Toromont Announces Results for the Fourth Quarter and Full Year 2011
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Three months ended Twelve months ended
December 31 December 31
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millions, except per % %
share amounts 2011 2010 change 2011 2010 change
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Continuing operations
basis:
Revenues $ 408.4 $ 342.9 19% $ 1,382.0 $ 1,207.0 14%
Operating income $ 48.2 $ 42.2 14% $ 148.2 $ 119.2 24%
Net earnings $ 34.2 $ 28.0 22% $ 102.7 $ 76.7 34%
Earnings per share -
basic $ 0.44 $ 0.36 22% $ 1.33 $ 1.00 33%
Discontinued operations:
Net earnings $ - $ 12.3 n/m $ 143.8 $ 27.2 n/m
Earnings per share -
basic $ - $ 0.16 n/m $ 1.87 $ 0.36 n/m
Total:
Net earnings $ 34.2 $ 40.3 (15%) $ 246.5 $ 103.9 n/m
Earnings per share -
basic $ 0.44 $ 0.52 (15%) $ 3.20 $ 1.36 n/m
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Note - net earnings from discontinued operations includes a gain on
disposition of $133.2 million , $1.73 per share basic.
Toromont reported strong results in the fourth quarter with net earnings from continuing operations increasing 22%, reflecting higher revenues and better margins. For the year, net earnings increased 34% on the same factors.
"We are pleased with our results for the quarter and year. Revenues from equipment sales, product support and rentals were at or near record levels for a fourth quarter and full year," said
Highlights:
-- Net earnings from continuing operations were$34.2 million in the quarter ($0.44 per share basic), up 22% from$28.0 million reported in the same quarter last year. Higher revenues and gross margins contributed to the improvement. For the full year, net earnings from continuing operations were$102.7 million ($1.33 per share basic), 34% higher than the similar period last year. --Equipment Group revenues of$371 million were up 25% in the fourth quarter versus the similar period of 2010 on higher new and used equipment sales and product support activities. Revenues were$1.2 billion for 2011, up 17% from a year ago. Operating income increased 17% in the fourth quarter and 24% in the full year compared to 2010 on higher revenues. --Equipment Group backlogs were$224 million at the end of 2011 compared to$256 million at this time last year. Significant mining deliveries began in the fourth quarter, drawing down the order backlog. Bookings of$157 million in the fourth quarter were 24% lower than the very strong orders booked in the fourth quarter of 2010. Bookings in 2011 totalled$635 million compared to$708 million in the prior year which included a record mining order. Power systems and road building have reported strong activity levels. --CIMCO revenues of$37 million in the fourth quarter were down 17% from the similar period last year and were 1% higher for the year. Decline in package sales revenues was expected given the end of the RecreationalInfrastructure Canada stimulus program in 2010. Operating income increased 26% for the year, reaching a new record on improved project execution. --CIMCO bookings of$27 million in the fourth quarter were 39% higher than those reported in the same period last year and were down 17% for the year, on a decline in recreation bookings. Backlogs were$51 million atDecember 31, 2011 . -- Net earnings were$34.2 million in the quarter ($0.44 per share basic) and$246.5 million ($3.20 per share basic) for the year. Return on opening shareholders' equity was 28.9% and return on capital employed was 27%, both adjusted for discontinued operations. -- The Company maintained a strong financial position and ended the year with$75 million of cash. Total debt net of cash to total capitalization was 13%, well within stated capital targets. -- The Board of Directors declared the regular quarterly dividend of$0.11 per common share, paid onJanuary 3, 2012 . The Company has paid dividends every year since going public in 1968. -- During the fourth quarter of 2011, the Company purchased and cancelled 242,769 shares under its normal course issuer bid. Total cost for the shares purchased was$4.2 million (average cost of$17.23 per share). -- In the fourth quarter, Toromont delivered the first Bucyrus shovel to theDetour Lake site. This shovel, now called theCAT 6060, was one of the first in the world to featureCAT colours . Caterpillar's 2011 acquisition ofBucyrus International significantly expanded Caterpillar's market leadership in mining and Toromont is currently in discussions with Caterpillar to secure the rest of the Bucyrus line of equipment and related product support opportunity for our dealership territory. These discussions are expected to conclude in the second half of 2012. -- The Board of Directors namedScott Medhurst to the position of President and Chief Executive Officer ofToromont Industries Ltd. , effectiveMarch 1, 2012 .Mr. Medhurst will also join our Board at the same time. Mr. Medhurst's career began with the Ontario Caterpillar dealership in 1988 and over the past two decades, he steadily progressed through equipment sales positions into branch and regional management roles to his appointment as President, Toromont CAT inSeptember 2004 .Robert Ogilvie will remain Executive Chairman of the Board and an active participant in Toromont's growth and development. -- The Company completed the spinoff of its natural gas compression and processing equipment business, Enerflex Ltd. ("Enerflex"), effectiveJune 1, 2011 . The financial results of Enerflex have been included in the Company's results of operations up to that date and are reported as discontinued operations. Earnings from discontinued operations in 2011 were$143.8 million for the first five months including a gain of$133.2 million ,$1.73 per share basic, realized on the spinoff of Enerflex.
"Toromont is well positioned to achieve continuing success, with a healthy backlog, leading market positions and growing product support activities," continued
Quarterly Conference Call and Webcast
Interested parties are invited to join the quarterly conference call with investment analysts, in listen-only mode, on
Both the live webcast and the replay of the quarterly conference call can be accessed at www.toromont.com.
Advisory
Information in this press release that is not a historical fact is "forward-looking information". Words such as "plans", "intends", "outlook", "expects", "anticipates", "estimates", "believes", "likely", "should", "could", "will", "may" and similar expressions are intended to identify statements containing forward-looking information. Forward-looking information in this press release is based on current objectives, strategies, expectations and assumptions which management considers appropriate and reasonable at the time including, but not limited to, general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and shareholder and regulatory approvals.
By its nature, forward-looking information is subject to risks and uncertainties which may be beyond the ability of Toromont to control or predict. The actual results, performance or achievements of Toromont could differ materially from those expressed or implied by forward-looking information. Factors that could cause actual results, performance, achievements or events to differ from current expectations include, among others, risks and uncertainties related to: business cycles, including general economic conditions in the countries in which Toromont operates; commodity price changes, including changes in the price of precious and base metals; changes in foreign exchange rates, including the Cdn$/US$ exchange rate; the termination of distribution or original equipment manufacturer agreements; equipment product acceptance and availability of supply; increased competition; credit of third parties; additional costs associated with warranties and maintenance contracts; changes in interest rates; the availability of financing; and, environmental regulation.
Any of the above mentioned risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied in the forward-looking information and statements included in this press release. For a further description of certain risks and uncertainties and other factors that could cause or contribute to actual results that are materially different, see the risks and uncertainties set out in the "Risks and Risk Management" and "Outlook" sections of Toromont's most recent annual or interim Management Discussion and Analysis, as filed with Canadian securities regulators at www.sedar.com and may also be found at www.toromont.com. Other factors, risks and uncertainties not presently known to Toromont or that Toromont currently believes are not material could also cause actual results or events to differ materially from those expressed or implied by statements containing forward-looking information.
Readers are cautioned not to place undue reliance on statements containing forward-looking information that are included in this press release, which are made as of the date of this press release, and not to use such information for anything other than their intended purpose. Toromont disclaims any obligation or intention to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.
About Toromont
Management's Discussion and Analysis
This Management's Discussion and Analysis ("MD&A") comments on the operations, performance and financial condition of
The consolidated financial statements reported herein have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars. The information in this MD&A is current to
Additional information is contained in the Company's filings with Canadian securities regulators, including the Company's 2010 Annual Report and 2011 Annual Information Form. These filings are available on SEDAR at www.sedar.com and on the Company's website at www.toromont.com.
SPINOFF OF ENERFLEX
On
The information presented herein reflects the spinoff, with Enerflex presented as discontinued operations in all periods. Results for 2011 include the results of Enerflex for the five months ended
CORPORATE PROFILE AND BUSINESS SEGMENTATION
As at
Toromont has two reportable operating segments: the
Prior to 2011, the Company reported two operating segments, the
PRIMARY OBJECTIVE AND MAJOR STRATEGIES
A primary objective of the Company is to build shareholder value through sustainable and profitable growth, founded on a strong financial position. To guide its activities in pursuit of this objective, Toromont works toward specific, long-term financial goals (see section heading "Key Performance Measures" in this MD&A) and each of its operating groups consistently employs the following broad strategies:
Expand Markets
Toromont serves diverse markets that offer significant long-term potential for profitable expansion. Each operating group strives to achieve or maintain leading positions in markets served. Incremental revenues are derived from improved coverage, market share gains and geographic expansion. Expansion of the installed base of equipment provides the foundation for product support growth and leverages the fixed costs associated with the Company's infrastructure.
Strengthen Product Support
Toromont's parts and service business is a significant contributor to overall profitability and serves to stabilize results through economic downturns. Product support activities also represent opportunities to develop closer relationships with customers and differentiate the Company's product and service offering. The ability to consistently meet or exceed customers' expectations for service efficiency and quality is critical, as after-market support is an integral part of the customer's decision-making process when purchasing equipment.
Broaden Product Offerings
Toromont delivers specialized capital equipment to a diverse range of customers and industries. Collectively, hundreds of thousands of different parts are offered through the Company's distribution channels. The Company expands its customer base through selectively extending product lines and capabilities. In support of this strategy, Toromont represents product lines that are considered leading and generally best-in-class from suppliers and business partners who continually expand and develop their offerings. Strong relationships with suppliers and business partners are critical in achieving growth objectives.
Invest in Resources
The combined knowledge and experience of Toromont's people is a key competitive advantage. Growth is dependent on attracting, retaining and developing employees with values that are consistent with Toromont's. A highly principled culture, share ownership and profitability based incentive programs result in a close alignment of employee and shareholder interests. By investing in employee training and development, the capabilities and productivity of employees continually improve to better serve shareholders, customers and business partners.
Toromont's information technology represents another competitive differentiator in the marketplace. The Company's selective investments in technology, inclusive of e-commerce initiatives, strengthen customer service capabilities, generate new opportunities for growth, drive efficiency and increase returns to shareholders.
Maintain a Strong Financial Position
A strong, well-capitalized balance sheet creates security and financial flexibility, and has contributed to the Company's long-term track record of profitable growth. It is also fundamental to the Company's future success.
CONSOLIDATED RESULTS OF OPERATIONS
Twelve months ended December 31
($ thousands, except per share
amounts) 2011 2010 $ change % change
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Revenues $ 1,381,974 $ 1,207,028 $ 174,946 14%
Cost of goods sold 1,032,599 913,336 119,263 13%
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Gross profit 349,375 293,692 55,683 19%
Selling and administrative
expenses 201,190 181,175 20,015 11%
Asset impairment reversal - (6,683) 6,683 n/m
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Operating income 148,185 119,200 28,985 24%
Interest expense 9,012 11,629 (2,617) (23%)
Interest and investment income (3,214) (2,803) (411) 15%
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Income before income taxes 142,387 110,374 32,013 29%
Income taxes 39,709 33,715 5,994 18%
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Earnings from continuing
operations 102,678 76,659 26,019 34%
Net gain on spinoff of
Enerflex 133,164 - 133,164 n/m
Earnings from discontinued
operations 10,617 27,253 (16,636) n/m
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Net earnings $ 246,459 $ 103,912 $ 142,547 n/m
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Earnings per share (basic)
Continuing operations $ 1.33 $ 1.00 $ 0.33 33%
Discontinued operations 1.87 0.36 1.51 n/m
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$ 3.20 $ 1.36 $ 1.84 n/m
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Key ratios:
Gross profit as a % of
revenues 25.3% 24.3%
Selling and administrative
expenses as a % of revenues 14.6% 15.0%
Operating income as a % of
revenues 10.7% 9.9%
Income taxes as a % of income
before income taxes 27.9% 30.5%
Revenues increased 14% in 2011 compared to 2010 on higher revenues in both operating groups.
Gross profit margin was 25.3% in 2011 compared with 24.3% in 2010. Gross profit margins in the
Selling and administrative expenses increased
In 2010, revised pricing under certain electricity supply contracts triggered an assessment of the recoverable amount of certain power generation assets held in the
Operating income increased 24% in 2011 compared to the prior year, 32% higher excluding the asset impairment reversal in the prior year. The increase is a result of higher revenues and gross margins and improved expense levels. Operating income as a percentage of revenues was 10.7% for 2011 compared to 9.9% in 2010 (9.3% in 2010 excluding asset impairment reversal).
Interest expense was
The effective income tax rate for 2011 was 27.9% compared to 30.5% in 2010. The reduction in rates reflects lower statutory rates.
Net earnings from continuing operations in 2011 were
Earnings from discontinued operations in 2011 included results from the Enerflex operations for the five months ended
Net earnings in 2011 were
Comprehensive income in 2011 was
BUSINESS SEGMENT OPERATING RESULTS
The accounting policies of the segments are the same as those of the consolidated entity. Management evaluates overall business segment performance based on revenue growth and operating income relative to revenues. Corporate expenses are allocated based on each segment's revenue. Interest expense and interest and investment income are not allocated.
Twelve months ended December 31
($ thousands) 2011 2010 $ change % change
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Equipment sales and rentals
New $ 515,046 $ 416,922 $ 98,124 24%
Used 153,326 144,296 9,030 6%
Rental 164,953 143,398 21,555 15%
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Total equipment sales and
rentals 833,325 704,616 128,709 18%
Power generation 12,085 11,450 635 6%
Product support 350,977 306,634 44,343 14%
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Total revenues $ 1,196,387 $ 1,022,700 $ 173,687 17%
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Operating income $ 134,314 $ 108,166 $ 26,148 24%
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Capital expenditures $ 82,287 $ 70,225 $ 12,062 17%
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Key ratios:
Product support revenues as a %
of total revenues 29.3% 30.0%
Group total revenues as a % of
consolidated revenues 86.6% 84.7%
Operating income as a % of
revenues 11.2% 10.6%
Despite global economic uncertainly in 2010 and 2011, demand for the Company's products and services were strong.
New and used equipment sales were 24% and 6% higher in 2011 respectively. Sales increases resulted largely from higher unit sales. Many market segments, notably mining, heavy construction and agriculture, were higher.
Rental revenues were 15% higher than 2010. Equipment utilization improved through 2011 leading to the increased rental revenues. Rental rates were fairly consistent in both years with continuing competitive market conditions. One new store in
Power generation revenues from Toromont-owned plants increased 6% compared to the similar period of the prior year, reflecting increased operating hours and higher average prices for electricity.
Product support revenues were a record
Operating income in 2010 included
Capital expenditures in the
$ millions 2011 2010 % change ---------------------------------------------------------------------------- Bookings - years ended December 31 $ 635 $ 708 -10% Backlog - as at December 31 $ 224 $ 256 -13%
Equipment bookings and backlog in 2010 benefited from a significant order of
Twelve months ended December 31
($ thousands) 2011 2010 $ change % change
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Package sales $ 103,925 $ 106,890 $ (2,965) (3%)
Product support 81,662 77,438 4,224 5%
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Total revenues $ 185,587 $ 184,328 $ 1,259 1%
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Operating income $ 13,871 $ 11,034 $ 2,837 26%
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Capital expenditures $ 590 $ 918 $ (328) (36%)
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Key ratios:
Product support revenues as a
% of total revenues 44.0% 42.0%
Group total revenues as a % of
consolidated revenues 13.4% 15.3%
Operating income as a % of
revenues 7.5% 6.0%
Package revenues were down 3% in 2011 compared to 2010. Recreational revenues in
Product support revenues increased 5% in 2011 compared to the prior year on increased activity in
Capital expenditures totalled
$ millions 2011 2010 % change ---------------------------------------------------------------------------- Bookings - years ended December 31 $ 91 $ 109 -17% Backlog - as at December 31 $ 51 $ 67 -23%
Bookings were down 17% compared to 2010. Canadian recreational bookings were down 62% as expected as the stimulus spending program drove significant bookings in 2010. Somewhat offsetting this decrease was a strengthening in Canadian industrial bookings, which were up 46% in the year. US bookings were also improved, with double-digit increases in both industrial and recreational projects.
Backlog ended the year at
CONSOLIDATED FINANCIAL CONDITION
The Company has maintained a strong financial position for many years. At
Working Capital
The Company's investment in non-cash working capital was
Change
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December 31 December 31
$ thousands 2011 2010 $ %
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Accounts receivable $ 209,243 $ 208,620 $ 623 -
Inventories 301,937 224,416 77,521 35%
Other current assets 4,718 3,342 1,376 41%
Accounts payable, accrued
liabilities and provisions (272,302) (232,903) (39,399) 17%
Income taxes, net (8,352) 229 (8,581) n/m
Derivative financial
instruments (628) (3,224) 2,596 (81%)
Dividends payable (8,433) (12,342) 3,909 (32%)
Deferred revenue (49,100) (45,069) (4,031) 9%
Current portion of long-term
debt (1,280) (6,889) 5,609 (81%)
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Continuing operations 175,803 136,180 39,623 29%
Discontinued operations - 168,020 (168,020) n/m
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Total non-cash working
capital $ 175,803 $ 304,200 $ (128,397) (42%)
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Accounts receivable were
Inventories at
Income taxes (payable) receivable reflect amounts owing for current corporate income taxes less instalments made to date as well as refunds to be received for prior taxation years' corporate income tax.
Derivative financial instruments represent the fair value of foreign exchange contracts. Fluctuations in the value of the Canadian dollar have led to a cumulative net loss of
Accounts payable and accrued liabilities at
Lower dividends payable year-over-year reflect the apportionment of the previous
Deferred revenues represent billings to customers in excess of revenue recognized In the
The current portion of long-term debt reflects scheduled principal repayments due in 2012. This amount is lower as a result of the maturity of certain senior debentures in 2011.
Goodwill
The Company performs impairment tests on its goodwill balances on an annual basis or as warranted by events or circumstances. The assessment of goodwill entails estimating the fair value of operations to which the goodwill relates using the present value of expected discounted future cash flows. This assessment affirmed goodwill values as at
Employee Share Ownership
The Company employs a variety of stock-based compensation plans to align employees' interests with corporate objectives.
The Company maintains an Executive Stock Option Plan for certain employees and directors. Stock options have a seven-year term, vest 20% cumulatively on each anniversary date of the grant and are exercisable at the designated common share price. At
The Company offers an Employee Share Ownership Plan whereby employees can purchase shares by way of payroll deductions. Under the terms of this plan, eligible employees may purchase common shares of the Company in the open market at the then current market price. The Company pays a portion of the purchase price, matching contributions at a rate of
The Company also offers a deferred share unit (DSU) plan for certain employees and non-employee directors, whereby they may elect, on an annual basis, to receive all or a portion of their performance incentive bonus or fees, respectively, in deferred share units. A DSU is a notional unit that reflects the market value of a single Toromont common share and generally vests immediately. DSUs will be redeemed on cessation of employment or directorship. DSUs have dividend equivalent rights, which are expensed as earned. The Company records the cost of the DSU Plan as compensation expense.
As at
Employee Future Benefits
The Company sponsors pension arrangements for substantially all of its employees, primarily through defined contribution plans in
Approximately 140 employees participate in one of two defined benefit plans:
--Powell Plan - Consists of personnel of Powell Equipment (acquired by Toromont in 2001); and -- Other plan assets and obligations - Provides for certain retirees and terminated vested employees of businesses previously acquired by the Company as well as for retired participants of the defined contribution plan who, in accordance with the plan provisions, have elected to receive a pension directly from the plan.
The Company also has a defined benefit pension arrangement for certain senior executives that provides for a supplementary retirement payout in excess of amounts provided for under the registered plan. This Executive Plan is a non-contributory pension arrangement and is solely the obligation of the Company. The Company is not obligated to fund this plan but is obligated to pay benefits under the terms of the plan as they come due. The Company has posted letters of credit to secure the obligations under this plan, which were
Financial markets continued to be volatile in 2011. The return on plan assets was
The Company estimates a long-term return on plan assets of 7%. While there is no assurance that the plan will be able to generate this assumed rate of return each year, management believes that it is a reasonable longer-term estimate.
A key assumption in pension accounting is the discount rate. IFRS requires that this rate is set with regard to the yield on high-quality corporate bonds of similar average duration to the cash flow liabilities of the Plans. Yields are volatile and can deviate significantly from period to period.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its results of operations or financial condition.
Legal and Other Contingencies
Due to the size, complexity and nature of the Company's operations, various legal matters are pending. Exposure to these claims is mitigated through levels of insurance coverage considered appropriate by management and by active management of these matters. In the opinion of management, none of these matters will have a material effect on the Company's consolidated financial position or results of operations.
Normal Course Issuer Bid
Toromont believes that, from time to time, the purchase of its common shares at prevailing market prices may be a worthwhile investment and in the best interests of both Toromont and its shareholders. As such, the normal course issuer bid with the TSX was renewed in 2011. This issuer bid allows the Company to purchase up to approximately 5.7 million of its common shares, representing 10% of common shares in the public float, in the year ending
In 2011, the Company purchased and cancelled 720,004 shares for
Outstanding Share Data
As at the date of this MD&A, the Company had 76,809,332 common shares and 2,239,505 share options outstanding.
Dividends
Toromont pays a quarterly dividend on its outstanding common shares and has historically targeted a dividend rate that approximates 30% of trailing earnings from continuing operations.
During 2011, the Company declared dividends of
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Toromont's liquidity requirements can be met through a variety of sources, including cash generated from operations, long- and short-term borrowings and the issuance of common shares. Borrowings are obtained through a variety of senior debentures, notes payable and committed long-term credit facilities.
The Company amended its Canadian credit facility in conjunction with the spinoff of Enerflex and commensurate with anticipated future requirements. Outstanding borrowings under the previous facility were repaid in part from funds received from Enerflex relating to inter-company borrowings on spinoff. The committed amount was reduced from
As at
Cash and cash equivalents at
The Company expects that continued cash flows from operations in 2012, cash and cash equivalents on hand and currently available credit facilities will be more than sufficient to fund requirements for investments in working capital and capital assets.
Principal Components of
Cash from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table:
Twelve months ended
December 31
$ thousands 2011 2010
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Cash, beginning of period $ 174,089 $ 206,957
Cash, provided by (used in):
Operating activities
Operations - continuing operations 136,546 108,842
Change in non-cash working capital and other (39,731) 48,437
Discontinued operations 57,433 98,507
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154,248 255,786
Investing activities
Continuing operations (55,941) (48,155)
Discontinued operations 140,115 (292,887)
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84,174 (341,042)
Financing activities (337,311) 54,453
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Decrease in cash in the period (98,889) (30,803)
Effect of foreign exchange on cash balances 119 (2,065)
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Cash, end of period $ 75,319 $ 174,089
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Cash Flows from Operating Activities
Operating activities from continuing operations provided
The components and changes in working capital are discussed in more detail in this MD&A under the heading "Consolidated Financial Condition."
Cash Flows from Investing Activities
Investing activities at continuing operations used
Net rental fleet additions (purchases less proceeds of disposition) totalled
Investments in property, plant and equipment in 2011 totalled
Investing activities at discontinued operations in 2011 included cash received from Enerflex Ltd. in repayment of intercompany debt of
Investing activities at discontinued operations in 2010 included cash used for acquisition of
Cash Flows from Financing Activities
Financing activities used
During 2011, payments on long-term debt totalled
Dividends paid to common shareholders in 2011 totalled
In 2011, the Company purchased and cancelled 720,004 shares for
Cash received on the exercise of share options totalled
OUTLOOK
Toromont has a history of performance at a high level for all stakeholders, resulting from consistent application of long-term strategies, a proven business model and a focus on asset management and constant improvement. Toromont is well positioned in each of its markets and both business segments have good growth prospects over the longer term.
Our
Toromont expects to benefit from Caterpillar's expanding product line-up. In 2011, Caterpillar completed the acquisition of Bucyrus, a leading manufacturer of mining equipment for the surface and underground mining industries. Toromont has entered into discussions with Caterpillar for distribution rights to these products; however the impact of this is not determinable at this time. Also in 2011, Caterpillar completed the acquisition of MWM, a leading global supplier of natural gas and alternative-fuel engines. This initiative has expanded
Our management teams have been successful in adjusting to changing market conditions. Our focus on staffing, asset management, discretionary spending and capital investment have left us in good position to capitalize on opportunities going forward.
CONTRACTUAL OBLIGATIONS
Contractual obligations are set out in the following table. Management believes that these obligations will be met comfortably through cash on hand, cash generated from operations and existing short- and long-term financing facilities.
Payments
due by
period 2012 2013 2014 2015 2016 Thereafter Total
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Long-term
Debt
- principal $ 1,280 $ 1,372 $ 1,471 $ 126,576 $ 1,690 $ 4,774 $ 137,163
- interest 6,986 6,895 6,796 5,342 427 517 26,963
Accounts
payable 280,735 - - - - - 280,735
Operating
Leases 2,520 2,037 1,575 2,586 986 1,925 11,629
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$ 291,521 $ 10,304 $ 9,842 $ 134,504 $ 3,103 $ 7,216 $ 456,490
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KEY PERFORMANCE MEASURES
Management reviews and monitors its activities and the performance indicators it believes are critical to measuring success. Some of the key financial performance measures are summarized in the following table. Others include, but are not limited to, measures such as market share, fleet utilization, customer and employee satisfaction and employee health and safety.
Years ended December 31, 2011 2010 2009 (3) 2008 2007
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Expanding Markets and
Broadening Product
Offerings
Revenue growth (1) 14.5% 14.8% -18.7% 0.7% 12.3%
Revenue per employee
(thousands) (1) $ 465 $ 423 $ 364 $ 430 $ 436
Strengthening Product
Support
Product support revenue
growth (1) 12.6% 7.4% -3.0% 4.2% 3.9%
Investing in Our Resources
Investment in information
technology (millions)
(1) $ 12.1 $ 10.1 $ 10.6 $ 10.9 $ 10.2
Return on capital
employed (2) 32.4% 10.8% 21.1% 26.4% 24.7%
Strong Financial Position
Non-cash working capital
(millions) (1) $ 176 $ 136 $ 172 $ 197 $ 177
Total debt, net of cash
to total capitalization 13% 17% -6% 4% 16%
Book value (shareholders'
equity) per share $ 5.27 $ 15.50 $ 13.17 $ 12.06 $ 10.08
Build Shareholder Value
Basic earnings per share
growth (1) 32.5% 9.6% -18.3% -12.7% 50.5%
Dividends per share
growth (4) 16.1% 3.3% 7.1% 16.7% 20.0%
Return on equity (5) 28.9% 9.1% 15.5% 21.5% 21.5%
(1) Metric presents results on a continuing operations basis.
(2) Return on capital employed is defined in the section titled "Non-IFRS
Financial Measures". 2011 ROCE was calculated excluding earnings and
capital employed from discontinued operations.
(3) Financial statements for 2009 and previous reflect Canadian GAAP. These
were not restated to IFRS.
(4) Dividends per share growth reflect the announced increase in dividend
subsequent to apportionment of dividend to Enerflex subsequent to
spinoff
(5) Return on equity is defined in the section titled "Non-IFRS Financial
Measures". 2011 ROE was calculated excluding earnings and equity from
discontinued operations.
While the global recession interrupted the steady string of growth across key performance measures, profitability endured and the balance sheet continued to strengthen. This has been discussed at length throughout this MD&A.
Measuring Toromont's results against these strategies over the past five years illustrates that the Company has made significant progress.
Since 2007, revenues increased at an average annual rate of 4.7%. Product support revenue growth has averaged 5.0% annually. Revenue growth in continuing operations has been a result of:
-- Increased customer demand in certain market segments, most notably
mining;
-- Additional product offerings over the years from Caterpillar and other
suppliers;
-- Organic growth through increased fleet size and additional branches;
-- Increased customer demand for formal product support agreements; and
-- Acquisitions, primarily within the Equipment Group's rental operations.
Over the same five-year period, revenue growth has been constrained at times by a number of factors including:
-- General economic weakness, which has negatively impacted revenues since
the latter part of 2008 through to early 2010;
-- Inability to source equipment from suppliers to meet customer demand or
delivery schedules; and
-- Declines in underlying market conditions such as depressed US industrial
markets.
Changes in the Canadian/U.S. exchange rate also impacts reported revenues as the exchange rate impacts on the purchase price of equipment that in turn is reflected in selling prices.
Toromont has generated significant competitive advantage over the past years by investing in its resources, in part to increase productivity levels.
Toromont continues to maintain a strong balance sheet. Leverage, as represented by the ratio of total debt, net of cash, to total capitalization (net debt plus shareholders' equity), was 13%, well within targeted levels.
Toromont has a history of progressive earnings per share growth. This trend was not continued in 2009 due to the weak economic environment, which reduced revenues. In 2010, earnings per share were negatively impacted by the issuance of shares in the year for the acquisition of ESIF. In 2011, on a continuing operations basis, earnings per share increased 32.5%, in line with earnings growth.
Toromont has paid dividends consistently since 1968, and has increased the dividend in each of the last 22 years. In 2011, the dividend rate was apportioned between Toromont and Enerflex in conjunction with the spinoff of Enerflex, such that shareholders received the same dividend in total. Subsequent to the spinoff, Toromont increased the quarterly dividend rate 10%.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE FOURTH QUARTER 2011
Three months ended December 31
($ thousands, except per share
amounts) 2011 2010 $ change % change
----------------------------------------------------------------------------
Revenues $ 408,432 $ 342,873 $ 65,559 19%
Cost of goods sold 304,665 257,147 47,518 18%
----------------------------------------------------------------------------
Gross profit 103,767 85,726 18,041 21%
Selling and administrative
expenses 55,549 50,204 5,345 11%
Asset impairment reversal - (6,683) 6,683 n/m
----------------------------------------------------------------------------
Operating income 48,218 42,205 6,013 14%
Interest expense 2,124 2,272 (148) (7%)
Interest and investment income (1,364) (1,335) (29) 2%
----------------------------------------------------------------------------
Income before income taxes 47,458 41,268 6,190 15%
Income taxes 13,235 13,313 (78) (1%)
----------------------------------------------------------------------------
Earnings from continuing
operations 34,223 27,955 6,268 22%
Earnings from discontinued
operations - 12,358 (12,358) n/m
----------------------------------------------------------------------------
Net earnings $ 34,223 $ 40,313 $ (6,090) (15%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (basic)
Continuing operations $ 0.44 $ 0.36 $ 0.08 22%
Discontinued operations - 0.16 (0.16) n/m
----------------------------------------------------------------------------
$ 0.44 $ 0.52 $ (0.08) (15%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Key ratios:
Gross profit as a % of revenues 25.4% 25.0%
Selling and administrative
expenses as a % of revenues 13.6% 14.6%
Operating income as a % of
revenues 11.8% 12.3%
Income taxes as a % of income
before income taxes 27.9% 32.3%
Results from continuing operations in the fourth quarter of 2011 were strong, with double-digit increases in revenue and earnings.
Revenues were 19% higher in the fourth quarter of 2011 compared to the same period last year on higher revenues at the
Gross profit increased 21% in the fourth quarter over last year on the higher sales volumes. Gross profit margin was 25.4% in 2011 compared to 25.0% in 2010. Higher margins were reported in
In the fourth quarter of 2010, revised pricing under certain electricity supply contracts triggered an assessment of the recoverable amount of certain power generation assets held in the
Selling and administrative expenses increased
Interest expense was
The effective income tax rate was 27.9% in the fourth quarter of 2011 compared to 32.3% in the same period last year. The lower tax rate reflects lower statutory rates.
Net earnings from continuing operations in the quarter were
Earnings from discontinued operations in the fourth quarter of 2010 were
Net earnings in the fourth quarter of 2011 were
Comprehensive income in the quarter was
Fourth Quarter Results of Operations in the
Three months ended December 31
($ thousands) 2011 2010 $ change % change
----------------------------------------------------------------------------
Equipment sales and rentals
New $ 187,677 $ 130,634 $ 57,043 44%
Used 46,763 38,584 8,179 21%
Rental 45,259 43,553 1,706 4%
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Total equipment sales and
rentals 279,699 212,771 66,928 31%
Power generation 2,720 3,758 (1,038) (28%)
Product support 88,627 81,410 7,217 9%
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Total revenues $ 371,046 $ 297,939 $ 73,107 25%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income $ 46,690 $ 39,778 $ 6,912 17%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bookings ($ millions) $ 157 $ 207 $ (49) (24%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Key ratios:
Product support revenues as a
% of total revenues 23.9% 27.3%
Group total revenues as a % of
consolidated revenues 90.8% 86.9%
Operating income as a % of
revenues 12.6% 13.4%
New and used equipment sales increased 44% and 21% respectively compared to the fourth quarter of 2010. Significant deliveries were made to mining customers in the quarter.
Rental revenues were up 4% in the quarter compared to the prior year on higher fleet utilization. Rental rates have been largely consistent with the prior year, with continuing competitive market conditions.
Power generation revenues from Toromont-owned plants decreased 28% in the quarter. Revenues in the fourth quarter of 2010 included certain 'catch up' payments with respect to revised operating contracts with certain customers. Excluding these remedial payments in the prior year, revenues would have increased 2%.
Product support revenues were up 9% compared to the prior year. Improved market conditions and a larger installed base of equipment in territory have driven higher activity levels.
Operating income was up 17% over last year on the higher revenues, 41% higher excluding the asset impairment reversal recorded in the comparable period of the prior year. Gross margins were up slightly in the quarter. Selling and administrative expenses increased 13% on the higher volumes, higher staffing levels and annual compensation increases. Operating income as a percentage of revenues was 12.6% compared to 13.4% in the fourth quarter of 2010 (11.1% in 2010 excluding the asset impairment reversal).
Bookings in the fourth quarter of 2011 were
Fourth Quarter Results of Operations in
Three months ended December 31
($ thousands) 2011 2010 $ change % change
----------------------------------------------------------------------------
Package sales $ 18,261 $ 25,976 $ (7,715) (30%)
Product support 19,125 18,958 167 1%
----------------------------------------------------------------------------
Total revenues $ 37,386 $ 44,934 $ (7,548) (17%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating income $ 1,528 $ 2,427 $ (899) (37%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bookings ($ millions) $ 27 $ 19 $ 8 39%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Key ratios:
Product support revenues as a %
of total revenues 51.2% 42.2%
Group total revenues as a % of
consolidated revenues 9.2% 13.1%
Operating income as a % of
revenues 4.1% 5.4%
Package revenues were down 30% in the quarter compared to 2010. Recreational revenues in
Product support revenues increased 1% in the fourth quarter of 2011 compared to the prior year on increased activity in the US.
Bookings in the quarter totalled
QUARTERLY RESULTS
The following table summarizes unaudited quarterly consolidated financial data for the eight most recently completed quarters. This quarterly information is unaudited but has been prepared on the same basis as the 2011 annual unaudited consolidated financial statements.
$ thousands, except per share
amounts Q1 2011 Q2 2011 Q3 2011 Q4 2011
--------------------------------------------
Revenues
Equipment Group $ 221,030 $ 289,191 $ 315,120 $ 371,046
CIMCO 40,579 55,453 52,169 37,386
--------------------------------------------
Total revenues $ 261,609 $ 344,644 $ 367,289 $ 408,432
--------------------------------------------
--------------------------------------------
Net earnings
Continuing operations $ 13,803 $ 23,722 $ 30,930 $ 34,223
Discontinued operations 7,821 135,960 - -
--------------------------------------------
$ 21,624 $ 159,682 $ 30,930 $ 34,223
--------------------------------------------
--------------------------------------------
Per share information:
Earnings per share - basic
Continuing operations $ 0.18 $ 0.31 $ 0.40 $ 0.44
Discontinued operations 0.10 1.76 - -
--------------------------------------------
$ 0.28 $ 2.07 $ 0.40 $ 0.44
--------------------------------------------
--------------------------------------------
Earnings per share - diluted
Continuing operations $ 0.18 $ 0.30 $ 0.40 $ 0.44
Discontinued operations 0.10 1.76 -
--------------------------------------------
$ 0.28 $ 2.06 $ 0.40 $ 0.44
--------------------------------------------
--------------------------------------------
Dividends paid per share $ 0.16 $ 0.10 $ 0.10 $ 0.11
Weighted average common shares
outstanding - Basic (in
thousands) 77,163 77,204 77,095 76,604
$ thousands, except per share
amounts Q1 2010 Q2 2010 Q3 2010 Q4 2010
--------------------------------------------
Revenues
Equipment Group $ 176,635 $ 264,538 $ 283,588 $ 297,938
CIMCO 36,227 50,781 52,387 44,934
--------------------------------------------
Total revenues $ 212,862 $ 315,319 $ 335,975 $ 342,872
--------------------------------------------
--------------------------------------------
Net earnings
Continuing operations $ 5,980 $ 19,989 $ 22,736 $ 27,954
Discontinued operations 9,497 1,933 3,465 12,358
--------------------------------------------
$ 15,477 $ 21,922 $ 26,201 $ 40,312
--------------------------------------------
--------------------------------------------
Per share information:
Earnings per share - basic
Continuing operations $ 0.08 $ 0.26 $ 0.30 $ 0.36
Discontinued operations 0.13 0.03 0.04 0.16
--------------------------------------------
$ 0.21 $ 0.29 $ 0.34 $ 0.52
--------------------------------------------
--------------------------------------------
Earnings per share - diluted
Continuing operations $ 0.08 $ 0.25 $ 0.30 $ 0.36
Discontinued operations 0.13 0.03 0.04 0.16
--------------------------------------------
$ 0.21 $ 0.28 $ 0.34 $ 0.52
--------------------------------------------
--------------------------------------------
Dividends paid per share $ 0.15 $ 0.15 $ 0.16 $ 0.16
Weighted average common shares
outstanding - Basic (in
thousands) 73,866 76,881 76,896 76,962
Interim period revenues and earnings historically reflect some seasonality.
As a result of the historical seasonal sales trends, inventories increase through the year in order to meet the expected demand for delivery in the fourth quarter of the fiscal year, while accounts receivable are highest at year end.
SELECTED ANNUAL INFORMATION
(in thousands, except per share amounts) 2011 2010 2009 (1) ---------------------------------------------------------------------------- Revenues $ 1,381,974 $ 1,207,028 $ 1,051,653 Net earnings - continuing operations $ 102,678 $ 76,659 $ 58,869 Net earnings $ 246,459 $ 103,912 $ 120,516 Earnings per share - continuing operations - Basic $ 1.33 $ 1.00 $ 0.91 - Diluted $ 1.32 $ 0.99 $ 0.91 Earnings per share - Basic $ 3.20 $ 1.36 $ 1.86 - Diluted $ 3.18 $ 1.35 $ 1.86 Dividends declared per share $ 0.48 $ 0.62 $ 0.60 Total assets $ 913,331 $ 2,271,763 $ 1,355,867 Total long-term debt $ 134,095 $ 419,929 $ 156,970 Weighted average common shares outstanding, basic (millions) 77.0 76.2 64.7 (1) Prepared following Canadian GAAP.
The global economic crisis of late 2008 and 2009 served to reduce revenues in 2009 as activity levels in end markets slowed. Revenues grew 14% in 2011 and 15% in 2010 on improved market conditions within the
Net earnings from continuing operations improved 30% in 2010 and 34% in 2011 on the higher revenues, generally improving margins and relatively slower growth in selling and administrative expenses.
Net earnings include results from discontinued operations, Enerflex. Toromont completed the acquisition of
Earnings per share have generally followed earnings. Earnings per share were impacted in 2010 as the number of common shares outstanding increased 18% due to shares issued in connection with the acquisition of ESIF.
Dividends have generally increased in proportion to trailing earnings growth. In 2011, in conjunction with the spinoff, the regular quarterly dividend was apportioned between Toromont and Enerflex. The previous dividend rate of
Total assets increased in 2010 on the acquisition of ESIF. Total assets acquired were approximately
Long-term debt increased in 2010 on financing assumed to fund the acquisition of ESIF. In conjunction with the spinoff, certain financing was repaid. Total debt net of cash to total capitalization was 13% at
RISKS AND RISK MANAGEMENT
In the normal course of business, Toromont is exposed to risks that may potentially impact its financial results in any or all of its business segments. The Company and each operating segment employ risk management strategies with a view to mitigating these risks on a cost-effective basis.
Business Cycle
Expenditures on capital goods have historically been cyclical, reflecting a variety of factors including interest rates, foreign exchange rates, consumer and business confidence, commodity prices, corporate profits, credit conditions and the availability of capital to finance purchases. Toromont's customers are typically affected, to varying degrees, by these factors and trends in the general business cycle within their respective markets. As a result, Toromont's financial performance is affected by the impact of such business cycles on the Company's customer base.
Commodity prices, and, in particular, changes in the view on long-term trends, affect demand for the Company's products and services in the
The business of the Company is diversified across a wide range of industry market segments, serving to temper the effects of business cycles on consolidated results. Continued diversification strategies such as expanding the Company's customer base, broadening product offerings and geographic diversification are designed to moderate business cycle impacts. The Company has focused on the sale of specialized equipment and ongoing support through parts distribution and skilled service. Product support growth has been, and will continue to be, fundamental to the mitigation of downturns in the business cycle. The product support business contributes significantly higher profit margins and is typically subject to less volatility than equipment supply activities.
Product and Supply
Toromont is dependent on the continued market acceptance of Caterpillar's products. It is believed that Caterpillar has a solid reputation as a high-quality manufacturer, with excellent brand recognition and customer support as well as leading market shares in many of the markets it serves. However, there can be no assurance that Caterpillar will be able to maintain its reputation and market position in the future. Any resulting decrease in the demand for Caterpillar products could have a material adverse impact on the Company's business, results of operations and future prospects.
Toromont is also dependent on Caterpillar for timely supply of equipment and parts. From time to time during periods of intense demand, Caterpillar may find it necessary to allocate its supply of particular products among its dealers. Such allocations of supply have not, in the past, proven to be a significant impediment in the conduct of business. However, there can be no assurance that Caterpillar will continue to supply its products in the quantities and timeframes required by customers.
Competition
The Company competes with a large number of international, national, regional and local suppliers in each of its markets. Although price competition can be strong, there are a number of factors that have enhanced the Company's ability to compete throughout its market areas including: the range and quality of products and services; ability to meet sophisticated customer requirements; distribution capabilities including number and proximity of locations; financing offered by Caterpillar Finance; e-commerce solutions; reputation and financial strength.
Increased competitive pressures or the inability of the Company to maintain the factors that have enhanced its competitive position to date could adversely affect the Company's business, results of operations or financial condition.
The Company relies on the skills and availability of trained and experienced tradesmen and technicians in order to provide efficient and appropriate services to customers. Hiring and retaining such individuals is critical to the success of these businesses. Demographic trends are reducing the number of individuals entering the trades, making access to skilled individuals more difficult. The Company has several remote locations which make attracting and retaining skilled individuals more difficult.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash equivalents, accounts receivable and derivative financial instruments. The carrying amount of assets included on the balance sheet represents the maximum credit exposure.
Cash equivalents consist mainly of short-term investments, such as money market deposits. The Company manages its credit exposure associated with cash equivalents by ensuring there is no significant concentration of credit risk with a single counterparty, and by dealing only with highly rated financial institutions as counterparties.
The Company has accounts receivable from a large diversified customer base, and is not dependent on any single customer or industry. The Company has accounts receivable from customers engaged in various industries including construction, mining, food and beverage, and governmental agencies. Management does not believe that any single industry represents significant credit risk. These customers are based predominately in
The credit risk associated with derivative financial instruments arises from the possibility that the counterparties may default on their obligations. In order to minimize this risk, the Company enters into derivative transactions only with highly rated financial institutions.
Warranties and Maintenance Contracts
Toromont provides warranties for most of the equipment it sells, typically for a one-year period following sale. The warranty claim risk is generally shared jointly with the equipment manufacturer. Accordingly, liability is generally limited to the service component of the warranty claim, while the manufacturer is responsible for providing the required parts.
The Company also enters into long-term maintenance and repair contracts, whereby it is obligated to maintain equipment for its customers. The length of these contracts varies generally from two to five years. The contracts are typically fixed price on either machine hours or cost per hour, with provisions for inflationary and exchange adjustments. Due to the long-term nature of these contracts, there is a risk that maintenance costs may exceed the estimate, thereby resulting in a loss on the contract. These contracts are closely monitored for early warning signs of cost overruns. In addition, the manufacturer may, in certain circumstances, share in the cost overruns if profitability falls below a certain threshold.
Foreign Exchange
Volatility in the rate of exchange between the Canadian and U.S. dollar has an impact on revenue trends. The Canadian dollar averaged US
The Company transacts business in multiple currencies, the most significant of which are the Canadian dollar and the U.S. dollar. As a result, the Company has foreign currency exposure with respect to items denominated in foreign currencies.
The Company sources the majority of its products and major components from
In addition, pricing to customers is customarily adjusted to reflect changes in the Canadian dollar landed cost of imported goods. Foreign exchange contracts reduce volatility by fixing landed costs related to specific customer orders and establishing a level of price stability for high-volume goods such as spare parts.
The Company does not enter into foreign exchange forward contracts for speculative purposes. The gains and losses on the foreign exchange forward contracts designated as cash flow hedges are intended to offset the translation losses and gains on the hedged foreign currency transactions when they occur.
As a result, the foreign exchange impact on earnings with respect to transactional activity is not significant.
Interest Rate
The Company minimizes its interest rate risk by managing its portfolio of floating and fixed rate debt, as well as managing the term to maturity.
At
The Company's fixed rate debt matures between 2015 and 2019.
Further, the fair value of the Company's fixed rate debt obligations may be negatively affected by declines in interest rates, thereby exposing the Company to potential losses on early settlements or refinancing. The Company does not intend to settle or refinance any existing debt before maturity.
Financing Arrangements
The Company requires capital to finance its growth and to refinance its outstanding debt obligations as they come due for repayment. If the cash generated from the Company's business, together with the credit available under existing bank facilities, is not sufficient to fund future capital requirements, the Company will require additional debt or equity financing in the capital markets. The Company's ability to access capital markets on terms that are acceptable will be dependent upon prevailing market conditions, as well as the Company's future financial condition. Further, the Company's ability to increase its debt financing may be limited by its financial covenants or its credit rating objectives. The Company maintains a conservative leverage structure and although it does not anticipate difficulties, there can be no assurance that capital will be available on suitable terms and conditions, or that borrowing costs and credit ratings will not be adversely affected.
Environmental Regulation
Toromont's customers are subject to significant and ever-increasing environmental legislation and regulation. This legislation can impact Toromont in two ways. First, it may increase the technical difficulty in meeting environmental requirements in product design, which could increase the cost of these businesses' products. Second, it may result in a reduction in activity by Toromont's customers in environmentally sensitive areas, in turn reducing the sales opportunities available to Toromont.
Toromont is also subject to a broad range of environmental laws and regulations. These may, in certain circumstances, impose strict liability for environmental contamination, which may render Toromont liable for remediation costs, natural resource damages and other damages as a result of conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners, operators or other third parties. In addition, where contamination may be present, it is not uncommon for neighbouring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of new environmental laws and regulations could be substantial and could negatively impact Toromont's business, results of operations or financial condition.
Spinoff Transaction Risk
Although the spinoff of Enerflex as a separate, publicly traded company is complete, the transaction exposes Toromont to certain ongoing risks. The spinoff was structured to comply with all the requirements of the public company "butterfly rules" in the Income Tax Act. However, there are certain requirements of these rules that depend on events occurring after completion of the spinoff or that may not be within the control of Toromont and/or Enerflex. If these requirements are not met, Toromont could be exposed to significant tax liabilities which could have a material effect on the financial position of Toromont. In addition, Toromont has agreed to indemnify Enerflex for certain liabilities and obligations related to its business at the time of the spinoff. These indemnification obligations could be significant. These risks are more fully described in the Management Information Circular
relating to the Plan of Arrangement dated
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's significant accounting policies are described in Note 1 to the unaudited consolidated interim financial statements. The preparation of financial statements in conformity with IFRS requires estimates and assumptions that affect the results of operations and financial position. By their nature, these judgments are subject to an inherent degree of uncertainty and are based upon historical experience, trends in the industry and information available from outside sources. Management reviews its estimates on an ongoing basis. Different accounting policies, or changes to estimates or assumptions could potentially have a material impact, positive or negative, on Toromont's financial position and results of operations. The critical accounting policies and estimates described below affect the operating segments similarly, and therefore are not discussed on a segmented basis.
Property, Plant and Equipment
Fixed assets are stated at cost less accumulated depreciation, including asset impairment losses. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives of fixed assets are reviewed on an annual basis. Assessing the reasonableness of the estimated useful lives of fixed assets requires judgment and is based on currently available information.
Fixed assets are also reviewed for potential impairment on a regular basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In cases where the undiscounted expected future cash flows are less than the carrying amount, an impairment loss is recognized. Impairment losses on long-lived assets are measured as the amount by which the carrying value of an asset or asset group exceeds its fair value, as determined by the discounted future cash flows of the asset or asset group. In estimating future cash flows, the Company uses its best estimates based on internal plans that incorporate management's judgments as to the remaining service potential of the fixed assets. Changes in circumstances, such as technological advances and changes to business strategy can result in actual useful lives and future cash flows differing significantly from estimates. The assumptions used, including rates and methodologies, are reviewed on an ongoing basis to ensure they continue to be appropriate. Revisions to the estimated useful lives of fixed assets or future cash flows constitute a change in accounting estimate and are applied prospectively.
Income Taxes
The liability method of accounting for income taxes is used. Deferred tax assets and liabilities, measured at substantively enacted tax rates, are recognized for all temporary differences caused when the tax bases of assets and liabilities differ from those reported in the financial statements.
Income tax rules and regulations in the countries in which the Company operates and income tax treaties between these countries are subject to interpretation and require estimates and assumptions in determining the Company's consolidated income tax provision that may be challenged by the taxation authorities.
Changes or differences in these estimates or assumptions may result in changes to the current or deferred tax balances on the consolidated statement of financial position, a charge or credit to income tax expense in the income statement and may result in cash payments or receipts.
Impairment of Non-financial Assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.
Revenue Recognition
The Company generates a portion of its revenues from the assembly and manufacture of equipment and these revenues are recognized using the percentage-of-completion approach of accounting. This approach to revenue recognition requires management to make a number of estimates and assumptions surrounding the expected profitability of the contract, the estimated degree of completion based on cost progression and other detailed factors. Although these factors are routinely reviewed as part of the project management process, changes in these estimates or assumptions could lead to changes in the revenues recognized in a given period. However, there are many of these projects in process at any given point, the majority of which are in actual construction for a period of three months or less.
FUTURE ACCOUNTING STANDARDS
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending
Consolidated Financial Statements - On
Joint Arrangements - On
As a result of the issuance of IFRS 10 and IFRS 11, IAS 28 - Investments in Associates and Joint Ventures has been amended to correspond to the guidance provided in IFRS 10 and IFRS 11.
Disclosure of Interests in Other Entities - On
IFRS 10, 11 and 12, and the amendments to IAS 27 and 28 are all effective for annual periods beginning on or after
Fair Value Measurement - On
Employee Benefits - On
Presentation of Financial Statements - On
Financial Instruments - Disclosures - On
Deferred Tax - Recovery of Underlying Assets - On
Financial Instruments - In
The Company is currently assessing the impact of these new standards and amendments on its financial statements.
TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
International Financial Reporting Standards ("IFRS") replaced Canadian generally accepted accounting principles ("Canadian GAAP") for publicly accountable enterprises for financial periods beginning on and after
Transitional Impacts
IFRS 1 - First-Time Adoption of International Financial Reporting Standards provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRS.
To assist with, and in some cases, simplify, transition to IFRS, certain exemptions and elections are available for first-time adopters under IFRS 1 First-Time Adoption of International Financial Reporting Standards ("IFRS 1"). The following are the key transitional provisions which were adopted on
----------------------------------------------------------------------------
Area of IFRS Summary of Exemption Available
----------------------------------------------------------------------------
Business Combinations Choices: The Company may elect on transition to
IFRS to either restate all past business
combinations in accordance with IFRS 3 "Business
Combinations" or to apply an elective exemption
from applying IFRS to past business combinations.
Policy selection: The Company elected to apply the
exemption such that transactions entered into
prior to the transition date are not restated. In
addition, the Company adopted Canadian Handbook
Section 1582, 1601 and 1602 effective January 1,
2010 . These new standards are considered to be
IFRS compliant.
Transition impact: None
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Property, Plant and Choices: The Company may elect to report items of
Equipment property, plant and equipment in its opening
statement of financial position on the transition
date at a deemed cost instead of the actual cost
that would be determined under IFRS. The deemed
cost of an item may be either its fair value at
the date of transition to IFRS or an amount
determined by a previous revaluation under
Canadian GAAP (as long as that amount was close to
either its fair value, cost or adjusted cost). The
exemption can be applied on an asset-by-asset
basis.
Policy selection: The Company did not elect to
report any items of property, plant and equipment
in its opening statement of financial position on
the transition date at a deemed cost instead of
the actual cost that would be determined under
IFRS.
Transition impact: None
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Share-Based Payments Choices: The Company may elect not to apply IFRS 2
"Share-Based Payments" to equity instruments
granted on or before November 7, 2002 or which
vested before the Company's date of transition to
IFRS.
Policy selection: The Company elected to apply
IFRS 2 to equity instruments granted on or before
November 7, 2002 or which vested before the
Company's date of transition to IFRS.
Transition impact: None
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Employee Future Benefits Choices: The Company may elect to recognize all
cumulative gains and losses through opening
retained earnings at the date of transition to
IFRS. Actuarial gains and losses would have to be
recalculated under IFRS from the inception of the
defined benefit plan if the exemption is not
taken.
Policy selection: The Company elected to recognize
all cumulative actuarial gains and losses at the
date of transition.
Transition impact: Increase total liabilities,
increase deferred tax assets and decrease retained
earnings
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Foreign Exchange Choices: On transition, cumulative translation
gains or losses in accumulated other comprehensive
income (OCI) can be reclassified to retained
earnings. If not elected, all cumulative
translation differences must be recalculated under
IFRS from inception.
Policy selection: The Company elected to
reclassify all cumulative translation gains and
losses at the date of transition to retained
earnings.
Transition impact: Reclassification of all
cumulative translation gains and losses in OCI
results in a charge to retained earnings of $16
million .
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Borrowing Costs Choices: On transition, the Company must select a
commencement date for capitalization of borrowing
costs related to all qualifying assets which is on
or before January 1, 2010 .
Policy selection: The Company elected to
capitalize borrowing costs on all qualifying
assets commencing on January 1, 2010 .
Transition impact: None
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There are several accounting policy differences which may impact the Company on a go-forward basis. The significant accounting policy differences are presented below. This is not an exhaustive list.
----------------------------------------------------------------------------
Accounting Key Difference from GAAP Status
Area
----------------------------------------------------------------------------
Employee Under Canadian GAAP, the The Company has elected to
Future Company applied the 'corridor' record actuarial gains and
Benefits method of accounting, whereby losses arising from its
actuarial gains and losses are defined benefit pension plans
deferred and amortized over in OCI. Expense associated
time. Under IFRS, a Company with the defined benefit
may elect to recognize pension plans will be
actuarial gains and losses: different under IFRS than
In full, as they arise, in the under Canadian GAAP as
income statement actuarial gains/losses are no
Over a longer period, using longer amortized. The impact
the 'corridor' method, or in 2010 was to reduce defined
In full as they arise, outside benefit pension expense by
profit or loss, in OCI $600. Variability in OCI will
increase as actuarial
gains/losses are recorded.
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Stock Based The valuation of stock options The impact of these changes is
Compensation under IFRS required individual not significant.
'tranche based' valuations for
those option plans with graded
vesting, whilst Canadian GAAP
allowed a single valuation for
all tranches.
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Impairment of IFRS requires impairment The Company has identified
Assets testing to be done at the more cash generating units
smallest identifiable group of than the reporting units
assets that generate cash currently used to assess for
inflows that are largely impairment under Canadian
independent of cash inflows GAAP.
from other groups of assets Whether the Company will be
('cash generating unit'), materially impacted by this
rather than the reporting unit change will depend upon the
level considered by Canadian facts at the time of each
GAAP. impairment test.
IFRS requires the assessment
of asset impairment to be
based on discounted future
cash-flows.
IFRS allows the reversal of
impairment losses, other than
for goodwill and indefinite
life intangible assets, while
GAAP does not.
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Borrowing Under IFRS, borrowing costs The impact of this policy
Costs will be capitalized to assets change will be dependent on
which take a substantial time the magnitude of capital spend
to develop or construct using on qualifying assets in the
a capitalization rate based on future. Generally, this will
all of the company's reduce finance costs and
outstanding third-party debt. increase property, plant and
equipment balances and
associated depreciation for
those assets.
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Comparative 2010 financial position and results of operations were required to be restated. Note 3 of our unaudited consolidated financial statements provides a complete list of our IFRS 1 elections, detailed reconciliations between Canadian GAAP and IFRS of shareholders' equity, net earnings and comprehensive income for 2010.
RESPONSIBILITY OF MANAGEMENT AND THE BOARD OF DIRECTORS
Management is responsible for the information disclosed in this MD&A and the accompanying consolidated financial statements, and has in place appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is materially complete and reliable. In addition, the Company's Audit Committee, on behalf of the Board of Directors, provides an oversight role with respect to all public financial disclosures made by the Company, and has reviewed and approved this MD&A and the accompanying consolidated financial statements. The Audit Committee is also responsible for determining that management fulfills its responsibilities in the financial control of operations, including disclosure controls and procedures and internal control over financial reporting.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The Chairman & Chief Executive Officer and the Chief Financial Officer, together with other members of management, have evaluated the effectiveness of the Company's disclosure controls and procedures and internal controls over financial reporting as at
There have been no changes in the design of the Company's internal controls over financial reporting during 2011 that would materially affect, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
While the Officers of the Company have evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting as at
NON-IFRS FINANCIAL MEASURES
The success of the Company and business unit strategies is measured using a number of key performance indicators, which are outlined below. These measures are also used by management in its assessment of relative investments in operations. These key performance indicators are not measurements in accordance with IFRS. It is possible that these measures will not be comparable to similar measures prescribed by other companies. They should not be considered as an alternative to net income or any other measure of performance under IFRS.
Operating Income and Operating Margin
Each business segment assumes responsibility for its operating results as measured by, amongst other factors, operating income, which is defined as income before income taxes, interest income and interest expense. Financing and related interest charges cannot be attributed to business segments on a meaningful basis that is comparable to other companies. Business segments and income tax jurisdictions are not synonymous, and it is believed that the allocation of income taxes distorts the historical comparability of the performance of the business segments. Consolidated and segmented operating income is reconciled to net earnings in tables where used in this MD&A.
Operating income margin is calculated by dividing operating income by total revenue.
Return on Equity and Return on Capital Employed
Return on equity ("ROE") is monitored to assess the profitability of the consolidated Company. ROE is calculated by dividing net earnings by opening shareholders' equity (adjusted for shares issued and redeemed during the year). Opening shareholders' equity in 2011 was also adjusted to remove both net earnings and equity associated with discontinued operations.
Return on capital employed ("ROCE") is a key performance indicator that is utilized to assess both current operating performance and prospective investments. The numerator used for the calculation is income before income taxes, interest expense and interest income (excluding interest on rental conversions). The denominator in the calculation is the monthly average capital employed, which is defined as net debt plus shareholders' equity.
Working Capital and
Working capital is defined as current assets less current liabilities. Non-cash working capital is defined as working capital less cash and equivalents.
Net Debt to Total Capitalization
Net debt is defined as total long-term debt less cash and cash equivalents. Total capitalization is defined as net debt plus shareholders' equity. The ratio of net debt to total capitalization is determined by dividing net debt by total capitalization.
TOROMONT INDUSTRIES LTD. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) December 31 December 31 January 1 ($ thousands) Note 2011 2010 2010 ---------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents 6 $ 75,319 $ 174,089 $ 206,957 Accounts receivable 7 209,243 208,620 166,748 Inventories 8 301,937 224,416 205,835 Income taxes receivable - 712 11,191 Derivative financial instruments 12 824 - Other current assets 4,718 3,342 2,919 Current assets of discontinued operations 4 - 490,499 254,180 ---------------------------------------------------------------------------- Total current assets 591,229 1,102,502 847,830 Property, plant and equipment 9 151,928 142,508 116,710 Rental equipment 9 135,362 119,944 124,033 Derivative financial instruments 418 - - Other assets 10 8,195 9,021 11,383 Deferred tax assets 19 12,749 10,435 12,492 Goodwill 11 13,450 13,450 13,450 Long-term assets of discontinued operations 4 - 873,903 229,969 ---------------------------------------------------------------------------- Total assets $ 913,331 $ 2,271,763 $ 1,355,867 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable, accrued liabilities and provisions 12 $ 280,735 $ 245,245 $ 169,291 Deferred revenues 49,100 45,069 30,059 Current portion of long-term debt 13 1,280 6,889 14,044 Derivative financial instruments 640 4,048 874 Income taxes payable 8,352 483 - Current liabilities of discontinued operations 4 - 322,479 128,624 ---------------------------------------------------------------------------- Total current liabilities 340,107 624,213 342,892 Deferred revenues 10,387 14,137 13,386 Long-term debt 13 132,815 413,040 142,926 Accrued pension liability 23 26,161 19,851 17,249 Derivative financial instruments - 1,839 - Long-term liabilities of discontinued operations 4 - 1,845 4,430 Shareholders' equity Share capital 14 265,436 469,080 132,261 Contributed surplus 15 5,890 10,882 10,012 Retained earnings 131,643 729,694 677,385 Accumulated other comprehensive income (loss) 892 (13,763) 15,326 ---------------------------------------------------------------------------- Shareholders' equity before non- controlling interest 403,861 1,195,893 834,984 ---------------------------------------------------------------------------- Non-controlling interest - 945 - ---------------------------------------------------------------------------- Shareholders' equity 403,861 1,196,838 834,984 ---------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 913,331 $ 2,271,763 $ 1,355,867 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notesTOROMONT INDUSTRIES LTD. CONSOLIDATED INCOME STATEMENTS (Unaudited) Years endedDecember 31 ($ thousands, except share amounts) Note 2011 2010 ---------------------------------------------------------------------------- Revenues $ 1,381,974 $ 1,207,028 Cost of goods sold 1,032,599 913,336 ---------------------------------------------------------------------------- Gross profit 349,375 293,692 Selling and administrative expenses 201,190 181,175 Asset impairment reversal 5 - (6,683) ---------------------------------------------------------------------------- Operating income 148,185 119,200 Interest expense 18 9,012 11,629 Interest and investment income 18 (3,214) (2,803) ---------------------------------------------------------------------------- Income before income taxes 142,387 110,374 Income taxes 19 39,709 33,715 ---------------------------------------------------------------------------- Net earnings from continuing operations 102,678 76,659 Net gain on spinoff of Enerflex 4 133,164 - Earnings from discontinued operations 4 10,617 27,253 ---------------------------------------------------------------------------- Net Earnings $ 246,459 $ 103,912 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings (losses) attributable to : Common shareholders $ 247,082 $ 103,450 Non-controlling interests $ (623) $ 462 Basic earnings per share Continuing operations 20 $ 1.33 $ 1.00 Discontinued operations 20 1.87 0.36 ---------------------------------------------------------------------------- $ 3.20 $ 1.36 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Diluted earnings per share Continuing operations 20 $ 1.32 $ 0.99 Discontinued operations 20 1.86 0.36 ---------------------------------------------------------------------------- $ 3.18 $ 1.35 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Weighted average number of shares outstanding Basic 77,013,509 76,170,972 Diluted 77,393,253 76,361,949 See accompanying notesTOROMONT INDUSTRIES LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) Years ended December 31 ($ thousands) 2011 2010 ---------------------------------------------------------------------------- Net earnings $ 246,459 $ 103,912 Other comprehensive income (loss): Unrealized loss on translation of financial statements of foreign operations (6,250) (11,220) Change in fair value of derivatives designated as cash flow hedges, net of income tax (recovery) (2011 - $2,245; 2010 - ($1,848)) 4,552 (3,380) Loss on derivatives designated as cash flow hedges transferred to net income in the current period, net of income tax (recovery) (2011 - ($719); 2010 - $621) (1,662) 1,126 Loss on translation of financial statements of foreign operations transferred to net income on spinoff of Enerflex 18,015 - Actuarial losses on pension plans, net of income tax (2011 - $2,411; 2010 - $1,308) (7,234) (3,887) Gain on financial assets designated as available-for-sale transferred to net income as a result of business acquisition, net of income taxes of $3,090 - (15,615) ---------------------------------------------------------------------------- Other comprehensive income (loss) 7,421 (32,976) ---------------------------------------------------------------------------- Comprehensive income $ 253,880 $ 70,936 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Comprehensive (loss) income attributable to non- controlling interests $ (623) $ 462 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying notesTOROMONT INDUSTRIES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Years ended December 31 ($ thousands) Note 2011 2010 ---------------------------------------------------------------------------- Operating activities Net earnings from continuing operations $ 102,678 $ 76,659 Items not requiring cash and cash equivalents Depreciation and amortization 45,863 46,383 Asset impairment charge reversal 5 - (6,683) Stock-based compensation 15 1,001 3,005 Accrued pension liability (3,335) (7,188) Future income taxes (1,450) 3,293 Gain on sale of rental equipment, property, plant and equipment (8,211) (6,627) Cash flow from discontinued operations 26,028 37,173 ---------------------------------------------------------------------------- 162,574 146,015 Net change in non-cash working capital and other from discontinued operations 4 31,405 61,334 Net change in non-cash working capital and other from continuing operations 25 (39,731) 48,437 ---------------------------------------------------------------------------- Cash provided by operating activities 154,248 255,786 ---------------------------------------------------------------------------- Investing activities Additions to: Rental equipment (57,860) (38,579) Property, plant and equipment (25,017) (32,564) Proceeds on disposal of: Rental equipment 23,040 20,859 Property, plant and equipment 4,080 899 (Increase) decrease in other assets (184) 1,230 Discontinued operations 4 140,115 (292,887) ---------------------------------------------------------------------------- Cash provided by (used in) investing activities 84,174 (341,042) ---------------------------------------------------------------------------- Financing activities Increase in term credit facility debt - 280,000 Increase in term loan facility - 450,000 Repayment of term loan facility - (450,000) Repayment of long-term debt (286,888) (178,854) Financing costs (575) (8,330) Dividends 14 (40,877) (45,099) Shares purchased for cancellation (12,213) - Cash received on exercise of stock options 3,242 6,736 ---------------------------------------------------------------------------- Cash (used in) provided by financing activities (337,311) 54,453 ---------------------------------------------------------------------------- Effect of exchange rate changes on cash denominated in foreign currency 119 (2,065) Decrease in cash and cash equivalents (98,770) (32,868) Cash and cash equivalents at beginning of year 174,089 206,957 ---------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 75,319 $ 174,089 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Supplemental cash flow information (note 25) See accompanying notesTOROMONT INDUSTRIES LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) ---------------------------------------------------------------------------- Foreign currency Share Contributed Retained translation Cash flow ($ thousands) Note capital surplus earnings adjustments hedges ---------------------------------------------------------------------------- At January 1, 2011 $ 469,080 $ 10,882 $ 729,694 $ (11,220) $ (2,543) Net earnings - - 246,459 - - Enerflex spinoff 4 (205,332) (5,081) (790,560) - (4,950) Other comprehensive income - - (7,234) (6,250) 7,840 Translation losses recognized on Enerflex spinoff 4 - - - 18,015 - Shares purchased for cancellation 14 (2,467) (9,748) Effect of stock compensation plans 4,155 89 - - - Dividends 14 - - (36,968) - - ---------------------------------------------------------------------------- At December 31, 2011 $ 265,436 $ 5,890 $ 131,643 $ 545 $ 347 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Total Available- accumulated for-sale other Non- financial comprehensive controlling ($ thousands) Note assets income Interest Total ---------------------------------------------------------------------------- At January 1, 2011 $ - $ (13,763) $ 945 $ 1,196,838 Net earnings - (623) 245,836 Enerflex spinoff 4 - (4,950) (322) (1,006,245) Other comprehensive income - 1,590 - (5,644) Translation losses recognized on Enerflex spinoff 4 - 18,015 - 18,015 Shares purchased for cancellation 14 (12,215) Effect of stock compensation plans - - - 4,244 Dividends 14 - - - (36,968) ---------------------------------------------------------------------------- At December 31, 2011 $ - $ 892 $ - $ 403,861 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Foreign currency Share Contributed Retained translation Cash flow ($ thousands) Note capital surplus earnings adjustments hedges ---------------------------------------------------------------------------- At January 1, 2010 $ 132,261 $ 10,012 $ 677,385 $ - $ (289) Non- controllling interest on acquisition - - - - - Net earnings - - 103,912 - - Other comprehensive income - - (3,887) (11,220) (2,254) Issue of share capital on Enerflex acquisition 327,947 - - - - Effect of stock compensation plans 8,872 870 - - - Dividends 14 - - (47,716) - - ---------------------------------------------------------------------------- At December 31, 2010 $ 469,080 $ 10,882 $ 729,694 $ (11,220) $ (2,543) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Total Available- accumulated for-sale other Non- financial comprehensive controlling ($ thousands) Note assets income Interest Total ---------------------------------------------------------------------------- At January 1, 2010 $ 15,615 $ 15,326 $ - $ 834,984 Non- controllling interest on acquisition - - 483 483 Net earnings - - 462 104,374 Other comprehensive income (15,615) (29,089) - (32,976) Issue of share capital on Enerflex acquisition - - - 327,947 Effect of stock compensation plans - - - 9,742 Dividends 14 - - - (47,716) ---------------------------------------------------------------------------- At December 31, 2010 $ - $ (13,763) $ 945 $ 1,196,838 ---------------------------------------------------------------------------- See accompanying notes NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 2011 ($thousands except where otherwise indicated)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Corporate Information
Statement of Compliance
These consolidated unaudited financial statements represent the first annual financial statements of the Company prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the
These consolidated unaudited financial statements were authorized for issue by the Audit Committee of the Board of the Directors on
Basis of Preparation
These consolidated financial statements were prepared on a historical cost basis, except for derivative instruments that have been measured at fair value. The consolidated financial statements are presented in Canadian dollars and all values are rounded to the nearest thousands, except where otherwise indicated.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, income and expenses and unrealized gains and losses resulting from intra-group transactions are eliminated in full.
Non-controlling interests represent the portion of net earnings and net assets that is not held by the Company and are presented separately in the consolidated income statement and within equity in the consolidated statement of financial position.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of consideration transferred, measured at acquisition date fair value. Acquisition costs are expensed as incurred.
Goodwill is initially measured at cost being the excess of the cost of the business combination over the Company's share in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company's cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed, the goodwill associated with the operation disposed is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed in this circumstance is measured based on the relative fair values of the operation disposed and the portion of the cash-generating unit retained.
Cash and Cash Equivalents
Cash and cash equivalents consist of petty cash, demand deposits and short-term deposits with an original maturity of three months or less. Cash and cash equivalents are recorded at cost, which approximates market value.
Accounts Receivable
Accounts receivable are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Accounts receivable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
The Company maintains an allowance for doubtful accounts to provide for impairment of trade receivables. The expense relating to doubtful accounts is included within "Selling and administrative expenses" in the income statement.
Inventories
Inventories are valued at the lower of cost and net realizable value.
Cost of equipment, repair and distribution parts and direct materials include purchase cost and costs incurred in bringing each product to its present location and condition. Serialized inventory is determined on a specific item basis. Non-serialized inventory is determined based on a weighted average actual cost.
Cost of work-in-process includes cost of direct materials, labour and an allocation of manufacturing overheads, excluding borrowing costs, based on normal operating capacity.
Cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognized in other comprehensive income, in respect of the purchase of inventory.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, net of accumulated depreciation and accumulated impairment losses, if any.
Depreciation is recognized principally on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives range from 20 to 30 years for buildings, 3 to 10 years for equipment and 20 years for power generation assets. Leasehold improvements and lease inducements are amortized on a straight-line basis over the term of the lease. Land is not depreciated.
The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
Rental Equipment
Rental equipment is recorded at cost, net of accumulated depreciation and accumulated impairment losses, if any. Depreciation is recognized principally on a straight-line basis over the estimated useful lives of the assets, which range from 1 to 10 years.
Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions for warranty costs are recognized when the product is sold or service provided. Initial recognition is based on historical experience.
Financial Instruments
The Company determines the classification of its financial assets and liabilities at initial recognition. Initially, all financial assets and liabilities are recognized at fair value. Regular way trades of financial assets and liabilities are recognized on the trade date. Transaction costs are expensed as incurred except for loans and receivables and loans and borrowing, in which case transaction costs are included in initial cost.
Financial Assets
Subsequent measurement of financial assets depends on the classification. The Company has made the following classifications:
-- Cash and cash equivalents are classified as held for trading and as such
are measured at fair value, with changes in fair value being included in
profit or loss.
-- Accounts receivable are classified as loans and receivables and are
recorded at amortized cost using the effective interest rate method,
less provisions for doubtful accounts.
-- Derivatives are classified as held for trading and are measured at fair
value with changes in fair value being included in profit or loss,
unless they are designated as effective hedging instruments in which
case changes in fair value are included in other comprehensive income.
The Company assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
Financial Liabilities
Subsequent measurement of financial liabilities depends on the classification. The Company has made the following classifications:
-- Accounts payable and accrued liabilities are classified as financial
liabilities held for trading and as such are measured at fair value,
with changes in fair value being included in profit or loss.
-- Long-term debt is classified as loans and borrowings and as such is
subsequently measured at amortized cost using the effective interest
rate method. Discounts, premiums, and fees on acquisition are taken into
account in determining amortized cost.
-- Derivatives are classified as held for trading and are measured at fair
value with changes in fair value being included in profit or loss,
unless they are designated as effective hedging instruments in which
case changes in fair value are included in other comprehensive income.
Fair value of financial instruments
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
-- Level 1 - unadjusted quoted prices in active markets for identical
assets or liabilities
-- Level 2 - other techniques for which all inputs that have a significant
effect on the recorded fair value are observable, either directly or
indirectly
-- Level 3 - techniques that use inputs that have a significant effect on
the recorded fair value that are not based on observable market data
Derivative financial instruments and hedge accounting
Derivative financial arrangements are used to hedge exposure to fluctuations in exchange rates. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains and losses arising from changes in the fair value of derivatives are taken directly to the statement of earnings, except for the effective portion of cash flow hedges, which is recognized in other comprehensive income.
At inception the Company designates and documents the hedge relationship including identification of the transaction and the risk management objectives and strategy for undertaking the hedge. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The Company has designated certain derivatives as cash flow hedges. These are hedges of firm commitments and highly probable forecast transactions. The effective portion of changes in the fair value of derivatives that are designated as a cash flow hedge is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Additionally:
-- If a hedge of a forecast transaction subsequently results in the
recognition of a non-financial asset, the associated gains and losses
that were recognized in other comprehensive income are included in the
initial cost or other carrying amount of the asset;
-- For cash flow hedges other than those identified above, amounts
accumulated in other comprehensive income are recycled to the income
statement in the period when the hedged item will affect profit and loss
(for instance, when the forecast sale that is hedged takes place);
-- When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss in
other comprehensive income remains in other comprehensive income and is
recognized when the forecast transaction is ultimately recognized in the
income statement; and
-- When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in other comprehensive income
is immediately recognized in the income statement.
Impairment of Non-financial Assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). In determining fair value less costs to sell, recent market transactions are taken into account, if available. In assessing value in use, the estimated further cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. Impairment losses are recognized in the statement of earnings.
The Company bases its impairment calculation on detailed budgets which are prepared for each of the cash generating units and generally cover a period of three years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the third year. For assets other than goodwill, an assessment is made at each reporting date whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement.
Goodwill is tested for impairment annually during the fourth quarter of the year and when circumstances indicate that the carrying value may be impaired.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, sales taxes and duty. The following specific recognition criteria must also be met before revenue is recognized:
-- Revenues from the sale of equipment are recognized when the significant
risks and rewards of ownership of the goods have passed to the buyer,
usually on shipment of the goods and/or invoicing.
-- Revenues from the sale of equipment for which the Company has provided a
guarantee to repurchase the equipment at predetermined residual values
and dates are accounted for as operating leases. Revenues are recognized
over the period extending to the date of the residual value guarantee.
-- Revenues from the sale of equipment systems involving design,
manufacture, installation and start-up are recorded using the
percentage-of-completion method. Percentage-of-completion is normally
measured by reference to costs incurred to date as a percentage of total
estimated cost for each contract. Any foreseeable losses on such
projects are recognized immediately in profit or loss as identified.
-- Revenues from equipment rentals are recognized in accordance with the
terms of the relevant agreement with the customer, generally on a
straight-line basis over the term of the agreement.
-- Product support services include sales of parts and servicing of
equipment. For the sale of parts, revenues are recognized when the part
is shipped to the customer. For servicing of equipment, revenues are
recognized on completion of the service work.
-- Revenues from long-term maintenance contracts and separately priced
extended warranty contracts are recognized on a percentage-of-completion
basis proportionate to the service work that has been performed based on
the parts and labour service provided. These contracts are closely
monitored for performance. Any losses estimated during the term of the
contract are recognized when identified. At the completion of the
contract, any remaining profit on the contract is recognized as revenue.
-- Interest income is recognized using the effective interest method.
Foreign Currency Translation
The functional and presentation currency of the Company is the Canadian dollar. Each of the Company's subsidiaries determines its functional currency and items included in the financial statements of each subsidiary are measured using that functional currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction or at the average rate for the period when this is a reasonable approximation. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange as at the reporting date. All differences are taken directly to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
The assets and liabilities of foreign operations (having a functional currency other than the Canadian dollar) are translated into Canadian dollars at the rate of exchange prevailing at the statement of financial position date and the statements of earnings are translated at the average exchange rate for the period. The exchange differences arising on translation are recognized in accumulated other comprehensive income in shareholders' equity. On disposal of a foreign operation, the deferred cumulative amount recognized in equity is recognized in the income statement.
Share-based Payment Transactions
The Company operates both equity-settled and cash-settled share-based compensation plans under which the Company receives services from employees, including senior executives and directors, as consideration for equity instruments of the Company or cash payments.
For equity-settled plans, expense is based on the fair value of the awards granted determined using the Black-Scholes option pricing model and the best estimate of the number of equity instruments that will ultimately vest. For awards with graded vesting, each tranche is considered to be a separate grant based on its respective vesting period. The fair value of each tranche is determined separately on the date of grant and is recognized as compensation expense, net of forfeiture estimate, over the term of its respective vesting period.
For cash-settled plans, the expense is determined based on the fair value of the liability incurred at each award date and at each subsequent statement of financial position date until the award is settled. The fair value of the liability is measured by applying quoted market prices. Changes in fair value are recognized in the statement of earnings in selling and administrative expenses.
Employee Future Benefits
For defined contribution plans, the pension expense recorded in the statement of earnings is the amount of the contributions the Company is required to pay in accordance with the terms of the plans.
For defined benefit plans, the pension expense is determined separately for each plan using the following policies:
-- The cost of pensions earned by employees is actuarially determined using
the projected unit credit method pro-rated on length of service and
management's best estimate assumptions to value its pensions using a
measurement date of December 31 ;
-- For the purpose of calculating the expected return on plan assets, those
assets are valued at fair value;
-- Past service costs from plan amendments are recognized immediately in
net earnings to the extent that the benefits have vested, otherwise,
they are amortized on a straight-line basis over the vesting period;
-- Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are recognized in retained earnings and
included in the statement of comprehensive income in the period in which
they occur.
Income Taxes
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets and liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the statement of earnings in the period that includes the date of substantive enactment. The Company assesses recoverability of deferred tax assets based on the Company's estimates and assumptions. Deferred tax assets are recorded at an amount that the company considers probable to be realized.
Current and deferred income taxes relating to items recognized directly in shareholders' equity are also recognized directly in shareholders' equity.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date. Leases which transfer substantially all of the benefits and risk of ownership of the property to the lessee are classified as finance leases; all other leases are classified as operating leases. Classification is re-assessed if the terms of the lease are changed.
Toromont as Lessee
Operating lease payments are recognized as an operating expense in the statement of earnings on a straight line basis over the lease term. Benefits received and receivable as an incentive to enter into an operating lease are deferred and amortized on a straight-line basis over the term of the lease.
Toromont as Lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur.
The Company capitalizes borrowing costs for all eligible assets where construction was commenced on or after
Standards Issued But Not Yet Effective
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ended
Consolidated Financial Statements - On
Joint Arrangements - On
As a result of the issuance of IFRS 10 and IFRS 11, IAS 28 - Investments in Associates and Joint Ventures has been amended to correspond to the guidance provided in IFRS 10 and IFRS 11.
Disclosure of Interests in Other Entities - On
IFRS 10, 11 and 12, and the amendments to IAS 27 and 28 are all effective for annual periods beginning on or after
Fair Value Measurement - On
Employee Benefits - On
Presentation of Financial Statements - On
Financial Instruments - Disclosures - On
Deferred Tax - Recovery of Underlying Assets - On
Financial Instruments - In
2. Significant Accounting Estimates and Assumptions
The preparation of the Company's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
In making estimates and judgments, management relies on external information and observable conditions where possible, supplemented by internal analysis as required.
In the process of applying the Company's accounting policies, management has made the following judgments, estimates and assumptions which have the most significant effect on the amounts recognized in the consolidated financial statements.
Property, Plant and Equipment - Depreciation is calculated based on the estimated useful lives of the assets and estimated residual values.
When determining the value in use of property, plant and equipment during impairment testing, the Company uses the following critical estimates: the timing of forecasted revenues; future selling prices and margins; maintenance and other capital expenditures; and discount rates.
Changes in circumstances, such as technological advances and changes to business strategy can result in actual useful lives, residual values and future cash flows differing significantly from estimates. The assumptions used are reviewed on an ongoing basis to ensure they continue to be appropriate.
Income Taxes - Estimates and judgement are made for uncertainties which exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income.
Revenue Recognition - The Company generates revenue from the assembly and manufacture of equipment using the percentage-of-completion method. This method requires management to make a number of estimates and assumptions surrounding: the expected profitability of the contract; the estimated degree of completion based on cost progression; and other detailed factors. Although these factors are routinely reviewed as part of the project management process, changes in these estimates or assumptions could lead to changes in the revenues recognized in a given period.
The Company also generates revenue from long-term maintenance and repair contracts whereby it is obligated to maintain equipment for its customers. The contracts are typically fixed price on either machine hours or cost per hour, with provisions for inflationary and exchange adjustments. Revenue is recognized using the percentage-of-completion method based on work completed. This method requires management to make a number of estimates and assumptions surrounding: machine usage; machine performance; future parts and labour pricing; manufacturers' warranty coverage; and other detailed factors. These factors are routinely reviewed as part of the contract management process; however changes in these estimates or assumptions could lead to changes in the revenue and costs of sales recognized in a given period.
Inventories - Management is required to make an assessment of the net realizable value of inventory at each reporting period. Management incorporates estimates and judgments that take into account current market prices, current economic trends and past experiences in the measurement of net realizable value.
Employee future benefits expense - The net obligations associated with the defined benefit pension plans are actuarially valued using: the projected unit credit method; management' best estimates for long-term expected rate of return on assets; salary escalation and life expectancy; and a current market discount rate. All assumptions are reviewed at each reporting date.
Stock-based compensation - Estimating the fair value for share-based payment transactions requires determining the most appropriate inputs to the valuation model including: the expected life of the share option; volatility; and dividend yield.
3. TRANSITION TO IFRS
The Company has adopted IFRS effective
Initial Elections and Exemptions upon Adoption of IFRS
IFRS 1 provides entities adopting IFRS for the first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRS. Most adjustments required on transition to IFRS were made retrospectively against opening retained earnings as of the date of the first comparative statement of financial position presented which is
The following are the key IFRS 1 exemptions and elections utilized by the Company:
-- Business Combinations - The Company elected to apply the exemption such
that transactions entered into prior to the transition date, January 1,
2010 , were not restated. As a condition of applying this exemption,
goodwill relating to business combinations that occurred prior to
January 1, 2010 was tested for impairment even though no impairment
indicators were identified. No impairment existed at the date of
transition.
-- Property, Plant and Equipment - The Company has not elected to report
any items of property, plant and equipment in its opening statement of
financial position on the transition date, at a deemed cost instead of
the actual cost that would be determined under IFRS.
-- Employee Future Benefits - The Company has elected to recognize all
cumulative actuarial gains and losses on the Company's employee future
benefits plans at the date of transition in opening retained earnings.
-- Cumulative Translation Differences - The Company has elected to set the
previously accumulated translation account, $15,954 , which was included
in accumulated other comprehensive income, to zero at the date of
transition and charged opening retained earnings.
-- Share-Based Payment Transactions - The Company has elected to apply IFRS
2 to equity instruments that were granted on or after November 7, 2002
but which had not vested by the Company's date of transition to IFRS.
-- Borrowing Costs - IAS 23 Borrowing Costs has been applied prospectively
to borrowing costs relating to qualifying assets for which the
commencement date for capitalization is on or after the transition date.
The following are the key IFRS 1 mandatory exceptions from full retrospective application of IFRS.
-- Hedge Accounting - Only hedging relationships that satisfied the hedge
accounting criteria as of the Transition Date were reflected as hedges
in the Company's financial statements under IFRS.
-- Estimates - Hindsight was not used to create or revise estimates. The
estimates previously made by the Company under Canadian GAAP are
consistent with their application under IFRS.
Reconciliation of Shareholders' Equity as Reported Under Canadian GAAP to IFRS
The following is a reconciliation of the Company's shareholders' equity reported in accordance with Canadian GAAP to its shareholders' equity in accordance with IFRS at the transition date,
December 31, January 1,
2010 2010
----------------------------------------------------------------------------
Total shareholders' equity under Canadian GAAP $ 1,206,637 $ 846,157
IFRS adjustments (1)
(i) Employee future benefits (14,611) (11,173)
(ii) Reversal of asset impairment 4,812 -
----------------------------------------------------------------------------
Total equity under IFRS $ 1,196,838 $ 834,984
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1 - Refer to Notes for Canadian GAAP to IFRS Reconciliations
Reconciliation of Net Earnings as Reported Under Canadian GAAP to IFRS
Year Ended December 31, 2010
----------------------------------------------------------------------------
Net earnings under Canadian GAAP $ 98,650
IFRS adjustments (1)
(i) Employee future benefits 450
(ii) Reversal of asset impairment 4,812
----------------------------------------------------------------------------
Increase in net earnings 5,262
----------------------------------------------------------------------------
Net earnings under IFRS $ 103,912
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Common Shareholders $ 103,450
Non-controlling Interests $ 462
1 - Refer to Notes for Canadian GAAP to IFRS Reconciliations
Reconciliation of Comprehensive (Loss) Income as Reported Under Canadian GAAP to IFRS
Year Ended December 31, 2010
----------------------------------------------------------------------------
Comprehensive income under Canadian GAAP $ 69,561
IFRS adjustments (1)
Increase in net earnings 5,262
(ii) Actuarial losses on pension plans (3,887)
----------------------------------------------------------------------------
Comprehensive income under IFRS $ 70,936
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1 - Refer to Notes for Canadian GAAP to IFRS Reconciliations
Reconciliation of Cash Flows as Reported Under Canadian GAAP to IFRS
There was no change to total cash flows from operating, investing or financing activities under IFRS.
Notes for Canadian GAAP to IFRS Reconciliations
i) Employee Future Benefits - Cumulative unrecognized actuarial gains and losses that existed at the transition date were recognized in opening retained earnings (loss of
ii) Reversal of Asset Impairment - In the fourth quarter of 2010, revised pricing under certain electricity supply contracts triggered an assessment of the recoverable amount of certain power generation assets. The value in use was based on cash flow forecast in real terms and discounted at a pre-tax rate of 3.3 per cent. This led to a reversal of
Statement of Financial Position Restatements
The following adjustments and reclassifications were made as at
Cumulative Translation Differences - The Company has elected to set the previously accumulated translation account, which was included in accumulated other comprehensive income, to zero at the date of transition and charged opening retained earnings.
Deferred Tax Assets and Liabilities - Deferred tax assets and liabilities are not classified as current under IFRS but are shown as non-current.
4. DISCONTINUED OPERATIONS
On
The book value of Toromont's outstanding common shares immediately prior to the arrangement was attributed to continuing Toromont common shares and the new Enerflex Ltd. common shares in proportion to the relative fair value at the time the arrangement (the "butterfly proportion"), which was determined to be 56.4% Toromont and 43.6% Enerflex.
In addition to assisting with the allocation of components of equity to the two entities, the butterfly proportion is also used by previous Toromont shareholders to allocate adjusted cost base of their shares between the continuing Toromont shares and new Enerflex shares, as well as in the allocation of stock option values, as more completely described in Note 22.
Coterminous with the arrangement, Enerflex Ltd. repaid amounts owing to Toromont of
The Toromont consolidated balance sheet reflects the transfer of various assets, liabilities and equity accounts to Enerflex Ltd. as part of the arrangement. The underlying net assets representing the distribution of shares were as follows:
Assets Cash$ 44,452 Accounts receivable 222,737 Inventories 201,019 Property, plant and equipment 164,818 Rental equipment 114,180 Deferred tax assets 46,753 Intangible assets 29,208 Goodwill 482,656 Other current and non-current assets 31,329 ---------------------------------------------------------------------------- Total assets$ 1,337,152 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities Accounts payable, accrued liabilities and provisions$ 130,254 Deferred revenues 174,027 Other current and non-current liabilities 4,523 Notes payable to Toromont 173,300 ---------------------------------------------------------------------------- 482,104 ---------------------------------------------------------------------------- Net assets transferred$ 855,048 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
The assets and liabilities at discontinued operations at
December 31 January 1.
2010 2010
----------------------------------------------------------------------------
Accounts receivable $ 243,238 $ 78,011
Inventories 222,855 167,275
Other current assets 24,406 8,894
----------------------------------------------------------------------------
Total current assets $ 490,499 $ 254,180
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment $ 178,377 $ 69,781
Rental equipment 116,162 59,142
Deferred tax assets 49,784 23,194
Intangible assets 33,127 -
Goodwill 482,656 21,350
Other assets 13,797 56,502
----------------------------------------------------------------------------
Total long-term assets $ 873,903 $ 229,969
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts payable, accrued liabilities and
provisions $ 164,422 $ 68,873
Deferred revenues 150,319 59,751
Other current liabilities 7,738 -
----------------------------------------------------------------------------
Total current liabilities $ 322,479 $ 128,624
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deferred tax liabilities $ 1,845 $ 4,430
----------------------------------------------------------------------------
Total long-term liabilities $ 1,845 $ 4,430
----------------------------------------------------------------------------
Results of discontinued operations were as follows:
2011 2010
----------------------------------------------------------------------------
Revenues $ 492,937 $ 1,167,107
Net earnings before tax $ 20,783 $ 43,447
Income taxes $ 10,166 $ 16,194
Net earnings after tax $ 10,617 $ 27,253
Earnings (losses) attributable to :
Common shareholders $ 11,240 $ 26,791
Non-controlling interests $ (623) $ 462
Toromont incurred certain legal and advisory costs related to the spinoff. These totalled
The Company followed IFRIC 17 - Distributions of Non-cash Assets to Owners in accounting for this transaction. In accordance with this guidance, a dividend of
Cash flows from investing activities at discontinued operations included cash used for the acquisition of
5. ASSET IMPAIRMENT REVERSAL
In the fourth quarter of 2010, revised pricing under certain electricity supply contracts triggered an assessment of the recoverable amount of certain power generation assets held in the
The recoverable amount is its value in use, which was based on cash flow forecasts and discounted at a pre-tax rate of 3.3 per cent. This led to a reversal of
6. CASH AND CASH EQUIVALENTS
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Cash $ 75,319 $ 174,089 $ 90,357
Cash equivalents - - 116,600
----------------------------------------------------------------------------
Cash and cash cash equivalents $ 75,319 $ 174,089 $ 206,957
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash equivalents include Bankers' Acceptances and Term Deposits with an original maturity of three months or less and are denominated in Canadian dollars.
7. ACCOUNTS RECEIVABLES
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Trade receivables $ 200,009 $ 191,498 $ 146,757
Less: allowance for doubtful
accounts (5,574) (5,096) (5,089)
----------------------------------------------------------------------------
Trade receivables - net 194,435 186,402 141,668
Other receivables 14,808 22,218 25,080
----------------------------------------------------------------------------
Trade and other receivables $ 209,243 $ 208,620 $ 166,748
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The aging of gross trade receivables at each reporting date was as follows:
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Current to 90 days $ 189,069 $ 179,813 $ 136,124
over 90 days 10,940 11,685 10,633
----------------------------------------------------------------------------
$ 200,009 $ 191,498 $ 146,757
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The movement in the Company's allowance for doubtful accounts is identified below:
2011 2010
----------------------------------------------------------------------------
Balance, beginning of year $ 5,096 $ 5,089
Provisions and revisions, net 478 7
----------------------------------------------------------------------------
Balance, end of year $ 5,574 $ 5,096
----------------------------------------------------------------------------
----------------------------------------------------------------------------
8. INVENTORIES
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Equipment $ 204,936 $ 138,818 $ 130,847
Repair and distribution parts 73,725 59,531 56,189
Direct materials 2,606 2,359 2,207
Work-in-process 20,670 23,708 16,592
----------------------------------------------------------------------------
$ 301,937 $ 224,416 $ 205,835
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The amount of inventory recognized as an expense and included in cost of goods sold accounted for other than by the percentage-of-completion method during 2011 were
9. PROPERTY, PLANT AND EQUIPMENT
Land Buildings Equipment
----------------------------------------------------------------------------
Cost
December 31, 2010 $ 46,268 $ 102,152 $ 99,125
Additions 1,860 8,513 15,088
Disposals (2,496) (380) (6,843)
Currency translation effects 3 12 10
----------------------------------------------------------------------------
December 31, 2011 $ 45,635 $ 110,297 $ 107,380
Accumulated depreciation
December 31, 2010 $ - $ 45,779 $ 78,211
Depreciation charge - 4,175 8,091
Depreciation of disposals - (380) (6,756)
Currency translation effects - 2 8
----------------------------------------------------------------------------
December 31, 2011 $ - $ 49,576 $ 79,554
----------------------------------------------------------------------------
Net book value - December 31, 2011 $ 45,635 $ 60,721 $ 27,826
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Power Rental
Generation Total Equipment
----------------------------------------------------------------------------
Cost
December 31, 2010 $ 37,736 $ 285,281 $ 235,183
Additions 278 25,739 62,205
Disposals (22) (9,741) (34,920)
Currency translation effects - 25 -
----------------------------------------------------------------------------
December 31, 2011 $ 37,992 $ 301,304 $ 262,468
Accumulated depreciation
December 31, 2010 $ 18,783 $ 142,773 $ 115,239
Depreciation charge 1,485 13,751 30,482
Depreciation of disposals (22) (7,158) (18,615)
Currency translation effects - 10 -
----------------------------------------------------------------------------
December 31, 2011 $ 20,246 $ 149,376 $ 127,106
----------------------------------------------------------------------------
Net book value - December 31, 2011 $ 17,746 $ 151,928 $ 135,362
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Land Buildings Equipment
----------------------------------------------------------------------------
Cost
January 1, 2010 $ 27,982 $ 95,615 $ 96,265
Additions 19,481 6,643 7,420
Disposals (1,188) (76) (4,537)
Currency translation effects (7) (30) (23)
----------------------------------------------------------------------------
December 31, 2010 $ 46,268 $ 102,152 $ 99,125
Accumulated depreciation
Janaury 1, 2010 $ - $ 41,775 $ 74,740
Depreciation charge - 4,084 7,575
Depreciation of disposals - (76) (4,082)
Impairment Reversal - - -
Currency translation effects - (4) (22)
----------------------------------------------------------------------------
December 31, 2010 $ - $ 45,779 $ 78,211
----------------------------------------------------------------------------
Net book value - December 31, 2010 $ 46,268 $ 56,373 $ 20,914
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Power Rental
Generation Total Equipment
----------------------------------------------------------------------------
Cost
January 1, 2010 $ 37,714 $ 257,576 $ 232,477
Additions 22 33,566 39,774
Disposals - (5,801) (37,068)
Currency translation effects - (60) -
----------------------------------------------------------------------------
December 31, 2010 $ 37,736 $ 285,281 $ 235,183
Accumulated depreciation
Janaury 1, 2010 $ 24,351 $ 140,866 $ 108,444
Depreciation charge 1,115 12,774 29,402
Depreciation of disposals - (4,158) (22,607)
Impairment Reversal (6,683) (6,683)
Currency translation effects - (26) -
----------------------------------------------------------------------------
December 31, 2010 $ 18,783 $ 142,773 $ 115,239
----------------------------------------------------------------------------
Net book value - December 31, 2010 $ 18,953 $ 142,508 $ 119,944
----------------------------------------------------------------------------
----------------------------------------------------------------------------
During 2011 depreciation expenses of
In the fourth quarter of 2010, revised pricing under certain electricity supply contracts triggered an assessment of the recoverable amount of certain power generation assets. This led to a reversal of
Operating income from rental operations for the year ended
10. OTHER ASSETS
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Equipment sold with guaranteed
residual values $ 7,263 $ 8,451 $ 10,940
Other 932 570 443
----------------------------------------------------------------------------
$ 8,195 $ 9,021 $ 11,383
----------------------------------------------------------------------------
----------------------------------------------------------------------------
11. GOODWILL
Goodwill acquired through business combinations has been allocated to two cash generating units (CGUs) or groups of CGUs for impairment testing as follows:
-- Toromont CAT, included within theEquipment Group --CIMCO , which is also an operating and reportable segment
Carrying amount of goodwill allocated to each of the CGUs
December 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Toromont CAT $ 13,000 $ 13,000 $ 13,000
CIMCO 450 450 450
----------------------------------------------------------------------------
Total $ 13,450 $ 13,450 $ 13,450
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Company performed the annual impairment test of goodwill allocated to Toromont CAT as at
The Company performed the annual impairment test of goodwill allocated to
Key assumption used in value in use calculations
The calculation of value in use for Toromont CAT and
-- Discount rates -- Growth rate to extrapolate cash flows beyond the budget period
Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate is derived from the CGUs weighted average cost of capital, taking into account both debt and equity. The cost of equity is derived from the expected return on investment by the Company's shareholders. The cost of debt is based on the interest bearing borrowings the Company is obliged to service. Segment-specific risk is incorporated by applying different debt to equity ratios.
Growth rate estimates are based on published data and is used as a conservative estimate of future growth.
Sensitivity to changes in assumptions
Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of either unit to materially exceed its recoverable amount.
12. PAYABLES, ACCRUALS AND PROVISIONS
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Accounts payable and accrued
liabilities $ 263,544 $ 226,079 $ 153,010
Dividends payable 8,433 12,342 9,728
Provisions 8,758 6,824 6,553
----------------------------------------------------------------------------
$ 280,735 $ 245,245 $ 169,291
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Activities related to provisions were as follows:
Warranty Other Total
----------------------------------------------------------------------------
Balance as at December 31, 2010 $ 4,812 $ 2,012 $ 6,824
New provisions 5,286 1,927 7,213
Charges/credits against provisions (4,966) (313) (5,279)
----------------------------------------------------------------------------
Balance as at December 31, 2011 $ 5,132 $ 3,626 $ 8,758
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Warranty Other Total
----------------------------------------------------------------------------
Balance as at January 1, 2010 $ 4,879 $ 1,674 $ 6,553
New provisions 4,701 1,154 5,855
Charges/credits against provisions (4,768) (816) (5,584)
----------------------------------------------------------------------------
Balance as at December 31, 2010 $ 4,812 $ 2,012 $ 6,824
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Warranty
A provision is recognized for expected warranty claims on products and services during the last year, based on past experience and known issues. It is expected that most of these costs will be incurred in the next financial year.
Other
Other provisions relate largely to open legal and insurance claims. No one claim is significant.
13. LONG-TERM DEBT
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Bank credit facility $ - $ 280,000 $ -
Senior debentures 137,163 144,051 155,999
Notes payable - - 2,096
Debt issuance costs, net of
amortization (3,068) (4,122) (1,125)
----------------------------------------------------------------------------
Total long-term debt 134,095 419,929 156,970
Less current portion 1,280 6,889 14,044
----------------------------------------------------------------------------
$ 132,815 $ 413,040 $ 142,926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
All debt is unsecured.
In
Effective
Effective
At
Terms of the senior debentures are:
--$125,000 , 4.92% senior debentures dueOctober 13, 2015 , interest payable semi-annually, principal due on maturity; and --$12,163 , 7.06% senior debentures dueMarch 29, 2019 , interest payable semi-annually throughSeptember 29, 2009 ; thereafter, blended principal and interest payments through to maturity.
These credit arrangements include covenants, restrictions and events of default usually present in credit facilities of this nature, including requirements to meet certain financial tests periodically and restrictions on additional indebtedness and encumbrances.
Scheduled principal repayments and interest payments on long-term debt are as follows:
Principal Interest
----------------------------------------------------------------------------
2012 $ 1,280 $ 6,986
2013 1,372 6,895
2014 1,471 6,796
2015 126,576 5,342
2016 1,690 427
2017 to 2019 4,774 517
----------------------------------------------------------------------------
$ 137,163 $ 26,963
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest expense included interest on debt initially incurred for a term greater than one year of
14. SHARE CAPITAL
Authorized
The Company is authorized to issue an unlimited number of common shares (no par value) and preferred shares. No preferred shares have been issued.
Issued
The changes in the common shares issued and outstanding during the period were as follows:
2011 2010
Number of Common Number of Common
Common Share Common Share
Shares Capital Shares Capital
----------------------------------------------------------------------------
Balance, beginning of
year 77,149,626 $ 469,080 64,867,467 $ 132,261
Enerflex spinoff - (205,318) - -
Issue of shares re
Enerflex acquisition - - 11,875,250 327,947
Exercise of stock
options 200,155 4,141 406,909 8,872
Purchase of shares for
cancellation (720,004) (2,467) - -
----------------------------------------------------------------------------
Balance, end of year 76,629,777 $ 265,436 77,149,626 $ 469,080
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The adjustment to contributed surplus on the spinoff of Enerflex represents 43.6% (butterfly proportion) of the balance of contributed surplus immediately prior to spinoff.
Shareholder Rights Plan
The Shareholder Rights Plan is designed to encourage the fair treatment of shareholders in connection with any takeover offer for the Company. Rights issued under the plan become exercisable when a person, and any related parties, acquires or commences a take-over bid to acquire 20% or more of the Company's outstanding common shares without complying with certain provisions set out in the plan or without approval of the Company's Board of Directors. Should such an acquisition occur, each rights holder, other than the acquiring person and related parties, will have the right to purchase common shares of the Company at a 50% discount to the market price at that time. Unless renewed by shareholders at the Annual and Special Meeting of Shareholders to be held on
Normal Course Issuer Bid ("NCIB")
Toromont renewed its NCIB program in 2011. The current issuer bid allows the Company to purchase up to approximately 5.7 million of its common shares in the 12 month period ending
In the year ended
Dividends
The Company paid dividends of
The dividend was adjusted to
15. CONTRIBUTED SURPLUS
Contributed surplus consists of accumulated stock option expense less the fair value of the options at the grant date that have been exercised and reclassified to share capital. Changes in contributed surplus were as follows:
2011 2010
----------------------------------------------------------------------------
Contributed surplus, beginning of year $ 10,882 $ 10,012
Enerflex spinoff (5,081) -
Stock-based compensation, net of forfeitures 1,001 3,005
Value of compensation cost associated with
exercised options (912) (2,135)
----------------------------------------------------------------------------
Contributed surplus, end of year $ 5,890 $ 10,882
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The adjustment to contributed surplus on the spinoff of Enerflex represents 43.6% (butterfly proportion) of the balance of contributed surplus immediately prior to spinoff.
16. FINANCIAL INSTRUMENTS
Financial Assets and Liabilities - Classification and Measurement
Financial assets and financial liabilities are measured on an ongoing basis at cost, fair value or amortized cost, depending on the classification. The following table highlights the carrying amounts and classifications of financial assets and liabilities:
Cash, loans Derivatives Other
as at December and used for Available financial
31, 2011 receivables hedging for sale liabilities Total
----------------------------------------------------------------------------
Cash and cash
equivalents $ 75,319 $ - $ - $ - $ 75,319
Accounts
receivable 209,243 - - - 209,243
Accounts
payable and
accrued
liabilities - - - (280,735) (280,735)
Current portion
of long-term
debt - - - (1,280) (1,280)
Derivative
financial
instruments - (210) - - (210)
Long term debt - - - (132,815) (132,815)
----------------------------------------------------------------------------
Total $ 284,562 $ (210) $ - $ (414,830) $ (130,478)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash, loans Derivatives Other
as at December and used for Available financial
31, 2010 receivables hedging for sale liabilities Total
----------------------------------------------------------------------------
Cash and cash
equivalents $ 174,089 $ - $ - $ - $ 174,089
Accounts
receivable 208,620 - - - 208,620
Accounts
payable and
accrued
liabilities - - - (245,245) (245,245)
Current portion
of long-term
debt - - - (6,889) (6,889)
Derivative
financial
instruments - (5,063) - - (5,063)
Long term debt - - - (413,040) (413,040)
Discontinued
operations 264,540 (155) - (164,422) 99,963
----------------------------------------------------------------------------
Total $ 647,249 $ (5,218) $ - $ (829,596) $ (187,565)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash, loans Derivatives Other
as at January and used for Available financial
1, 2010 receivables hedging for sale liabilities Total
----------------------------------------------------------------------------
Cash and cash
equivalents $ 206,957 $ - $ - $ - $ 206,957
Accounts
receivable 166,748 - - - 166,748
Accounts
payable and
accrued
liabilities - - - (169,291) (169,291)
Current portion
of long-term
debt - - - (14,044) (14,044)
Derivative
financial
instruments - (874) - - (874)
Long term debt - - - (142,926) (142,926)
Discontinued
operations 78,011 - 56,502 (68,873) 65,640
----------------------------------------------------------------------------
Total $ 451,716 $ (874) $ 56,502 $ (395,134) $ 112,210
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Certain investments at discontinued operations were classified as available for sale and were recorded at fair value based on quoted market prices. Gains and losses resulting from the periodic revaluation were recorded in other comprehensive income.
Fair Value of Financial Instruments
The estimated fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and borrowings under the bank term facility approximate their respective carrying values given their short term maturities.
The fair value of derivative financial instruments is measured using the discounted value of the difference between the contract's value at maturity based on the contracted foreign exchange rate and the contract's value at maturity based on the comparable foreign exchange rate at period end under the same conditions. The financial institution's credit risk is also taken into consideration in determining fair value. The valuation is determined using Level 2 inputs which are observable inputs or inputs which can be corroborated by observable market data for substantially the full term of asset or liability.
The fair value of senior debentures as at
During the year ended
Derivative Financial Instruments and Hedge Accounting
Foreign exchange contracts and options are transacted with financial institutions to hedge foreign currency denominated obligations related to purchases of inventory and sales of products. The following table summarizes the Company's commitments to buy and sell foreign currencies as at
Average
Notional Exchange
Amount Rate (i) Maturity
----------------------------------------------------------------------------
Purchase contracts USD 248,453 $ 1.0200 January 2012 to January 2014
EUR 3,648 $ 1.3540 January 2012 to May 2012
GBP 1,800 $ 1.5611 January 2012
(i) CDN $ required to purchase one denominated unit
Management estimates that a loss of
All hedging relationships are formally documented, including the risk management objective and strategy. On an ongoing basis, an assessment is made as to whether the designated derivative financial instruments continue to be effective in offsetting changes in cash flows of the hedged transactions.
17. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
In the normal course of business, Toromont is exposed to financial risks that may potentially impact its operating results in one or all of its operating segments. The Company employs risk management strategies with a view to mitigating these risks on a cost-effective basis. Derivative financial agreements are used to manage exposure to fluctuations in exchange rates. The Company does not enter into derivative financial agreements for speculative purposes.
Currency Risk
The Canadian operations of the Company source the majority of its products and major components from
The Company maintains a conservative hedging policy whereby all significant transactional currency risks are identified and hedged.
Sensitivity analysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in foreign exchange rates on the Company's financial instruments and show the impact on net earnings and comprehensive income. Financial instruments affected by currency risk include cash and cash equivalents, accounts receivable, accounts payable and derivative financial instruments. This sensitivity analysis relates to the position as at
Cdn dollar weakens by 5% USD Euro GBP Total ---------------------------------------------------------------------------- Financial instruments held in foreign operations: Other comprehensive Income $ 302 $ - $ - $ 302 Financial instruments held in Canadian operations: Net earnings $ 1,497 $ - $ - $ 1,497 Other comprehensive Income $ 4,195 $ 178 $ 105 $ 4,478
The movement in other comprehensive income in foreign operations reflects the change in the fair value of financial instruments. Gains or losses on translation of foreign subsidiaries are deferred in other comprehensive income. Accumulated currency translation adjustments are recognized in income when there is a reduction in the net investment in the foreign operation.
The movement in net earnings in Canadian operations is a result of a change in the fair values of financial instruments. The majority of these financial instruments are hedged.
The movement in other comprehensive income in Canadian operations reflects the change in the fair value of derivative financial instruments that are designated as cash flow hedges. The gains or losses on these instruments are not expected to affect net income as the gains or losses will offset losses or gains on the underlying hedged items.
Credit Risk
Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, accounts receivable and derivative financial instruments. The carrying amount of assets included on the statement of financial position represents the maximum credit exposure.
Cash equivalents consist mainly of short-term investments, such as money market deposits. The Company has deposited the cash equivalents with reputable financial institutions, from which management believes the risk of loss to be remote.
The Company has accounts receivable from customers engaged in various industries including mining, construction, food and beverage, and governmental agencies. These specific industries may be affected by economic factors that may impact accounts receivable. Management does not believe that any single industry represents significant credit risk. Credit risk concentration with respect to trade receivables is mitigated by the Company's large customer base.
The credit risk associated with derivative financial instruments arises from the possibility that the counterparties may default on their obligations. In order to minimize this risk, the Company enters into derivative transactions only with highly rated financial institutions.
Interest Rate Risk
The Company minimizes its interest rate risk by managing its portfolio of floating and fixed rate debt, as well as managing the term to maturity. The Company may use derivative instruments such as interest rate swap agreements to manage its current and anticipated exposure to interest rates. There were no interest rate swap agreements outstanding as at
The Company had no floating rate debt as at
Liquidity Risk
Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with financial liabilities. As at
Accounts payable are primarily due within 90 days and will be satisfied from current working capital.
The Company expects that continued cash flows from operations in 2011, together with cash and cash equivalents on hand and currently available credit facilities, will be more than sufficient to fund its requirements for investments in working capital, capital assets and dividend payments through the next twelve months, and that the Company's credit ratings provide reasonable access to capital markets to facilitate future debt issuance.
18. INTEREST INCOME AND EXPENSE
The components of interest expense are as follows:
2011 2010
------------------------------
Term loan facility $ 1,941 $ 3,808
Senior debentures 7,071 7,821
------------------------------
$ 9,012 $ 11,629
------------------------------
------------------------------
The components of interest and investment income are as follows:
2011 2010
------------------------------
Interest income on rental conversions $ 2,981 $ 2,503
Other 233 300
------------------------------
$ 3,214 $ 2,803
------------------------------
------------------------------
19. INCOME TAXES
Significant components of the provision for income tax expense were as follows:
2011 2010
----------------------------------------------------------------------------
Current income tax expense $ 41,159 $ 30,422
Deferred income tax expense (recovery) (1,450) 3,293
----------------------------------------------------------------------------
Total income tax expense $ 39,709 $ 33,715
----------------------------------------------------------------------------
----------------------------------------------------------------------------
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes was as follows:
Twelve months
ended Dec 31
2011 2010
----------------------------------------------------------------------------
Statutory Canadian federal and provincial
income tax rates 28.25% 31.0%
----------------------------------------------------------------------------
Expected taxes on income $ 40,224 $ 34,216
Increase (decrease) in income taxes
resulting from:
Higher (lower) effective tax rates in other
jurisdictions (67) (383)
Manufacturing and processing rate reduction (239) (198)
(Income) expenses not (taxable) deductible
for tax purposes (218) (919)
Non-taxable gains (244) (61)
Effect of future income tax rate reductions 64 (28)
Other 189 1,088
----------------------------------------------------------------------------
Provision for income taxes $ 39,709 $ 33,715
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Effective income tax rate 27.9% 30.5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The statutory income tax rate represents the combined Canadian federal and
The source of deferred income taxes was as follows:
December 31, December 31, January 1,
2011 2010 2010
----------------------------------------------------------------------------
Accrued liabilities $ 8,964 $ 8,836 $ 8,043
Deferred revenue 1,021 659 1,202
Accounts receivable 1,231 1,070 1,142
Inventories 2,927 2,949 3,814
Capital assets (8,454) (9,565) (9,206)
Pension 4,294 4,975 4,349
Other 503 112 2,985
Cash flow hedges in other
comprehensive income 2,263 1,399 163
----------------------------------------------------------------------------
Deferred tax assets $ 12,749 $ 10,435 $ 12,492
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Movement in net deferred tax assets:
2011 2010
----------------------------------------------------------------------------
Balance, January 1 $ 10,435 $ 12,492
Tax expense (recovery) recognized in income 1,450 (3,293)
Tax expense recognized in other comprehensive
income 864 1,236
----------------------------------------------------------------------------
Balance, December 31 $ 12,749 $ 10,435
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax assets have not been recognized as at
20. EARNINGS PER SHARE
Basic earnings per share ("EPS") are calculated by dividing net earnings for the year by the weighted average number of common shares outstanding during the year.
Diluted EPS is calculated by dividing net earnings by the weighted average number of common shares outstanding during the year plus the weighted average number of common shares that would be issued on conversion of all dilutive stock options in to common shares.
EPS amounts for continuing and discontinued operations is calculated by dividing net earnings from continuing and discontinued operations respectively by the weighted average number of common shares for both basic and diluted amounts.
2011 2010
----------------------------------------------------------------------------
Net earnings available to common shareholders $ 246,459 $ 103,912
Net earnings from discontinued operations 143,781 27,253
----------------------------------------------------------------------------
Net earnings from continuing operations $ 102,678 $ 76,659
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average common shares outstanding 77,013,509 76,170,972
Dilutive effect of stock option conversion 379,744 190,977
----------------------------------------------------------------------------
Diluted weighted average common shares
outstanding 77,393,253 76,361,949
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per share
Continuing operations $ 1.33 $ 1.00
Discontinued operations 1.87 0.36
----------------------------------------------------------------------------
$ 3.20 $ 1.36
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings per share
Continuing operations $ 1.32 $ 0.99
Discontinued operations 1.86 0.36
----------------------------------------------------------------------------
$ 3.18 $ 1.35
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the calculation of diluted earnings per share for the year ended
21. EMPLOYEE BENEFITS EXPENSE
2011 2010
----------------------------------------------------------------------------
Wages and salaries $ 243,995 $ 221,133
Other employment benefit expenses 46,644 42,461
Share options granted to directors and
employees 1,001 3,005
Pension costs 8,768 8,423
----------------------------------------------------------------------------
$ 300,407 $ 275,022
----------------------------------------------------------------------------
22. STOCK BASED COMPENSATION
The Company maintains a stock option program for certain employees. Under the plan, up to 6,096,000 options may be granted for subsequent exercise in exchange for common shares. It is the Company policy that no more than 1% of outstanding shares or 771,149 share options may be granted in any one year. Stock options have a seven-year term, vest 20% per year on each anniversary date of the grant and are exercisable at the designated common share price, which is fixed at prevailing market prices of the common shares at the date the option is granted.
With the completion of the Enerflex spinoff, previously issued stock options were split. For each Toromont stock option previously held, option holders received one option in each of Toromont and Enerflex, with the exercise price determined by applying the "butterfly proportion" to the previous exercise price. All other conditions related to these options, including term and vesting periods, remained the same and there was no acceleration of options vesting. The butterfly proportion was determined to be 56.4% to 43.6% for Toromont and Enerflex respectively.
Toromont accrues compensation cost over the vesting period based on fair value. The Enerflex options are reflected in the financial statements of Enerflex Ltd.
A reconciliation of the outstanding options for the year ended
Weighted
Average
Number of Exercise
Options Price
----------------------------------------------------------------------------
Options outstanding, beginning of year 2,144,860 $ 26.04
Granted prior to spinoff - -
Exercised prior to spinoff (1) (62,770) 22.99
Forfeited prior to spinoff (52,060) 27.11
----------------------------------------------------------------------------
Options outstanding at spinoff 2,030,030 $ 26.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options outstanding post spinoff 2,030,030 $ 14.72
Granted subsequent to spinoff 601,975 17.10
Exercised subsequent to spinoff (2) (137,385) 12.80
Forfeited subsequent to spinoff (75,560) 15.12
----------------------------------------------------------------------------
Options outstanding, end of year 2,419,060 $ 15.41
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options exercisable, end of year 972,605 $ 14.43
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) weighted average share price at date of exercise was $31.45
(2) weighted average share price at date of exercise was $20.05
A reconciliation of the outstanding options for the year ended
Twelve months ended December 31, 2010
----------------------------------------------------------------------------
Weighted
Average
Number of Exercise
Options Price
----------------------------------------------------------------------------
Options outstanding, beginning of year 1,961,809 $ 22.91
Granted 610,050 29.71
Exercised (1) (406,909) 16.37
Forfeited (20,090) 21.25
----------------------------------------------------------------------------
Options outstanding, end of year 2,144,860 $ 26.04
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options exercisable, end of year 811,824 $ 24.51
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) weighted average share price at date of exercise was $29.64
The number of options outstanding at
The following table summarizes stock options outstanding and exercisable as at
Options Options
Outstanding Exercisable
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Life (years) Price Outstanding Price
----------------------------------------------------------------------------
$12.32 - $13.17 492,625 3.2 $ 12.41 255,685 $ 12.40
$13.86 - $17.10 1,926,435 4.4 16.18 716,920 15.16
----------------------------------------------------------------------------
Total 2,419,060 4.2 $ 15.41 972,605 $ 14.43
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The fair value of the stock options granted during 2011 was determined at the time of grant using the Black-Scholes option pricing model with the following assumptions: share price
The fair value of the stock options granted during 2010 was determined at the time of grant using the Black-Scholes option pricing model with the following assumptions: share price
Deferred Share Unit Plan
The Company offers a deferred share unit ("DSU") plan for executives and non-employee directors, whereby they may elect on an annual basis to receive all or a portion of their performance incentive bonus or fees, respectively, in deferred share units. In addition, the Board may grant discretionary DSUs.
DSUs outstanding as at
The following table summarizes information related to DSU activity:
Twelve months ended Twelve months ended
December 31, 2011 December 31, 2010
----------------------------------------------------------------------------
Number of Number of
DSUs Value DSUs Value
----------------------------------------------------------------------------
Outstanding, beginning
of year 87,969 $ 2,747 68,357 $ 1,872
Units taken in lieu of
bonuses and dividends 25,900 690 20,475 564
Redemptions - - (864) (25)
Adjustment to reflect
spinoff 58,888 - - -
DSUs granted 20,971 362 - -
Market value
adjustment 294 336
----------------------------------------------------------------------------
Outstanding, end of
year 193,728 $ 4,093 87,968 $ 2,747
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The liability for deferred share units is recorded in Accounts payable and accrued liabilities.
Employee Share Ownership Plan
The Company offers an Employee Share Ownership Plan whereby employees who meet the eligibility criteria can purchase shares by way of payroll deductions. There is a Company match of up to
23. EMPLOYEE FUTURE BENEFITS
The Company sponsors pension arrangements for substantially all of its employees, primarily through defined contribution plans in
Approximately 140 employees are included in defined benefit plans.
a)
b) Executive Plan - This is a non-contributory pension arrangement for certain senior executives that provides for a supplementary retirement payout in excess of amounts provided for under the registered plan. The most recent actuarial valuation of the plan was completed as at
c) Other plan assets and obligations - This provides for certain retirees and terminated vested employees of businesses previously acquired by the Company as well as for retired participants of the defined contribution plan that, in accordance with the plan provisions, have elected to receive a pension directly from the plan. The most recent actuarial valuation of the plan was completed as at
The changes in the fair value of assets and the pension obligations and the funded status of the defined benefit plans were as follows:
2011 2010
----------------------------------------------------------------------------
Accrued benefit obligations:
Balance, beginning of year $ 72,164 $ 65,649
Service cost 998 854
Interest cost 3,614 3,732
Net actuarial loss 7,666 6,657
Benefits paid (5,502) (5,135)
Voluntary contributions 433 407
----------------------------------------------------------------------------
Balance, end of year $ 79,373 $ 72,164
----------------------------------------------------------------------------
Plan assets:
Fair value, beginning of year $ 52,313 $ 48,400
Expected return on plan assets 3,640 3,397
Net actuarial gain (loss) (1,990) 1,470
Company contributions 4,306 3,771
Participant contributions 433 407
Benefits paid (5,502) (5,135)
Other adjustments 12 3
----------------------------------------------------------------------------
Fair value, end of year $ 53,212 $ 52,313
----------------------------------------------------------------------------
Accrued pension liability $ 26,161 $ 19,851
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The funded status of the Company's defined benefit pension plans at year-end are as follows:
2011
Accrued pension
Accrued benefit asset
obligation Plan assets (liability)
----------------------------------------------------------------------------
Powell Plan $ 49,228 $ 42,018 $ (7,210)
Executive Plan 21,791 2,230 (19,561)
Other plan assets and
obligations 8,354 8,964 610
----------------------------------------------------------------------------
Accrued pension asset
(liability) $ 79,373 $ 53,212 $ (26,161)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2010
Accrued pension
Accrued benefit asset
obligation Plan assets (liability)
----------------------------------------------------------------------------
Powell Plan $ 43,525 $ 40,364 $ (3,161)
Executive Plan 20,342 2,252 (18,090)
Other plan assets and
obligations 8,297 9,697 1,400
----------------------------------------------------------------------------
Accrued pension asset
(liability) $ 72,164 $ 52,313 $ (19,851)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Executive Plan is a supplemental pension plan and is solely the obligation of the Company. The Company is not obligated to fund this plan but is obligated to pay benefits under the terms of the plan as they come due. The Company has posted letters of credit in the amount of
The significant annual actuarial assumptions adopted in measuring the accrued benefit obligations were as follows:
2011 2010
----------------------------------------------------------------------------
Discount rate 4.25% 5.00%
Expected long-term rate of return on plan
assets 7.00% 7.00%
Rate of compensation increase 4.00% 4.00%
The allocations of plan assets were as follows:
2011 2010
----------------------------------------------------------------------------
Equity securities 39.5% 45.3%
Debt securities 44.2% 43.1%
Real estate 15.2% 11.5%
Cash and cash equivalents 1.1% 0.1%
No plan assets were directly invested in the Company's securities.
The net pension expense for the years ended
2011 2010
----------------------------------------------------------------------------
Defined Benefit Plans
Service cost $ 998 $ 854
Interest cost 3,614 3,732
Expected return on plan assets (3,640) (3,397)
----------------------------------------------------------------------------
972 1,189
Defined Contribution Plans 7,692 7,145
401(k) matched savings plan 104 89
----------------------------------------------------------------------------
Net pension expense $ 8,768 $ 8,423
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The total cash amount paid or payable for employee future benefits in 2011, including defined benefit and defined contribution plans, was
The Company expects to contribute
The cumulative actuarial losses recognized in OCI as at
24. CAPITAL MANAGEMENT
The Company defines capital as the aggregate of shareholders' equity and long-term debt less cash and cash equivalents.
The Company's capital management framework is designed to maintain a flexible capital structure that allows for optimization of the cost of capital at acceptable risk while balancing the interests of both equity and debt holders.
The Company generally targets a net debt to total capitalization ratio of 33%, although there is a degree of variability associated with the timing of cash flows. Also, if appropriate opportunities are identified, the Company is prepared to significantly increase this ratio depending upon the opportunity.
The Company's capital management criteria can be illustrated as follows:
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Shareholders' equity $ 403,861 $ 1,196,838 $ 834,984
Long-term debt 134,095 419,929 156,970
Less cash and cash equivalents (75,319) (174,089) (206,957)
----------------------------------------------------------------------------
Total capitalization $ 462,637 $ 1,442,678 $ 784,997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net debt as a % of total
capitalization 13% 17% n/m
Net debt to equity ratio 0.15:1 0.21:1 n/m
n/m - not meaningful, cash exceeds long-term debt at January 1, 2010 The Company is subject to minimum capital requirements relating to bank credit facilities and senior debentures. The Company has comfortably met these minimum requirements during the year.
There were no changes in the Company's approach to capital management during the year.
25. SUPPLEMENTAL CASH FLOW INFORMATION
2011 2010
----------------------------------------------------------------------------
Net change in non-cash working capital and
other
Accounts receivables $(623) $(41,873)
Inventories (77,521) (18,580)
Accounts payable, accrued liabilities and
provisions 35,490 75,953
Deferred revenues 4,031 15,011
Other (1,108) 17,926
----------------------------------------------------------------------------
$(39,731) $48,437
----------------------------------------------------------------------------
Cash paid during the year for:
Interest $8,788 $7,761
Income taxes $31,412 $29,780
Cash received during the year for:
Interest $3,214 $2,738
Income taxes $740 $11,396
26. COMMITMENTS
The Company has entered into leases on buildings, vehicles and office equipment. The vehicle and office equipment leases generally have an average life between 3 and 5 years with no renewal options. The building leases have a maximum lease term of 20 years including renewal options. Some of the contracts include lease escalation clause, which is usually based on consumer price index.
Future minimum lease payments under non-cancellable operating leases as at
2012$ 2,520 2013 2,037 2014 1,575 2015 2,586 2016 986 2017 and thereafter 1,925 ----------------------------------------------------------------------------$ 11,629 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
27. SEGMENTED INFORMATION
The Company has two reportable operating segments, each supported by the corporate office. The business segments are strategic business units that offer different products and services, and each is managed separately. The corporate office provides finance, treasury, legal, human resources and other administrative support to the business segments. Corporate overheads are allocated to the business segments based on revenue.
The Company previously reported two operating segments,
The accounting policies of the reportable operating segments are the same as those described in Note 1 - Significant Accounting Policies. Each reportable operating segment's performance is measured based on operating income. No reportable operating segment is reliant on any single external customer.
Segmented information excludes results from discontinued operations.
Equipment Group CIMCO
2011 2010 2011 2010
----------------------------------------------------------------------------
Equipment/packag
e sales $ 668,372 $ 561,218 $ 103,925 $ 106,890
Rentals 164,953 143,398 - -
Product support 350,977 306,634 81,662 77,438
Power generation 12,085 11,450 - -
----------------------------------------------------------------------------
Total revenues $ 1,196,387 $ 1,022,700 $ 185,587 $ 184,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Income $ 134,314 $ 108,166 $ 13,871 $ 11,034
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest expense
Interest and
investment
income
Income taxes
----------------------------------------------------------------------------
Net earnings
from continuing
operations
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated
2011 2010
------------------------------------------------
Equipment/packag
e sales $ 772,297 $ 668,108
Rentals 164,953 143,398
Product support 432,639 384,072
Power generation 12,085 11,450
------------------------------------------------
Total revenues $ 1,381,974 $ 1,207,028
------------------------------------------------
------------------------------------------------
Operating Income $ 148,185 $ 119,200
------------------------------------------------
------------------------------------------------
Interest expense 9,012 11,629
Interest and
investment
income (3,214) (2,803)
Income taxes 39,709 33,715
------------------------------------------------
Net earnings
from continuing
operations $ 102,678 $ 76,659
------------------------------------------------
------------------------------------------------
Selected balance sheet information:
Equipment
As at December 31, 2011 Group CIMCO Consolidated
----------------------------------------------------------------------------
Identifiable assets $ 780,926 $ 43,651 $ 824,577
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets of discontinued operations -
Corporate assets 88,754
----------------------------------------------------------------------------
Total assets $ 913,331
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Identifiable liabilities $ 294,994 $ 27,600 $ 323,594
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities of discontinued
operations -
Corporate liabilities 185,876
----------------------------------------------------------------------------
Total liabilities $ 509,470
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures $ 82,287 $ 590 $ 82,877
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depreciation $ 43,642 $ 591 $ 44,233
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Goodwill $ 13,000 $ 450 $ 13,450
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equipment
As at December 31, 2010 Group CIMCO Consolidated
----------------------------------------------------------------------------
Identifiable assets $ 662,021 $ 52,087 $ 714,108
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets of discontinued operations 1,364,402
Corporate assets 193,253
----------------------------------------------------------------------------
Total assets $ 2,271,763
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Identifiable liabilities $ 251,800 $ 39,418 $ 291,218
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities of discontinued
operations 324,324
Corporate liabilities 459,383
----------------------------------------------------------------------------
Total liabilities $ 1,074,925
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures $ 70,225 $ 918 $ 71,143
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depreciation $ 41,530 $ 645 $ 42,175
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Goodwill $ 13,000 $ 450 $ 13,450
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equipment
As at January 1, 2010 Group CIMCO Consolidated
----------------------------------------------------------------------------
Identifiable assets $ 599,358 $ 47,367 $ 646,725
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets of discontinued operations 484,149
Corporate assets 224,992
----------------------------------------------------------------------------
Total assets $ 1,355,867
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Identifiable liabilities $ 154,039 $ 32,880 $ 186,919
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities of discontinued
operations 133,054
Corporate liabilities 200,910
----------------------------------------------------------------------------
Total liabilities 520,883
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations are based primarily in
2011 2010
---------------------------------------------------------------
Revenues
Canada $ 1,337,230 $ 1,164,518
United States 39,638 37,270
International 5,106 5,240
---------------------------------------------------------------
$ 1,381,974 $ 1,207,028
---------------------------------------------------------------
---------------------------------------------------------------
December 31 December 31 January 1
2011 2010 2010
----------------------------------------------------------------------------
Capital Assets and Goodwill
Canada $ 299,669 $ 274,841 $ 253,042
United States 1,071 1,061 1,151
International - - -
----------------------------------------------------------------------------
$ 300,740 $ 275,902 $ 254,193
----------------------------------------------------------------------------
----------------------------------------------------------------------------
28. RELATED PARTY DISCLOSURES
Key management personnel and director compensation from continuing operations comprised:
2011 2010
----------------------------------------------------------------------------
Salaries $ 2,759 $ 2,841
Option based awards 798 1,054
Annual non-equity incentive based plan
compensation 2,865 2,075
Pension 205 103
All other compensation 141 143
----------------------------------------------------------------------------
$ 6,768 $ 6,216
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The remuneration of directors and key management is determined by the
29. ECONOMIC RELATIONSHIP
The Company, through its
Contacts:Toromont Industries Ltd. Robert M. Ogilvie Chairman and Chief Executive Officer (416) 667-5554Toromont Industries Ltd. Paul R. Jewer Executive Vice President and Chief Financial Officer (416) 667-5638
Source:
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