Wajax Limited

Wajax Limited

March 03, 2005 12:51 ET

Wajax Increases Earnings 76% in Fourth Quarter, 91% for the Year and Raises Dividend


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: WAJAX LIMITED

TSX SYMBOL: WJX

MARCH 3, 2005 - 12:51 ET

Wajax Increases Earnings 76% in Fourth Quarter, 91%
for the Year and Raises Dividend

TORONTO, ONTARIO--(CCNMatthews - March 3, 2005) - Wajax Limited
(TSX:WJX):



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(Dollars in millions,
except per share data) Three Months Year
Ended Ended
December 31 December 31
------------- -------------
2004 2003 2004 2003


Revenue $249.2 $230.9 $928.2 $884.0

Net earnings $6.0 $3.4 $18.3 $9.6

Basic earnings per share $0.38 $0.22 $1.17 $0.61

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Wajax Limited today announced fourth quarter 2004 earnings of $6.0
million, or $0.38 per share, 76% above the $3.4 million, or $0.22 per
share, for the corresponding period in 2003. For the year ended December
31, 2004, the Company earned $18.3 million, or $1.17 per share, compared
to $9.6 million, or $0.61 per share, recorded in the prior year.

Fourth Quarter Highlights

- Fourth quarter revenues increased 8% (11% after excluding the negative
impact of the declining U.S. dollar) with gains experienced in all three
core businesses. For the second consecutive quarter Industrial
Components led the way with a 13% increase in revenues with strength in
virtually all regions of Canada and the U.S. Revenues in Mobile
Equipment and Diesel Engines increased by 6% and 3% respectively,
largely as a result of strong oil sector related sales in western Canada.

- Quarterly earnings in Industrial Components of $3.1 million improved
substantially in Canada and the U.S. from the $0.2 million posted in
2003 as a result of higher revenues and increased margins. Mobile
Equipment recorded a 33% earnings increase compared to 2003 on the
strength of higher volume, while Diesel Engines earnings were down
slightly to $4.7 million.

- Interest expense decreased $0.7 million in the quarter mainly as a
result of lower debt, net of cash compared to last year.

- The Company announced that it has recently received two large mining
equipment supply and service orders. North American Construction Group
intends to purchase fifteen 330 ton Hitachi mining trucks and two 800
ton Hitachi hydraulic shovels over the next sixteen months for use in a
major oil sands project in the Fort McMurray, Alberta area. The Company
will also supply Elk Valley Coal Corporation four pieces of LeTourneau
mining equipment over the next six months. The Company expects to enter
into long-term product support agreements with these two customers. The
total sales value of the equipment plus product support is estimated to
be approximately $157 million over the life of the agreements, with the
equipment value equal to approximately one half of the total.

- Effective March 1, 2005, the Company will phase out its distribution
of Timberjack forestry products for northern Ontario, Manitoba and the
Maritimes. To replace this product line, the Company has secured
distribution rights to the Direct Technologies and Logset forestry
equipment lines for most regions of Canada. As these two lines are
relatively new to the Canadian market place, replacing the Timberjack
revenues will not be immediate; however, they give the Company access to
a much larger portion of the Canadian forestry market. The company
estimates that this change will reduce 2005 revenue by approximately $15
million.

- The Company raised its quarterly dividend payment by $0.03 per share,
declaring a dividend of $0.07 per share payable on March 31, 2005, to
shareholders of record on March 15, 2005.

Commenting on the fourth quarter earnings and the outlook for 2005, Neil
Manning, President and CEO, stated "Our fourth quarter results were a
continuation of the trend we have seen throughout 2004 where earnings
were ahead of our expectations. Going into 2005, with the outlook of
continued strong industry fundamentals and strategic initiatives in
place for each business, we expect to continue to grow revenue and
improve profitability overall, with particular emphasis on continuing to
build revenue and earnings in the Industrial Components segment".

Wajax is a diversified company that has three core distribution
businesses engaged in the sale and after-sales parts and service support
of mobile equipment, diesel engines and industrial components, through a
network of over 100 branches across Canada and the western United
States. Its customer base spans natural resources, construction,
transportation, manufacturing, industrial processing and utilities.

Wajax will Webcast its Fourth Quarter Financial Results Conference Call.
You are invited to listen to the live Webcast on Thursday, March 3, 2005
at 2:30 P.M. EST. To access the Webcast, enter www.wajax.com and click
on the link for the Webcast on the Investor Relations page. The archived
Webcast will be available at the above mentioned website within 24 hours
after the conference call.

This news release contains forward-looking information. Actual future
results may differ from expected results.


MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the
Company's Quarterly Consolidated Financial Statements and accompanying
Notes and the Company's Management's Discussion and Analysis for the
first, second, and third quarters of 2004 and the year ended December
31, 2003. Unless otherwise indicated, all financial information is in
millions of dollars, except per share data.



Quarterly Results of Operations

Consolidated Results

for the three months ended December 31 2004 2003
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Gross revenue $249.2 $230.9
Net earnings $6.0 $3.4
Earnings per share - basic $0.38 $0.22
- diluted $0.37 $0.22
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for the year ended December 31 2004 2003
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Gross revenue $928.2 $884.0
Net earnings $18.3 $9.6
Earnings per share - basic $1.17 $0.61
- diluted $1.14 $0.61
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Revenue increased $18.3 million to $249.2 million in the fourth quarter
of 2004 from $230.9 million in the fourth quarter of 2003. Net quarterly
earnings of $6.0 million, or $0.38 per share, increased $2.6 million
compared to the $3.4 million, or $0.22 per share, recorded the previous
year. For the year ending December 31, 2004 revenue increased $44.2
million to $928.2 million and net earnings increased $8.7 million to
$18.3 million, or $1.17 per share, from $9.6 million, or $0.61 per
share, the previous year. The strengthening Canadian dollar relative to
the U.S. dollar had the effect of decreasing consolidated revenues by
$7.3 million for the quarter and $30.0 million for the year ended
December 31, 2004. Canadian operations realized lower sales dollars per
unit on U.S. sourced products and Spencer's U.S. dollar revenues were
translated to Canadian dollars at a lower exchange rate.

The following factors contributed to the change in year-over-year
quarterly results from operations:

- Mobile Equipment revenues increased 6% and earnings increased $1.7
million compared to last year due primarily to an increase in equipment
sales in western Canada and higher margins in eastern Canada.

- Industrial Components revenues increased $9.2 million or 13%.
Earnings increased $2.9 million as the Industrial Components group
continued to benefit from increased volumes and higher margins compared
to last year.

- Diesel Engines revenues increased $1.5 million while earnings
decreased $0.4 million as a result of higher selling and administrative
expenses.

- Corporate costs and eliminations increased $1.5 million compared to
last year due mainly to accruals for long-term incentive costs based on
changes in the Company's share price.

- The Company's debt of $26.2 million, net of cash, decreased $23.1
million compared to September 30, 2004 and $12.5 million compared to
December 31, 2003. As a result, the Company's quarter-end debt to
equity ratio of 0.13:1 was improved from last year's ratio of 0.22:1.

- Interest expense decreased $0.7 million quarter-over-quarter mainly as
a result of a $30.5 million reduction in the average amount of funded
debt, net of cash, outstanding during the quarter compared to last year.

During the quarter the Company paid a dividend of $0.04 per share and
has declared a dividend of $0.07 per share payable March 31, 2005.



Mobile Equipment

for the three months ended December 31 2004 2003
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Equipment sales 87.1 81.1
Parts and service 37.5 36.1
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Gross revenue $124.6 $117.2
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Segment earnings $6.9 $5.2
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for the year ended December 31 2004 2003
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Equipment sales 298.1 294.5
Parts and service 150.7 144.4
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Gross revenue $448.8 $438.9
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Segment earnings $22.6 $18.3
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Revenues increased $7.4 million, or 6%, to $124.6 million in the fourth
quarter of 2004 from $117.2 million in 2003. The strengthening Canadian
dollar relative to the U.S. dollar had the effect of decreasing mobile
equipment revenues by $3.7 million for the quarter. Segment earnings
increased $1.7 million, or 33%, to $6.9 million in the fourth quarter of
2004 from $5.2 million in the previous year. For the year ended
December 31, 2004, revenues increased $9.9 million to $448.8 million and
segment earnings of $22.6 million increased $4.3 million compared to
last year.

The following factors contributed to the fourth quarter results:

- Revenues in western Canada increased $15.5 million in the quarter
which included a 54% increase in equipment revenues,
quarter-over-quarter. Strong forestry and construction and mining
markets resulted in a $15.9 million increase in equipment sales driven
by a $5.5 million increase in new Hitachi excavator sales and an $8.4
million increase in mining equipment revenues resulting from the
delivery of four large mining machines. Slightly offsetting these
increases were a $0.9 million reduction in crane & utility equipment
volumes and a $1.1 million decrease in material handling equipment
revenue due mainly to fewer large truck sales compared to last year.
Parts and service revenues increased $1.6 million, or 11%, as a result
of targeted revenue building initiatives in all sectors. Earnings
increased $1.3 million, as the positive impact of higher sales volumes
more than offset the reduced margins resulting from a higher percentage
of total revenues being derived from lower margin equipment revenues and
a $0.7 million increase in selling and administrative costs associated
with increased sales volume compared to last year.

- In eastern Canada revenues decreased $8.1 million
quarter-over-quarter, due to a $7.9 million decrease in equipment
volumes and a $0.2 million decrease in parts and service revenues. A
$5.1 million or 30% increase in forestry and construction equipment
sales was more than offset by an $8.9 million reduction in crane and
utility equipment volumes resulting from fewer deliveries to provincial
hydro utilities, a $3.2 million reduction in mining equipment revenues
due to the sale of a large LeTourneau loader in 2003, and a $1.1 million
decrease in material handling equipment revenues compared to last year.
Earnings increased by $0.4 million as higher margins as a result of the
favourable impact of the stronger Canadian dollar on U.S. dollar parts
purchases and a lower equipment obsolescence provision, more than offset
the impact of lower volumes and higher selling and administrative costs
compared to last year.

On October 7, 2004, the Company completed an $0.8 million acquisition of
a JCB distributor based in southwestern Ontario. It is anticipated this
acquisition will increase revenues by more than $4 million annually.
The JCB line supplements this segment's Canada-wide distribution of the
Hitachi construction excavator line.

The Company has recently received two large mining equipment supply and
service orders. Wajax has received an order from North American
Construction Group ("NACG")for fifteen 330 ton Hitachi mining trucks and
two 800 ton Hitachi hydraulic shovels over the next sixteen months for
use in a major oil sands project in the Fort McMurray, Alberta area. The
Company also expects to enter into a long-term parts support agreement
with NACG for this equipment. The Company will also supply Elk Valley
Coal Corporation, four pieces of LeTourneau mining equipment over the
next six months. In addition the equipment will be operated through an
eight year product support program. Total sales value for the equipment
and product support for both of these customers is estimated to be
approximate $157 million over the life of the agreements, with the
equipment sales value equal to approximately one half of the total.

Effective March 1, 2005, the Company will phase out its distribution of
Timberjack forestry products in northern Ontario, Manitoba and the
Maritimes. To replace this line, the Company has secured distribution
rights for the Direct Technologies line of tracked feller bunchers and
harvesters, and the Logset forwarder and wheeled harvester line for most
of Canada. As these two lines are relatively new to the Canadian market
place, replacing the Timberjack revenues will not be immediate; however,
they give the Company access to a much larger portion of the Canadian
forestry market. Revenues from the Timberjack forestry line in 2004
were approximately $35 million. The company estimates that this change
will reduce 2005 revenue and earnings by approximately $15 million and
$1.5 million respectively.



Industrial Components

for the three months ended December 31 2004 2003
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Canada - Kinecor $65.4 $57.5
United States - Spencer $12.5 $11.2
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Gross revenue $77.9 $68.7
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Canada - Kinecor $2.7 $1.1
United States - Spencer $0.4 ($0.9)
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Segment earnings $3.1 $0.2
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for the year ended December 31 2004 2003
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Canada - Kinecor $253.0 $229.0
United States - Spencer $56.8 $51.1
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Gross revenue $309.8 $280.1
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Canada - Kinecor $7.6 $4.2
United States - Spencer $1.1 ($2.9)
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Segment earnings $8.7 $1.3
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Revenues increased 13% in the quarter to $77.9 million from $68.7
million in 2003. The strengthening Canadian dollar relative to the U.S.
dollar had the effect of decreasing Industrial Components revenues by
$2.5 million for the quarter. Earnings of $3.1 million increased $2.9
million compared to $0.2 million the previous year. For the year ended
December 31, 2004, revenue increased 11% to $309.8 million and segment
earnings increased $7.4 million to $8.7 million.

The following factors contributed to the quarterly results:

- Total revenues in Kinecor increased 14% to $65.4 million in 2004 as
all regions across Canada realized increased volumes. Bearings and
power transmission parts sales increased $4.5 million as a result of
personnel additions to the sales force in western Canada, stronger sales
in eastern Canada's steel and forestry sectors, and new branches in
Rimouski, Quebec and Guelph, Ontario compared to last year. Hydraulics
parts and service revenues increased by $3.0 million, or 19%, as strong
results in western Canada's oil and gas sector were supplemented by
increases in eastern Canada resulting from the acquisition of PMDF in
late 2003 and the opening of the Guelph branch. A margin increase of
2.7 percentage points was achieved primarily through increases in volume
related supplier rebates and lower freight costs. Earnings increased
$1.6 million to $2.7 million as improved volumes combined with higher
margins across all regions more than offset the negative impact of
higher selling and administrative expenses. Selling and administrative
expenses increased by $1.9 million quarter-over-quarter primarily as a
result of additional personnel costs required to support the increased
volumes, new branches, and additional headcount associated with the PMDF
acquisition.

- Revenues in Spencer, a U.S. based hydraulics business, increased 12%
(20% on a U.S. dollar basis) to $12.5 million compared to $11.2 million
last year, due principally to higher parts sales to OEMs and increased
mining parts and service revenues. Earnings for the quarter increased
$1.3 million to $0.4 million from a loss of $0.9 million in 2003. The
earnings improvement was the result of the positive volume variance
combined with improved margins primarily attributable to increased
growth related supplier rebates.



Diesel Engines

for the three months ended December 31 2004 2003
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Equipment sales 21.4 19.4
Parts and service 25.8 26.3
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Gross revenue $47.2 $45.7
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Segment earnings $4.7 $5.1
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for the year ended December 31 2004 2003
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Equipment sales 73.5 63.1
Parts and service 98.2 103.8
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Gross revenue $171.7 $166.9
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Segment earnings $15.2 $15.7
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Revenue increased $1.5 million, or 3%, to $47.2 million in the fourth
quarter of 2004 while earnings declined $0.4 million to $4.7 million
compared to $5.1 million last year. The strengthening Canadian dollar
relative to the U.S. dollar had the effect of decreasing Diesel Engine
revenues by $1.1 million for the quarter. For the twelve months ended
December 31, 2004, revenues increased $4.8 million to $171.7 million,
while earnings decreased $0.5 million from last year's level of $15.7
million. The following events affected quarterly revenue and earnings:

- Revenues at the Waterous operation in Alberta increased $0.8 million
compared to 2003. Higher equipment sales in the oil and gas sector and
increased service revenues from increased truck shop activity, were
offset by fewer engine rebuilds and a decrease in part sales to
Freightliner truck dealers.

- Revenues at the Company's Quebec and Maritimes operation, Detroit
Diesel-Allison Canada East, increased $0.7 million as a $1.8 million
increase in generator set equipment sales due to a large delivery to a
major telecom company, more than offset lower parts sales to
Freightliner truck dealers.

- Segment earnings decreased $0.4 million to $4.7 million in the quarter
as the positive impact of higher volumes was offset by a decrease in
margins and a $0.3 million increase in selling and administrative costs
due to higher personnel costs in western Canada.



SELECTED QUARTERLY INFORMATION

2004 2003(a)
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Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
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Revenue $249.2 $230.0 $238.1 $210.9 $230.9 $207.8 $227.0 218.3
Net earnings 6.0 5.2 4.6 2.5 3.4 2.6 2.5 1.1
Earnings per
share - Basic $0.38 $0.33 $0.29 $0.16 $0.22 $0.17 $0.16 $0.07
- Diluted $0.37 $0.33 $0.28 $0.16 $0.22 $0.16 $0.16 $0.07
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(a) Restated. See Note 2 in the Q4 2004 Quarterly Financial
Statements.


A discussion of the Company's previous quarterly results can be found in
the Company's quarterly Management's Discussion & Analysis reports
available on SEDAR at www.sedar.com.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated $21.0 million of cash before financing activities
in the fourth quarter of 2004 compared to $40.2 million in the fourth
quarter of 2003. For the year ended December 31, 2004 cash inflows
before financing activities amounted to $13.2 million compared to $68.2
million in 2003.

Cash provided by operating activities amounted to $24.8 million in the
fourth quarter of 2004, with $9.7 million generated from operating
earnings and $15.1 million from changes in non-cash working capital.
Significant components of the $15.1 million decrease in working capital
are described as follows:

- Inventory increased by $4.0 million due mainly to an increase in
Mobile Equipment's inventory to support the new JCB line, and a general
increase in all segments to support higher sales volumes.

- Accounts payable and accrued liabilities increased by $17.2 million
primarily as a result of higher inventory levels and accruals.

- Income taxes payable increased $2.0 million due to current taxes
payable exceeding tax installments made in the quarter.

For the twelve months ended December 31, 2004 cash provided by operating
activities amounted to $23.3 million and included $31.1 million of cash
from operating earnings net of a $7.8 million increase in non-cash
working capital excluding the impact of changes in foreign currency
translation.

Working capital, exclusive of funded debt and cash, decreased $17.8
million to $122.7 million at December 31, 2004 from $140.5 million at
September 30, 2004. The decrease is due to the cash flow factors listed
above and the decrease in the quarter-end U.S. dollar exchange rate
compared to the September 30, 2004 rate.

The Company invested a net amount of $3.8 million of the cash provided
by operating activities into operations during the fourth quarter of
2004. The most significant investing activities were $1.8 million of
lift truck rental fleet additions in Mobile Equipment, $1.4 million for
other various capital asset additions and the $0.8 million acquisition
of the JCB distributor based in southwestern Ontario.

Debt, net of cash, of $26.2 million decreased $23.1 million compared to
September 30, 2004. Of this decrease, $3.0 million resulted from the
translation of the U.S. senior notes into Canadian dollars at a lower
exchange rate compared to last quarter. The Company's debt to equity
ratio decreased to 0.13:1 at December 31, 2004 compared to 0.26:1 at
September 30, 2004.

During the quarter, the Company renewed its $20 million 364-day
revolving secured bank borrowing facility, which will expire December
16, 2005. Borrowing capacity under the facility is dependent upon the
level of the Company's inventories on hand and the outstanding trade
accounts receivable. This facility bears floating interest rates at a
margin over Canadian dollar and U.S. dollar bankers' acceptances.

At December 31, 2004, the Company had utilized $4.0 million (represented
entirely by letters of credit) of the $20 million bank facility. It is
expected that the cash on-hand of $49.4 million at year-end along with
the $20 million bank facility and cash generated from earnings will
provide sufficient cash flow to meet the Company's short-term cash
requirements and longer term growth initiatives.

The Mobile Equipment segment had possession of $57.3 million of
consigned inventory from a major manufacturer at December 31, 2004,
compared to $38.8 million the previous year. This inventory is not
included in the Company's inventory as the manufacturer has title to the
inventory.

The Company enters into hedges of its foreign currency exposures on a
portion of its U.S. dollar-denominated senior notes by entering into
offsetting U.S dollar forward contracts. On March 31, 2004 the Company
entered into a short-term foreign currency forward contract to buy $30
million U.S dollars on March 31, 2005 to offset the effect of foreign
exchange gains or losses on the portion of its U.S dollar-denominated
senior notes that does not form a part of the hedge against the
Company's investment in its U.S. self-sustaining operations. The
foreign currency forward contracts, valued using prevailing currency
exchange rates, have been recognized on the balance sheet.

During the quarter the Company paid a dividend of $0.04 per share and
will pay a dividend of $0.07 per share on March 31, 2005, to
shareholders of record on March 15, 2005. No dividends on common
shares were paid in 2003.

SHARE CAPITAL

During the quarter, 18,000 stock options were exercised with a
weighted-average exercise price of $4.71 per share. The following is
a summary of the changes in share capital and options.



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Issued and fully paid common shares: Number of Shares Amount
---------------------------------------------------------------------
September 30, 2004 15,721,460 $102.3
Issued 18,000 0.1
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December 31, 2004 15,739,460 $102.4
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Year to date, the Company has issued employee stock options to purchase
141,570 shares with a weighted-average exercise price of $10.70 and
weighted average life of 9.1 years as of the date of issuance. No
options have expired during the year. The following table summarizes
the status of the stock option plan:



Weighted
Number Average
of Exercise
Shares Price
---------------------------------------------------------------------
Outstanding as at December 31, 2004 843,070 $6.30
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CHANGES IN ACCOUNTING POLICY

Hedging Relationships

Effective January 1, 2004, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") Accounting Guideline AcG-13 "Hedging
Relationships", which requires assessment of new and existing hedging
relationships to determine whether they satisfy the conditions of hedge
accounting. The Company is satisfied that all hedging relationships
existing at January 1, 2004 and all new hedging relationships entered
into during the quarter and year were documented and deemed effective at
inception as well as effective on a prospective and retroactive basis at
December 31, 2004. Hedge accounting has been applied for all hedging
relationships.

Revenue Recognition

Effective January 1, 2004, the Company adopted CICA EIC-141 "Revenue
Recognition". This abstract provides interpretive guidance on the
application of existing standards on revenue recognition. There was no
impact on these consolidated financial statements upon adoption of the
abstract as the Company had previously accounted for revenue recognition
in the manner required by this guidance.

Multiple Deliverables

Effective January 1, 2004, the Company adopted the CICA EIC-142 "Revenue
Arrangements with Multiple Deliverables". This abstract addresses
certain aspects of the accounting for arrangements under which a vendor
will perform multiple revenue-generating activities. In particular, the
abstract addresses how to determine whether an arrangement contains more
than one unit of accounting and how to allocate the arrangement
consideration among separate units of accounting. Management evaluates
the application of this abstract to these types of transactions on an
individual basis when they occur. There has not been a significant
change in the way management accounts for these types of arrangements.

Separately Priced Extended Warranty and Product Maintenance Contracts

Effective January 1, 2004, the Company adopted the CICA EIC-143
"Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts". This abstract addresses how revenue and costs
from separately priced extended warranty or product maintenance
contracts are to be recognized and is effective prospectively for
contracts entered into after December 17, 2003. Revenues should be
deferred and recognized in income on a straight-line basis over the
contract period except in those circumstances in which sufficient
historical evidence indicates that the costs of performing services
under the contract are incurred on other than a straight-line basis. In
those circumstances, revenue should be recognized over the contract
period in proportion to the costs expected to be incurred in performing
the services under the contract. The Company is continuing to recognize
revenue for separately priced extended warranty or product maintenance
contracts over the contract period in proportion to the costs expected
to be incurred in performing the services under the contract unless
insufficient historical evidence exists to support an other than
straight-line pattern.

Vendor Rebates

Effective September 30, 2004, the Company adopted CICA EIC-144
"Accounting by a Customer (Including a Reseller) For Certain
Consideration Received From a Vendor". The abstract requires a customer
to record cash consideration received from a vendor as a reduction in
the price of the vendor's products and reflect it as a reduction to cost
of goods sold and related inventory when recognized in the income
statement and balance sheet. The abstract must be applied retroactively
for annual and interim periods ending after August 15, 2004. This
impact has resulted in a reduction to opening retained earnings of $482
thousand for the full year ending December 31, 2004. For the 3 months
ending December 31, 2004 and the 12 months ending December 31, 2004 the
implementation of the new standard has resulted in a $1.2 million
reduction of inventory and a $241 thousand reduction of net earnings
with a corresponding $0.01 reduction in earnings per share quarter to
date and $0.02 reduction in earnings per share year to date. The
company has restated its 2003 comparative results and balances in its
financial statements. The implementation of the new standard has
resulted in a reduction to opening retained earnings for the 3 months
ending December 31, 2003 of $490 thousand and for the 12 months ending
December 31, 2003 of $491 thousand. The impact on balance sheet
accounts as of December 31, 2003 was a decrease in inventory of $777
thousand and an increase in future income taxes of $295 thousand. The
net earnings for the 3 months ending December 31, 2003 and the 12 months
ending December 31, 2003 reflect a nominal increase.

Variable Interest Entities

Effective October 1, 2004, the Company elected to early adopt AcG-15
"Consolidation of Variable Interest Entities" which is effective for
periods beginning on or after November 1, 2004. Upon adoption of this
guideline the Company has determined that it has a variable interest in
Wajax Finance, a "private label" financing operation of CIT Equipment
Financing Canada, which is used primarily to provide customers of the
Mobile Equipment segment with equipment financing. In addition, the
Mobile Equipment segment leases its long-term lift truck rental fleet
through Wajax Finance and will periodically finance inventory with Wajax
Finance on a non-interest bearing basis. The Company's association with
Wajax Finance is limited to a sharing of annual profits; any losses are
financed by CIT and deducted from future profit distributions to the
Company. In the event the Wajax Finance program is terminated, the
Company's liability would be limited to amounts owing to Wajax Finance
for the rental fleet, any inventory financed at the time of termination
and any contingent contractual obligations. As the Company is not the
primary beneficiary of Wajax Finance, its financial position and results
of operations have not been consolidated in these financial statements
and the Company will continue to account for the residual returns of
Wajax Finance as earned.

Asset Retirement Obligations

Effective January 1, 2004, the Company adopted the CICA Handbook section
3110 "Asset Retirement Obligations". This section requires a company to
capitalize the fair market value of the costs to decommission an asset,
with an offsetting liability. The implementation of the new standard has
resulted in a reduction to opening retained earnings of $450 thousand
for the full year ending December 31, 2004. The impact on the Company's
consolidated statement of earnings for the three months and full year
ending December 31, 2004 and comparative periods was negligible. The
asset retirement obligations pertain to operating leases of branch
facilities where certain clauses require premises to be returned to
their original state at the end of the lease term. The total estimated
undiscounted cash flows required to settle these obligations amount to
$1,025 thousand. The Company adopted the section on a retroactive basis
beginning on October 1, 2004. As a result, figures for the consolidated
balance sheets as at September 30, 2004 were restated as follows: a $7
thousand increase in fixed assets, an increase in future income taxes of
$283 thousand, an increase in accrued liabilities of $749 thousand and a
decrease in retained earnings of $459 thousand. The implementation of
the new standard has resulted in a reduction to opening retained
earnings for the 3 months ending December 31, 2003 of $447 thousand and
for the 12 months ending December 31, 2003 of $437 thousand. The impact
on balance sheet accounts as of December 31, 2003 was an increase in
fixed assets of $13 thousand, an increase in accounts payable and
accrued liabilities of $740 thousand and an increase in future income
taxes of $277 thousand.

Impairment of Long Lived Assets

Effective January 1, 2004, the Company adopted CICA Handbook section
3063 "Impairment of Long-lived Assets". This section establishes
standards for the recognition, measurement and disclosure of the
impairment of long-lived assets held for use. Accounting for the
potential impairment of long-lived assets held for use is a two-step
process with the first step determining when impairment should be
recognized, and the second step measuring the amount of the impairment.
An impairment loss is recognized when the carrying amount of an asset
held for use exceeds the sum of the undiscounted cash flows expected
from its use and eventual disposition. The impairment loss is measured
as the amount by which the asset's carrying amount exceeds its fair
value. The effect of adopting the new recommendations did not have an
impact on the consolidated financial statements.

RISKS AND UNCERTAINTIES

A Statement of Claim has been served naming the Company and its
subsidiary Wajax Industries Limited as defendants in proceedings under
the Class Proceedings Act of British Columbia. The action arises out of
the conversion on January 1, 2001 of the Employee Pension Plan from
defined benefit to defined contribution, the taking of contribution
holidays and the payment of pension administration expenses from the
pension fund. The Company had previously evaluated the claims it
anticipated could be articulated and concluded such claims would be
unlikely to succeed. Management has assessed the facts and arguments
pleaded and continues to believe the claims would be unlikely to succeed.

For further details about the Company's risks and uncertainties, please
refer to the Management's Discussion and Analysis for the year ended
December 31, 2003 included in the Company's 2003 Annual Report.

OUTLOOK

In 2004 the Company surpassed its profitability objectives and recorded
its best earnings performance in seven years. Management believes that
each of its three core businesses has a strong management team and a
sound plan for future growth. While many of the profit improvement
initiatives outlined in previous years did result in greater
profitability in 2004, the Company also enjoyed strong industry
fundamentals in a number of sectors. The energy sector in western
Canada, along with base metal mining throughout Canada, benefiting from
increased world-wide demand and improved pricing, have increased their
requirement for product supplied by all three of the Company's core
businesses. As well, the booming Canadian housing market has continued
to positively impact demand for product from the Mobile Equipment
business.

Going into 2005, management expects these positive economic trends to
continue. With the expectation of strong industry fundamentals and the
execution of strategic initiatives outlined for each business,
management expects to continue to grow revenue and improve profitability
overall, with particular emphasis on building revenue and earnings in
the Industrial Components segment.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis contains forward-looking
information that involves assumptions and estimates that may not be
realized and other risks and uncertainties. The inclusion of this
information herein should not be regarded as a representation by 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.

Additional information, including the Company's Annual Report and Annual
Information Form, may be found on SEDAR at www.sedar.com.


WAJAX LIMITED

Unaudited Consolidated Financial Statements

For the twelve months ended December 31, 2004


Notice required under National Instrument 51-102, "Continuous Disclosure
Obligations" Part 4.3(3) (a).


The attached consolidated financial statements have been prepared by
Management of Wajax Limited and have not been reviewed by the auditors
of Wajax Limited.



WAJAX LIMITED
CONSOLIDATED BALANCE SHEETS
(unaudited)

---------------------------------------------------------------------
---------------------------------------------------------------------

December 31 December 31
(in thousands of dollars) 2004 2003
---------------------------------------------------------------------
(restated
note 2)
Current Assets
Cash and cash equivalents $49,409 $45,395
Accounts receivable 115,207 106,027
Inventories 161,046 142,905
Future income taxes 6,132 6,829
Prepaid expenses and other recoverable amounts 3,963 2,353
---------------------------------------------------------------------
335,757 303,509
---------------------------------------------------------------------

Non-Current Assets
Rental equipment 16,362 16,205
Capital assets 30,251 31,868
Goodwill and other assets 54,621 55,386
Future income taxes 2,851 2,772
---------------------------------------------------------------------
104,085 106,231
---------------------------------------------------------------------
$439,842 $409,740
---------------------------------------------------------------------
---------------------------------------------------------------------

Current Liabilities
Accounts payable and accrued liabilities $155,730 $140,816
Income taxes payable 7,935 1,348
Current portion of long-term debt 4,683 4,267
---------------------------------------------------------------------
168,348 146,431
---------------------------------------------------------------------

Non-Current Liabilities
Future income taxes 3,545 2,745
Long-term pension liability 2,080 2,052
Long-term debt 70,884 79,838
---------------------------------------------------------------------
76,509 84,635
---------------------------------------------------------------------

Shareholders' Equity
Share capital 102,390 102,212
Contributed surplus 373 63
Retained earnings 92,222 76,399
---------------------------------------------------------------------
194,985 178,674
---------------------------------------------------------------------
$439,842 $409,740
---------------------------------------------------------------------
---------------------------------------------------------------------


WAJAX LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS
AND RETAINED EARNINGS
(unaudited)

---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
(in thousands of dollars, --------------------- ---------------------
except per share data) 2004 2003 2004 2003
---------------------------------------------------------------------
(restated (restated
note 2) note 2)
Revenue $249,200 $230,905 $928,180 $883,967
Cost of sales 192,454 181,775 715,490 688,914
---------------------------------------------------------------------
---------------------------------------------------------------------

Gross profit 56,746 49,130 212,690 195,053
Selling and
administrative expenses 44,909 39,964 174,389 166,368
---------------------------------------------------------------------

Earnings before interest
and income taxes 11,837 9,166 38,301 28,685
Interest expense 1,690 2,368 7,481 10,858
---------------------------------------------------------------------

Earnings before income taxes 10,147 6,798 30,820 17,827
Income taxes - current 3,206 (171) 11,307 2,560
- future 903 3,534 1,175 5,698
---------------------------------------------------------------------

Net earnings $6,038 $3,435 $18,338 $9,569

Retained earnings, beginning
of period as reported 87,273 73,901 77,331 67,758

Impact of new accounting
standards: (Note 2)
Vendor Rebates - (490) (482) (491)
Asset Retirement Obligations (459) (447) (450) (437)
---------------------------------------------------------------------
Retained earnings, beginning
of period, as restated 86,814 72,964 76,399 66,830

Dividends on common shares (630) - (2,515) -
---------------------------------------------------------------------
---------------------------------------------------------------------

Retained earnings,
end of period $92,222 $76,399 $92,222 $76,399
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings per share
(Note 3) - basic $0.38 $0.22 $1.17 $0.61
---------------------------------------------------------------------
---------------------------------------------------------------------
- diluted $0.37 $0.22 $1.14 $0.61
---------------------------------------------------------------------
---------------------------------------------------------------------

Number of common shares
outstanding 15,739,460 15,696,960 15,739,460 15,696,960

Number of common share
stock options outstanding 843,070 744,000 843,070 744,000

---------------------------------------------------------------------
---------------------------------------------------------------------


WAJAX LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three months ended December 31
(in thousands of dollars) 2004 2003
---------------------------------------------------------------------
(restated
note 2)
OPERATING ACTIVITIES

Net earnings $6,038 $3,435
Items not affecting cash flows:
Amortization
- Rental equipment 1,137 1,298
- Capital assets 1,273 1,374
- Deferred expenses and intangible assets 250 271
Pension expense - net of payments 14 395
Stock compensation expense (Note 4) 79 63
Future income taxes 903 3,666
---------------------------------------------------------------------
Cash flows before changes in non-cash
working capital 9,694 10,502
---------------------------------------------------------------------

Changes in non-cash working capital:
Accounts receivable 1,403 5,882
Inventories (3,999) 18,120
Prepaid expenses and other recoverable amounts (1,543) 66
Accounts payable and accrued liabilities 17,200 8,472
Income taxes payable 2,011 (262)
---------------------------------------------------------------------
15,072 32,278
---------------------------------------------------------------------
Cash flows provided by operating activities 24,766 42,780
---------------------------------------------------------------------

INVESTING ACTIVITIES
Rental equipment additions (1,778) (1,302)
Rental equipment disposals 227 561
Capital asset additions (1,419) (1,832)
Proceeds on disposal of capital assets 23 964
Acquisition of business (Note 9) (845) (1,004)
---------------------------------------------------------------------
(3,792) (2,613)
---------------------------------------------------------------------
Cash flows before financing activities 20,974 40,167
---------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common shares on exercise of
stock options (Note 4) 85 -
Repayment of debt upon acquisition of business (326) -
Repayment of debentures (1,325) (1,216)
Increase in deferred financing costs (50) (275)
Dividends paid (630) -
---------------------------------------------------------------------
(2,246) (1,491)
---------------------------------------------------------------------
Cash flows before effect of foreign exchange 18,728 38,676
---------------------------------------------------------------------
Effect of foreign exchange on translation
adjustment 133 (231)
---------------------------------------------------------------------
Net change in cash and cash equivalents $18,861 $38,445
---------------------------------------------------------------------

---------------------------------------------------------------------
---------------------------------------------------------------------
Cash and cash equivalents - beginning of period $30,548 $6,950
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash and cash equivalents - end of period $49,409 $45,395
---------------------------------------------------------------------
Cash flows provided by operating activities
include the following:
---------------------------------------------------------------------
Interest paid $2,446 $2,940
Income taxes paid $1,177 $78
---------------------------------------------------------------------
Significant non-cash transaction:

Rental equipment transferred to inventory $102 $239


WAJAX LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Year ended December 31
(in thousands of dollars) 2004 2003
---------------------------------------------------------------------
(restated
note 2)
OPERATING ACTIVITIES
Net earnings $18,338 $9,569
Items not affecting cash flows:
Amortization
- Rental equipment 4,385 4,268
- Capital assets 5,194 6,553
- Deferred expenses and intangible assets 1,130 1,048
Pension expense - net of payments 552 2,865
Stock compensation expense (Note 4) 310 63
Future income taxes 1,175 5,291
---------------------------------------------------------------------
Cash flows before changes in non-cash
working capital 31,084 29,657
---------------------------------------------------------------------

Changes in non-cash working capital:
Accounts receivable (9,466) 7,238
Inventories (17,850) 33,855
Prepaid expenses and other recoverable amounts (1,613) 5,377
Accounts payable and accrued liabilities 14,539 (3,610)
Income taxes payable 6,592 4,693
---------------------------------------------------------------------
(7,798) 47,553
---------------------------------------------------------------------
Cash flows provided by operating activities 23,286 77,210
---------------------------------------------------------------------

INVESTING ACTIVITIES
Rental equipment additions (6,663) (7,819)
Rental equipment disposals 1,293 1,187
Capital asset additions (3,782) (4,520)
Proceeds on disposal of capital assets 138 3,132
Acquisition of business (Note 9) (1,095) (1,004)
---------------------------------------------------------------------
(10,109) (9,024)
---------------------------------------------------------------------
Cash flows (used) before financing activities 13,177 68,186
---------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common shares on exercise of
stock options (Note 4) 178 -
Decrease in long-term debt - (25,691)
Repayment of debt upon acquisition of business (326)
Repayment of debentures (4,267) (3,888)
Increase in deferred financing costs (50) (275)
Hedging activities (Note 5) (2,025) (6,336)
Dividends paid (2,515) -
---------------------------------------------------------------------
(9,005) (36,190)
---------------------------------------------------------------------
Cash flows before effect of foreign exchange 4,172 31,996
---------------------------------------------------------------------
Effect of foreign exchange on translation adjustment (158) (158)
---------------------------------------------------------------------
Net change in cash and cash equivalent $4,014 $31,838
---------------------------------------------------------------------

---------------------------------------------------------------------
---------------------------------------------------------------------
Cash and cash equivalent - beginning of period $45,395 $13,557
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash and cash equivalent - end of period $49,409 $45,395
---------------------------------------------------------------------
Cash provided by operating activities included
the following:
---------------------------------------------------------------------
Interest paid $7,096 $9,582
Income taxes paid (received) $4,714 $(1,545)
---------------------------------------------------------------------
Significant non-cash transaction:

Rental equipment transferred to inventory $828 $678


WAJAX LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabulated in thousands of dollars)
(unaudited)


Note 1 Significant accounting policies

The accounting policies used in the preparation of these unaudited
interim consolidated financial statements conform with those used in the
Company's annual consolidated financial statements except for the
changes noted below (See Note 2).

These interim consolidated financial statements do not include all of
the disclosures included in the Company's annual consolidated financial
statements. Accordingly, these unaudited interim financial statements
should be read in conjunction with the Company's annual consolidated
financial statements as at and for the year ended December 31, 2003.

Note 2 Change in accounting policies

a. Hedging Relationships

Effective January 1, 2004, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") Accounting Guideline AcG-13 "Hedging
Relationships", which requires assessment of new and existing hedging
relationships to determine whether they satisfy the conditions of hedge
accounting. The Company is satisfied that all hedging relationships
existing at January 1, 2004 and all new hedging relationships entered
into during the quarter and year were documented and deemed effective at
inception as well as effective on a prospective and retroactive basis at
December 31, 2004. Hedge accounting has been applied for all hedging
relationships.

b. Revenue Recognition

Effective January 1, 2004, the Company adopted CICA EIC-141 "Revenue
Recognition". This abstract provides interpretive guidance on the
application of existing standards on revenue recognition. There was no
impact on these consolidated financial statements upon adoption of the
abstract as the Company had previously accounted for revenue recognition
in the manner required by this guidance.

c. Multiple Deliverables

Effective January 1, 2004, the Company adopted the CICA EIC-142 "Revenue
Arrangements with Multiple Deliverables". This abstract addresses
certain aspects of the accounting for arrangements under which a vendor
will perform multiple revenue-generating activities. In particular, the
abstract addresses how to determine whether an arrangement contains more
than one unit of accounting and how to allocate the arrangement
consideration among separate units of accounting. Management evaluates
the application of this abstract to these types of transactions on an
individual basis when they occur. There has not been a significant
change in the way management accounts for these types of arrangements.

d. Separately Priced Extended Warranty and Product Maintenance Contracts

Effective January 1, 2004, the Company adopted the CICA EIC-143
"Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts". This abstract addresses how revenue and costs
from separately priced extended warranty or product maintenance
contracts are to be recognized and is effective prospectively for
contracts entered into after December 17, 2003. Revenues should be
deferred and recognized in income on a straight-line basis over the
contract period except in those circumstances in which sufficient
historical evidence indicates that the costs of performing services
under the contract are incurred on other than a straight-line basis. In
those circumstances, revenue should be recognized over the contract
period in proportion to the costs expected to be incurred in performing
the services under the contract. The Company is continuing to recognize
revenue for separately priced extended warranty or product maintenance
contracts over the contract period in proportion to the costs expected
to be incurred in performing the services under the contract unless
insufficient historical evidence exists to support an other than
straight-line pattern.

e. Vendor Rebates

Effective September 30, 2004, the Company adopted CICA EIC-144
"Accounting by a Customer (Including a Reseller) For Certain
Consideration Received From a Vendor". The abstract requires a customer
to record cash consideration received from a vendor as a reduction in
the price of the vendor's products and reflect it as a reduction to cost
of goods sold and related inventory when recognized in the income
statement and balance sheet. The abstract must be applied retroactively
for annual and interim periods ending after August 15, 2004. This
impact has resulted in a reduction to opening retained earnings of $482
thousand for the full year ending December 31, 2004. For the 3 months
ending December 31, 2004 and the 12 months ending December 31, 2004 the
implementation of the new standard has resulted in a $1.2 million
reduction of inventory and a $241 thousand reduction of net earnings
with a corresponding $0.01 reduction in earnings per share quarter to
date and $0.02 reduction in earnings per share year to date. The
company has restated its 2003 comparative results and balances in its
financial statements. The implementation of the new standard has
resulted in a reduction to opening retained earnings for the 3 months
ending December 31, 2003 of $490 thousand and for the 12 months ending
December 31, 2003 of $491 thousand. The impact on balance sheet
accounts as of December 31, 2003 was a decrease in inventory of $777
thousand and an increase in future income taxes of $295 thousand. The
net earnings for the 3 months ending December 31, 2003 and the 12 months
ending December 31, 2003 reflect a nominal increase.

f. Variable Interest Entities

Effective October 1, 2004, the Company elected to early adopt AcG-15
"Consolidation of Variable Interest Entities" which is effective for
periods beginning on or after November 1, 2004. Upon adoption of this
guideline the Company has determined that it has a variable interest in
Wajax Finance, a "private label" financing operation of CIT Equipment
Financing Canada, which is used primarily to provide customers of the
Mobile Equipment segment with equipment financing. In addition, the
Mobile Equipment segment leases its long-term lift truck rental fleet
through Wajax Finance and will periodically finance inventory with Wajax
Finance on a non-interest bearing basis. The Company's association with
Wajax Finance is limited to a sharing of annual profits; any losses are
financed by CIT and deducted from future profit distributions to the
Company. In the event the Wajax Finance program is terminated, the
Company's liability would be limited to amounts owing to Wajax Finance
for the rental fleet, any inventory financed at the time of termination
and any contingent contractual obligations. As the Company is not the
primary beneficiary of Wajax Finance, its financial position and results
of operations have not been consolidated in these financial statements
and the Company will continue to account for the residual returns of
Wajax Finance as earned.

g. Asset Retirement Obligations

Effective January 1, 2004, the Company adopted the CICA Handbook section
3110 "Asset Retirement Obligations". This section requires a company to
capitalize the fair market value of the costs to decommission an asset,
with an offsetting liability. The implementation of the new standard has
resulted in a reduction to opening retained earnings of $450 thousand
for the full year ending December 31, 2004. The impact on the Company's
consolidated statement of earnings for the three months and full year
ending December 31, 2004 and comparative periods was negligible. The
asset retirement obligations pertain to operating leases of branch
facilities where certain clauses require premises to be returned to
their original state at the end of the lease term. The total estimated
undiscounted cash flows required to settle these obligations amount to
$1,025 thousand. The Company adopted the section on a retroactive basis
beginning on October 1, 2004. As a result, figures for the consolidated
balance sheets as at September 30, 2004 were restated as follows: a $7
thousand increase in fixed assets, an increase in future income taxes of
$283 thousand, an increase in accrued liabilities of $749 thousand and a
decrease in retained earnings of $459 thousand. The implementation of
the new standard has resulted in a reduction to opening retained
earnings for the 3 months ending December 31, 2003 of $447 thousand and
for the 12 months ending December 31, 2003 of $437 thousand. The impact
on balance sheet accounts as of December 31, 2003 was an increase in
fixed assets of $13 thousand, an increase in accounts payable and
accrued liabilities of $740 thousand and an increase in future income
taxes of $277 thousand.

h. Impairment of long-lived assets

Effective January 1, 2004, the Company adopted CICA Handbook section
3063 "Impairment of Long-lived Assets". This section establishes
standards for the recognition, measurement and disclosure of the
impairment of long-lived assets held for use. Accounting for the
potential impairment of long-lived assets held for use is a two-step
process with the first step determining when impairment should be
recognized, and the second step measuring the amount of the impairment.
An impairment loss is recognized when the carrying amount of an asset
held for use exceeds the sum of the undiscounted cash flows expected
from its use and eventual disposition. The impairment loss is measured
as the amount by which the asset's carrying amount exceeds its fair
value. The effect of adopting the new recommendations did not have an
impact on the consolidated financial statements.

Note 3 Earnings per share

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share information):



Quarter 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
(restated
note 2)
Numerator for basic and diluted earnings per share:
- net income $6,038 $3,435

---------------------------------------------------------------------
Denominator for basic earnings per share :
- weighted average shares 15,731,619 15,696,960
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator for diluted earnings per share:
- weighted average shares 15,731,619 15,696,960
- effect of dilutive employee stock options 428,509 214,943
---------------------------------------------------------------------
Denominator for diluted earnings per share 16,160,128 15,911,903
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share $0.38 $0.22
---------------------------------------------------------------------
Diluted earnings per share $0.37 $0.22
---------------------------------------------------------------------
---------------------------------------------------------------------


Of the 843,070 (2003 - 744,000) stock options outstanding at the end of
the period, 55,000 (2003 - 202,000) options with an exercise price of
$13.34 (2003 - $7.34-$11.50) are excluded from the above calculations as
they are currently anti-dilutive. These securities could potentially
dilute earnings per share in future periods.



Year-to-date 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
(restated
note 2)
Numerator for basic and diluted earnings per share:
- net income $18,338 $9,569
---------------------------------------------------------------------
Denominator for basic earnings per share :
- weighted average shares 15,713,115 15,696,960
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator for diluted earnings per share:
- weighted average shares 15,713,115 15,696,960
- effect of dilutive employee stock options 356,357 108,610
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator for diluted earnings per share 16,069,472 15,805,570
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share $1.17 $0.61
---------------------------------------------------------------------
Diluted earnings per share $1.14 $0.61
---------------------------------------------------------------------
---------------------------------------------------------------------


Of the 843,070 (2003 - 744,000) stock options outstanding at the end of
the period, 120,000 (2003 - 202,000) options with an exercise price
range of $10.22-$13.34 (2003 - $7.34-$11.50) are excluded from the above
calculations as they are currently anti-dilutive. These securities could
potentially dilute earnings per share in future periods.

Note 4 Stock-based compensation plans

During the quarter 18,000 (2003 - nil) stock options were exercised with
a weighted-average exercise price of $4.71. The Company issued employee
stock options to purchase 55,000 shares (2003 - 40,000) with an exercise
price of $13.34 (2003 - $7.34) and a life of 10 years (2003 - 5 years).

Year to date, the Company issued employee stock options to purchase
141,570 (2003 - 110,000) shares with a weighted-average exercise price
of $10.70 (2003 - $5.50) and weighted average life of 9.13 (2003 - 5.0)
years as of the date of issuance. Employees of the Company exercised
42,500 (2003 - nil) stock options with a weighted-average exercise price
of $4.19. No options expired during the year.

The Company recorded a compensation cost of $79 thousand for the quarter
and $310 thousand year to date in respect of employee stock options
granted after December 31, 2002. The Company had accounted for employee
stock options using the intrinsic value method prior to 2003 and
accordingly has not recorded compensation cost for grants prior to this
year. There would have been a reduction in net earnings of $18 thousand
(2003 - $44 thousand) for the quarter and $110 thousand (2003 - $253
thousand) year to date and a nominal reduction in earnings per share
(2003 - $0.01 reduction in basic and diluted earnings per share) if the
Company had accounted for employee stock options issued in 2002 under
the fair value method. The fair value of employee stock options is
determined using the Black-Scholes option pricing model, adjusted for
performance vesting criteria, using the following weighted average
assumptions:



Risk free interest rate 3.76%
Expected life 7.35 years
Expected volatility 32%
Expected dividends 2%


The weighted average fair value of the options issued during the quarter
at the grant date was $4.23 (2003 - $2.80). The weighted average fair
value of the options issued during the full year at the grant date was
$3.71 (2003 - $2.00).

Note 5 Financial Instruments

The Company hedges its foreign currency exposures on a portion of its
U.S. dollar-denominated senior notes by entering into offsetting U.S.
dollar forward contracts. During the year, the Company had a $2.0
million loss on these hedging activities that was offset by a $2.0
million foreign currency gain on the U.S. dollar-denominated senior
notes. At December 31, 2004 the Company has two short-term foreign
currency forward contracts outstanding to buy a total of $30 million
U.S. dollars on March 31, 2005.

Note 6 Employees' pension plans

Net pension plan expenses are as follows:



Quarter 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Net pension plan expense - defined benefit plans $60 $86
Net pension plan expense - defined contribution plans 918 753
---------------------------------------------------------------------
$978 $839
---------------------------------------------------------------------
---------------------------------------------------------------------


Year-to-date
---------------------------------------------------------------------
---------------------------------------------------------------------
Net pension plan expense - defined benefit plans $732 $292
Net pension plan expense - defined contribution plans 3,796 3,038
---------------------------------------------------------------------
$4,528 $3,330
---------------------------------------------------------------------
---------------------------------------------------------------------


Note 7 Segmented information

Quarter 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue (restated
note 2)
---------------------------------------------------------------------
---------------------------------------------------------------------
Mobile Equipment $124,606 $117,233

Industrial Components
- Canada 65,343 57,531
- United States 12,515 11,158
---------------------------------------------------------------------
Total Industrial Components 77,858 68,689
---------------------------------------------------------------------
Diesel Engines 47,206 45,653
Segment eliminations (470) (670)
---------------------------------------------------------------------

Total consolidated $249,200 $230,905
---------------------------------------------------------------------
---------------------------------------------------------------------

Segment Earnings (Loss)
---------------------------------------------------------------------
---------------------------------------------------------------------
Mobile Equipment $6,901 $5,170
Industrial Components
- Canada 2,725 1,104
- United States 360 (916)
---------------------------------------------------------------------
Total Industrial Components 3,085 188
---------------------------------------------------------------------
Diesel Engines 4,657 5,085
Corporate costs and eliminations (2,806) (1,277)
---------------------------------------------------------------------

Total consolidated $11,837 $9,166
---------------------------------------------------------------------
---------------------------------------------------------------------
Interest expense, income taxes and all other corporate costs are not
allocated to business segments.


Year-to-date 2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenue (restated
note 2)
---------------------------------------------------------------------
---------------------------------------------------------------------
Mobile Equipment $448,761 $438,856
Industrial Components
- Canada 252,991 229,032
- United States 56,802 51,060
---------------------------------------------------------------------
Total Industrial Components 309,793 280,092
---------------------------------------------------------------------
Diesel Engines 171,700 166,884
Segment Eliminations (2,074) (1,865)
---------------------------------------------------------------------

Total consolidated $928,180 $883,967
---------------------------------------------------------------------
---------------------------------------------------------------------

Segment Earnings (Loss)
---------------------------------------------------------------------
---------------------------------------------------------------------
Mobile Equipment $22,572 $18,254
Industrial Components
- Canada 7,573 4,231
- United States 1,147 (2,852)
---------------------------------------------------------------------
Total Industrial Components 8,720 1,379
---------------------------------------------------------------------
Diesel Engines 15,223 15,676
Corporate costs and eliminations (8,214) (6,624)
---------------------------------------------------------------------

Total consolidated $38,301 $28,685
---------------------------------------------------------------------
---------------------------------------------------------------------
Interest expense, income taxes and all other corporate costs are not
allocated to business segments.


Note 8 Contingencies

A Statement of Claim has been served naming the Company and its
subsidiary, Wajax Industries Limited, as defendants in proceedings under
the Class Proceedings Act of British Columbia. The action arises out of
the conversion on January 1, 2001 of the Employee Pension Plan from
defined benefit to defined contribution, the taking of contribution
holidays and the payment of pension administration expenses from the
pension fund. The Company had previously evaluated the claims it
anticipated could be articulated and concluded such claims would be
unlikely to succeed. Management has assessed the facts and arguments
pleaded and continues to believe the claims would be unlikely to succeed.

Note 9 Acquisition

Effective October 7, 2004, the company's Mobile Equipment segment
acquired all of the outstanding shares of XR Equipment Ltd, a JCB
distribution business in London Ontario, for a total purchase price,
including assumed debt, of $1.2 million. The results of operations from
the acquisition have been included in the consolidated statements of the
Company as of the effective date.

The following is a summary of the purchase price allocation:



----------------------------------------------------
----------------------------------------------------
Working capital $793
Capital assets 27
Intangible assets 351
Assumed debt (326)
----------------------------------------------------
Total cash paid $845
----------------------------------------------------
----------------------------------------------------


In the three month period ending Dec 31, 2003 the company purchased all
the assets of P.M.D.F. Hydraulique Inc. an industrial distribution
business, for a total purchase price of $1.0 million.

Note 10 Comparative information

Certain comparative numbers have been reclassified to conform with
current presentation.

-30-

Contact Information