignment terms, which may have a
materially negative or positive impact on working capital
balances such as cash, inventories, trade and other payables
and bank debt.
Wajax Corporation 2012 Annual Report 29
MANAGEMENT’S DISCUSSION AND ANALYSIS Economic Conditions/Business Cyclicality
Wajax’s customer base consists of businesses operating
in the natural resources, construction, transportation,
manufacturing, industrial processing and utilities
industries. These industries can be capital intensive and
cyclical in nature, and as a result, customer demand for
Wajax’s products and services may be affected by economic
conditions at both a global or local level. Changes in interest
rates, consumer and business confidence, corporate profits,
credit conditions, foreign exchange, commodity prices
and the level of government infrastructure spending may
influence Wajax’s customers’ operating, maintenance and
capital spending, and therefore Wajax’s sales and results of
operations. Although Wajax has attempted to address its
exposure to business and industry cyclicality by diversifying
its operations by geography, product offerings and customer
base, there can be no assurance that Wajax’s results of
operations or cash flows will not be adversely affected by
changes in economic conditions.
Commodity Prices
Many of Wajax’s customers are directly and indirectly
affected by fluctuations in commodity prices in the forestry,
metals and minerals and petroleum and natural gas
industries, and as a result Wajax is also indirectly affected
by fluctuations in these prices. In particular, each of Wajax’s
businesses is exposed to fluctuations in the price of oil and
natural gas. A downward change in commodity prices,
and particularly in the price of oil and natural gas, could
therefore adversely affect Wajax’s results of operations or
cash flows.
Growth Initiatives, Integration of
Acquisitions and Project Execution
As part of its long-term strategy, Wajax intends to continue
growing its business through a combination of organic
growth and strategic acquisitions. Wajax’s ability to
successfully grow its business through organic growth will
be dependent on the segments’ achieving their individual
base business objectives and new opportunities. Wajax’s
ability to successfully grow its business through acquisitions
will be dependent on a number of factors including:
identification of accretive new business or acquisition
opportunities; negotiation of purchase agreements on
satisfactory terms and prices; prior approval of acquisitions
by third parties, including regulatory authorities; securing
attractive financing arrangements; and integration of newly
acquired operations into the existing business. All of these
activities associated with growing the business, may be more
difficult to implement or may take longer to execute than
management anticipates. Further, any significant expansion
of the business may increase the operating complexity of
Wajax, and divert management away from regular business
activities. Any failure of Wajax to manage its growth strategy,
including acquisitions, successfully could have a material
adverse impact on Wajax’s business, results of operations or
financial condition.
Key Personnel
The success of Wajax is largely dependent on the abilities
and experience of its senior management team and other
key personnel. Its future performance will also depend on
its ability to attract, develop and retain highly qualified
employees in all areas of its business. Competition for skilled
management, sales and technical personnel is intense,
particularly in certain markets where Wajax competes.
Wajax continuously reviews and makes adjustments to its
hiring, training and compensation practices in an effort to
attract and retain a highly competent workforce. However,
there can be no assurance that Wajax will be successful in its
efforts and a loss of key employees, or failure to attract and
retain new talent as needed, may have an adverse impact on
Wajax’s current operations or future prospects.
Leverage, Credit Availability and Restrictive Covenants
Wajax has a $300 million bank credit facility which expires
August 12, 2016 comprised of a $80 million non-revolving
term portion and a $220 million revolving term portion.
The facility contains restrictive covenants which place
restrictions on, among other things, the ability of Wajax to
encumber or dispose of its assets, the amount of interest cost
incurred and dividends declared relative to earnings and
certain reporting obligations. A failure to comply with the
obligations of the facility could result in an event of default
which, if not cured or waived, could require an accelerated
repayment of the facilities. There can be no assurance that
Wajax’s assets would be sufficient to repay the facility in full.
Wajax’s short-term normal course working capital
requirements can swing widely quarter-to-quarter due to
timing of large inventory purchases and/or sales and changes
in market activity. In general, as Wajax experiences growth,
there is a need for additional working capital as was the
case in 2012. Conversely, as Wajax experiences economic
slowdowns working capital reduces reflecting the lower
activity levels as was the case in 2009. While management
believes the bank credit facility will be adequate to meet the
Corporation’s normal course working capital requirements,
there can be no assurance that additional credit will become
available if required, or that an appropriate amount of credit
with comparable terms and conditions will be available
when the facility matures.
Wajax may be required to access the equity or debt markets
or reduce dividends in order to fund significant acquisitions
and growth related working capital and capital expenditures.
30 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS The amount of debt service obligations under the bank
credit facility will be dependant on the level of borrowings
and fluctuations in interest rates to the extent the rate is
unhedged. As a result, fluctuations in debt servicing costs
may have a detrimental effect on future earnings or cash flow.
could result in a requirement for Wajax to take a material
write down of its inventory balance resulting in Wajax not
being able to realize expected revenue and cash flows from
its inventory, which would negatively affect results from
operations or cash flow.
Wajax also has credit lines available with other financial
institutions for purposes of financing inventory and
off balance sheet financing of long-term rental fleet.
These facilities are not committed lines and their future
availability cannot be assured, which may have a negative
impact on cash available for dividends and future growth
opportunities.
Quality of Products Distributed
The ability of Wajax to maintain and expand its customer
base is dependent upon the ability of the manufacturers
represented by Wajax to improve and sustain the quality of
their products. The quality and reputation of such products
are not within Wajax’s control, and there can be no assurance
that manufacturers will be successful in meeting these goals.
The failure of these manufacturers to maintain a market
presence could adversely affect Wajax’s results of operations
or cash flow.
Government Regulation
Wajax’s business is subject to evolving laws and government
regulations, particularly in the areas of taxation, the
environment, and health and safety. Changes to such laws
and regulations may impose additional costs on Wajax and
may adversely affect its business in other ways, including
requiring additional compliance measures by Wajax.
Insurance
Wajax maintains a program of insurance coverage that
is ordinarily maintained by similar businesses, including
property insurance and general liability insurance. Although
the limits and deductibles of such insurance have been
established through risk analysis and the recommendation
of professional advisors, there can be no assurance that such
insurance will remain available to Wajax at commercially
reasonable rates or that the amount of such coverage will be
adequate to cover all liability incurred by Wajax. If Wajax is
held liable for amounts exceeding the limits of its insurance
coverage or for claims outside the scope of that coverage, its
business, results of operations or financial condition could
be adversely affected.
Inventory Obsolescence
Wajax maintains substantial amounts of inventories in
all three core businesses. While Wajax believes it has
appropriate inventory management systems in place,
variations in market demand for the products it sells can
result in certain items of inventory becoming obsolete. This
Information Systems and Technology
Information systems are an integral part of Wajax’s business
processes, including marketing of equipment and support
services, inventory and logistics, and finance. Some of these
systems are integrated with certain suppliers’ core processes
and systems. Any disruptions to these systems due, for
example, to the upgrade or conversion thereof, or the failure
of these systems to operate as expected could, depending
on the magnitude of the problem, adversely affect Wajax’s
operating results by limiting the ability to effectively monitor
and control Wajax’s operations.
Credit Risk
Wajax extends credit to its customers, generally on an
unsecured basis. Although Wajax is not substantially
dependant on any one customer and it has a system of credit
management in place, the loss of a large receivable would
have an adverse effect on Wajax’s profitability.
Labour Relations
Wajax has approximately 2,833 employees. Wajax is a
party to thirteen collective agreements covering a total
of approximately 410 employees. Of these, two collective
agreements covering 108 employees expired on or before
December 31, 2012 and are currently being re-negotiated.
Of the remaining eleven collective agreements, four expire
in 2013, five expire in 2014, and two expire in 2015. Overall,
Wajax believes its labour relations to be satisfactory and
does not anticipate it will be unable to renew the collective
agreements. If Wajax is unable to renew or negotiate
collective agreements from time to time, it could result in
work stoppages and other labour disturbances. The failure to
renew collective agreements upon satisfactory terms could
have a material adverse impact on Wajax’s businesses, results
of operations or financial condition.
Foreign Exchange Exposure
Wajax’s operating results are reported in Canadian dollars.
While the majority of Wajax’s sales are in Canadian dollars,
significant portions of its purchases are in U.S. dollars.
Changes in the U.S. dollar exchange rate can have a negative
or positive impact on Wajax’s revenue, margins and working
capital balances. Wajax mitigates certain exchange rate
risks by entering into short-term foreign currency forward
contracts to fix the cost of certain inbound inventory and
to hedge certain foreign-currency denominated sales to
customers. In addition, Wajax will periodically institute
price increases to offset the negative impact of foreign
Wajax Corporation 2012 Annual Report 31
MANAGEMENT’S DISCUSSION AND ANALYSIS There can be no assurance that Wajax will be able to
continue to effectively compete. Increased competitive
pressures or the inability of Wajax to maintain the factors
which have enhanced its competitive position could
adversely affect its results of operations or cash flow.
Litigation and Product Liability Claims
In the ordinary course of its business, Wajax may be party
to various legal actions, the outcome of which cannot be
predicted with certainty. One category of potential legal
actions is product liability claims. Wajax carries product
liability insurance, and management believes that this
insurance is adequate to protect against potential product
liability claims. Not all risks, however, are covered by
insurance, and no assurance can be given that insurance will
be consistently available, or will be consistently available
on an economically feasible basis, or that the amounts of
insurance will at all times be sufficient to cover each and
every loss or claim that may occur involving Wajax’s assets
or operations.
Guaranteed Residual Value, Recourse
and Buy-Back Contracts
In some circumstances Wajax makes certain guarantees
to finance providers on behalf of its customers. These
guarantees can take the form of assuring the resale value
of equipment, guaranteeing a portion of customer lease
payments, or agreeing to buy back the equipment at a
specified price. These contracts are subject to certain
conditions being met by the customer, such as maintaining
the equipment in good working condition. Historically,
Wajax has not incurred substantial losses on these types
of contracts, however, there can be no assurance that
losses will not be incurred in the future. See Contractual
Obligations section.
Future Warranty Claims
Wajax provides manufacturers’ and/or dealer warranties
for most of the product it sells. In some cases, the product
warranty claim risk is shared jointly with the manufacturer.
In addition, Wajax provides limited warranties for
workmanship on services provided. Accordingly, Wajax
has some liability for warranty claims. There is a risk that
a possible product quality erosion or a lack of a skilled
workforce could increase warranty claims in the future, or
may be greater than management anticipates. If Wajax’s
liability in respect of such claims is greater than anticipated,
it may have a material adverse impact on Wajax’s business,
results of operations or financial condition.
exchange rate increases on imported goods. The inability
of Wajax to mitigate exchange rate risks or increase prices
to offset foreign exchange rate increases, including sudden
and volatile changes in the U.S. dollar exchange rate, may
have a material adverse effect on the results of operations or
financial condition of Wajax.
A declining U.S. dollar relative to the Canadian dollar can
have a negative effect on Wajax’s revenue and cash flows as
a result of certain products being imported from the U.S. In
some cases market conditions require Wajax to lower its
selling prices as the U.S. dollar declines. As well, many
of Wajax’s customers export products to the U.S., and a
strengthening Canadian dollar can negatively impact their
overall competitiveness and demand for their products,
which in turn may reduce product purchases from Wajax.
A strengthening U.S. dollar relative to the Canadian dollar
can have a positive effect on Wajax’s revenue as a result of
certain products being imported from the U.S. Wajax will
periodically institute price increases to offset the negative
impact of foreign exchange rate increases and volatility on
imported goods to ensure margins are not eroded.
Wajax maintains a hedging policy whereby significant
transactional currency risks are identified and hedged.
Competition
The equipment, power systems and industrial components
distribution industries in which Wajax competes are highly
competitive. In the Equipment segment, Wajax primarily
competes against regional equipment distributors that tend
to handle a dedicated product line, such as those offered
by John Deere, Komatsu and Caterpillar. There can be no
assurance that Wajax will be able to continue to compete
on the basis of product quality and price of product lines,
distribution and servicing capabilities as well as proximity of
its distribution sites to customers.
The Power Systems business competes with other major
diesel engine distributors representing such products as
Cummins and Caterpillar. Competition is based primarily
on product quality, pricing and the ability to service the
product after the sale.
In terms of the Industrial Components segment, the
hydraulics and process equipment branches compete with
other distributors of hydraulics components and process
equipment on the basis of quality and price of the product
lines, the capacity to provide custom-engineered solutions
and high service standards. The bearings and power
transmission product branches compete with a number of
distributors representing the same or competing product
lines and rely primarily on high service standards, price and
value added services to gain market advantage.
32 Wajax Corporation 2012 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS Maintenance and Repair Contracts
STRATEGIC DIRECTION AND OUTLOOK
Wajax frequently enters into long-term maintenance
and repair contracts with its customers, whereby Wajax
is obligated to maintain certain fleets of equipment at
various negotiated performance levels. The length of these
contracts varies significantly, often ranging up to five or
more years. The contracts are generally fixed price, although
many contracts have additional provisions for inflationary
adjustments. Due to the long-term nature of these contracts,
there is a risk that significant cost overruns may be incurred.
If Wajax has miscalculated the extent of maintenance
work required, or if actual parts and service costs increase
beyond the contracted inflationary adjustments, the
contract profitability will be adversely affected. In order
to mitigate this risk, Wajax closely monitors the contracts
for early warning signs of cost overruns. In addition, the
manufacturer may, in certain circumstances, share in the
cost overruns if profitability falls below a certain threshold.
Any failure by Wajax to effectively price and manage these
contracts could have a material adverse impact on Wajax’s
business, results of operations or financial condition.
Environmental Factors
From time to time, Wajax experiences environmental
incidents, emissions or spills in the course of its normal
business activities. With the assistance of environmental
consultants, Wajax has established environmental
compliance and monitoring programs which management
believes are appropriate for its operations. To date, these
environmental incidents, emissions and spills have not
resulted in any material liabilities to the Corporation,
however, there can be no assurance that any future incidents,
emissions or spills will not result in a material adverse effect
on Wajax’s results of operations or cash flows.
In 2012 Wajax achieved another record performance with
revenue and earnings before tax of $1.47 billion and $89.7
million, respectively. Wajax was positively impacted by
strong construction and forestry markets across Canada in
2012. The oil and gas sector in western Canada remained
active in the first half of the year, but began to decline in the
second half of 2012 as deteriorating industry fundamentals
in North America resulted in reduced customer spending. In
particular, this decline affected Power Systems and Industrial
Components. Mining activity, including in the oil sands, was
somewhat stronger compared to last year in all segments.
Although quoting activity remained high at year-end, the
Equipment segment saw a reduction in mining equipment
backlog in the latter part of the year as customers began to
take a more cautious approach in making commitments to
buy equipment.
Looking forward to 2013, the combined effect of continuing
weakness in the oil and gas market, delays in mining
investment decisions and the loss of the LeTourneau
distribution rights will create challenges for growth in
2013. Quoting activity for mining remains very active in
both Equipment and Power Systems. However, Wajax does
not expect meaningful improvement in the oil and gas
market during 2013. As a result, management anticipates a
weaker first half of the year relative to 2012. Achieving full
year earnings that are comparable to 2012 will depend on
reasonable end market recovery in the second half of 2013.
Additional information, including Wajax’s Annual Report
and Annual Information Form, are available on SEDAR at
www.sedar.com.
Wajax Corporation 2012 Annual Report 33
MANAGEMENT’S DISCUSSION AND ANALYSIS Management’s Responsibility for Financial Reporting
The consolidated financial statements of Wajax Corporation are
the responsibility of management and have been prepared in
accordance with International Financial Reporting Standards.
Where appropriate, the information reflects management’s
judgement and estimates based on the available information.
Management is also responsible for all other information in
the Annual Report and for ensuring that this information is
consistent with the consolidated financial statements.
Wajax maintains a system of internal control designed to
provide financial information and the safeguarding of its
assets. Wajax also maintains an internal audit function, which
reviews the system of internal control and its application.
The Audit Committee of the Board, consisting solely of outside
directors, meets regularly during the year with management,
internal auditors and the external auditors, to review their
respective activities and the discharge of their responsibilities.
Both the external and internal auditors have free and
independent access to the Audit Committee to discuss the
scope of their audits, the adequacy of the system of internal
control and the adequacy of financial reporting. The Audit
Committee reports its findings to the Board, which reviews
and approves the consolidated financial statements.
Wajax’s external auditors, KPMG LLP , are responsible for
auditing the consolidated financial statements and expressing
an opinion thereon.
Mark Foote
President and
Chief Executive Officer
John J. Hamilton
Senior Vice President, Finance
and Chief Financial Officer
Mississauga, Canada, March 5, 2013
Independent Auditors’ Report
TO THE SHAREHOLDERS OF WAJAX CORPORATION
We have audited the accompanying consolidated financial
statements of Wajax Corporation, which comprise the
consolidated statements of financial position as at December
31, 2012 and December 31, 2011, the consolidated
statements of earnings, comprehensive income, changes
in shareholder’ equity and cash flows for the years ended
December 31, 2012 and December 31, 2011, and notes,
comprising a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for
the Consolidated Financial Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards,
and for such internal control as management determines is
necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether
due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
34 Wajax Corporation 2012 Annual Report
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected
depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those
risk assessments, we consider internal control relevant to the
entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial
position of Wajax Corporation as at December 31, 2012
and December 31, 2011, and its consolidated financial
performance and its consolidated cash flows for the years
ended December 31, 2012 and December 31, 2011 in
accordance with International Financial Reporting Standards.
Chartered Accountants, Licensed Public Accountants
Toronto, Canada, March 5, 2013
Consolidated Statements of Financial Position
As at December 31 (in thousands of Canadian dollars)
2012
2011
ASSETS
Current
Cash
Trade and other receivables (note 5)
Inventories (note 6)
Prepaid expenses
Non-Current
Rental equipment (note 7)
Property, plant and equipment (note 8)
Intangible assets (note 10)
Deferred taxes (note 22)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Bank indebtedness (note 14)
Accounts payable and accrued liabilities (note 13)
Provisions (note 11)
Dividends payable
Income taxes payable
Obligations under finance leases (note 9)
Derivative instruments
Non-Current
Provisions (note 11)
Deferred taxes (note 22)
Employee benefits (note 12)
Other liabilities
Obligations under finance leases (note 9)
Bank debt (note 14)
Shareholders’ Equity
Share capital (note 17)
Contributed surplus (note 20)
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
On behalf of the Board:
$
– $
194,567
285,185
7,089
486,841
43,731
50,700
87,668
2,922
5,659
174,233
241,524
8,033
429,449
28,060
47,924
84,493
–
185,021
160,477
$
671,862 $
589,926
$
10,195 $
186,897
7,033
4,519
44,349
3,611
149
256,753
–
245,011
7,851
3,326
2,398
3,646
208
262,440
4,088
–
7,160
2,083
8,192
151,701
173,224
4,010
17,694
6,843
5,644
6,688
59,021
99,900
106,651
4,346
130,944
(56)
241,885
105,371
4,888
117,477
(150)
227,586
$
671,862 $
589,926
Paul E. Gagné
Chairman
Ian A. Bourne
Director
Wajax Corporation 2012 Annual Report 35
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Earnings
For the years ended December 31 (in thousands of Canadian dollars, except per share data)
2012
2011
Revenue (note 18)
Cost of sales
Gross profit
Selling and administrative expenses
Earnings from operating activities
Finance costs (note 19)
Earnings before income taxes
Income tax expense (note 22)
Net earnings
Basic earnings per share (note 23)
Diluted earnings per share (note 23)
$ 1,466,014 $ 1,377,100
1,084,667
1,164,199
301,815
207,672
94,143
4,442
89,701
23,762
292,433
200,321
92,112
4,630
87,482
23,679
$
65,939 $
63,803
$
$
3.95 $
3.89 $
3.84
3.77
Consolidated Statements of Comprehensive Income
For the years ended December 31 (in thousands of Canadian dollars)
Net earnings
Items that will not be reclassified to income
Actuarial losses on pension plans, net of tax of $251 (2011 – $885) (note 12)
Items that may subsequently be reclassified to income
Losses on derivative instruments designated as cash flow hedges in prior periods reclassified
to cost of inventory or finance costs in the current year, net of tax recovery of $187 (2011 – $237)
(Losses) gains on effective portion of derivative instruments designated as cash flow hedges,
net of tax recovery of $149 (2011 – expense of $381)
Other comprehensive loss, net of tax
Total comprehensive income
2012
2011
$
65,939 $
63,803
(683)
(2,544)
517
565
(423)
(589)
1,062
(917)
$
65,350 $
62,886
36 Wajax Corporation 2012 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Changes
in Shareholders’ Equity
Accumulated
other
comprehensive
(loss) income
AOCL
For the year ended December 31, 2012
(in thousands of Canadian dollars)
Share
capital
Contributed
surplus
Retained
earnings
Cash flow
hedges
Total
January 1, 2012
$
105,371
4,888
117,477
(150) $
227,586
Net earnings
Other comprehensive loss
Total comprehensive income for the year
Shares issued to settle share-based
compensation plans (note 20)
Dividends (note 16)
Share-based compensation expense (note 20)
–
–
–
1,280
–
–
–
–
–
65,939
(683)
65,256
(1,280)
–
–
738
(51,789)
–
–
94
94
–
–
–
65,939
(589)
65,350
–
(51,789)
738
December 31, 2012
$
106,651
4,346
130,944
(56) $
241,885
For the year ended December 31, 2011
(in thousands of Canadian dollars)
Share
capital
Trust Contributed
surplus
units
Retained
earnings
Cash flow
hedges
Total
AOCL
January 1, 2011
$
–
105,371
3,931
91,805
(1,777) $
199,330
Conversion to corporation
Net earnings
Other comprehensive loss
105,371
–
–
(105,371)
–
–
Total comprehensive income for the year
Dividends (note 16)
Share-based compensation expense (note 20)
–
–
–
December 31, 2011
$
105,371
–
–
–
–
–
–
–
–
–
63,803
(2,544)
61,259
–
957
(35,587)
–
–
–
1,627
1,627
–
–
–
63,803
(917)
62,886
(35,587)
957
4,888
117,477
(150) $
227,586
Wajax Corporation 2012 Annual Report 37
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
For the years ended December 31 (in thousands of Canadian dollars)
2012
2011
$
65,939 $
63,803
7,883
8,467
1,466
139
738
(1,687)
(618)
72
4,442
23,762
110,603
(114,347)
(25,076)
(3,784)
(4,118)
(2,387)
4,838
7,441
1,216
61
957
(303)
(478)
–
4,630
23,679
105,844
(20,253)
(20,177)
95
(4,132)
(116)
(39,109)
61,261
(6,234)
523
(237)
(10,078)
(5,499)
132
(664)
(23,247)
(16,026)
(29,278)
92,998
(568)
(2,553)
(50,596)
39,281
(20,000)
(1,061)
(3,484)
(44,733)
(69,278)
(15,854)
(37,295)
5,659
42,954
$
(10,195) $
5,659
OPERATING ACTIVITIES
Net earnings
Items not affecting cash flow:
Depreciation and amortization
Rental equipment (note 7)
Property, plant and equipment (note 8)
Intangible assets (note 10)
Loss on disposal of property, plant and equipment
Share rights plans compensation expense (note 20)
Non-cash rental expense
Employee benefits income, net of payments
Non-cash loss on derivative instruments
Finance costs
Income tax expense
Changes in non-cash operating working capital (note 24)
Rental equipment additions (note 7)
Other non-current liabilities
Finance costs paid
Income taxes paid
Cash (used in) generated from operating activities
INVESTING ACTIVITIES
Property, plant and equipment additions
Proceeds on disposal of property, plant and equipment
Intangible assets additions (note 10)
Acquisition of businesses (note 27)
Cash used in investing activities
FINANCING ACTIVITIES
Increase (decrease) in bank debt
Debt facility amendment costs (note 14)
Finance lease payments
Dividends paid
Cash generated from (used in) financing activities
Change in cash
Cash – beginning of year
(Bank indebtedness) cash – end of year
38 Wajax Corporation 2012 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Notes to Consolidated Financial Statements
December 31, 2012 (amounts in thousands of Canadian dollars, except share and per share data)
1. CORPORATION PROFILE
Wajax Corporation (the “Corporation”) is incorporated in
Canada. The address of the Corporation’s registered office
is 3280 Wharton Way, Mississauga, Ontario, Canada. The
Corporation’s core distribution businesses are engaged in the
sale and after-sale parts and service support of equipment,
power systems and industrial components, through a
network of 128 branches across Canada. The Corporation is
a multi-line distributor and represents a number of leading
worldwide manufacturers across its core businesses. Its
customer base is diversified, spanning natural resources,
construction, transportation, manufacturing, industrial
processing and utilities.
2. BASIS OF PREPARATION
Statement of Compliance
These consolidated financial statements have been prepared
in accordance with International Financial Reporting
Standards (“IFRS”) as published by the International
Accounting Standards Board (“IASB”).
The consolidated financial statements were authorized for
issue by the Board of Directors on March 5, 2013.
Basis of Measurement
The consolidated financial statements have been prepared
under the historical cost basis except for derivative financial
instruments and liabilities for cash-settled share-based
payment arrangements that have been measured at fair
value. The defined benefit liability is recognized as the net
total of the fair value of the plan assets and the present value
of the defined benefit obligation.
Functional and Presentation Currency
These consolidated financial statements are presented in
Canadian dollars, which is the Corporation’s functional
currency. All financial information presented in Canadian
dollars has been rounded to the nearest thousand, unless
otherwise stated and except share and per share data.
Judgements and Estimation Uncertainty
The preparation of the consolidated financial statements
in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported
amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those judgements, estimates
and assumptions. The Corporation bases its estimates on
historical experience and various other assumptions that are
believed to be reasonable in the circumstances.
The key assumptions concerning the future and other key
sources of estimation uncertainty that have a significant
risk of resulting in a material adjustment to the carrying
amount of assets and liabilities within the next fiscal year
are as follows:
Allowance for Doubtful Accounts
The Corporation is exposed to credit risk with respect to
its trade and other receivables. However, this is somewhat
minimized by the Corporation’s large customer base which
covers most business sectors across Canada. The Corporation
follows a program of credit evaluations of customers
and limits the amount of credit extended when deemed
necessary. The Corporation maintains provisions for possible
credit losses, and any such losses to date have been within
management’s expectations. The provision for doubtful
accounts is determined on an account-by-account basis.
Inventory Obsolescence
The value of the Corporation’s new and used equipment is
evaluated by management throughout the year, on a unit-by-
unit basis. When required, provisions are recorded to ensure
that the book value of equipment is valued at the lower of cost
or estimated net realizable value. The Corporation performs
an aging analysis to identify slow moving or obsolete parts
inventories and estimates appropriate obsolescence provisions
related thereto. The Corporation takes advantage of supplier
programs that allow for the return of eligible parts for credit
within specified time periods.
Goodwill and Intangible Assets
The value in use of goodwill and intangible assets has been
estimated using the forecasts prepared by management
for the next three years. The key assumptions for the
estimate are those regarding revenue growth, gross margin
and the level of working capital required to support the
business. These estimates are based on past experience and
management’s expectations of future changes in the market
and forecasted growth initiatives. To prepare the value in use
calculations, the forecasts are extrapolated beyond the three
year period at the estimated long-term inflation rate (2%)
and discounted back to present value. The discount rate is
based on the Corporation’s pre-tax weighted average cost of
capital of approximately 11% to reflect a market participant’s
view of the cash-generating unit.
During the year, the Corporation performed impairment
tests, based on value in use, of its goodwill and intangible
assets with an indefinite life and concluded that no
impairment existed in either the goodwill associated with
any of the Corporation’s cash-generating units (“CGUs”) or
the intangible assets with an indefinite life.
Wajax Corporation 2012 Annual Report 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Warranty Provision
The Corporation maintains provisions for possible customer
warranty claims that may not be covered by the manufacturers’
standard warranty and limited warranties for workmanship
on services provided. The provisions are developed using
management’s best estimate of actual warranty expense,
generally based on recent claims experience, and are regularly
reviewed and adjusted as required.
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
These consolidated financial statements include the accounts
of Wajax Corporation and its subsidiary entities, which are
all wholly-owned. Intercompany balances and transactions
are eliminated on consolidation.
Revenue Recognition
Revenue is measured at the fair value of consideration
received or receivable and is recognized as it is earned in
accordance with the following:
Revenue from the sale of equipment, parts and internally-
manufactured or assembled products is recorded at
the time goods are shipped to customers or when all
contracted-upon conditions have been fulfilled.
Revenue from the rental of equipment is recognized on a
straight-line basis over the term of the lease.
Revenue from the provision of engineering and technical
services to customers is recognized upon performance of
contracted–upon services with the customer.
Derivative Financial Instruments
The Corporation uses derivative financial instruments in
the management of its foreign currency exposures related to
certain inventory purchase and customer sales commitments.
The Corporation’s policy is not to utilize derivative financial
instruments for trading or speculative purposes.
Where the Corporation intends to apply hedge accounting it
formally documents the relationship between the derivative
and the risk being hedged, as well as the risk management
objective and strategy for undertaking the hedge transaction.
The documentation links the derivative to a specific asset
or liability or to specific firm commitments or forecasted
transactions. The Corporation also assesses, at the hedge’s
inception as well as on an ongoing basis, whether the hedge
is effective in offsetting changes in fair values or cash flows
of the risk being hedged. Should a hedge become ineffective,
hedge accounting will be discontinued prospectively.
All derivative instruments are recorded in the consolidated
statements of financial position at fair value unless exempted
from derivative treatment as a normal purchase and sale. All
changes in fair value are recorded in earnings unless cash
flow hedge accounting is applied, in which case changes
in fair value are recorded in other comprehensive income.
If the cash flow hedge of a firm commitment or forecast
transaction results in the recognition of a non-financial
asset or liability, then, at the time the asset or liability is
recognized, the associated gains or losses on the derivative
that had previously been recognized in other comprehensive
income are included in the initial measurement of the asset
or liability.
Revenue for separately priced extended warranty or
Inventories
product maintenance contracts is recognized over the
contract period in proportion to the costs expected to be
incurred in performing the services under the contract.
If insufficient historical evidence exists to support this
pattern, then revenue is recognized on a straight-line basis
over the term of the contract.
Inventories are valued at the lower of cost and net
realizable value.
Cost is determined using the weighted average method
except where the items are not ordinarily interchangeable, in
which case the specific identification method is used.
Revenue from arrangements with separately identifiable
components is recognized separately for each component
based on the relative fair values.
Cost of equipment and parts includes purchase cost,
conversion cost if applicable and cost incurred in bringing
inventory to its present location and condition.
Provision is made for expected returns, collection losses
and warranty costs based on past performance, and for
estimated costs to fulfill contractual obligations and other
sales-related contingencies depending on the terms of each
individual contract.
Cost of work-in-progress and cost of conversion includes
cost of direct labour, direct materials and a portion of direct
and indirect overheads, allocated based on normal capacity.
Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs to sell.
40 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Rental Equipment
Rental equipment assets are recorded at cost less
accumulated depreciation. Cost includes all expenditures
directly attributable to the acquisition of the asset. Assets
are depreciated over their estimated useful lives using the
declining balance method at a rate of 20% per year for
material handling equipment and a units of production
method for power generation equipment.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less
accumulated depreciation. Cost includes all expenditures
directly attributable to the acquisition of the asset. Assets are
depreciated over their estimated useful lives based on the
following methods and annual rates:
Asset
Method
Rate
Buildings
Equipment and vehicles
Computer hardware
Furniture and fixtures
Leasehold improvements
declining balance
declining balance
straight-line
declining balance
straight-line
4% – 5%
20% – 30%
3 – 7 years
20%
over the remaining
terms of the leases
Assets under finance leases are depreciated over the shorter
of the lease term and their useful life.
Leases
As lessor:
The Corporation’s equipment rentals and leases are classified
as operating leases with amounts received included in
revenue on a straight-line basis over the term of the lease.
As lessee:
Leases are classified as finance leases when the terms of
the lease transfer substantially all the risks and rewards of
ownership to the Corporation. Under finance leases the
asset is recorded at the lower of its fair value and the present
value of the minimum lease payments at the inception of the
lease. A liability is recorded and is classified as current and
non-current liabilities. The interest component of the lease
is charged to earnings over the period of the lease using the
effective interest method.
All other leases are classified as operating leases. The cost
of operating leases is charged to earnings on a straight-line
basis over the periods of the leases.
Intangible Assets
Product distribution rights represent the fair value
attributed to these rights pursuant to an acquisition and
are classified as indefinite life intangibles assets because the
Corporation is generally able to renew these rights with
minimal cost of renewal.
Goodwill and indefinite life intangible assets are not
amortized but are tested at least annually for impairment,
or more frequently if certain indicators arise that indicate
the assets might be impaired. Goodwill and indefinite life
intangible assets are allocated to CGUs that are expected to
benefit from the synergies of the acquisition.
Customer lists and non-competition agreements are
amortized on a straight-line basis over their useful lives which
range from 2 to 7 years. Computer application software is
classified as an intangible asset and is amortized on a straight-
line basis over the useful life ranging from 1 to 7 years.
Impairment
Property, plant and equipment, rental equipment and
definite life intangible assets are reviewed at the end of each
year to determine if any indicators of impairment exist. If
an indicator of impairment is identified, an impairment
loss would be recognized as the amount by which the asset’s
carrying amount exceeds its recoverable amount. Where the
asset does not generate cash flows that are independent of
other assets, impairment is considered for the CGU to which
the asset belongs.
Goodwill and indefinite life intangible assets are tested at
least annually for impairment. To test for impairment, the
Corporation compares each CGU’s carrying value to its
recoverable amount. Recoverable amount is the higher of
value in use or fair value less costs to sell, if the fair value can
be readily determined. The value in use is the present value
of future cash flows using a pre-tax discount rate that reflects
the time value of money and the risk specific to the assets.
Any impairment of goodwill or indefinite life intangible
assets would be recorded as a charge against earnings.
Cash
Cash includes cash on hand, demand deposits and bank
indebtedness. The Corporation considers bank indebtedness
to be an integral part of the Corporation’s cash management.
Cash and bank indebtedness are offset and the net amount
presented in the consolidated statements of financial
position to the extent that there is a right to set off and a
practice of net settlement. Cash was designated as loans and
receivables upon initial recognition.
Financing Costs
Transaction costs directly attributable to the acquisition
or amendment of bank debt are deferred and amortized to
finance costs over the term of the debt using the effective
interest method. Deferred financing costs are included in the
carrying amount of the related bank debt.
Wajax Corporation 2012 Annual Report 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Provisions
The Corporation provides for customer warranty claims
that may not be covered by the manufacturers’ standard
warranty. Warranties relate to products sold and generally
cover a period of 6 months to 5 years. The reserve is
determined by applying a claim rate to the value of each
machine sold. The rate is developed using management’s
best estimate of actual warranty expense, generally based
on recent claims experience, and is adjusted as required.
The provision is not discounted to reflect the time value of
money because the impact is not material.
The Corporation has guaranteed the resale value of certain
equipment sold and guaranteed a portion of certain
customers’ lease payments. These contracts are subject to
certain conditions being met by the customers.
Financial Instruments
The Corporation measures loans and receivables and other
financial liabilities at amortized cost. Derivative instruments
are measured at fair value. All changes in their fair value
are recorded in earnings unless cash flow hedge accounting
is used, in which case changes in fair value are recorded
in other comprehensive income with any ineffectiveness
charged to earnings.
Share-Based Compensation Plans
The fair value of share-based compensation plan rights
is based on the trading price of a Wajax Corporation
common share on the Toronto Stock Exchange (“TSX”).
Compensation expense for share-settled plans is based upon
the fair value of the rights at the date of grant and is charged
to selling and administrative expenses on a straight-line
basis over the vesting period, with an offsetting adjustment
to contributed surplus. Compensation expense for cash-
settled plans varies with the price of the Corporation’s shares
and is recognized over the vesting period with an offset to
accounts payable and accrued liabilities.
Employee Benefits
The Corporation has defined contribution pension plans for
most of its employees. The cost of the defined contribution
plans is recognized in earnings based on the contributions
required to be made each year.
The Corporation also has defined benefit plans covering
some of its employees. The benefits are based on years of
service and the employees’ earnings. Defined benefit plan
obligations are accrued as the employees render the services
necessary to earn the pension benefits. The Corporation has
adopted the following policies:
The cost of pension benefits earned by employees is
actuarially determined using the projected unit credit
method for defined benefit plans and management’s best
estimate of expected plan investment performance, salary
escalation, and retirement ages of employees.
For purposes of calculating expected return on plan assets,
those assets are valued at fair value.
The charge to earnings for the defined benefit plans is
split between an operating cost and a finance charge. The
finance charge represents the interest cost on the accrued
benefit obligation net of the expected return on plan assets
and is included in selling and administrative expenses.
Actuarial gains and losses are recognized in full in the
statement of other comprehensive income in the year in
which they occur.
Income Taxes
Income tax expense comprises current and deferred tax.
Current tax and deferred tax are recognized in earnings
except to the extent that it relates to a business combination,
or items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date,
and any adjustment to income taxes payable in respect of
previous years.
Deferred tax is recognized in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is measured at
the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have
been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognized for unused tax losses
and deductible temporary differences to the extent that it is
probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
4. CHANGES IN ACCOUNTING POLICIES
On January 1, 2012, the Corporation early adopted
amendments to International Accounting Standard (“IAS”)
1 Presentation of Financial Statements: Presentation of Items
of Other Comprehensive Income. The amendments to IAS
1 require that an entity present separately the items of other
comprehensive income that may be reclassified to profit or
loss in the future from those that would never be reclassified
to profit or loss. These amendments are to be applied
42 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS retrospectively in the first annual fiscal period beginning on
or after July 1, 2012, with early adoption permitted. This new
presentation is included in the consolidated statements of
comprehensive income.
New Standards and Interpretations Not Yet Adopted
The new standards or amendments to existing standards
that may be significant to the Corporation set out below
are not yet effective for the year ended December 31, 2012
and have not been applied in preparing these consolidated
financial statements.
As of January 1, 2013, the Corporation will be required
to adopt the amendments to IFRS 7 Offsetting Financial
Assets and Liabilities, which contains new disclosure
requirements for financial assets and liabilities that are
offset in the statement of financial position or are subject
to master netting arrangements or similar arrangements.
The Corporation does not expect IFRS 7 to have a material
impact on its consolidated financial statements.
As of January 1, 2013, the Corporation will be required to
adopt IFRS 10 Consolidated Financial Statements, which
establishes principles for the preparation and presentation
of consolidated financial statements when an entity controls
one or more other entities. The Corporation does not
expect IFRS 10 to have a material impact on its consolidated
financial statements.
As of January 1, 2013, the Corporation will be required to
adopt IFRS 13 Fair Value Measurement, which defines fair
value and sets out a framework for measuring fair value
when fair value measurements are required or permitted
by other standards. The Corporation is currently assessing
the impact of this standard on its consolidated financial
statements.
As of January 1, 2013, the Corporation will be required
to adopt IAS 19 Employee Benefits, which requires
recognition of actuarial gains and losses immediately in
other comprehensive income, the full recognition of past
service costs immediately in profit or loss, recognition of
the expected return on plan assets in profit or loss to be
calculated based on the rate used to discount the defined
benefit obligation, and certain additional disclosures. This
standard does not significantly impact the Corporation’s
consolidated financial statements.
As of January 1, 2015, the Corporation will be required to
adopt IFRS 9 Financial Instruments, which is the result
of the first phase of the IASB’s project to replace IAS 39
Financial Instruments: Recognition and Measurement. The
new standard replaces the current multiple classification and
measurement models for financial assets and liabilities with
a single model that has only two classification categories:
amortized cost and fair value. The Corporation is currently
assessing the impact of this standard on its consolidated
financial statements.
5. TRADE AND OTHER RECEIVABLES
2012
2011
Trade accounts receivable
Less: allowance for credit losses
$
177,068 $
(2,458)
157,273
(3,514)
Net trade accounts receivable
Other receivables
174,610
19,957
153,759
20,474
Total trade and other receivables
$
194,567 $
174,233
The Corporation’s exposure to credit and currency risks
related to trade and other receivables is disclosed in note 15.
6. INVENTORIES
Equipment
Parts
Work-in-process
Total inventories
$
2012
157,480 $
110,779
16,926
2011
106,055
115,716
19,753
$
285,185 $
241,524
All amounts shown are net of obsolescence reserves of
$11,314 (2011 – $11,495). During the year ended December
31, 2012, $1,857 (2011 – $3,209) was recorded in cost of
sales for the write-down of inventories to estimated net
realizable value.
The Corporation recognized $1,021,606 (2011 – $974,424) of
inventories as an expense which is included in cost of sales.
Substantially all of the Corporation’s inventories are pledged
as security for the bank credit facility (Note 14).
7. RENTAL EQUIPMENT
January 1, 2012
Additions
Transfers to
inventories
Accumulated
Cost Depreciation
Net Book
Value
$
43,448 $
25,076
15,388 $
7,883
28,060
17,193
(4,551)
(3,029)
(1,522)
December 31, 2012 $
63,973 $
20,242 $
43,731
January 1, 2011
Additions
Transfers to
inventories
$
30,397 $
20,177
14,603 $
4,838
15,794
15,339
(7,126)
(4,053)
(3,073)
December 31, 2011
$
43,448 $
15,388 $
28,060
Wajax Corporation 2012 Annual Report 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. PROPERTY, PLANT AND EQUIPMENT
Cost
January 1, 2012
Additions
Acquisition of businesses (Note 27)
Disposals
Land and
buildings
Equipment
and vehicles
Computer
hardware
Furniture
Leasehold
and fixtures improvements
Total
$
34,724
589
1,466
(334)
63,905
9,433
377
(7,596)
4,720
350
5
(133)
10,016
747
5
(46)
10,783 $
349
–
(341)
124,148
11,468
1,853
(8,450)
December 31, 2012
$
36,445
66,119
4,942
10,722
10,791 $
129,019
Accumulated depreciation
January 1, 2012
Charge for the year
Disposals
$
13,870
794
(1)
42,793
6,068
(5,950)
3,761
440
(133)
7,597
472
(61)
8,203 $
693
(227)
76,224
8,467
(6,372)
December 31, 2012
$
14,663
42,911
4,068
8,008
8,669 $
78,319
Carrying amount
December 31, 2012
Cost
January 1, 2011
Additions
Acquisition of business
Disposals
December 31, 2011
Accumulated depreciation
January 1, 2011
Charge for the year
Disposals
December 31, 2011
Carrying amount
December 31, 2011
$
21,782
23,208
874
2,714
2,122 $
50,700
$
33,686
1,088
35
(85)
$
34,724
$
13,142
780
(52)
$
13,870
57,374
7,968
1,246
(2,683)
63,905
39,763
5,158
(2,128)
42,793
4,260
471
21
(32)
4,720
3,397
384
(20)
3,761
9,143
989
239
(355)
10,067 $
383
337
(4)
114,530
10,899
1,878
(3,159)
10,016
10,783 $
124,148
7,479
396
(278)
7,597
7,481 $
723
(1)
71,262
7,441
(2,479)
8,203 $
76,224
$
20,854
21,112
959
2,419
2,580 $
47,924
Included in property, plant and equipment are vehicles held
under finance leases as follows:
Cost, beginning of year
Additions
Acquisition of businesses (Note 27)
Disposals
Purchased at end of lease
$
2012
24,091 $
5,234
238
(6,977)
(1,283)
2011
22,006
5,400
–
(2,333)
(982)
Cost, end of year
$
21,303 $
24,091
Accumulated depreciation,
beginning of year
Charge for the year
Disposals
Purchased at end of lease
Accumulated depreciation, end of year
13,009
3,498
(5,588)
(917)
10,002
12,542
3,031
(1,848)
(716)
13,009
Carrying amount
$
11,301 $
11,082
All property, plant and equipment except land and buildings
and vehicles held under finance leases have been pledged as
security for bank debt.
9. OPERATING AND FINANCE LEASES
Operating Leases – As Lessor
The Corporation rents equipment to customers under
rental agreements with terms of up to 5 years. The rentals
have been classified as operating leases. The rentals may be
cancelled subject to a cancellation fee. The future minimum
non-cancellable lease payments receivable under the
agreements are as follows:
Less than one year
Between one and five years
More than five years
$
2012
3,884 $
5,261
–
2011
6,187
8,199
17
$
9,145 $
14,403
44 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating Leases – As Lessee
The Corporation leases certain land and buildings, rental
equipment and office equipment. Some of the leases have
renewal terms.
Less than one year
Between one and five years
More than five years
$
2012
16,699 $
47,012
33,244
2011
16,827
33,281
21,229
$
96,955 $
71,337
The future minimum non-cancellable payments due under
the agreements are as follows:
Finance Leases – As Lessee
The Corporation finances certain vehicles under finance lease arrangements. The leases have a minimum one year term and
are extended on a monthly basis thereafter until terminated. On termination the difference between the lessor’s proceeds of
disposal and the residual value is charged or refunded to the Corporation as a rental adjustment. Obligations under finance
leases are as follows:
Current
Non-current (between one and five years)
Total minimum lease payments
10. INTANGIBLE ASSETS
Cost
January 1, 2012
Acquisition of businesses (Note 27)
Additions
Disposals
December 31, 2012
Accumulated amortization
January 1, 2012
Amortization for the year
Disposals
December 31, 2012
Carrying amount
December 31, 2012
Cost
January 1, 2011
Acquisition of business
Additions
December 31, 2011
Accumulated Amortization
January 1, 2011
Amortization for the year
December 31, 2011
Carrying amount
December 31, 2011
2012
Finance
costs
560
1,119
1,679
Present
value of
minimum
lease
payments
Payment
3,611 $
8,192
4,061
7,586
2011
Finance
costs
415
898
Present
value of
minimum
lease
payments
3,646
6,688
11,803 $
11,647
1,313
10,334
Payment
4,171
9,311
13,482
$
$
Product
distribution
rights
Customer
lists/Non-
competition
agreements
8,800
–
–
–
8,800
–
–
–
–
5,302
2,900
–
–
8,202
3,095
557
–
3,652
$
Goodwill
70,644
1,504
–
–
$
72,148
$
$
–
–
–
–
Software
Total
7,759 $
–
237
(30)
92,505
4,404
237
(30)
7,966 $
97,116
4,917 $
909
(30)
8,012
1,466
(30)
5,796 $
9,448
$
72,148
8,800
4,550
2,170 $
87,668
$
66,335
4,309
–
$
70,644
$
$
–
–
–
4,900
3,900
–
8,800
–
–
–
4,302
1,000
–
5,302
2,565
530
3,095
7,053 $
42
664
82,590
9,251
664
7,759 $
92,505
4,231 $
686
4,917 $
6,796
1,216
8,012
$
70,644
8,800
2,207
2,842 $
84,493
Wajax Corporation 2012 Annual Report 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amortization of intangible assets is charged to selling and administrative expenses.
Goodwill and indefinite life intangible assets have been allocated to the Corporation’s CGUs that are expected to benefit from
the acquisition that gave rise to the goodwill or indefinite life intangible assets as follows:
Cash-generating units
Equipment
Power Systems West
Power Systems Central
Power Systems East
Industrial Components
In 2012, the Corporation performed impairment tests,
based on value in use, of its goodwill and intangible assets
with an indefinite life. The Corporation concluded that no
impairment existed in either the goodwill or the intangible
assets with an indefinite life.
11. PROVISIONS, COMMITMENTS AND CONTINGENCIES
Warranties
Other
Total
Provisions,
January 1, 2012
Charge for the year
Utilized in the year
$
Provisions,
December 31, 2012 $
9,632 $
6,320
(7,326)
2,229 $
1,431
(1,165)
11,861
7,751
(8,491)
8,626 $
2,495 $
11,121
Current
Non-current
4,538
4,088
2,495
–
7,033
4,088
Total
$
8,626 $
2,495 $
11,121
The Corporation also has contingent contractual obligations
where the Corporation has guaranteed the resale value of
equipment sold (“guaranteed residual value contracts”)
or has guaranteed a portion of customer lease payments
(“recourse contracts”). These contracts are subject to certain
conditions being met by the customer. As at December 31,
2012, the Corporation had guaranteed $1,177 of contracts
(2011 – $5,325) with commitments arising between 2013
and 2016. The commitments made by the Corporation
in these contracts reflect the estimated future value of
the equipment, based on the judgment and experience of
management. The Corporation has recorded a $67 provision
(2011 – $82) as an estimate of the financial loss likely to
result from such commitments.
46 Wajax Corporation 2012 Annual Report
2012
2011
$
Goodwill
21,341
2,535
4,309
1,409
42,554
Product
distribution
rights
– $
1,600
3,900
–
3,300
Goodwill
21,341
2,535
4,309
1,409
41,050
$
72,148
8,800 $
70,644
Product
distribution
rights
–
1,600
3,900
–
3,300
8,800
Litigation
In the ordinary course of business, the Corporation is
contingently liable for litigation in varying amounts. These
liabilities could arise from litigation, environmental matters
or other sources. It is not possible to determine the amounts
that may ultimately be assessed against the Corporation, but
management believes that any such amounts would not have
a material impact on the business or financial position of the
Corporation as they generally are fully covered by insurance.
Provisions have been made in these consolidated financial
statements when the liability is expected to result in an
outflow of economic benefits, and where the obligation can
be reliably measured.
12. EMPLOYEE BENEFITS
The Corporation sponsors three pension plans: the Wajax
Limited Pension Plan (the “Employees’ Plan”) which, except
for a small group of employees, is a defined contribution
plan (“DC”) and two defined benefit plans (“DB”): the
Pension Plan for Executive Employees of Wajax Limited (the
“Executive Plan”) and the Wajax Limited Supplementary
Executive Retirement Plan (the “SERP”).
The Corporation also contributes to several union sponsored
multi-employer plans for a small number of employees. Two
of these are target benefit plans but they are all accounted
for as DC plans as the Corporation has no involvement in
the management of these plans and does not have sufficient
information to account for the plans as DB plans.
The Corporation uses actuarial reports prepared by
independent actuaries for funding and accounting purposes
and measures its accrued benefit obligations and the fair
value of plan assets for accounting purposes as at December
31 of each year. These actuarial assumptions include discount
rates, expected long-term rate of return on plan assets,
compensation increases and service life. While management
believes that the actuarial assumptions are appropriate, any
significant changes to those used would affect the statement
of financial position and statement of earnings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The schedule for actuarial valuations of the pension plans for
funding purposes is as follows:
Plan
Previous valuation
Next valuation
Employees’ Plan
Executive Plan
SERP
January 1, 2011
January 1, 2012
January 1, 2012
January 1, 2014
January 1, 2015
January 1, 2015
Total Cash Payments
Total cash payments for employee future benefits for
2012, consisting of cash contributed by the Corporation
to its funded pension plans, cash payments directly to
beneficiaries for its unfunded pension plans, and cash
contributed to its DC plans was $8,918 (2011 – $7,561).
The Corporation expects to contribute $418 to the defined
benefit pension plans in the year ended December 31, 2013.
The plan expenses recognized in earnings are as follows:
Defined contribution plans
Current service cost
Defined benefit plans
Current service cost
Administration expenses
Finance cost on accrued
benefit obligation
Expected return on plan assets
Total plan expense recognized
in the statement of earnings
2012
2011
$
7,823 $
6,678
403
75
742
(663)
346
80
850
(883)
$
8,380 $
7,071
Of the amounts recognized in earnings, $3,836 (2011
– $2,958) is included in cost of sales and $4,544 (2011 –
$4,113) is included in selling and administrative expenses.
The amounts recognized in other comprehensive income
are as follows:
Net actuarial losses
Deferred tax
Amount recognized in other
comprehensive income
Cumulative actuarial losses
2012
934 $
(251)
683 $
3,855 $
2011
3,429
(885)
2,544
3,172
$
$
$
The following significant actuarial assumptions were employed
to determine the periodic pension income and the accrued
benefit obligations:
Expected long-term rate
of return on plan assets
Discount rate – at beginning of year
(to determine plan expenses)
Discount rate – at end of year
(to determine accrued benefit obligation)
Rate of compensation increase
December 31
2012
6.0%
4.0%
3.8%
3.0%
2011
6.0%
5.0%
4.0%
3.0%
The expected long-term rate of return on plan assets has
been derived as the weighted average of the expected returns
from each of the main asset classes. The expected return
for each asset class is determined by reference to long-
term government bond rates plus a risk premium. The risk
premiums are long-term assumptions and were set after
considering actuarial advice.
Plan assets for the DC plans are invested according to the
directions of the plan members. Plan assets for defined
benefit plans are invested in the following major categories
of plan assets as a percentage of total plan assets:
Cash
Fixed Income
Canadian Equities
Foreign Equities
December 31
2012
4.3%
32.1%
29.7%
33.9%
2011
6.2%
32.3%
29.3%
32.2%
100.0%
100.0%
The history of experience adjustments on the defined benefit
plans for the current and prior years:
Experience (loss)
gain on accrued
benefit obligation
Experience gain (loss)
on plan assets
$
$
2012
2011
2010
(466) $
47 $
109
69 $
(1,566) $
89
Wajax Corporation 2012 Annual Report 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information about the Corporation’s defined benefit pension
plans, in aggregate, is as follows:
Present value of benefit obligation
2012
2011
Present value of benefit obligation,
beginning of year
Current service cost
Participant contributions
Finance cost on accrued
benefit obligation
Actuarial loss
Benefits paid
Present value of benefit obligation,
end of year
$
18,599 $
403
60
17,019
346
43
742
1,033
(1,509)
850
1,863
(1,522)
14. BANK DEBT
$
19,328 $
18,599
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Deferred income
Other payables and accrued liabilities
$
2012
98,004 $
18,460
70,433
2011
139,828
10,918
94,265
Accounts payable and
accrued liabilities
$
186,897 $
245,011
On May 24, 2012 and December 7, 2012, the Corporation
amended its bank credit facility to increase the limit
of the facility by $50,000 and $75,000 respectively, on
substantially the same terms and conditions as the existing
facility. The fully secured facility of $300,000, due August
12, 2016, is now comprised of an $80,000 non-revolving
term portion and a $220,000 revolving term portion. The
$568 cost of amending the facility has been capitalized
and will be amortized over the remaining term of the
facility. Borrowing capacity under the bank credit facility is
dependent upon the level of the Corporation’s inventories
on hand and the outstanding trade accounts receivable.
At December 31, 2012 borrowing capacity under the bank
credit facility was equal to $300,000. In addition, the bank
credit facility contains customary restrictive covenants
including limitations on the declaration of cash dividends
and the maintenance of certain financial ratios, all of which
were met as at December 31, 2012. The Corporation will be
restricted from the declaration of monthly cash dividends
in the event the Corporation’s leverage ratio, as defined in
the bank credit facility agreement, exceeds three times. The
Corporation’s interest coverage ratio, as defined under the
bank credit facility agreement, must not be lower than three
times. Borrowings under the facility bear floating rates of
interest at margins over Canadian dollar bankers’ acceptance
yields, U.S. dollar LIBOR rates or prime. Margins on the
facility depend on the Corporation’s leverage ratio at the
time of borrowing and range between 1.5% and 3.0% for
Canadian dollar bankers’ acceptances and U.S. dollar LIBOR
borrowings, and 0.5% and 2.0% for prime rate borrowings.
Bank indebtedness consists of bank overdrafts and
outstanding cheques.
Bank credit facility,
repayable August 12, 2016
Non-revolving term portion
Revolving term portion
2012
2011
$
80,000 $
73,000
153,000
30,000
30,000
60,000
Deferred financing costs, net of
accumulated amortization of
$330 (2011 – $82)
(1,299)
(979)
Total bank debt
$
151,701 $
59,021
Plan assets
2012
2011
Fair value of plan assets,
beginning of year
Actual gain (loss) on plan assets
Participant contributions
Employer contributions
Benefits paid
Administration expenses
Fair value of plan assets,
end of year
$
11,269 $
732
60
1,275
(1,509)
(75)
12,557
(683)
43
954
(1,522)
(80)
$
11,752 $
11,269
Funded status
2012
2011
Fair value of plan assets,
end of year
Present value of benefit obligation,
end of year
$
11,752 $
11,269
(19,328)
(18,599)
Plan deficit
$
(7,576) $
(7,330)
The accrued benefit liability is included in the Corporation’s
statement of financial position as follows:
Employee benefits asset
Trade and other payables
Employee benefits liability
2012
–
(416)
(7,160)
Plan deficit
$
(7,576) $
2011
–
(487)
(6,843)
(7,330)
Present value of benefit obligation includes a benefit
obligation of $4,589 (2011 – $4,279) related to the SERP that
is not funded. This obligation is secured by a letter of credit
of $4,893 (2011 – $4,550).
48 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation had $5,917 (2011 – $5,952) letters of credit
outstanding at the end of the year.
Finance costs on bank debt amounted to $3,782 (2011 –
$4,232).
15. FINANCIAL INSTRUMENTS
The Corporation categorizes its financial assets and financial
liabilities as follows:
Loans and receivables:
(Bank indebtedness) cash
Trade and other receivables
$
(10,195) $
194,567
5,659
174,233
2012
2011
Other financial liabilities:
Accounts payable and
accrued liabilities
Dividends payable
Other liabilities
Bank debt
(186,897)
(4,519)
(2,083)
(151,701)
(245,011)
(3,326)
(5,644)
(59,021)
Derivative instruments – cash flow hedges:
Foreign exchange forward contracts $
(149) $
(208)
The Corporation measures loans and receivables and
other financial liabilities at amortized cost. Derivatives
designated as effective hedges are measured at fair value
with subsequent changes in fair value being charged to other
comprehensive income. Bank indebtedness and cash were
designated as loans and receivables upon initial recognition.
The fair values of trade and other receivables and other
financial liabilities approximate their recorded values due to
the short-term maturities of these instruments. The carrying
values of other financial assets and financial liabilities
reported in the statement of financial position for financial
instruments are not significantly different from their fair
values.
The following method and assumptions were used in 2012
and 2011 to determine the fair value of each class of assets
and liabilities recorded at fair value on the consolidated
statement of financial position:
Derivative Instruments
The fair value of foreign currency forward contracts is
determined by discounting contracted future cash flows
using a discount rate derived from forward rate curves for
comparable assets and liabilities adjusted for changes in
credit risk of the counterparties.
Credit Risk
The Corporation is exposed to credit risk with respect to its
trade and other receivables. This risk is somewhat minimized
by the Corporation’s large customer base which covers many
business sectors across Canada. The Corporation follows a
program of credit evaluations of customers and limits the
amount of credit extended when deemed necessary. The
Corporation’s trade and other receivables consist of trade
accounts receivable from customers and other accounts
receivable generally from suppliers for warranty and rebates.
The aging of the trade accounts receivable is as follows:
Current
Less than 60 days overdue
More than 60 days overdue
$
2012
108,914 $
63,588
4,566
2011
93,268
58,408
5,597
Total trade accounts receivable
$
177,068 $
157,273
The carrying amounts of accounts receivable represent the
maximum credit exposure.
The Corporation maintains provisions for possible credit
losses by performing an analysis of specific accounts.
Any such losses to date have been within management’s
expectations. Movement of the allowance for credit losses is
as follows:
Opening balance
Additions
Utilization
Closing balance
$
2012
3,514 $
302
(1,358)
$
2,458 $
2011
3,902
592
(980)
3,514
The Corporation is also exposed to non-performance by
counterparties to short-term currency forward contracts.
These counterparties are large financial institutions with
“Stable” outlook and high short-term and long-term credit
ratings. To date, no such counterparty has failed to meet its
financial obligations to the Corporation. Management does
not believe there is a significant risk of non-performance by
these counterparties and will continue to monitor the credit
risk of these counterparties.
Liquidity Risk
Liquidity risk is the risk that the Corporation will encounter
difficulty in meeting obligations associated with its financial
liabilities as they become due. The contractual maturity
of the bank debt facility is August 12, 2016. At December
31, 2012 the Corporation had borrowed $154,822 (2011
– $60,000) and issued $5,917 (2011 – $5,952) of letters of
credit for a total utilization of $160,739 (2011 – $65,952) of
its $300,000 (2011 – $175,000) bank credit facility and had
not utilized any (2011 – nil) of its $15,000 (2011 – $15,000)
equipment financing facility.
Wajax Corporation 2012 Annual Report 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation’s $300,000 bank credit facility along with
$15,000 of capacity permitted in addition to the credit
facility should be sufficient to meet the Corporation’s short-
term normal course working capital, maintenance capital
and growth capital requirements.
In the long-term the Corporation may be required
to access the equity or debt markets in order to fund
significant acquisitions and growth related working capital
and capital expenditures.
Financial Risk Management Policy
The Corporation has in place a financial risk management
policy that addresses the Corporation’s financial exposure
to currency risk and interest rate risk. The Corporation’s
tolerance to interest rate risk decreases as the Corporation’s
leverage ratio increases and interest coverage ratio decreases.
To manage this risk prudently, guideline percentages of
floating interest rate debt decrease as the Corporation’s
leverage ratio increases. The policy also defines acceptable
levels of exposure to transactional currency risk. The
exposure to currency and interest rate risk is managed
through the use of various derivative instruments.
Currency Risk
The Corporation enters into short-term currency forward
contracts to hedge the exchange risk associated with the cost
of certain inbound inventory and certain foreign currency-
denominated sales to customers along with the associated
receivables as part of its normal course of business. The
impact of a change in foreign currency relative to the
Canadian dollar on the Corporation’s financial statements of
unhedged foreign currency-denominated sales to customers
along with the associated receivables and purchases from
vendors along with the associated payables would be
insignificant. The Corporation’s commitments to buy and
sell foreign currencies are summarized as follows:
December 31, 2012
Purchase contracts
Sales contracts
December 31, 2011
Purchase contracts
Purchase contracts
Sales contracts
Notional
Amount
Fair
Value
Average
Exchange
Rate
Maturity
USD $
USD $
26,453 $
11,135 $
(59)
(90)
0.9998 January 2013 to April 2014
January 2013
0.9868
USD $
EUR
USD $
35,952 $
220
979 $
(201)
(16)
9
1.0249
1.3993
1.0262
January to December 2012
January to June 2012
January to February 2012
The Corporation maintains a hedging policy whereby significant transactional currency risks are usually identified and hedged.
Interest Rate Risk
17. SHARE CAPITAL
The Corporation’s borrowing costs are impacted by changes
in interest rates. In order to manage this risk to an acceptable
level, the Corporation may use derivative instruments such
as interest rate swap agreements. As at December 31, 2012
the Corporation had not entered into any interest rate swaps
with its lenders.
Sensitivity Analysis
A 1.00 percentage point change in interest rates on the average
debt level for 2012 would result in a change to earnings before
income taxes of approximately $1,110 for the year.
16. DIVIDENDS DECLARED
During 2012 the Corporation declared cash dividends
of $3.10 per share, or $51,789 (2011, $2.14 per share or
$35,587).
The Corporation has declared dividends of $0.27 per share
or $4,519 for each of January and February 2013.
The Corporation is authorized to issue an unlimited number
of shares, with each share entitling the holder of record to
one vote at all meetings of shareholders. The shares have
no par value and all issued shares are fully paid. Each share
represents an equal beneficial interest in any distributions of
the Corporation and in the net assets of the Corporation in
the event of its termination or winding-up.
Balance, December 31, 2010
Converted on January 1, 2011
from trust units
Balance, December 31, 2011
Shares issued to settle share-
based compensation plans
Number
of Shares
Amount
– $
–
16,629,444
105,371
16,629,444
105,371
107,003
1,280
Balance, December 31, 2012
16,736,447 $
106,651
50 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. REVENUE
Equipment
Parts
Service
Rental and other
Total revenues
$
2012
598,671 $
641,605
186,400
39,338
2011
553,489
627,690
164,376
31,545
$ 1,466,014 $ 1,377,100
19. FINANCE COSTS
Interest on bank debt
Interest on finance leases
$
2012
3,782 $
660
Finance costs
$
4,442 $
2011
4,232
398
4,630
20. SHARE-BASED COMPENSATION PLANS
The Corporation has five share-based compensation plans: the Wajax Share Ownership Plan (“SOP”), the Deferred Share
Program (“DSP”), the Directors’ Deferred Share Unit Plan (“DDSUP”), the Mid-Term Incentive Plan for Senior Executives
(“MTIP”) and the Deferred Share Unit Plan (“DSUP”).
a) Share Rights Plans
Under the SOP, DSP and the DDSUP, rights are issued to the participants which, upon satisfaction of certain time and
performance vesting conditions, are settled by issuing Wajax Corporation shares for no cash consideration. Vested rights are
settled when the participant is no longer employed by the Corporation or one of its subsidiary entities or no longer sits on
its board.
Whenever dividends are paid on the Corporation’s shares, additional rights (dividend equivalents) with a value equal to the
dividends are credited to the participants’ accounts.
The Corporation recorded compensation cost of $738 (2011 – $957) in respect of these plans.
Share Rights Plans
Outstanding at beginning of year
Granted in the year – new grants
– dividend equivalents
Settled in the year
Outstanding at end of year
At December 31, 2012, 240,102 share rights were vested
(December 31, 2011 – 312,020).
The outstanding aggregate number of shares issuable to
satisfy entitlements under these plans is as follows:
2012
2011
Number
of Shares
Number
of Shares
Approved by shareholders
Exercised to date
Rights outstanding
1,050,000
(153,917)
(254,951)
1,050,000
(46,914)
(316,595)
Available for future grants
641,132
686,491
B) Cash-Settled Rights Plans
The MTIP and DSUP, which are settled in cash, consist
of an annual grant that vests over three years and is based
upon time and performance vesting criteria, a portion
of which is determined by the price of the Corporation’s
shares. Compensation expense varies with the price of the
December 31, 2012
December 31, 2011
Number
of Rights
Fair value at
time of grant
Number
of Rights
Fair value at
time of grant
316,595 $
27,231
18,129
(107,003)
4,908
1,304
–
(1,280)
273,960 $
21,137
21,498
–
4,133
775
–
–
254,952 $
4,932
316,595 $
4,908
Corporation’s shares and is recognized over the vesting
period. Vested DSUP rights are settled when the participant
is no longer employed by the Corporation or one of its
subsidiary entities. The Corporation recorded compensation
cost of $2,653 (2011 – $4,420) in respect of these plans.
The carrying amount of the share-based portion of these
liabilities was $2,444 (2011 – $8,272).
21. EMPLOYEE COSTS
Employee costs for the Corporation during the year
amounted to:
Wages and salaries, including bonuses $
Other benefits
Pension costs
– defined contribution plans
Pension costs
– defined benefit plans
Share-based payments expense
2012
2011
208,575 $
30,145
193,152
28,008
7,823
557
4,268
6,678
393
5,377
$
251,368 $
233,608
Wajax Corporation 2012 Annual Report 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. INCOME TAXES
Income tax expense comprises current and deferred tax
as follows:
Current
Deferred
– Origination and reversal
of temporary difference
– Change in tax law and rate
2012
$
44,353 $
2011
442
(20,621)
30
24,401
(1,164)
Income tax expense
$
23,762 $
23,679
The calculation of current tax is based on a combined
federal and provincial statutory income tax rate of 26.2%
(2011 – 27.7%). The tax rate for the current year is 1.5%
lower than 2011 due to the effect of the reduced statutory
tax rates. Deferred tax assets and liabilities are measured
at tax rates that are expected to apply to the period when
the asset is realized or the liability is settled. Deferred tax
assets and liabilities have been measured using an expected
average combined statutory income tax rate of 26.1% based
on the tax rates in years when the temporary differences are
expected to reverse.
The reconciliation of effective income tax is as follows:
Combined statutory income tax rate
Expected income tax
expense at statutory rates
Non-deductible expenses
Deferred tax related to
changes in tax law and rates
Other
$
2012
26.2%
2011
27.7%
$
23,502
548
24,233
621
30
(318)
(1,164)
(11)
Income tax expense
$
23,762 $
23,679
Recognized Deferred Tax Assets and Liabilities
Recognized deferred tax assets and liabilities and the movement in temporary differences during the year are as follows:
Recognized
Recognized
in other
Recognized
December 31
2011
in profit comprehensive on acquisition December 31
2012
income of businesses
or loss
Property, plant and equipment
Finance leases
Intangible assets
Accrued liabilities
Provisions
Derivative instruments
Employee benefits
Deferred financing costs
Partnership income not currently taxable
Tax loss carryforwards
$
(1,773)
(195)
(2,355)
5,249
2,504
56
1,752
(29)
(23,236)
333
(326)
312
(430)
(8)
(239)
–
(142)
110
21,343
(29)
Net deferred tax (liabilities) assets
$
(17,694)
20,591
–
–
–
–
–
(38)
251
–
–
–
213
– $
–
(188)
–
–
–
–
–
–
–
(2,099)
117
(2,973)
5,241
2,265
18
1,861
81
(1,893)
304
(188) $
2,922
Property, plant and equipment
Finance leases
Intangible assets
Accrued liabilities
Provisions
Derivative instruments
Employee benefits
Deferred financing costs
Partnership income not currently taxable
Tax loss carryforwards
December 31
2010
Recognized
Recognized
in other
in profit comprehensive December 31
2011
income
or loss
$
(1,418)
(147)
(2,052)
4,792
2,400
675
1,065
(38)
–
–
(355)
(48)
(303)
457
104
–
(198)
9
(23,236)
333
– $
–
–
–
–
(619)
885
–
–
–
(1,773)
(195)
(2,355)
5,249
2,504
56
1,752
(29)
(23,236)
333
Net deferred tax assets (liabilities)
$
5,277
(23,237)
266 $
(17,694)
52 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
2012
2011
The leverage ratio at the end of a particular quarter is
defined as funded net debt divided by trailing 12-month
EBITDA. Funded net debt includes bank debt, bank
indebtedness and obligations under finance leases, net of
cash. EBITDA is calculated as earnings before finance costs,
income tax expense, depreciation and amortization.
$
65,939 $
63,803
At December 31, 2012 the Corporation’s leverage ratio was
within its stated objective.
Numerator for basic and
diluted earnings per share:
– net earnings
Denominator for basic
earnings per share:
– weighted average shares
Denominator for diluted
earnings per share:
– weighted average shares
– effect of dilutive share rights
Denominator for diluted
earnings per share
Basic earnings per share
Diluted earnings per share
16,699,874
16,629,444
16,699,874
254,236
16,629,444
294,555
16,954,110
16,923,999
$
$
3.95 $
3.89 $
3.84
3.77
No share rights were excluded from the above calculations as
none were anti-dilutive.
24. CHANGES IN NON-CASH OPERATING WORKING CAPITAL
Trade and other receivables
Inventories
Prepaid expenses
Accounts payable
and accrued liabilities
Provisions
$
2012
(17,139) $
(39,035)
999
2011
(27,054)
(34,959)
(571)
(58,354)
(818)
39,833
2,498
Total
$
(114,347) $
(20,253)
25. CAPITAL MANAGEMENT
Objective
The Corporation defines its capital as the total of its
shareholders’ equity and bank debt and obligations under
finance leases (“interest bearing debt”). The Corporation’s
objective when managing capital is to have a capital structure
and capacity to support the Corporation’s operations and
strategic objectives set by the Board of Directors.
Management of Capital
The Corporation’s capital structure is managed such that
it maintains a relatively low leverage ratio, defined below,
as the Corporation pays dividends to shareholders equal
to a significant portion of its earnings. In addition, the
Corporation’s tolerance to interest rate risk decreases/
increases as the Corporation’s leverage ratio increases/
decreases. The Corporation’s objective is to maintain a
leverage ratio between 1.5 times and 2.0 times.
Although management currently believes the Corporation
has adequate debt capacity, the Corporation may have to
access the equity or debt markets, or temporarily reduce
dividends to accommodate any shortfalls in the Corporation’s
credit facilities or significant growth capital requirements.
There were no significant changes in the Corporation’s
approach to capital management during the year.
Restrictions on Capital
The Corporation’s interest bearing debt includes a $300,000
bank credit facility which expires August 12, 2016. The bank
credit facility contains the following covenants:
Borrowing capacity is dependent upon the level of the
Corporation’s inventories on-hand and the outstanding
trade accounts receivable (“borrowing base”). The
Corporation’s borrowing base was in excess of $300,000
at December 31, 2012 and, as a result, did not restrict the
borrowing capacity under the bank credit facility.
The Corporation’s interest coverage ratio, as defined under
the bank credit facility, must not be lower than three times.
The Corporation will be restricted from the declaration
of monthly cash dividends in the event the Corporation’s
leverage ratio, as defined under the bank credit facility,
exceeds three times.
At December 31, 2012, the Corporation was in compliance
with all covenants and there were no restrictions on the
declaration of monthly cash dividends.
Under the terms of the $300,000 bank credit facility, the
Corporation is permitted to have additional interest bearing
debt of $15,000. As such, the Corporation has up to $15,000
of demand inventory equipment financing capacity with
two-non bank lenders. The equipment notes payable under
the facilities bear floating rates of interest at margins over
Canadian dollar bankers’ acceptance yields and U.S. LIBOR
rates. Principal repayments are generally due the earlier
of 12 months from the date of financing and the date the
equipment is sold. At December 31, 2012, the Corporation
had no utilization of its interest bearing equipment
financing facilities.
Wajax Corporation 2012 Annual Report 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26. RELATED PARTY TRANSACTIONS
The Corporation’s related party transactions consist of the
compensation of directors and key management personnel
which is set out in the following table:
Salaries, bonus and other
short-term employee benefits
Defined benefit pension
Share-based compensation expense
$
2012
2011
4,533 $
545
2,819
5,790
335
5,032
Total compensation
$
7,897 $
11,157
27. ACQUISITION OF BUSINESSES
On October 22, 2012, the Industrial Components segment
acquired all of the issued and outstanding shares of ACE
Hydraulic Limited, a hydraulic cylinder repair business
located in Bathurst, New Brunswick with annual revenues of
approximately $2,000.
On December 31, 2012, the Industrial Components segment
acquired certain assets of Kaman Industrial Technologies,
a leading distributor of industrial parts in British
Columbia and southern Ontario with annual revenues of
approximately $21,000.
Recognized amounts of identifiable assets acquired and
liabilities assumed for both acquisitions are as follows:
Trade and other receivables
Inventories
Prepaid expenses
Property, plant and equipment
Accounts payable and accrued liabilities
Deferred taxes
Other liabilities
Obligations under finance leases
Tangible net assets acquired
Intangible assets
$
3,210
3,104
55
1,853
(1,853)
(188)
(302)
(205)
5,674
4,404
Consideration paid
$
10,078
The consideration paid is subject to post-closing adjustments
and therefore the purchase price equation is subject to change.
28. OPERATING SEGMENTS
The Corporation operates through a network of 128
branches in Canada in three core businesses which reflect
the internal organization and management structure
according to the nature of the products and services
provided. The Corporation’s three core businesses are: i)
the distribution, modification and servicing of equipment;
ii) the distribution, servicing and assembly of power
systems; and iii) the distribution, servicing and assembly of
industrial components.
54 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance is measured based on segment earnings before finance costs and income taxes, as included in the internal
management reports that are reviewed by the Corporation’s chief operating decision maker. Information regarding the results
of each reportable segment is shown below.
2012
Equipment
Parts
Service
Rental and other
Revenue
Equipment
Power
Industrial
Systems Components
Segment
Eliminations
and
Unallocated
Amounts
$
475,647 $
165,398
99,239
38,198
123,024 $
135,043
68,276
5,951
– $
341,164
18,885
–
– $
–
–
(4,811)
Total
598,671
641,605
186,400
39,338
$
778,482 $
332,294 $
360,049 $
(4,811) $ 1,466,014
Segment earnings before finance costs and income taxes
Corporate costs and eliminations
Earnings before finance costs and income taxes
Finance costs
Income tax expense
$
56,130 $
26,130 $
22,130 $
$
56,130
26,130
22,130
(10,247)
(10,247)
4,442
23,762
104,390
(10,247)
94,143
4,442
23,762
Net earnings
$
56,130 $
26,130 $
22,130 $
(38,451) $
65,939
Segment assets excluding intangible assets
Intangible assets
Corporate and other assets
$
315,499 $
145,444 $
121,045 $
$
21,845
14,488
51,333
2
2,206
581,988
87,668
2,206
Total assets
$
337,344 $
159,932 $
172,378 $
2,208 $
671,862
Segment liabilities
Corporate and other liabilities
Total liabilities
Asset additions
Rental equipment
Property, plant and equipment
Intangible assets
Asset depreciation
Rental equipment
Property, plant and equipment
Intangible assets
$
110,546 $
47,663 $
48,887 $
$
221,881
207,096
221,881
$
110,546 $
47,663 $
48,887 $
221,881 $
429,977
$
19,177 $
5,629
47
5,899 $
4,750
16
– $
– $
1,048
159
41
15
25,076
11,468
237
$
24,853 $
10,665 $
1,207 $
56 $
36,781
$
6,529 $
4,163
285
1,354 $
2,931
288
– $
– $
1,251
873
122
20
7,883
8,467
1,466
$
10,977 $
4,573 $
2,124 $
142 $
17,816
Wajax Corporation 2012 Annual Report 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2011
Equipment
Parts
Service
Rental and other
Revenue
Power
Industrial
Systems Components
Segment
Eliminations
and
Unallocated
Amounts
155,876 $
125,509
61,134
4,906
– $
328,993
18,545
–
– $
–
–
(3,703)
Total
553,489
627,690
164,376
31,545
$
Equipment
397,613
173,188
84,697
30,342
$
685,840
347,425 $
347,538 $
(3,703) $ 1,377,100
Segment earnings before finance costs and income taxes
Corporate costs and eliminations
Earnings before finance costs and income taxes
Finance costs
Income tax expense
$
50,193
32,915 $
23,106 $
$
50,193
32,915
23,106
(14,102)
(14,102)
4,630
23,679
106,214
(14,102)
92,112
4,630
23,679
Net earnings
$
50,193
32,915 $
23,106 $
(42,411) $
63,803
Segment assets excluding intangible assets
Intangible assets
Cash
Corporate and other assets
$
238,161
22,083
146,695 $
114,714 $
$
14,760
47,643
7
5,659
204
499,570
84,493
5,659
204
Total assets
$
260,244
161,455 $
162,357 $
5,870 $
589,926
Segment liabilities
Corporate and other liabilities
Total liabilities
Asset additions
Rental equipment
Property, plant and equipment
Intangible assets
Asset depreciation
Rental equipment
Property, plant and equipment
Intangible assets
$
144,762
69,787 $
45,969 $
$
101,822
260,518
101,822
$
144,762
69,787 $
45,969 $
101,822 $
362,340
$
15,495
6,108
495
4,682 $
3,459
–
– $
– $
1,200
156
132
13
20,177
10,899
664
$
22,098
8,141 $
1,356 $
145 $
31,740
$
4,129
3,968
43
709 $
– $
– $
2,122
225
1,234
927
117
21
4,838
7,441
1,216
$
8,140
3,056 $
2,161 $
138 $
13,495
Segment assets do not include assets associated with the corporate office, financing costs or income taxes. Additions to
corporate assets, and depreciation of these assets, are included in segment eliminations and unallocated amounts.
56 Wajax Corporation 2012 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF QUARTERLY DATA – UNAUDITED
(in millions of dollars, except per share data)
Revenue
Net earnings
Earnings per share – Basic
Earnings per share – Diluted
2012
2011
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
17.1
$ 358.1 $ 386.6 $ 356.4 $ 364.9 $ 303.9 $ 334.1 $ 361.9 $ 377.2
16.6
14.2
$ 1.03 $ 1.11 $ 0.97 $ 0.85 $ 0.77 $ 0.99 $ 1.08 $ 1.00
0.98
0.84
1.06
17.9
16.5
18.5
0.95
0.76
12.8
1.01
1.09
16.2
0.98
ELEVEN YEAR SUMMARY – UNAUDITED
For the years ended December 31 (in millions of dollars, except per share data) (2002 – 2009 reported under previous Canadian GAAP)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
Operating Results
Revenue*
Net earnings (loss)*
Finance costs
Cash flows from
operating activities
before changes in
non-cash operating
working capital*
Property, plant and
equipment – net
Rental equipment
expenditures – net
Depreciation and
amortization
$ 1,466.0 $ 1,377.1 $ 1,110.9 $ 1,007.2 $ 1,213.5 $ 1,192.3 $ 1,206.5 $ 1,049.4 $ 871.4 $ 884.0 $ 908.8
(25.8)
15.8
9.6
10.9
56.4
5.2
63.8
4.6
35.6
4.6
72.0
4.9
75.8
4.7
17.6
7.5
71.5
4.5
34.2
4.5
65.9
4.4
110.6 105.8
73.4
45.1
87.5
85.0
85.1
46.0
29.5
29.7
9.5
5.6
25.1
17.8
5.3
1.7
7.0
7.4
4.0
8.3
4.7
3.5
1.4
7.4
20.2
5.8
0.4
7.0
8.6
7.9
6.2
5.4
6.6
1.2
13.5
11.2
9.7
9.7
9.9
10.0
10.0
10.3
11.9
12.3
Per Share
Net earnings (loss) – Basic* $
Dividends declared
Distributions declared
Equity
3.95 $ 3.84 $ 3.39 $ 2.06 $ 4.57 $ 4.34 $ 4.31 $ 2.19 $ 1.12 $ 0.61 $
–
3.10
–
–
(1.64)
–
–
14.45 13.69 12.00 12.07 12.40 11.94 11.89 11.88 12.39 11.38 10.83
–
3.40
2.14
–
–
4.43
–
4.13
0.14
1.89
–
2.47
0.16
–
–
4.36
Financial Position
Working capital*
Rental equipment
Property, plant and
equipment – net
Long-term debt excluding
current portion
Shareholders’ equity
Total assets*
Other Information
Number of employees
Shares outstanding (000’s)
Price range of shares
High
Low
$ 230.1 $ 167.0 $ 77.9 $ 160.1 $ 198.8 $ 147.4 $ 147.8 $ 129.8 $ 153.0 $ 157.1 $ 155.0
14.5
16.2
28.1
15.8
18.9
21.8
16.4
21.7
17.2
16.4
43.7
50.7
47.9
43.3
36.2
33.6
29.5
33.3
29.0
28.8
31.9
37.4
59.0
151.7
98.4
241.9 227.6 199.3 200.4 205.7 198.1 197.2 197.1 195.0 178.7 170.0
671.9 589.9 522.5 448.2 529.6 468.2 500.6 437.9 418.1 409.7 442.0
79.5 116.2
79.8
53.9
59.0
70.9
33.4
–
2,833 2,738 2,382 2,291 2,662 2,551 2,566 2,387 2,357 2,279 2,308
16,736 16,629 16,629 16,603 16,585 16,585 16,585 16,582 15,739 15,697 15,697
$ 53.43 $ 44.94 $ 38.50 $ 23.40 $ 35.75 $ 37.95 $ 47.00 $ 32.45 $ 14.90 $ 8.25 $ 7.25
3.76
38.59 27.80 21.65 10.95 14.00 24.80 24.60 13.00
3.10
7.70
* 2006, 2005 and 2004 exclude discontinued operations
Wajax Corporation 2012 Annual Report 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE INFORMATION
Corporate Information
DIRECTORS
Paul E. Gagné
Chairman, Wajax Corporation
Corporate Director
Edward M. Barrett 1, 2
Chairman and Co-Chief Executive
Officer, Barrett Corporation
Ian A. Bourne 1, 3
Corporate Director
Douglas A. Carty 1, 2
Corporate Director
Brian M. Dyck
Senior Vice President,
Wajax Equipment
Richard M. G. Plain
Senior Vice President,
Wajax Power Systems
Adrian A. Trotman
Senior Vice President,
Wajax Industrial Components
Katie Hunter
Senior Vice President,
Human Resources
Robert P. Dexter, q.c. 2, 3
Chairman and Chief Executive Officer,
Maritime Travel Inc.
Linda J. Corbett
Treasurer
Andrew W. H. Tam
General Counsel and Secretary
HEAD OFFICE
3280 Wharton Way
Mississauga, ON L4X 2C5
Telephone: (905) 212-3300
Fax: (905) 212-3350
SHAREHOLDER INFORMATION
Transfer Agent and Registrar
For information relating to shareholdings,
dividends, lost certificates, changes of
address or estate transfers, please contact
our transfer agent:
Computershare Trust
Company of Canada
100 University Avenue, 9th Floor
Toronto, ON M5J 2Y1
Telephone: (514) 982-7555 or
1-800-564-6253
Fax: (514) 982-7635 or
1-888-453-0330
E-mail: services@computershare.com
Auditors
KPMG LLP
John C. Eby 1, 3
Corporate Director
A. Mark Foote
President and Chief Executive Officer,
Wajax Corporation
JD Hole 2, 3
Corporate Director
Alexander S. Taylor 2, 3
Senior Group Vice President, Oil, Gas
and Petrochemical Business Unit
ABB Inc.
1 Member of the Audit Committee
2 Member of the Human Resources
and Compensation Committee
3 Member of the Governance Committee
HONOURARY DIRECTOR
H. Gordon MacNeill
OFFICERS
A. Mark Foote
President and Chief Executive Officer
John J. Hamilton
Senior Vice President, Finance
and Chief Financial Officer
58 Wajax Corporation 2012 Annual Report
Exchange Listing
Toronto Stock Exchange
Symbol: WJX
Wajax Corporation Share
Trading Information
(January 1 – December 31, 2012)
Open
High
Volume
of Shares
Traded
Low Close
$39.09 $53.43 $38.59 $40.74 15,752,194
Quarterly Earnings Reports
Quarterly earnings for the balance of
2013 are anticipated to be announced on
May 10, August 9 and November 5.
2013 Dividend Dates
Monthly dividends are payable to
shareholders of record on the last
business day of each month and are
generally paid on the 20th day of the
following month or the next following
business day.
Investor Information
John Hamilton
Senior Vice President, Finance and
Chief Financial Officer
Telephone: (905) 212-3300
Fax: (905) 624-6020
E-mail: ir@wajax.com
To obtain a delayed share quote, read
news releases, listen to the latest analysts’
conference call, and stay abreast of other
Corporation news, visit our website at
www.wajax.com.
Annual Meeting
Shareholders are invited to attend the
Annual Meeting of Wajax Corporation,
to be held at the Sheraton Gateway
Hotel, Toronto International Airport,
Toronto, Ontario, on Friday, May 10,
2013, at 11:00 a.m.
Vous pouvez obtenir la version française
de ce rapport en écrivant à la Secrétaire,
Corporation Wajax
3280 Wharton Way
Mississauga, ON L4X 2C5
m
o
c
.
y
a
m
n
e
t
Operating Divisions and Branch Listings
OPERATING DIVISIONS
Wajax Equipment
30 – 26313 Township Road 531A
Acheson, Alberta T7X 5A3
Brian Dyck,
Senior Vice President,
Wajax Equipment
Wajax Power Systems
10025 – 51st Avenue
Edmonton, Alberta T6E 0A8
Richard Plain,
Senior Vice President,
Wajax Power Systems
Wajax Industrial Components
2200 52nd Avenue
Lachine, Québec H8T 2Y3
Adrian Trotman,
Senior Vice President,
Wajax Industrial Components
BRANCH LISTINGS
Wajax Equipment
Wajax Power Systems
Wajax Industrial Components
West
Fort St. John, BC
Calgary, AB
Edmonton, AB
Fort McMurray, AB
Grande Prairie, AB
Red Deer, AB
Redcliff, AB
Regina, SK
Saskatoon, SK
Winnipeg, MB
Central
Concord, ON
Cornwall, ON
Hamilton, ON
London, ON
Niagara Falls, ON
Ottawa, ON
Pembroke, ON
Sudbury, ON
Thunder Bay, ON
Timmins, ON
Toronto, ON
East
Dorval, QC
Drummondville, QC
Québec City, QC
Val d’Or, QC
Moncton, NB
Dartmouth, NS
Mount Pearl, NL
West
Cranbrook, BC
Delta, BC
Fort St. John, BC
Prince George, BC (2)
Sparwood, BC
Surrey, BC (2)
Terrace, BC
Calgary, AB
Edmonton, AB
Nisku, AB
Regina, SK
Saskatoon, SK
Flin Flon, MB
Thompson, MB
Winnipeg, MB
Yellowknife, NW
Central
Belleville, ON
Concord, ON
Espanola, ON
Guelph, ON
Kapuskasing, ON
London, ON
Mississauga, ON (2)
Sarnia, ON
Sault Ste. Marie, ON
Stoney Creek, ON
Sudbury, ON
Thunder Bay, ON (2)
Timmins, ON
Windsor, ON
Temiscaming, QC
East
Ottawa, ON
Chicoutimi, QC
Drummondville, QC
Granby, QC
Lachine, QC
LaSalle, QC
Laval, QC
Longueuil, QC
Noranda, QC
Québec City, QC
Rimouski, QC
Sept-Iles, QC
Sherbrooke, QC
Thetford Mines, QC
Tracy, QC
Trois-Rivières, QC
Val d’Or, QC
Valleyfield, QC
Ville d’Anjou, QC
Bathurst, NB (2)
Edmundston, NB
Moncton, NB
Charlottetown, PEI
Dartmouth, NS
Port Hawkesbury, NS
Stellarton, NS
Corner Brook, NL
Mount Pearl, NL
Wabush, NL
West
Genelle, BC
Kamloops, BC
Langley, BC
Nanaimo, BC
Prince George, BC
Sparwood, BC
Tumbler Ridge, BC
Blackfalds, AB
Calgary, AB
Clairmont, AB
Edmonton, AB (2)
Fort McKay, AB
Fort McMurray, AB (2)
Saskatoon, SK
Winnipeg, MB
Central
Hamilton, ON
Kitchener, ON
London, ON
Mississauga, ON
Ottawa, ON
Sudbury, ON
Thunder Bay, ON
Timmins, ON
Windsor, ON
East
Chambly, QC
Laval, QC
Québec City, QC
St-Félicien, QC
Moncton, NB
Dartmouth, NS
Mount Pearl, NL
Pasadena, NL
Wabush, NL
3280 Wharton Way
Mississauga, ON L4X 2C5
Telephone: (905) 212-3300
Fax: (905) 212-3350
www.wajax.com