Fourth Quarter Results
The Corporation is reporting net earnings for the three months ended December 31, 2012 of $24.5 million, compared to net earnings of $33.4 million for the same period in 2011, on revenues of $155.2 million versus Q4-2011 revenues of $185.0 million.
The Domestic Dry-Bulk segment’s operating earnings net of income tax decreased from $23.8 million in 2011 to $21.0 million in 2012. The Product Tanker segment’s operating earnings net of income tax also decreased from $3.8 million in 2011 to $2.8 million in 2012. The decreases in both segments were the result of a reduction in vessel utilization during the fourth quarter and an unfavourable revenue variance versus 2011, offset by a reduction in vessel operating costs in both segments. The operating earnings net of income tax of the Ocean Shipping segment decreased to $3.6 million in 2012, compared to $6.1 million for the same period in 2011 due to the timing of regulatory dry-dockings which was partially offset by a gain on the sale of the vessel, the M.V. Ambassador.
The Real Estate segment operating earnings net of income tax increased from $648,000 to $816,000 due primarily to income tax adjustments in 2012. Financial expense decreased from $3.7 million in 2011 to $977,000 in 2012. The decrease was due to the mark-to-market adjustment of the fair value of certain foreign exchange contracts, a result of the weakening of the Canadian dollar against the U.S. dollar
The Corporation is reporting net earnings for the twelve months ended December 31, 2012 of $43.8 million, compared to net earnings of $68.8 million for the same period in 2011, on revenues of $560.4 million versus 2011 revenues of $582.7 million. The main factor impacting the comparability of 2012 and 2011 was the timing of the acquisition of Upper Lakes Group Inc. (ULG) in 2011. Had the transaction occurred at January 1, 2011 instead of April 14, 2011 the reported net earnings for 2011 would have been reduced by $14.2 million to $54.6 million.
The Domestic Dry-Bulk segment’s operating earnings net of income tax decreased from $36.6 million in 2011 to $31.6 million. The comparability of the results for 2012 to 2011 for the Domestic Dry-Bulk segment has been affected by the ULG Transaction, resulting in the Corporation recognizing 100% domestic dry-bulk operations in 2012 while in 2011 it recognized only 59% of the first quarter loss on the domestic dry-bulk fleet. Had the ULG Transaction occurred on January 1, 2011, the Domestic Dry-Bulk segment would have reported operating earnings net of income tax for 2011 of $22.4 million, a decrease of $14.2 million compared to the reported figure. Taking this adjustment into account, operating earnings for this segment have increased significantly in 2012, primarily as a result of improved mix of business and reductions in direct costs.
The Product Tanker segment operating earnings net of income tax decreased from $13.7 million to $9.3 million mainly as a result of fewer operating days due to two regulatory dry-dockings in 2012 versus none in 2011, and increased professional fees in connection with the arbitration process related to the refund of deposits on rescinded contracts to build three product tankers for international service.
The operating earnings net of income tax of the Ocean Shipping segment for 2012 were $15.0 million compared to $15.5 million for 2011. The decrease resulted from reduced vessel revenues due to sale of the Ambassador in 2012 and an increase in costs related to dry-dockings which offset other operating income improvements.
The Real Estate segment operating earnings net of income tax decreased from $3.4 million in 2011 to $3.1 million in 2012 due to the decreases in occupancy and an increase in depreciation expense. Financial expense for 2012 was $11.6 million compared to $8.6 million for 2011. The increase was due primarily to mark-to-market adjustment recognizing the change in the period in the fair value of certain currency contracts. Other factors affecting the comparability of the 2012 results with 2011 include an increase in 2012 in the loss on the translation of foreign-denominated assets and liabilities, a revaluation gain recognized on an asset held for sale and a larger impairment reversal recorded in 2011 that were not reported in 2012. Income tax expense for 2012 was $18.8 million compared to $13.7 million for the previous year. Included in 2012 is $3.3 million relating to the Province of Ontario announcement that it will defer indefinitely planned reductions to the corporate tax rate.