2016 ANNUAL GENERAL MEETING May 11, 2016 · 4 2015 year-end financial summary ($ millions, except...
Transcript of 2016 ANNUAL GENERAL MEETING May 11, 2016 · 4 2015 year-end financial summary ($ millions, except...
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2016 ANNUAL GENERAL MEETING May 11, 2016
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ROBERT BEUTEL Executive Chairman
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Today’s discussion may contain forward-looking statements that involve assumptions and estimates that may not be realized and other risks and uncertainties. These statements relate to future events or future performance and reflect management’s current expectations and assumptions which are based on information currently available to the Company’s management. The forward-looking statements include but are not limited to: (i) the ability of the Company to meet contractual obligations through cash flow generated from operations, (ii) the expectation that customer support revenues will grow following the warranty period on new machine sales and (iii) the outlook for 2016. There is significant risk that forward-looking statements will not prove to be accurate. These statements are based on a number of assumptions, including, but not limited to, continued demand for Strongco’s products and services. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward looking statements. The inclusion of this information should not be regarded as a representation of the Company or any other person that the anticipated results will be achieved and investors are cautioned not to place undue reliance on such information. These forward-looking statements are made as of the date of this presentation, or as otherwise stated and the Company does not assume any obligation to update or revise them to reflect new events or circumstances. Additional information, including the Company’s financial statements, Management’s Discussion and Analysis, and Annual Information Form, may be found on SEDAR at sedar.com.
FORWARD-LOOKING STATEMENTS
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2015 YEAR-END FINANCIAL SUMMARY
($ MILLIONS, EXCEPT PER SHARE AMOUNTS) Year Ended December 31 2015 2014
Revenues $474.3 $498.3
Gross Profit $82.7 $86.3
Operating Income (Loss) – Before Real Estate Gains in 2014 ($1.5) $4.3
EBITDA $24.7 $43.0
Net Income (Loss) ($7.4) $0.9
Basic and Diluted Earnings (Loss) Per Share ($0.56) $0.07
Equipment Inventory $199.0 $226.3
Equipment Notes Payable $180.3 $197.8
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STRATEGIC OBJECTIVES
Focus on what we do best: Fully optimize our allocation of talent and resources 1
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Profitability without revenue growth: Achieve better performance, even in difficult markets
Financial certainty: Accelerate improvements to inventory and debt levels and other de-risking initiatives to achieve the financial stability over the long term
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INDUSTRY LEADERSHIP AND MAJOR BRANDS
CONSTRUCTION
83.4% customer satisfaction score for Strongco’s Volvo customers in 2015
Leading equipment manufacturers with globally recognized brands
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2015 AWARD-WINNER
Volvo Construction Equipment • Highest Retail Finance, Canada • Highest Retail Volume, Canada
Volvo Customer Solutions (Large Market)
• Highest OTC Fill Rate
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DAVID WOOD Vice President and CFO
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2015 REVENUES
$427.3 $385.0
$71.0 $89.3
2014 2015
Canada U.S.
2015 REVENUES ($ millions)
$474.3 $498.3
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2015 REVENUE BREAKDOWN BY CATEGORY
EQUIPMENT SALES RENTALS PRODUCT SUPPORT
Canada U.S.
2014 2015
-6%
$326.5 $307.5
$44.4
$282.1 $252.6
$54.9
2014 2015
$5.5
$4.8
$24.9
$26.5
Canada U.S.
-17%
$30.4
$25.3
2014 2015
$27.9 $21.1
$113.6 $120.3
Canada U.S.
0%
$141.4 $141.5
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% OF REVENUES
2015 GROSS PROFIT
18.3 17.3 17.4
19.2
2013 2014 2015 Q12016
2015: $82.7M
4%
Q4 2015: Additional $4.5 million reserve for aged equipment inventory reduced gross profit from $87.2 million, or 18.4% of revenues, to $82.7 million or 17.4% of revenues.
2014: $86.3M
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2015 EXPENSES
($ MILLIONS) Year Ended December 31 2015 2014
Operating Expenses $82.6 $81.3
As a % of Revenue 17.4% 16.3%
Before the impact of the weaker Canadian dollar, operating expenses were down year-over-year, despite incremental lease costs from sale/leaseback of facilities in 2015 and depreciation of new computer system.
2014 2015
$81.3
$1.9
$2.1 $0.5 ($3.2)
$82.6
Weaker Cdn$
Lease Costs
SAP Depreciation
Expense Reduction
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2015 EARNINGS
($ MILLIONS, EXCEPT PER SHARE AMOUNTS) Year Ended December 31 2015 2014
Operating Income (Loss) – Before Real Estate Gains in 2014 ($1.5) $4.3
Gain on Sale/Leaseback of Real Estate ̶ $8.7
Impairment of Intangible Asset ̶ $1.8
Interest Expense $8.6 $11.1
Earnings (Loss) Before Tax ($10.1) $0.1
Net Earnings (Loss) ($7.4) $0.9
Earnings (Loss) Per Share ($0.56) $0.07
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IMPROVED INVENTORY MANAGEMENT & BALANCE SHEET
Dec. 2015
Dec. 2014
EQUIPMENT INVENTORY
$199.0M
12%
$226.3M
$27.3M
EQUIPMENT NOTES PAYABLE
$180.3M
9%
$197.8M
$17.5M
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Q1 2016 BALANCE SHEET
226.3 207.5
217.8 236.3
199.0
176.7
Q4 2015 Q1 2015 Q2 2015 Q3 20-15 Q4 2015 Q1 2016
197.8 183.2 190.4 198.1
180.3
154.0
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
TOTAL EQUIPMENT INVENTORY ($000s)
TOTAL EQUIPMENT NOTES ($000s)
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2016 Q1 RESULTS – SUMMARY
($ MILLIONS, EXCEPT PER SHARE AMOUNTS) Quarter Ended March 31 2016 2015
Revenues $109.7 $112.6
Gross Profit $21.1 $21.2
Operating Income (Before Restructuring Provision) $2.5 $2.1
EBITDA $6.6 $8.3
Interest Expense $1.8 $3.1
Net Loss ($0.9) ($0.8)
Basic and Diluted Loss Per Share ($0.07) ($0.06)
Equipment Inventory $176.7 $207.5
Equipment Notes Payable $154.0 $183.2
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CAPEX LARGELY COMPLETE
Major Capital Expenditures 2011 to 2015: • New Acheson Branch –
$10.7 million • New Fort McMurray Branch –
$18.7 million • New Saint-Augustin Branch –
$8.9 million • Upgrade Edmonton Crane Branch –
$1.2 million • Renovations Mississauga Branch –
$1.4 million • New Dealer Management System
(SAP®) – $17.1 million
$0.7 $0.3
$9.0 $5.9
$33.6
$10.1
$6.0
$1.8
2009 2010 2011 2012 2013 2014 2015 2016E
CAPEX 2009 – 2016 ($ millions)
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KEY REGIONS
ALBERTA
• Economic activity expected to remain depressed throughout 2016
• New development in the oil sands region severely curtailed
• Demand for heavy equipment and cranes expected to remain weak
• Strongco making adjustments to the cost structure with layoffs and other reductions, and focusing on operating efficiencies and sales execution
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KEY REGIONS
ONTARIO
• Overall air of caution impacting purchasing decisions for heavy equipment
• Low oil prices and weak Canadian dollar should benefit manufacturing, leading to improved confidence, new investment and increased demand
• No significant government infrastructure plans announced; few large projects over the near term
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KEY REGIONS
QUEBEC
• Charbonneau Commission report issued in late 2015; however, construction activity remains low
• Turcot Interchange and Champlain Bridge the only large infrastructure projects in the province
• Mining activity and related demand for heavy equipment in the northern regions expected to remain low
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KEY REGIONS
ATLANTIC CANADA & NORTHEASTERN U.S.
• Heavy equipment markets remain soft in Atlantic Canada; weak oil prices impacted demand for equipment in Newfoundland
• Further, modest improvements in heavy equipment markets, as U.S. economy continues to grow
• Residential construction and forestry markets in Northeastern U.S. expected to remain active
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CUSTOMER SUCCESS STORY: BLUEBIRD CONTRACTING
Customer Ken Kirk, Vice President
Company BlueBird Contracting – A Trotter Morton Group
Location Offices in Calgary and Edmonton, AB
Core Business Earthworks and Demolition
Strongco Customer > 20 years
Equipment Aged VOLVO Excavators (EC330 and EC460)
High-Profile Projects 2013-2016
Decommissioning Lafarge Concrete Plant, Bow River Flood Rehabilitation, Calgary Stampede Grounds, Calgary Zoo Currie Barracks Urban Development, Calgary
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CUSTOMER SUCCESS STORY: BLUEBIRD CONTRACTING
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CUSTOMER SUCCESS STORY: HUB EQUIPMENT
Customer Joe Cuzzolino, Rental Operations Manager
Company HUB Equipment
Location Toronto, ON
Core Business Construction Equipment Sales & Rentals
Strongco Customer > 25 years
Equipment VOLVO A40 Articulated Hauler
High-Profile Project 2016 Highway 407 Extension – Phase 2
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CUSTOMER SUCCESS STORY: HUB EQUIPMENT
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ROBERT BEUTEL Executive Chairman
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