Strongco Announces Substantial Increases in Fourth Quarter and Full Year 2011 Results
Summary of 12-month Results for 2011(i) - Revenues increased by 44% to $423.2 million - National market share improved year over year - Gross margin increased by 42% to $80.6 million - EBITDA increased to $43.1 million from $24.2 million - Net earnings totalled $9.9 million vs net loss of $0.9 million - EPS of $0.76 compared to a net loss of $0.08 per share (i) Comparisons are between full year 2011 and full year 2010
(firmenpresse) - MISSISSAUGA, ONTARIO -- (Marketwire) -- 03/22/12 -- Strongco Corporation (TSX: SQP) today released financial results for the fourth quarter and year ended December 31, 2011.
"We are pleased with Strongco's performance during 2011," said Robert Dryburgh, President and Chief Executive Officer. "Our results were far ahead of 2010 in every major category - revenues, margins, EBITDA, net earnings and EPS. In addition, our acquisition of Chadwick-Baross Inc. in February 2011 plus the new branches, facility upgrades and brand expansion we announced during the year position Strongco for continued, sustainable growth."
During 2011 the strengthening Canadian economy increased construction activity and resulting demand for heavy equipment, plus parts, service and rentals provided by Strongco at key locations across Canada. The gain was fuelled by the recovering commercial construction market, infrastructure spending and increased activity in the oil and gas and mining sectors.
Rising economic activity in Canada fuelled a 35% increase in the heavy equipment market, other than cranes, in the markets that Strongco serves. Strongco outperformed the market, with total unit volume up more than 40% during the year.
"This is the second consecutive year we have increased national market share," Mr. Dryburgh noted. "Strongco's order book continued at a strong level throughout 2011 and remains robust in the first quarter of 2012. This is a solid leading indicator of demand as we proceed into the main selling season this year."
Fourth Quarter 2011 Review
Revenues in the three months ended December 31, 2011 totalled $113.2 million, an increase of $21.4 million, or 23% from the fourth quarter of 2010. The acquisition of Chadwick-BaRoss in February contributed $15.7 million of the increase. "Strongco's revenues in the fourth quarter reflect continued high demand in all regions and revenue categories in Canada, combined with a solid performance from Chadwick-BaRoss in the northeastern U.S.," said David Wood, Vice President and Chief Financial Officer.
Equipment sales increased by 20% from the fourth quarter of 2010 to $74.5 million. Most of the gain was from Chadwick-BaRoss but revenues were also up in Canada. The increase in Canada was powered by a significant volume of rental purchase option ("RPO") contracts being converted to sales in the quarter, especially in Alberta and Quebec. Rental activity, which has been strong all year, remained high in the fourth quarter. Strongco's rental revenues were $8.9 million including $1.3 million from Chadwick-BaRoss, which was up 22% from the fourth quarter of 2010. Product support revenues, comprising parts and service, gained 33% or $7.4 million to $29.8 million. Product support revenues from Chadwick-BaRoss were $4.3 million in the quarter.
Gross margin increased to $20.8 million from $16.4 million during the fourth quarter. As a percentage of revenue, gross margin increased to 18.4% from 17.8% in the same period of 2010.
Administrative, distribution and selling expenses during the fourth quarter totalled $17.0 million, compared to $13.5 million in the final quarter of 2010. Most of the increase relates to expenses of the newly acquired Chadwick-BaRoss operation, which amounted to $2.2 million in the quarter. In addition, with the stronger results, $1.6 million was accrued in the fourth quarter for anticipated payments under the Company's annual incentive plans for a wide range of employees and the newly approved long-term incentive plan for senior managers.
EBITDA for the fourth quarter increased to $12.5 million from $10.3 million a year earlier.
Strongco's net income in the fourth quarter of 2011 was $2.1 million ($0.15 per share), compared to $1.7 million ($0.17 per share) in the fourth quarter of 2010. The difference in EPS is largely accounted for by an increase in outstanding equity, to 13.1 million shares at December 31, 2011, versus 10.5 million at the same time in 2010.
Fiscal 2011 Financial Review
Revenues for 2011 totalled $423.1 million, including $46.6 million from Chadwick-BaRoss, which compared to $294.7 million in 2010.
Strongco's equipment sales in 2011 increased by $92.2 million or 50%, to $275.9 million. Chadwick-BaRoss equipment sales were $26.9 million for the 11 months from the date of acquisition in February. Rental revenues were $29.6 million, an increase of $7.4 million or 33% from 2010. Chadwick-BaRoss contributed $3.6 million and rental activity in Canada was higher as construction markets gained momentum, especially rentals under RPO contracts. For the year, Strongco's product support revenues, comprising sales of parts and service, advanced $28.9 million or 33% to $117.7 million. Product support revenues from Chadwick-BaRoss were $16.1 million.
Gross margin in 2011 was $80.6 million, up 42.3% or $24.0 million over the prior year. The acquisition of Chadwick-BaRoss contributed $10.4 million of the increase, as gross margin in Canada moved up by $13.5 million. Gross margin as a percentage of revenue was consistent with the prior year at 19.1%.
Administrative, distribution and selling expenses in 2011 increased by 20.9% to $64.7 million. The change reflects 11 months of costs of the newly acquired Chadwick-BaRoss unit from its acquisition in February 2011, plus incremental expenses for annual and long-term incentives and other employee bonuses. Expenses were 15.3% of revenues, an improvement from 18.2% in 2010.
The Company's enhanced operating profitability is reflected in EBITDA, which surged to $43.1 million from $24.2 million in 2010.
Strongco ended the year with net income of $9.9 million or $0.76 per share, compared with a net loss of $0.9 million or $0.08 per share in 2010.
Outlook
The Canadian economy in general and construction markets across Canada are expected to continue to improve throughout 2012, which should result in strong demand for heavy equipment.
Mild weather conditions have affected equipment usage in much of the country and significantly curtailed oilfield activities in northern Alberta. In addition, the Ontario government has announced a slowdown in infrastructure activity. These factors have tempered demand for heavy equipment and product support in the first quarter of 2012. As a result, revenue growth in the first quarter of 2012 may also be moderated, but backlogs in the early part of the year remain strong and growing.
An important contribution to anticipated growth in 2012 is expected from Alberta. Oil prices have continued to show strength and stability, which has powered an ongoing economic upturn in the province. In particular, the outlook for northern Alberta and the oil sands is for continued significant investment over the next several years, which bodes well for heavy equipment demand in the region.
Equipment suppliers are expected to improve product availability and delivery lead times in 2012. Inventory levels at Strongco were allowed to run slightly higher than normal at year end to ensure availability of product as the Company enters the prime selling season. Consequently, product availability is not expected to affect the Company's sales in 2012. Strongco's significant position with its equipment suppliers should allow the Company to optimize equipment deliveries.
Management remains cautiously optimistic that the improving Canadian economy in 2011 will continue in 2012, which is expected to increase revenues. In addition, while market conditions in the northeastern United States were weak, Chadwick-BaRoss realized modest growth in 2011 and contributed positively to Strongco's overall results. Chadwick-BaRoss services a broad range of market sectors in Maine, New Hampshire and Massachusetts. Demand for equipment in these regions is expected to show a modest increase in 2012, which should contribute to improved revenue and profitability in 2012.
Conference Call Details
Strongco will hold a conference call on Thursday, March 22, 2012 at 10 am ET to discuss fourth quarter and year end results. Analysts and investors can participate by dialing 416-644-3415 or toll free 1-877-974-0445. An archived audio recording will be available until midnight on April 5, 2012. To access it, dial 416-640-1917 and enter passcode 4523113#.
About Strongco Corporation
Strongco Corporation is one of Canada's largest multiline mobile equipment dealers and operates in the Northeast United States through Chadwick-BaRoss, Inc. Strongco sells, rents and services equipment used in sectors such as construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. Strongco has approximately 640 employees servicing customers from 25 branches in Canada and five in the United States. Strongco represents leading equipment manufacturers with globally recognized brands, including Volvo Construction Equipment, Case Construction, Manitowoc Crane, National, Grove, Terex Cedarapids, Terex Finlay, Ponsse, Fassi, Allied Construction, Taylor, ESCO, Dressta, Sennebogen, Jekko, Takeuchi, Doppstadt, Link-Belt and Kawasaki. Strongco is listed on the Toronto Stock Exchange under the symbol SQP.
Forward-Looking Statements
This news release contains "forward-looking" statements within the meaning of applicable securities legislation which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Strongco or industry results, to be materially different from any future results, events, expectations, performance or achievements expressed or implied by such forward-looking statements. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. Forward-looking statements typically contain words or phrases such as "may", "outlook", "objective", "intend", "estimate", "anticipate", "should", "could", "would", "will", "expect", "believe", "plan" and other similar terminology suggesting future outcomes or events. This news release contains forward-looking statements relating to the expected trading of common shares of Strongco on the TSX, and such statements are based upon the expectations of management.
Information Contact
Strongco Corporation
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 Strongco Corporation, formerly Strongco Income Fund ("the Fund"), Strongco GP Inc. and Strongco Limited Partnership collectively referred to as "Strongco" or "the Company", as at and for the year ended December 31, 2011. This discussion and analysis should be read in conjunction with the accompanying audited consolidated financial statements as at and for the year ended December 31, 2011. For additional information and details, readers are referred to the Company's quarterly unaudited consolidated financial statements and quarterly MD&A for fiscal 2011 and fiscal 2010 as well as the Company's Notice of Annual Meeting of Unitholders and Information Circular ("IC") dated April 20, 2011, and the Company's Annual Information Form ("AIF") dated March 30, 2011, all of which are published separately and are available on SEDAR at .
Unless otherwise indicated, all financial information within this discussion and analysis is in millions of Canadian dollars except per share amounts. The information in this MD&A is current to March 20, 2012.
FINANCIAL HIGHLIGHTS
Note 1 -2009 income statement figures reflect Canadian Generally Accepted Accounting Principles ("GAAP") before the adoption of International Financial Reporting Standards ("IFRS"); 2009 balance sheet figures include the impact of changes related to the adoption of IFRS.
Note 2 - "EBITDA" refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. EBITDA is presented as a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not a measure of financial performance or earnings recognized under International Financial Reporting Standards ("IFRS") and therefore has no standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other similar issuers. The Company's management believes that EBITDA is an important supplemental measure in evaluating the Company's performance and in determining whether to invest in Shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as indicators of the Company's performance or to cash flows from operating, investing and financing activities as measures of the Company's liquidity and cash flows.
COMPANY OVERVIEW
Strongco is one of the largest multi-line mobile equipment distributors in Canada. In February 2011, Strongco acquired 100% of the shares of Chadwick-BaRoss, Inc., a multi-line distributor of mobile construction equipment in the New England region of the United States, (see discussion below under the heading "Acquisition of Chadwick-BaRoss, Inc."). Strongco sells and rents new and used equipment and provides after-sale product support (parts and service) to customers that operate in infrastructure, construction, mining, oil and gas exploration, forestry and industrial markets. This business distributes numerous equipment lines in various geographic territories. The primary lines distributed include those manufactured by:
The distribution agreements with Volvo and Case provide exclusive rights to distribute the products manufactured by these companies in specific regions and/or provinces. In addition to the above noted primary lines, Strongco also distributes several other ancillary or complementary equipment lines and attachments.
CONVERSION TO A CORPORATION
The Fund was an unincorporated, open-ended, limited purpose trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated March 21, 2005 as amended and restated on April 28, 2005 and September 1, 2006.
Pursuant to a plan of arrangement approved by the unitholders at the Fund's Annual and Special Meeting on May 14, 2010, the Fund was converted to a corporation effective July 1, 2010. The conversion involved the incorporation of Strongco Corporation, which issued shares to the unitholders in exchange for the units of the Fund on a one for one basis so that the unitholders became shareholders in Strongco Corporation, after which the Fund was wound up into Strongco Corporation.
Following the conversion on July 1, 2010, Strongco Corporation has carried on the business of the Fund unchanged except that Strongco Corporation is subject to taxation as a corporation. The results of operations, balance sheet and cash flow figures presented in the following MD&A for comparative periods prior to July 1, 2010 reflect those of the Fund. References in this MD&A to shares and shareholders of the Company are comparable to units and unitholders previously under the Fund.
Details of the conversion are outlined in the Fund's Management Information Circular dated April 6, 2010, which contains the Plan of Arrangement, available on SEDAR at .
FINANCIAL RESULTS - ANNUAL
Consolidated Results of Operations
Note 1 -2009 income statement figures reflect Canadian GAAP before the adoption of International Financial Reporting Standards ("IFRS"); 2009 balance sheet figures include the impact of changes related to the adoption of IFRS.
Note 2 - "EBITDA" refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. EBITDA is presented as a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not a measure of financial performance or earnings recognized under International Financial Reporting Standards ("IFRS") and therefore has no standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other similar issuers. The Company's management believes that EBITDA is an important supplemental measure in evaluating the Company's performance and in determining whether to invest in Shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as indicators of the Company's performance or to cash flows from operating, investing and financing activities as measures of the Company's liquidity and cash flows.
Acquisition of Chadwick-BaRoss, Inc.
On February 17, 2011, the Company completed the acquisition of 100% of the shares of Chadwick -BaRoss, Inc. ("Chadwick-BaRoss") for net proceeds of US$11.1 million. The transaction value was satisfied with net cash proceeds of US$9.2 million and notes issued to the major shareholders of Chadwick-BaRoss totalling US$1.9 million. Chadwick-BaRoss is a heavy equipment dealer headquartered in Westbrook, Maine, with three branches in Maine and one in each of New Hampshire and Massachusetts. The acquisition was effective as of February 1, 2011 and the results of Chadwick-BaRoss have been included in the consolidated results of Strongco from that date.
Market Overview
Strongco participates in number of geographic regions and in a wide range of end use markets that utilize heavy equipment and which may have differing economic cycles. Construction markets generally follow the cycles of the broader economy, but typically lag by periods ranging up to 12 months. As construction markets recover following a recession, demand for heavy equipment normally improves as construction activity and confidence in construction markets build. In addition, as the financial resources of customers strengthen, they have historically replenished and upgraded their equipment fleets after a period of restrained capital expenditures. Demand in oil and gas and mining markets is affected by the economy but also tends to be driven by the global demand and pricing of the relevant commodities. Recovery in equipment markets is normally first evident in equipment used in earth moving applications and followed by cranes, which are typically utilized in later phases of construction. Cranes are also extensively utilized in the oil and gas sector. Rental of heavy equipment is typically stronger following a recession until confidence is restored and financial resources of customers improve.
While the economic recession that persisted throughout most of 2009 was officially over in Canada in 2010, construction markets remained weak in the first quarter of 2010. With the onset of warmer spring weather and spurred by government stimulus spending for infrastructure projects, construction activity began to show signs of improvement in the third quarter of 2010. This improvement continued in the fourth quarter of 2010 as confidence in the economy increased. Correspondingly, demand for new heavy equipment was soft in the first quarter of 2010 but started to improve late in the second quarter and continued to strengthen in the third and fourth quarters of 2010. While construction markets and demand for heavy equipment were improving, many customers remained reluctant or lacked the financial resources following the recession to commit to purchase new construction equipment and instead rented to meet their equipment needs in the first half of 2010. That trend continued in the second half of 2010, but with confidence in the economy continuing to rise, construction activity increasing, and activity in the oil patch in Alberta increasing, customers were more willing to purchase equipment and exercise purchase options under rental purchase option contracts ("RPO's") in the fourth quarter of 2010. Recovery was first evident in the markets for compact and lower priced equipment while demand for larger higher priced equipment was slower to recover. In particular, the market for cranes remained weak in the first and second quarters of 2010 but started to show improvement in the latter half of the year. Strongco's sales backlogs for all categories of equipment, including cranes, improved steadily during the first and second quarters of 2010 and remained strong through the balance of the year and into 2011.
With continuing strength in the Canadian economy, construction activity and demand for heavy equipment remained strong in 2011. Significant projects for hydro-electric facilities, road construction and bridge repair and other infrastructure improvements initiated in 2010 and 2011 also increased demand for heavy equipment. In addition, with continued strength in the oil sector, activity in and around Alberta's oil sands has been robust, resulting in increased demand for heavy equipment. While customer s have been more confident and willing to purchase equipment in 2011, rental activity, especially under RPO's, also remained strong. With the increasing demand for heavy equipment, sales backlogs in Canada continued to show strength in 2011.
While the economy and demand for equipment have been improving in Canada, there has been little recovery in heavy equipment markets in the United States due to continued weak economic conditions. Residential construction has been a major driver of the US economy and heavy equipment markets in the past. However, current housing activity in most states remains depressed and this situation continues to negatively affect demand for heavy equipment. Certain market segments, however, such as waste management and scrap handling, have experienced continued activity and generated demand for heavy equipment in the northeastern US. In addition, while sales of new equipment have not shown significant growth, parts and service activity in New England has remained fairly strong as customers repaired rather than replaced their fleets.
In response to the weak global economic conditions and the recession in the United States in particular, original equipment manufacturers ("OEM's") scaled back production capacity starting in 2009. As demand in Canada and certain other countries around the world has been increasing, OEM's have been challenged to bring production capacity and supply lines back on line at the same pace. This resulted in longer delivery lead times and reduced availability of equipment in 2011. OEM production levels are improving, but delivery lead times for new equipment have remained stretched in 2011. This has benefitted dealers carrying higher levels of older equipment inventories. In addition, the scheduled transition from tier 3 engines to the new lower-emission tier 4 technology has affected supply and increased demand for equipment with tier 3 engines.
The tsunami and nuclear disaster in Japan early in 2011 affected production and supply of certain brands and types of equipment manufactured in Japan. In addition, supply of certain parts from Japan for equipment manufactured in other parts of the world has also been affected by the crisis. During 2011, Strongco was not severely impacted by this disaster as the vast majority of the equipment it distributes is manufactured outside of Japan. However, parts shortages from Japan have impacted production schedules and could affect equipment availability in the future.
Revenues
A breakdown of revenue for the years ended December 31, 2011, 2010 and 2009 is as follows:
Equipment Sales
Strongco's equipment sales for the year ended December 31, 2011 were $275.9 million which was up $92.2 million or 50% from $183.7 million in 2010. The acquisition of Chadwick-BaRoss in February 2011 accounted for $26.9 million of the sales increase while sales in Canada increased by $65.3 million or 36% in the year. Sales were up in all regions of Canada, with the largest increase in Western Canada.
To view Figure 1, please visit the following link: .
While the Canadian economy fell into a recession in the early part of 2009 that lasted for most of the year, sales in the first quarter of 2009 were partially sustained from the fairly robust backlogs that existed at the end of 2008. However, as construction markets in Canada declined significantly during the recession, Strongco's equipment sales concurrently fell in all regions of the country through the balance of 2009. Total unit volumes in the markets Strongco serves were estimated to be down on average approximately 50% in 2009 with some regions experiencing declines of close to 80%. These conditions contributed to a decline in Strongco's equipment sales of 35% in 2009.
In 2010, as the recession abated, construction markets in Canada slowly began to recover. However, in the immediate post- recession environment, order backlogs were low. Demand for heavy equipment remained weak until late in the second quarter as many customers remained reluctant or lacked financial resources following the recession to make significant equipment purchases. Recovery in demand for compact equipment was much faster than for larger, more expensive units. Strongco's sales pattern in 2010 followed the same recovery trend, with sales increasing each quarter through the year as construction markets and demand for heavy equipment recovered following the recession. The traditional seasonality for equipment sales normally results in sales in the third quarter, when contractors are typically working on projects, being less than sales in the second quarter, when customers tend to be buying in anticipation of summer work. This trend was present in the marketplace in 2010. While Strongco's sales in the first and second quarters fell short of 2009, sales in the latter half of 2010 were well ahead of the prior year and increased despite the seasonal downturn in the third quarter. For the full year, Strongco's equipment sales were flat compared to 2009 at $183.7 million.
Price competition was aggressive in the first and second quarters of 2010 as many equipment dealers were carrying excess levels of aging inventory and large amounts of equipment coming off rent following the recession. This contributed to a decline in Strongco's market share in the first half of the year. As market demand for equipment increased, excess inventory levels were reduced, and with improved sales execution, Strongco's market share improved through the latter half of 2010 and at year end had recovered to levels consistent with the prior year.
Average selling prices vary from period to period depending on sales mix between product categories, model mix within product categories and features and attachments included in equipment being sold. While average selling prices in 2010 remained below pre-recession levels, Strongco's average selling prices increased during the year across most product categories as customer confidence grew and willingness increased to purchase larger, higher price equipment (such as cranes, articulated trucks and large loaders). In addition, the ongoing strength of the Canadian dollar and increased price competition also contributed to lower average selling prices in 2010.
The recovery evident in the latter half of 2010 continued into 2011. Improving economic conditions, continued recovery in construction markets, higher infrastructure spending and increased activity in oil and gas and mining sectors in Canada all resulted in stronger demand for heavy equipment. Demand for heavy equipment varied across the country and between product categories. On a national basis the markets for heavy equipment, other than cranes, that Strongco serves in Canada were estimated to be an average of 35% higher in 2011. Overall, Strongco outperformed the market in Canada with total unit volume up more than 40%, which resulted in a larger share of the total market in 2011. Accurate market data for cranes is not available, but the crane market in Canada has improved in 2011 as many end users and large crane rental companies that curtailed purchases during the recession replenished and replaced aging fleets. Strongco's crane sales in 2011 were more than double the level of 2010. The largest increase in demand for heavy equipment was in Alberta followed by Quebec and Ontario.
Average selling prices also continued to improve in 2011 due primarily to a higher proportion of sales of larger, more expensive equipment and slight increase in most product categories. While the ongoing strength of the Canadian dollar and price competition continued to put pressure on selling prices, increased demand, combined with product availability and delivery issues, helped support stronger selling prices in 2011.
On a regional basis, equipment sales in Eastern Canada (Quebec and Atlantic regions) totalled $90.1 million in 2011, which was up $18.9 million, or 27%, from $71.2 million in 2010. The bulk of the increase was in Quebec where construction markets continued to benefit from a high level of spending on infrastructure projects and large hydroelectric projects in the northern region of the province. Most of Strongco's sales increase was in cranes, loaders, articulated trucks and larger equipment. In addition, the Company's sales of rock crushing equipment in Quebec were strong in 2011. The markets for heavy equipment, other than cranes, in which Strongco participates in Eastern Canada, were estimated to be up by approximately 20% in 2011 over 2010. For the first three quarters of 2011, Strongco outperformed the market and captured a larger market share. However, Strongco's share of the market showed a slight decline in the fourth quarter, as total market volumes in the quarter included higher than normal increases by dealer owned rental fleets as well as replenishment of equipment fleets at several independent rental companies, both segments of the market in which Strongco does not participate. In addition, equipment sales at auction were very high in the fourth quarter, which inflated the total market numbers. Excluding the replenishment of rental fleets and auction sales, Strongco's market share in the fourth quarter in Eastern Canada for heavy equipment, other than cranes, was consistent with the first three quarters and for the full year was up over 2010. Market statistics for cranes sold to end use customers are not readily available but the crane market in Eastern Canada, which generally remained weak in 2010 following the recession, showed continued improvement throughout 2011. Some of this growth was the result of certain large crane rental customers in Quebec upgrading and increasing their fleets. In addition, a few large cranes that had been on RPO contracts were sold in 2011. The Company's sales of cranes in Eastern Canada were up 142% in 2011 compared to 2010.
Strongco's equipment sales in Central Canada were $89.2 million, which was up $18.5 million, or 26%, from 2010. After a slow start to the year as a result of the cold, snowy winter and very wet spring weather conditions that delayed many construction and infrastructure projects, activity in Ontario picked up in the second, third and fourth quarters, which increased demand and spending for heavy equipment. In the markets that Strongco serves in Central Canada, total unit volumes of heavy equipment, other than cranes, were approximately 20% higher than in 2010. In most product categories, Strongco outperformed the market, with unit volume increases greater than the market, which resulted in higher market shares. However, product availability and extended supplier delivery lead times, combined with aggressive price competition from certain dealers, resulted in lower volumes and a loss of market share in particular product categories and markets. This was especially evident within the Company's Case Construction Equipment product lines. Accurate market data is not readily available for cranes, but demand for cranes in Central Canada was stronger in 2011, demonstrating continued recovery following the recession. Strongco's crane sales in Ontario in 2011 were up more than 77% from a year ago as certain crane rental customers, who refrained from purchasing new cranes during the recession, replenished their fleets.
Equipment sales in Western Canada during 2011 were $69.7 million, which was up $27.9 million or 67% over 2010. Strongco's product lines in Alberta serve the oil sector, primarily in the site preparation phase, as well as natural gas production, both of which were significantly impacted by weakness in the energy sector during 2009. In addition, the construction and infrastructure segments that Strongco serves in the region were also severely impacted by the recession. With the upward trend and sustainability in oil prices through 2010 and into 2011, economic conditions in Alberta improved significantly. Construction activity and demand for heavy equipment began to show signs of recovery in 2010, particularly in Northern Alberta in the latter half of that year, and the improvement continued in 2011. Total units sold in the markets served by Strongco in Alberta, excluding cranes, were estimated to be up approximately 80% relative to 2010 and Strongco's unit sales were up 53% in the region. For the first three quarters of 2011, Strongco outperformed the market in Western Canada and captured a larger share of the growing market. However, the Company's market share showed a decline in the fourth quarter due in part to lack of product availability and delayed deliveries from the OEM suppliers. In addition, the market in Western Canada spiked in the fourth quarter due to an unusually high level of rental fleet replenishment at certain dealers as well as independent rental companies. Excluding rental fleet replenishment, where Strongco does not participate, the Company's market share was down slightly in the fourth quarter and full year. The largest portion of Strongco's increase in sales in Western Canada was in GPE and larger equipment, but compact and road equipment sales were also up in 2011. While the sales increase in 2011 was substantial, volumes in Northern Alberta were hampered by longer delivery lead times and availability issues with certain products. The market for cranes in Alberta has been recovering since the recession, but more slowly than other heavy equipment. Demand for cranes in Western Canada, particularly in Northern Alberta, improved significantly in 2011. Strongco's crane sales in Alberta were somewhat constrained in the first half of the year due to delivery delays from the manufacturer. Benefitting from continued recovery in the market and a catch-up on OEM deliveries, Strongco's crane sales in Western Canada grew by 75% during 2010. Sales backlog of cranes in Alberta remains strong and RPO activity has increased, which are positive signs of continued recovery in the crane markets in Western Canada.
Strongco's equipment sales in the northeastern United States were $26.9 million in the 11 months from February 1, 2011, the effective date of the acquisition of Chadwick-BaRoss (see "Acquisition of Chadwick-BaRoss, Inc."), to December 31, 2011. The markets for heavy equipment in New England remained soft in 2011 and were estimated to be down approximately 40% from pre-recession levels. The traditional heavy equipment markets for residential construction, forestry and infrastructure in the region have remained flat year over year, but other markets for scrap handling and waste management have experienced some increase in activity. Chadwick-BaRoss' equipment sales for the 11 months were slightly ahead of the same period in 2010, but market share in this soft market declined slightly in 2011 due primarily to product shortages and delivery delays from the manufacturer.
Equipment Rentals
It is common industry practice for certain customers to rent to meet their heavy equipment needs rather than commit to a purchase. In some cases this is in response to the seasonal demands of the customer, as in the case of municipal snow removal contracts, or to meet the customers' needs for specific projects. In other cases, certain customers prefer to enter into short-term rental contracts with an option to purchase after a period of time or hours of machine usage. This latter type of contract is referred to as a rental purchase option contract ("RPO"). Under an RPO, a portion of the rental revenue is applied toward the purchase price of the equipment should the customer exercise the purchase option. This provides flexibility to the customer and results in a more affordable purchase price after the rental period. Normally, the significant majority of RPO's are converted to sales within a six-month period and this market practice has proven to be an effective method of building sales revenues and the field population of equipment.
Rental activity was strong during the recession in 2009, as customers were more inclined to rent equipment rather than purchase in the uncertain environment. In 2010, the recession was officially over, but customers remained reluctant or lacked the financial resources to purchase equipment and while construction markets were recovering, many customers opted to rent equipment under RPO contracts. Consequently, Strongco decided to commit a higher level of inventory available for RPO's which resulted in continued strong rental activity in 2010. Rentals under RPO contracts were particularly strong in Alberta in 2010 as the economy recovered and activity in the oil sands increased, and in Quebec.
Rental activity, including rentals under RPO contracts, remained strong in 2011. In addition, Strongco's crane business, which has traditionally not had a significant rental element, experienced an increase in rental activity in 2011 as customers showed a preference to rent following the recession as the demand and market for cranes recovered. Strongco's rental revenue in 2011 was $29.6 million, which was up $7.4 million, or 33%, from $22.2 million in 2010. Rental revenue from the acquisition of Chadwick-BaRoss in February 2011 contributed $3.6 million of the increase in the year but rental revenue in Canada was up by $3.8 million, or 18%, in 2011.
On a regional basis in Canada, rental activity was stronger in all regions of the country with the exception of Ontario where rental revenues declined slightly to $5.1 million from $6.0 million in 2010. In Eastern Canada, which has traditionally not been a large rental market, equipment rentals were $11.2 million in 2011, or 35% higher than 2010. Most of the increase in Eastern Canada was the result of RPO contracts for articulated trucks and loaders in Quebec. Rental activity was also strong in Alberta in 2011, demonstrating further evidence of recovery in that province following the significant decline in rental activity during the recession. Rental revenues in Western Canada in 2011 were $9.7 million compared to $7.9 million in 2010.
Product Support
Sales of new equipment usually carry the warranty from the manufacturer for a defined term. Product support revenues from the sales of parts and service are therefore not impacted until the warranty period expires. Warranty periods vary from manufacturer to manufacturer and depend on customer purchases of extended warranties. Product support activities (sales of parts and service outside of warranty), therefore, tend to increase at a slower rate and lag equipment sales by three to five years. The increasing equipment population in the field leads to increased product support activities over time.
Product support revenues declined in 2009 as a result of the recession but represented a larger proportion of total revenues as many customers chose to repair and refurbish existing machines, rather than buy new equipment. That was particularly true in Eastern and Central Canada while in Alberta, where significant amounts of equipment in customers' hands were sitting idle, product support revenues declined further. Product support activity was anticipated to increase in 2010 as the economy and construction activity increased, but the mild winter and lack of snow in the first quarter of 2010, particularly in Eastern and Central Canada, resulted in significantly reduced use of snow removal equipment through the winter season, which in turn resulted in reduced parts and service activity. In addition, in the first half of 2010, many customers, particularly in Ontario, continued to make only critical repairs necessary to keep their equipment in service. Parts and service activity began to increase through the second half of the year as construction activity increased but for the full year product support revenues in Eastern and Central Canada declined slightly in 2010. In Alberta, as customers began using equipment that had sat idle through the recession in 2009, product support revenues increased throughout the year but not enough to offset the decline in Central and Eastern Canada. As a result, product support overall was down slightly in 2010 to $88.8 million.
The recovery in construction and infrastructure markets evident in the latter half of 2010 continued in 2011. In addition, the oil and gas sector and other end use markets for heavy equipment in Canada also showed further improvement in 2011. With the increase in activity, utilization of heavy equipment also increased, which resulted in continued growth in product support activity in 2011. Strongco's product support revenues in 2011 totalled $117.7 million, including $16.1 million from the newly acquired Chadwick-BaRoss, which compared to $88.8 million in 2010. Product support revenues were higher in all regions of Canada, especially in Western and Eastern Canada. Product support was stronger in the first quarter of 2011, in particular, due in part to increased snowfall and use of snow removal equipment, especially in Western and Eastern Canada.
Gross Margin
With lower revenues in 2009, Strongco's gross margin declined by $5.9 million from 2008, to $59.9 million. However, as a percentage of revenue, gross margin improved in 2009 to 20.5% due primarily to the higher proportion of product support revenue in 2009. Equipment sales typically generate a lower gross margin percentage than rental revenues and product support activities. During the recession in 2009, many customers preferred to rent equipment to meet their equipment needs or to repair/refurbish existing equipment which resulted in rentals and sales of parts and service being a higher proportion of total revenues and contributed to an improvement in Strongco's overall gross margin percentage in 2009.
Gross margin in 2010 was $56.7 million, which was down $3.2 million from 2009. The decline was due primarily to lower product support revenues in 2010. As a percentage of revenues gross margin declined to 19.2% compared to 20.5% in 2009 due primarily to revenue mix as product support sales represented a lower proportion of total revenues in 2010 relative to equipment sales.
With the substantial increase in revenue in 2011, gross margins increased by $23.9 million, or 42%, from 2010. The acquisition of Chadwick-BaRoss contributed $10.2 million of the increase in gross margins but the gross margin in Canada was up by $13.5 million, or 24% from 2010. Revenues from equipment sales, rentals and product support were all higher in 2011, which led to an increase in the gross margin from each revenue stream. As a percentage of sales, overall gross margin was 19.0% compared to 19.2% in 2010. The slight decline was due to a higher proportion of equipment sales in 2011, which offer lower margin percentages than product support or rentals.
The gross margin percentage on equipment sales in 2011 was 9.7%, which was consistent with 9.6% in 2010. While the ongoing strength of the Canadian dollar and price competition continued to put pressure on margins in 2011, increased demand, combined with product availability and delivery issues, helped support sales margins. Gross margins of equipment were also supported by a higher proportion of sales of larger, more expensive machines in 2011.
The gross margin percentage on rentals in contracts without purchase options is typically higher than the margin percentage on equipment sales. Gross margins on rentals under RPO contracts are recorded at margin percentages consistent with the margin on the anticipated sale under the purchase option which are lower than margins on straight rental contracts. Following the recession, rental activity under RPO contracts was particularly strong in 2010, particularly in Alberta and Quebec, which resulted in a lower overall rental gross margin percentage in that year. While RPO activity remained strong, rentals under RPO represented a lower proportion of total rentals in 2011, which contributed to an increase in the overall rental gross margin percentage in 2011.
Gross margin percentage on product support activities was 40.9% in 2011, which compared to 40.2% in 2010 and 41.1% in 2009. A slightly higher proportion of service revenue contributed to the slight improvement in overall product support margins in 2011.
Administrative, Distribution and Selling Expense
In 2009, in response to the weak recession environment, Strongco implemented cost controls and reengineered its cost structure to reduce overhead, which resulted in substantial savings in 2009 and established a lower cost base from which to operate going forward. Administrative, distribution and selling expenses in 2009 were down 9% to $55.8 million or 19.1% of revenue. While heavy equipment markets were improving and revenues growing throughout 2010, expense levels were generally held at the new operating level established in 2009. Realizing the full year impact of the cost reduction initiatives implemented in the prior year, such expenses were down a further 4% in 2010 to $53.5 million, or 18.2% of revenue. This was achieved, in spite of increased expenses for training programs and recruiting and one-time costs for the conversion from an income fund to a corporation and implementation of International Financial Reporting Standards (IFRS).
Administrative, distribution and selling expenses in 2011 were $64.7 million or 15.3% of revenue. Most of the increase over 2010 relates to administration, distribution and selling expenses of the newly acquired Chadwick -BaRoss, which amounted to $8.0 million in 11 months from the date of acquisition in February 2011. Expenses in 2011 also include one-time costs for the acquisition of Chadwick-BaRoss of $0.4 million. In addition, with the stronger results, $3.9 million was accrued in 2011 for anticipated payments under the Company's annual and long-term incentive plans and other employee bonuses, while employee incentive and bonus accruals in 2010 were minimal given the lower earnings. While certain other variable expenses were higher in 2011 due to the substantial increase in revenues, administrative, distribution and selling expenses overall were down year over year by $1.2 million before the incremental expenses of Chadwick-BaRoss and accrued bonuses.
Other Income
Other income and expense is primarily comprised of gains or losses on disposition of fixed assets, foreign exchange gains or losses, service fees received by Strongco as compensation for sales of new equipment by other third parties into the regions where Strongco has distribution rights for that equipment, commissions received from third party financing companies for customer purchase financing Strongco places with such finance companies and royalties fees received on sales of parts from certain OEM's.
Other income in 2011 amounted to $1.2 million compared to $0.7 million in 2010 and $1.8 million in 2009. The decline in 2010 from 2009 was due primarily to the termination of a royalty fee on parts distribution when the parts supplier changed to direct distribution. Other income in 2011 includes a net unrealized foreign exchange gain of $0.3 million on forward foreign exchange contracts purchased as a hedge to protect the margin on specific future committed sales. The unrealized foreign exchange gains arose from mark to market adjustments on forward foreign exchange contracts as a result of changes in the Canadian/US dollar exchange rate during the year relative to the exchange rate in the forward contract.
Interest Expense
Strongco's interest expense was $5.8 million in 2011 compared to $4.8 million in 2010 and $4.4 million in 2009.
Strongco's interest-bearing debt comprises bank indebtedness, interest-bearing equipment notes, various term loans with the Company's banks and other notes payable. Strongco typically finances equipment inventory under lines of credit available from various non-bank finance companies. Most equipment financing has interest free periods up to 12 months from the date of financing, after which the equipment notes become interest-bearing. The rate of interest on the Company's bank indebtedness and interest-bearing equipment notes varies with the Canadian chartered bank prime rate ("prime rate") and Canadian Bankers Acceptances Rates ("BA rates"). (See discussion under "Financial Condition and Liquidity"). Prime rates and BA rates declined during the recession in 2009. Prime rates rose in 2010 but have remained fairly stable through 2011.
During 2009, in response to the recession, Strongco reduced equipment inventories and correspondingly reduced equipment notes payable. However, at the same time, in response to the credit crisis in financial markets and the weak economy, Strongco's equipment note lenders increased the interest rates charged on the Company's equipment notes in 2009 which resulted in a slight increase in interest expense in that year.
During 2010, Strongco increased inventory levels in support of the sales growth, as well as its commitment to inventory for RPO's. As a consequence the balance of equipment notes increased in 2010 and resulted in a higher level of interest-bearing equipment notes outstanding in 2010 compared to 2009. Strongco's average bank debt levels were also higher in 2010 than in 2009. Prime lending rates and BA rates also increased in 2010 following the recession, which resulted in higher rates of interest being charged on the Company's bank debt and equipment notes in the year. The higher interest rates, combined with the slightly higher average balance of interest-bearing equipment notes and average bank debt levels, resulted in a higher interest expense 2010 compared to 2009.
Average interest-bearing debt levels increased further in 2011. The Company continued to build inventory to support sales growth which led to a higher level of interest-bearing equipment notes throughout the year. The acquisition of Chadwick-BaRoss in February 2011 for $11.1 million, was financed with debt from the operating line and a new $5.0 million term loan from the Company's bank and US$1.9 million interest-bearing notes issued to the previous shareholders of Chadwick-BaRoss. In addition, the Company's debt now includes the bank indebtedness, equipment notes, and mortgage term loans of Chadwick- BaRoss. Strongco also obtained a construction loan facility from its bank during the year to finance the construction of a new branch facility in Edmonton, Alberta which added to the level of interest-bearing debt in 2011. Prime lending rates and BA rates rose through 2010 but remained fairly consistent through 2011. However, for the year, the average prime and BA rates were higher in 2011 compared to 2010, which resulted in higher rates of interest being charged on the Company's bank lines and equipment notes in 2011. The higher interest-bearing debt levels combined with higher rates of interest resulted in a higher interest expense in 2011.
Earnings (Loss) Before Income Taxes
Primarily as a result of the substantial increase in revenues during the year, Strongco achieved earnings before income taxes of $11.1 million in 2011, which was up from a loss before taxes of $0.9 million in 2010 and profit before tax from continuing operations in 2009 of $1.5 million.
Provision for Income Tax
Following conversion to a corporation on July 1, 2010, Strongco is now subject to income tax at corporate tax rates. As a consequence, Strongco was able to utilize tax losses, including those previously unrecognized from the Fund. In addition, on the adoption of IFRS, temporary or timing differences between the tax and accounting values arose resulting in a net deferred income tax asset. However, given the Company's history of losses, there was no certainty of realization of the benefit of either the temporary differences or the losses from the Fund previously unrecognized and a valuation allowance was recorded for the full amount of the deferred income tax asset of $2.1 million as at December 31, 2010. While Strongco generated taxable income in Canada in 2011, the valuation allowance at December 31, 2010 was drawn down in full to recognize the benefit of the tax loss carry forwards and other temporary differences, which resulted in a provision for income tax in Canada of only $0.7 million.
In addition, the tax provision related to Chadwick-BaRoss in the U.S. amounted to $0.5 million in 2011.
Net Income (Loss)
Strongco's net income in 2011 was $9.9 million ($0.76 per share) which was significantly improved from a loss of $0.9 million (loss of $0.08 per share) in 2010 and earnings from continuing operations of $0.7 million ($0.07 per share) in 2009.
EBITDA
EBITDA (see note 2 below) in 2011 was $43.1 million which compares to $24.2 million in 2010 and $18.0 in 2009. EBITDA was
calculated as follows:
Note 1 - 2009 income statement figures reflect Canadian GAAP before the adoption of International Financial Reporting Standards ("IFRS"); 2009 balance sheet figures include the impact of changes related to the adoption of IFRS.
Note 2 - "EBITDA" refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet. EBITDA is presented as a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not a measure of financial performance or earnings recognized under International Financial Reporting Standards ("IFRS") and therefore has no standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other similar issuers. The Company's management believes that EBITDA is an important supplemental measure in evaluating the Company's performance and in determining whether to invest in Shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as indicators of the Company's performance or to cash flows from operating, investing and financing activities as measures of the Company's liquidity and cash flows.
Cash Flow, Financial Resources and Liquidity
Cash Flow Provided By Operating Activities:
During 2011, Strongco provided $44.4 million of cash from operating activities before changes in working capital. However, $26.2 million of cash was used to increase net working capital, $3.0 million to fund future employee benefits, $5.8 million to pay interest and $0.2 million to pay taxes, resulting in a net source of cash from operations in the quarter of $9.2 million. By comparison, in 2010, $25.9 million of cash was provided by operating activities before changes in working capital, $19.3 million was used to increase working capital and $1.4 million to fund future employee benefits and $4.8 million to pay interest, resulting in a net source of cash from operating activities of $0.4 million.
The components of the cash provided by operating activities were as follows:
Non-cash items include amortization of equipment inventory on rent of $20.7 million, which compared to $18.2 million in 2010. Higher volumes of equipment rentals in 2011 resulted in the higher amortization of equipment inventory on rent.
Components of cash flow from the net change in non-cash working capital for 2011 and 2010 were as follows:
With continued recovery in the markets for heavy equipment in Canada, Strongco's revenues increased through 2011 and to support this growth, Strongco made a net investment in working capital of $26.2 million during the year. The largest investment was in inventory in response to the increase in sales and service activity. The net increase in inventory in 2011 was $60.5 million, the majority of which was equipment inventory. By comparison, inventories (mainly equipment) increased by $33.7 million in 2010.
Following the recession, in 2010 and 2011, OEM's struggled to ramp up production to meet the increase in demand. This led to product shortages and significantly extended delivery lead times. In the fourth quarter of 2011 Strongco received a large quantity of equipment inventory from its major OEM suppliers that had been ordered for delivery earlier in the year. This, in particular, contributed to a higher than normal level of inventory at year end. The OEM suppliers have offered extended interest-free financing on these late delivered inventories and with markets for heavy equipment continuing to be robust, management is confident this higher level of inventory will be sold through the season in 2012.
With the increase in equipment inventories, equipment notes also increased. The net increase in equipment notes in 2011 was $34.2 million. By comparison, equipment notes increased by $13.3 million in 2010.
Cash Used In Investing Activities:
Investing activities in 2011 include the acquisition of Chadwick-BaRoss Inc. in February for $9.2 million, net of promissory notes issued by the Company to the previous shareholders of CBR. CBR maintains a rental fleet of equipment and during the year it purchased $13.4 million of new rental fleet assets and sold rental fleet assets for proceeds of $8.3 million. Capital expenditures in 2011 totalled $9.0 million, the majority of which was for the construction of a new branch in Edmonton, Alberta.
The components of the cash used in investing activities were as follows:
Cash Provided By Financing Activities:
In 2011, net cash of $15.8 million was provided by financing activities compared to net cash of $0.2 million provided in 2010.
The significant sources and uses of cash from financing activities in 2011 were as follows:
The components of cash provided in financing activities are summarized as follows:
Bank Credit Facilities
The Company has credit facilities with banks in Canada and United States that provide 364 -day committed operating lines of credit totaling approximately $22.5 million that are renewable annually on or about May 31 of each year. Borrowings under the lines of credit are limited by standard borrowing base calculations based on accounts receivable and inventory, which are typical of such bank credit facilities. As collateral, the Company has provided a $50 million debenture and a security interest in accounts receivable, inventories (subordinated to the collateral provided to the equipment inventory lenders), capital assets (subordinated to collateral provided to lessors), real estate and on intangible and other assets. The operating lines bear interest at rates that range between bank prime rate plus 0.50% and bank prime rate plus 3.00% and between the one month Canadian BA rates plus 1.50% and BA rates plus 4.00% in Canada and at LIBOR plus 2.60% in the United States. Under its bank credit facilities, the Company is able to issue letters of credit up to a maximum of $5 million. Outstanding letters of credit reduce the Company's availability under its operating lines of credit. For certain customers, Strongco issues letters of credit as a guarantee of Strongco's performance on the sale of equipment to the customer. As at December 31, 2011, there were outstanding letters of credit of $0.1 million and $11.0 million drawn on the Company's bank operating lines of credit.
In addition to its operating lines of credit, Strongco has a $15 million line for foreign exchange forward contracts as part of its bank credit facilities ("FX Line") available to hedge foreign currency exposure. Under this FX Line, the Company can purchase foreign exchange forward contracts up to a maximum of $15 million. As at December 31, 2011, the Company had outstanding foreign exchange forward contracts under this facility totaling US$6.2 million at an average exchange rate of $1.0203 Canadian for each US$1.00 with settlement dates between January 31, 2012 and May 31, 2012.
The Company's bank credit facilities also include term loans secured by real estate in the United States. At December 31, 2011 the outstanding balance on these term loans was US$3.7 million. The term loans bear interest at LIBOR plus 3.05% and require monthly principal payments of US$13,300 plus accrued interest. The Company has interest rate swap agreements in place that have converted the variable rate on the term loans to a fixed rate of 5.17%. The term loan and swap agreements expire in September 2012 at which point a balloon payment from the balance of the loans is due. It is management's intention to renew the term loans and interest rate swap agreement prior to their expiry.
In connection with the acquisition of Chadwick-BaRoss, in April 2011, Strongco secured an additional $5.0 million demand non- revolving term loan from its bank secured against certain real estate assets in Canada ("Term Loan - Canadian Real Estate"). This loan is for a term of 60 months to April 2016 and bears interest at the bank's prime rate plus 2.0%. The Term loan - Canadian Real Estate is subject to monthly principal payments of $83.3 thousand plus accrued interest. As at December 31, 2011, there was $4.3 million owing on the Term Loan - Canadian Real Estate.
In April 2011, Strongco secured an additional construction loan facility with its bank ("Construction Loan #1") to finance the construction of the Company's new Edmonton, Alberta branch. Under Construction Loan #1, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $6.6 million. Construction of the new branch commenced in June 2011 and is scheduled to be completed before the end of March 2011. Upon completion, Construction Loan #1 will be converted to a demand, non-revolving term loan ("Mortgage Loan #1"). Mortgage Loan #1 will be for an amount of $7.1 million and a term of 60 months. Construction Loan #1 (and Mortgage Loan #1) bears interest at the bank's prime lending rate plus 2.0%. As at December 31, 2011, there was $5.0 million drawn on Construction Loan #1.
In addition, in September 2011, Strongco secured an additional construction loan facility with its bank ("Construction Loan #2") to finance the construction of a planned new Fort McMurray, Alberta branch. Under Construction Loan #2, the Company is able to borrow 70% of the cost of the land and building construction costs to a maximum of $7.9 million. The Company anticipates construction of the new Fort McMurray branch will commence in the third quarter of 2012 and will be completed in the second quarter of 2013. Upon completion, Construction Loan #2 will be converted to a demand, non-revolving term loan ("Mortgage Loan #2"). Mortgage Loan #2 will be for an amount of $8.4 million and a term of 60 months. Construction Loan #2 (and Mortgage Loan #2) bears interest at the bank's prime rate plus 2.0%. As at December 31, 2011, Construction Loan #2 was undrawn.
Strongco's bank credit facilities contain financial covenants typical of such credit facilities that require the Company to maintain certain financial ratios and meet certain financial thresholds. In particular, the credit facilities in Canada contain covenants that require the Company to maintain a
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Datum: 22.03.2012 - 10:00 Uhr
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"Strongco Announces Substantial Increases in Fourth Quarter and Full Year 2011 Results"
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