Stella-Jones is providing this update to inform of the impact on financial results stemming from recent changes to the U.S Federal Corporate income tax rate. On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act, which will favourably affect the Company’s U.S. subsidiaries, specifically the reduction in the top federal corporate income tax rate from 35% to 21%, effective January 1, 2018.
Management expects that the change in the tax rate will result in a one-off non-cash material tax benefit in the statement of income for the fourth quarter ended December 31, 2017, stemming from the remeasurement of the deferred tax liability, in the range of $28 to $30 million. Management is currently evaluating whether there are other impacts from the Act to consider.
Additionally, for the 4Q, the Company is currently anticipating increased sales in the range of $376 to $379 million, compared with $341.7 million last year, while income before income taxes is expected to be relatively flat year over year, estimated at between $24 and $26 million, versus $23.9 million a year ago, and net income should be between $50 and $52 million (taking into account the above-mentioned remeasurement of deferred tax liability), compared to $18.5 million last year. The lower margins mainly result from the sales mix within each product category and softer pricing in certain regions, as anticipated in management’s discussion and analysis for the 3Q.
The year 2017 will mark the seventeenth consecutive year of sales and net income growth for Stella-Jones. For the fiscal year ended December 31, 2017, consolidated sales are expected to show a year-over-year increase, reaching close to $1.89 billion, in comparison to $1.84 billion in 2016, while income before income taxes should be between $187 and $189 million, compared to $215.4 million a year ago, and net income should be between $167 and $169 million, compared to $153.9 million last year. For the 2018 fiscal year, total sales and operating margins are expected to improve, assuming stable currencies. The overall effective tax rate for 2018 is expected to be around 26%.
Stella-Jones Inc. is a leading producer and marketer of pressure treated wood products.
