Finning Reports Stronger Second Quarter Results-Improving Market Activity in All Operations

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 11, 2010) - Finning International Inc. (TSX:FTT) -

Q2 2010 HIGHLIGHTS (from continuing operations)

- Consolidated EBIT of $67 million, while below Q2 2009, improved by 61% from Q1 2010 driven by higher EBIT performance from Canada and the U.K. Results from South America continued to be solid.

- Product support remained strong in mining and improved in non-mining sectors, particularly construction. Consolidated product support revenues increased by 10% from Q2 2009 and were up significantly in all operations, by 16% - 18% in local currencies.

- The Company remains on track to achieve its annual targets for permanent cost reduction, free cash flow and net debt to capital ratio.

- Market activity continued to improve in all operations and across all sectors. Consolidated order backlog of $1.0 billion was up 10% from Q1 2010.

Finning International Inc. reported the following second quarter 2010 results from continuing operations: revenues of $1.1 billion, earnings before interest and income taxes (EBIT) of $67 million and diluted earnings per share (EPS) of $0.21. The second quarter 2010 results included net non-operational charges of $0.06 per share.

"Market conditions are improving for all our operations and the recovery is unfolding earlier than we expected," said Mike Waites, president and chief executive officer of Finning International Inc. "Mining remains strong and activity in non-mining markets is picking up. We are also starting to see the benefits of our operational excellence initiatives as we are generating improved EBIT margins."

"Looking forward, we will continue to capture growth opportunities that play to our core competencies in product support, mining and power systems," continued Mike Waites. "We are making selective investments in capacity in South America and Canada to support the growing product support business. The recently announced acquisition of the Caterpillar dealerships in Northern Ireland and The Republic of Ireland leverages our existing infrastructure and power systems expertise in the U.K. and will be accretive to EBIT."

As previously announced, on May 5, 2010, the Company sold Hewden, its UK rental business, for an after-tax loss of $244 million or $1.43 per share. Gross proceeds on sale were GBP 110 million (C$ 171 million). This transaction completed the strategic realignment of the Company's UK operations. The results of operations of Hewden for the periods up to May 5, 2010 have been reclassified as discontinued operations in the consolidated statements of income and cash flow. The assets and liabilities of Hewden in the balance sheet for the periods prior to the date of disposition have been presented separately.


Q2 2010 FINANCIAL SUMMARY (from continuing operations)

C$ millions, except per share              Three months ended June 30
 amounts (unaudited)                    2010     2009        % Change
Revenue                                1,075    1,097              (2)
Earnings before interest and income
 taxes (EBIT)(1)                          67       73              (9)
Net income                                36       57             (36)
Diluted EPS                             0.21     0.33             (36)
Earnings before interest, income
 taxes, depreciation and
 amortization (EBITDA) (1)               105      121             (13)
Free cash flow (1)(2)                     33      140


- Revenues of $1.1 billion were 2% lower than in Q2 2009. New equipment sales were down 12%, primarily in Canada. Used equipment sales and rental revenues declined by 2% and 15% respectively. Product support revenues increased in all operations. Consolidated product support revenues were up 10% from Q2 2009 reflecting improved market conditions and the Company's focus on growing its product support business. Foreign exchange had a negative impact on quarterly revenues of approximately $125 million due to the 12% stronger Canadian dollar relative to the U.S. dollar and the 15% stronger Canadian dollar relative to the U.K. pound sterling for Q2 2010 compared to Q2 2009.

- Gross profit increased by $2 million or 1% from Q2 2009 despite lower revenues. Gross profit margin of 30.8% was slightly higher than 30.0% in Q2 2009 due to the shift in revenue mix to higher margin product support and improved margins in other lines of business. Product support accounted for 48% of the total revenues compared to 43% in Q2 2009.

- Selling, general and administrative (SG&A) expenses were $13 million or 5% higher than in Q2 2009. The Company continues to realize cost savings from initiatives announced last year and remains on track to meet the permanent cost reductions targeted by the end of 2010. Cost savings realized in Q2 2010 were more than offset by costs relating to a 10% increase in the workforce in South America to support growing demand for product support and Q2 2009 SG&A included $8 million of foreign exchange gains.

- EBIT of $67 million was 9% below Q2 2009. While consolidated EBIT margin of 6.2% was lower than 6.6% in Q2 2009, it improved significantly from Q1 2009 EBIT margin of 4.2% as a result of higher EBIT margins in Canada and the U.K. Driving improved EBIT margin performance remains at the top of the Company's near-term priorities.

- Net income decreased by 36% to $36 million. Diluted EPS was $0.21 compared to $0.33 in Q2 2009 and $0.14 in Q1 2010. Foreign exchange had a negative impact of $0.10 per share compared Q2 2009. Non-operational costs totaled $0.06 per share and included IT system implementation costs of $0.03 per share and the premium and related costs associated with the partial purchase of the Company's Eurobond Notes of $0.03 per share.

- EBITDA, which is an indicator of a company's cash operating performance and generation of operating cash flow, was $105 million compared to $121 million in Q2 2009.

- Free cash flow was $33 million, compared to $140 million in Q2 2009 due to higher inventory levels to meet growing customer demand. Year to date, free cash flow was $132 million, and the Company remains on track to generate approximately $200 million of free cash flow in 2010.

- Net debt to total capital was 37%, comparable to the March 31, 2010 level and down from 39% at December 2009. The net debt to total capital ratio is expected to be in the mid 30%s range by the end of 2010.

- Consolidated backlog was $1.0 billion at June 30, 2010, up from $0.9 billion at March 31, 2010, the third consecutive quarterly increase in backlog. While the new order intake continues to be driven by the mining sector, there was an increase in new orders from the non-mining markets in the second quarter.



- Second quarter revenues were down 4% from Q2 2009. The decline in new equipment sales and rental revenues, which were down 23% and 17% respectively, was partly offset by strong product support growth. Product support revenues were 18% higher than in Q2 2009, driven primarily by mining, including the oil sands, and also increased in non-mining sectors. Mining product support revenues increased by 19% from Q2 2009. Used equipment sales increased by 7% in the second quarter, over Q2 2009.

- Cost savings related to workforce reductions and productivity improvements reduced SG&A in Q2 2010. In spite of this, SG&A was higher than the prior year as Q2 2009 included an $8 million foreign exchange gain on US denominated payables and Q2 2010 included higher bad debt provisions. The Canadian operations incurred IT system implementation costs of $4 million in Q2 2010 ($2 million in Q2 2009). The Company is on track to launch the new system in Canada in Q4 2010.

- EBIT of $33 million was below $38 million in Q2 2009, but improved substantially from the Q1 2010 EBIT of $9 million. EBIT margin of 5.8% was down compared to 6.5% in Q2 2009, but improved significantly from 1.9% in Q1 2010. Finning (Canada) remains focused on increasing service labor productivity and implementing supply chain efficiencies to drive higher EBIT margin.

- The backlog continued to increase in Q2 2010 with most of the order intake driven by the mining sector, including the oil sands. In addition, activity in the non-mining sectors improved in the second quarter.

South America

- Second quarter revenues declined by 3% from Q2 2009; however, in functional currency (USD), revenues were up 10%. New equipment sales declined 5% (up 8% in functional currency) as lower new equipment sales in mining were more than offset by higher deliveries to the construction and power systems sectors. Product support revenues increased by 2% from Q2 2009 and were up 16% in functional currency. Mining product support revenues were up 15% in functional currency from Q2 2009 and also grew in construction.

- EBIT was $33 million, compared to $38 million in Q2 2009. In functional currency, EBIT declined by 4% due to an increase in the workforce and higher IT implementation costs as Finning South America continued to invest in product support growth. EBIT margin was 9.3% compared to 10.6% in Q2 2009.

- Order intake was strong in all market segments. The backlog continued to increase in Q2 2010 driven by the strong mining sector and rising activity in construction and power systems. The backlog does not include the order for Codelco's Ministro Hales mine. Market conditions in South America continue to improve. The momentum in mining is expected to continue into 2011 and 2012, and Finning is in an excellent position to capture equipment and product support opportunities. Construction activity is strengthening due to growing demand from public infrastructure and mining customers.

United Kingdom (continuing operations)

- Quarterly revenues rose 5% from Q2 2009, primarily due to higher new equipment sales to the coal mining sector. In functional currency (GBP), quarterly revenues were up 24%, driven by a 31% increase in new equipment sales and an 18% increase in product support revenues over Q2 2009. Used equipment sales were up 28% in local currency.

- EBIT from UK operations improved to $7 million compared to $3 million in Q2 2009, reflecting increased revenues and on-going discipline around SG&A costs. EBIT margin increased to 4% from 2% in Q2 2009 and in Q1 2010.

- Equipment sales in the U.K. improved in the second quarter in coal mining, quarries waste management and plant hire sectors. Outlook for other sectors remains uncertain due to reduced government funding. The order backlog increased from Q1 2010.


Dealerships in Northern Ireland and the Republic of Ireland

On August 2, 2010, Finning was appointed the Caterpillar dealer for Northern Ireland. The Company reached agreement on the acquisition of certain assets from the Administrator of the previous Caterpillar dealership for Northern Ireland. The total purchase price for the assets is approximately GBP 3.1 million.

On August 9, 2010, Finning was appointed the Caterpillar dealer for the Republic of Ireland. The Company reached agreement on the acquisition of certain assets from the Receiver of the previous Caterpillar dealer in the Republic of Ireland and from Caterpillar for approximately Euro 2.7 million.

Executive Appointments

On July 7, 2010, Finning announced the appointment of Andy Fraser as executive vice-president power systems and global business development for Finning International. Most recently, Mr. Fraser oversaw the Company's UK operations as managing director. Assuming leadership of the UK operations will be Neil Dickinson, who was appointed managing director of Finning UK. Most recently, Neil was director, construction for the UK operations.


The Board of Directors approved a quarterly dividend at $0.12 per common share, payable on September 10, 2010, to shareholders of record on August 27, 2010. This dividend will be considered an eligible dividend for Canadian income tax purposes.


(from continuing operations unless otherwise stated, C$ millions,
 except per share amounts)

                      Three months ended June 30   Six months ended June 30
Revenue                   2010     2009 % Change     2010     2009 % Change
  New equipment          411.3    465.3      (12)   757.0  1,097.4      (31)
  Used equipment          86.1     87.4       (2)   155.6    159.4       (2)
  Equipment rental        63.9     74.9      (15)   133.9    163.5      (18)
  Product support        511.8    466.6       10  1,003.4    960.3        5
  Other                    2.1      3.2      (33)     5.0      6.2      (19)
  Total revenue        1,075.2  1,097.4       (2) 2,054.9  2,386.8      (14)
Gross profit             331.1    328.9        1    624.6    698.7      (11)
Gross profit margin (3)   30.8%    30.0%             30.4%    29.3%
SG&A                    (257.1)  (244.4)      (5)  (501.3)  (519.7)       4
Other expenses            (7.5)   (11.8)      36    (15.5)   (19.0)      19
EBIT                      66.5     72.7       (9)   107.8    160.0      (33)
EBIT margin (4)            6.2%     6.6%              5.2%     6.7%
Income from
 continuing operations    36.0     56.5      (36)    59.1    109.4      (46)
Loss from
 operations, net of
 tax                    (246.1)    (8.7)           (249.1)   (16.6)
Net income (loss)       (210.1)    47.8            (190.0)    92.8
Diluted earnings
 (loss) per share
  from continuing
   operations             0.21     0.33      (36)    0.35     0.64      (45)
  from discontinued
   operations            (1.44)   (0.05)            (1.46)   (0.10)
Total diluted
 earnings (loss) per
 share                   (1.23)    0.28             (1.11)    0.54

EBITDA                   104.8    120.9      (13)   189.2    262.7      (28)
Free cash flow(i)         32.6    139.7             131.9    137.9       (4)
                                                   Jun 30,  Dec 31,
                                                     2010     2009
Total assets(i)                                   3,401.5  3,671.4
Total shareholders' equity(i)                     1,363.6  1,515.7
Net debt to total capital (5)(i)                       37%      39%

(i) Free cash flow and assets from Hewden have been included in the
    figures for periods prior to the sale.


To download Finning's complete Q2 2010 results in PDF, please open the following link:

To download the CEO and CFO certification letters, please open the following link:


Management will hold an investor conference call on Thursday, August 12 at 11:00 am Eastern Time. Dial-in numbers: 1-866-223-7781 (anywhere within Canada and the U.S.) or (416) 340-8018 (for participants dialing from Toronto and overseas).

The call will be webcast live and subsequently archived at Playback recording will be available at 1-800-408-3053 from 1:00 pm Eastern Time on August 12 until August 19. The pass code to access the playback recording is 6407118 followed by the number sign.

Q3 2010 RESULTS - NOVEMBER 10, 2010

Finning's third quarter 2010 results will be released on November 10, 2010 after market close. An investor conference call will be held on November 11, 2010.

About Finning

Finning International Inc. (TSX:FTT) is the world's largest Caterpillar equipment dealer delivering unrivalled service to customers since 1933. Finning sells, rents and services equipment and engines to help customers maximize productivity. Headquartered in Vancouver, B.C., the Company operates in western Canada, Chile, Argentina, Bolivia, Uruguay, and the United Kingdom.


(1) These amounts do not have a standardized meaning under generally accepted accounting principles. For a reconciliation of these amounts to net income and cash flow from operating activities, see the heading "Description of Non-GAAP Measures" in the Company's management discussion and analysis that accompanies the second quarter consolidated financial statements.

(2) Free cash flow is defined as cash flow provided by (used in) operating activities less net capital expenditures.

(3) Gross profit margin is defined as gross profit as a percentage of total revenue.

(4) EBIT margin is defined as earnings before interest and income taxes as a percentage of total revenue.

(5) Net debt to total capital ratio is calculated as short-term debt and long-term debt, net of cash and cash equivalents (net debt) divided by total capitalization. Total capitalization is defined as the sum of net debt and all components of equity (share capital, contributed surplus, accumulated other comprehensive loss, and retained earnings).

Forward-Looking Disclaimer

This report contains statements about the Company's business outlook, objectives, plans, strategic priorities and other statements that are not historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, project, seek, should, strategy, strive, target, and will. Forward-looking statements in this report include, but are not limited to, statements with respect to: expectations with respect to the economy and associated impact on the Company's financial results; the estimated annualized cost savings and anticipated restructuring charges related to actions taken by the Company in response to the economic downturn; expected revenue levels and EBIT growth; anticipated effective tax rate; anticipated generation of free cash flow (including projected net capital and rental expenditures), and its expected use; anticipated defined benefit plan contributions; and expected target range of Debt Ratio. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.

Unless otherwise indicated by us, forward-looking statements in this report describe our expectations at August 11, 2010. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans, strategic priorities and other statements that are not historical facts may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize. Factors that could cause actual results or events to differ materially from those expressed in or implied by our forward-looking statements include: general economic and credit market conditions; foreign exchange rates; commodity prices; the level of customer confidence and spending, and the demand for, and prices of, our products and services; our dependence on the continued market acceptance of Caterpillar's products and Caterpillar's timely supply of parts and equipment; our ability to continue to implement our cost reduction initiatives while continuing to maintain customer service; the intensity of competitive activity; our ability to raise the capital we need to implement our business plan; regulatory initiatives or proceedings, litigation and changes in laws or regulations; stock market volatility; changes in political and economic environments for operations outside Canada. Forward-looking statements are provided in this report for the purpose of giving information about management's current expectations and plans and allowing investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this report are based on a number of assumptions that we believed were reasonable on the day we made the forward-looking statements. Refer in particular to the Market Outlook section of the MD&A. Some of the assumptions, risks, and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this report are discussed in the Company's current Annual Information Form (AIF) in Section 4.

We caution readers that the risks described in the AIF are not the only ones that could impact us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, or results of operations.

Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business.

Finning International Inc. Mauk Breukels Director, Investor Relations and Corporate Affairs (604) 331-4934

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