VANCOUVER, British Columbia, Feb. 06, 2018 — Finning International Inc. (TSX:FTT) (â€œFinningâ€� or the â€œCompanyâ€�) reported fourth quarter and annual 2017 results today. All monetary amounts are in Canadian dollars unless otherwise stated.
Q4 2017 HIGHLIGHTSQ4 2017 EPS(1) of $0.39 per share included severance costs of $0.03 mostly offset by insurance proceeds related to Alberta wildfires of $0.02. Q4 2017 Adjusted EPS(2)(3) was $0.40, a 43% increase from Q4 2016 on 16% higher revenues.Canada achieved an EBIT(1) margin of 7.7% in Q4 2017. Excluding significant items that management does not consider indicative of operational and financial trends in both years(2)(3), Canadaâ€™s Adjusted EBIT(2)(3) increased by 45% on 19% higher revenue and Adjusted EBIT margin(2)(3) was up 140 basis points from Q4 2016.South America reported the highest quarterly product support revenues over the last two years, up 14% in functional currency from Q4 2016.Inventory turns improved by 9% from Q3 2017 to 2.83 times, the highest level over the last five years. Equipment backlog(2) increased to $1.3 billion in Q4 2017 to the highest level since Q1 2014, reflecting improved order intake(2) in all regions.2017 ANNUAL HIGHLIGHTSBasic EPS was $1.31 in 2017 compared to $0.38 in 2016. Excluding significant items that management does not consider indicative of operational and financial trends in both years(2)(3), Adjusted EPS rose by 55% from 2016 on an 11% increase in revenue.The Company demonstrated cost discipline while growing revenue. Excluding the impact in SG&A of the significant items detailed on pages 4 and 5 of the Companyâ€™s Managementâ€™s Discussion and Analysis (â€œMD&Aâ€�), 2017 SG&A costs increased by only 4% while revenue grew by 11% from 2016, and SG&A as a percentage of revenue decreased by 140 basis points from 2016.Higher earnings and improved capital efficiency drove a significant increase in ROIC(1)(2) in all regions compared to 2016.Working capital to sales ratio(2) improved by 330 basis points and inventory turns(2) were up 14% from 2016, despite higher inventory levels to meet stronger demand.Annual free cash flow(2) was $165 million.â€œIn 2017, we delivered significantly improved financial performance, driven by strong operating leverage and capital discipline. I am pleased with our ability to control costs and improve working capital efficiencies as we continue to capitalize on strengthening market activity and support our customers in a highly competitive environment. The operational improvements implemented across the organization combined with the strong execution of our strategic priorities have enabled us to generate significantly higher return on invested capital and solid free cash flow in 2017,â€� said Scott Thomson, President and CEO of Finning.â€œLooking ahead, we expect current momentum in market activity to continue into 2018. We are focused on generating earnings leverage while investing in growth opportunities and long-term strategic initiatives to enhance our customerâ€™s experience. Continued progress on optimizing our global supply chain is expected to drive further working capital efficiencies and support positive annual free cash flow in 2018. We remain committed to improving our return on invested capital.â€� concluded Mr. Thomson.
Q4 2017 FINANCIAL SUMMARYIncluded in Q4 2017 and Q4 2016 results are the following significant items that management does not consider indicative of operational and financial trends either by nature or amount. These significant items are summarized below and described in more detail on page 19 of the Companyâ€™s MD&A.
Revenue in Q4 2017 was up 16% from Q4 2016, with increases in all regions, lines of business, and key market segments. New equipment sales increased by 27%, driven primarily by improved activity in the construction and power systems markets. Product support revenue grew by 10%, and was higher in all regions and market segments.Gross profit rose by 15% over Q4 2016. Gross profit margin of 25.1% was slightly below gross profit margin of 25.4% in Q4 2016 due to a shift in revenue mix to new equipment sales.Adjusted EBIT was up 58% from Q4 2016 to $113 million on a 16% increase in revenue, reflecting leverage of incremental revenues on fixed costs. Excluding significant items summarized on page 2, SG&A(1) as a percentage of revenue declined by 190 basis points from Q4 2016. Adjusted EBIT margin improved to 6.5% from 4.8% in Q4 2016.Adjusted EPS was $0.40 per share, up 43% from $0.28 per share in Q4 2016. Severance costs in Canada and South America of $0.03 per share were partly offset by insurance proceeds of $0.02 per share related to the business interruption impact of the 2016 Alberta wildfires.Q4 2017 free cash flow was $350 million compared to $113 million in Q4 2016, driven by an increase in earnings, higher collections, and higher supplier payables associated with improved market conditions.Excluding the impact of foreign exchange, invested capital was up by $85 million from Q4 2016 mostly due to an increase in accounts receivable associated with higher sales, and higher parts inventory to meet stronger demand.Capital efficiency metrics showed substantial improvement from Q4 2016 on higher sales, increased supply chain efficiencies, and capital discipline.Q4 2017 Adjusted ROIC increased significantly in all regions compared to Q4 2016 Adjusted ROIC, driven by higher profitability and improved invested capital turnover.Q4 2017 HIGHLIGHTS BY OPERATION
All comparisons are to Q4 2016 unless otherwise stated.CanadaRevenues increased by 19%, with higher revenues in all lines of business. New equipment sales were up 32%, driven by improved activity in the construction and power systems markets. Product support revenues grew by 12%, with stronger parts volumes in the construction sectors and increased component rebuild activity in mining. Used and rental equipment revenues were up 31% and 14%, respectively, reflecting stronger activity in the general construction markets and the integrated go-to-market offerings of new, used, and rental equipment.Adjusted EBIT increased by 45% to $65 million, driven by strong leverage of incremental revenues on fixed costs. Excluding significant items, SG&A as a percentage of revenue declined by 310 basis points from Q4 2016. As a result, Adjusted EBIT margin of 7.6% was up from 6.2% in Q4 2016, despite a shift in revenue mix to new equipment sales and a highly competitive pricing environment.South AmericaRevenues were up 10% (up 15% in functional currency, U.S. dollar), representing the highest quarterly revenues over the last two years. New equipment sales grew by 21% in functional currency, driven by improvements in the construction and mining markets. Product support revenues rose by 14% in functional currency, reflecting improved demand from the Chilean mining customers.Adjusted EBIT increased by 41% to $52 million on stronger revenues and tight cost control. Adjusted EBIT margin was 9.0%, up from 7.0% in Q4 2016. United Kingdom & IrelandRevenues increased by 22% (up 20% in functional currency, U.K. pound sterling). A new equipment sales increase of 31% in functional currency was driven by robust activity in general construction and electric power generation markets. Product support revenues increased by 6% in functional currency, on higher parts sales in construction, marine, and electric power segments.EBIT was $12 million and EBIT margin was 4.0%, up from Q4 2016 EBIT of $8 million and EBIT margin of 3.3%, due to higher gross profit margin and cost control.CORPORATE AND BUSINESS DEVELOPMENTSDividend
The Board of Directors has approved a quarterly dividend of $0.19 per share, payable on March 8, 2018 to shareholders of record on February 22, 2018. This dividend will be considered an eligible dividend for Canadian income tax purposes.
SELECTED CONSOLIDATED FINANCIAL INFORMATIONTo download Finning's complete Q4 and annual 2017 results in PDF, please open the following link: http://resource.globenewswire.com/Resource/Download/cd09602c-c08b-406d-9b19-37044e1bb341Q4 2017 INVESTOR CALL
The Company will hold an investor call on February 6 at 10:00 am Eastern Time. Dial-in numbers: 1-800-319-4610 (Canada and US), 1-416-915-3239 (Toronto area), 1-604-638-5340 (international). The call will be webcast live and archived for three months at http://www.finning.com/en_CA/company/investors.html. Finning no longer provides a phone playback recording; please use the webcast to access the archived call.About Finning
Finning International Inc. (TSX:FTT) is the worldâ€™s largest Caterpillar equipment dealer delivering unrivalled service to customers for 85 years. Finning sells, rents, and provides parts and service for equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in Western Canada, Chile, Argentina, Bolivia, the United Kingdom and Ireland.Contact information
Vice President, Investor Relations and Corporate Affairs
Phone: (604) 331-4934
Email: [email protected]
www.finning.comFootnotesEarnings Before Finance Costs and Income Taxes (EBIT); Basic Earnings per Share (EPS); Earnings Before Finance Costs, Income Taxes, Depreciation and Amortization (EBITDA); Selling, General & Administrative Expenses (SG&A); Return on Invested Capital (ROIC).These financial metrics, referred to as â€œnon-GAAP financial measuresâ€� do not have a standardized meaning under International Financial Reporting Standards (IFRS), which are also referred to herein as Generally Accepted Accounting Principles (GAAP), and therefore may not be comparable to similar measures presented by other issuers. For additional information regarding these financial metrics, including definitions and reconciliations from each of these non-GAAP financial measures to their most directly comparable measure under GAAP, where available, see the heading â€œDescription of Non-GAAP Financial Measures and Reconciliationsâ€� in the Companyâ€™s MD&A. Management believes that providing certain non-GAAP financial measures provides users of the Companyâ€™s consolidated financial statements with important information regarding the operational performance and related trends of the Company's business. By considering these measures in combination with the comparable IFRS measures set out in the Companyâ€™s MD&A, management believes that users are provided a better overall understanding of the Company's business and its financial performance during the relevant period than if they simply considered the IFRS measures alone.Certain 2017 and 2016 financial metrics were impacted by significant items management does not consider indicative of operational and financial trends either by nature or amount; these significant items are described on pages 40 to 43 of the Companyâ€™s MD&A. The financial metrics which have been adjusted to take into account these items are referred to as â€œAdjustedâ€� metrics.Forward-Looking Disclaimer
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