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Toromont Announces Results for the Third Quarter of 2010

TORONTO, ONTARIO -- (MARKET WIRE) -- 11/09/10 -- Toromont Industries Ltd. (TSX: TIH) today reported financial results for the three and nine-month periods ended September 30, 2010.




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                           Three months ended        Nine months ended

                              September 30              September 30

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

millions, except per                         %                           %

 share amounts              2010   2009 change        2010     2009 change

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Revenues                  $619.4 $429.9     44%   $1,622.5 $1,371.8     18%

Operating income          $ 45.9 $ 47.4     (3%)  $   93.7 $  136.5    (31%)

Net earnings              $ 26.2 $ 31.9    (18%)  $   64.8 $   89.2    (27%)

Earnings per share -

 basic                    $ 0.34 $ 0.50    (32%)  $   0.83 $   1.38    (40%)

Weighted average

 shares outstanding         76.9   64.7     19%       75.9     64.7     17%

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Note - In the first quarter of 2010, Toromont completed the acquisition of Enerflex Systems Income Fund and its results have been consolidated from January 20, 2010, the date of acquisition.

Revenues increased 44% in the third quarter and 18% in the first nine months of 2010 compared to 2009, with increases reported in both operating groups. Equipment Group revenues increased 21% in the quarter with growth in every revenue category reflecting generally improved business conditions and bookings increased 118%. Compression Group revenues increased 71% in the third quarter due to growth at CIMCO and revenues generated as a result of the acquisition of Enerflex Systems Income Fund (ESIF). On a comparable basis, Enerflex revenues declined in all geographic areas reflecting weak natural gas prices in North America and capital investment deferrals in International markets. Recent activity indicates that some International markets may be resuming their capital investment programs, as bookings were 311% higher in the Compression Group in the third quarter of 2010 versus a year ago. Consolidated order backlogs at September 30, 2010 were $809 million, approximately double those of 2009.

Operating income increased year-over-year in the Equipment Group reflecting the increased activity levels. While quarter-over-quarter results continued to show improvement, the Compression Group reported lower operating income relative to the prior year period as Enerflex continued the process of integrating and rationalizing the two legacy businesses while operating with reduced backlogs carried over from weak markets conditions in prior quarters. Net earnings in the third quarter and first nine months of 2010 were down 18% and 27% respectively versus the comparable periods of 2009. Earnings per share (basic) were $0.34 for the third quarter and $0.83 through September, down 32% and 40% from the respective comparable periods in 2009, reflecting lower earnings and a higher number of shares outstanding.

"Bookings were a record $582 million in the third quarter, up 68% from the second quarter of 2010," said Robert M. Ogilvie, Chairman and Chief Executive Officer of Toromont Industries Limited. "The Equipment Group reported growth in revenues and net income over the prior year, and continues to perform above the comparable period last year. Cimco remains on track to deliver a standout year, with strong revenue growth and record profitability. As management continues the process of rationalizing facilities, working capital and cost structures at Enerflex, we are beginning to see the results of their efforts in improving operating results."

Highlights for the Third Quarter:




--  Equipment Group revenues were up 21% in the quarter versus the similar

    period of 2009 on strong new and used machine sales and higher product

    support activities. Operating income increased 26% compared to last year

    on higher revenues.



--  Equipment Group bookings increased 118% in the third quarter and 73% in

    the year-to-date versus 2009. This included a $125 million order from

    Detour Gold Corporation. In addition to mining, improved activity levels

    have also been experienced in power systems and road building.



--  Compression Group revenues were up 71% in the quarter compared to the

    same period last year due to the acquisition. Operating income decreased

    35% from the third quarter of 2009 as lower shop utilization, higher

    combined overheads, rationalization costs and acquisition-related

    transaction costs impacted results.



--  Compression Group bookings for the quarter were three times those

    reported in the third quarter of 2009 and 71% higher than those reported

    in the second quarter of 2010. Backlogs ended the quarter at levels

    twice those reported both at this time last year and as at December 31,

    2009.



--  Subsequent to the end of the quarter, Enerflex announced orders from QGC

    totalling a record USD $193 million for natural gas compression and

    process equipment for the Queensland Curtis LNG project and domestic

    Australian natural gas production.



--  The operations of Syntech, an electrical, instrumentation and control

    business, were sold effective September 1, 2010. Syntech was a component

    of the ESIF acquisition however it was not considered to be core to the

    growth strategy of Enerflex and its assets were sold.



--  Estimated savings achieved from actions completed through the end of the

    quarter have risen to $30 million including reductions of 310 people.

    These savings will be increasingly reflected in future quarters as

    termination payments diminish and the carrying costs related to surplus

    facilities are eliminated with their disposal.



--  After reducing acquisition debt by $100 million in the quarter, the

    Company maintained a strong financial position and ended the quarter

    with $86 million of cash and cash equivalents. After completing the

    largest acquisition in the Company's history earlier this year, total

    debt net of cash to shareholders' equity was 0.33:1, comfortably within

    stated capital targets.



--  As previously announced, the Board of Directors approved a 7% increase

    in Toromont's regular quarterly dividend marking twenty-one consecutive

    years of increasing dividends. The quarterly dividend at the new rate of

    $0.16 per common share was paid on October 1, 2010 to shareholders of

    record on September 16, 2010.



--  Subsequent to the end of the quarter, the Company renegotiated its term

    loan and bank credit facilities achieving a one-year extension and

    reducing interest costs.



--  On November 8, 2010, the Company announced its intention to spin off

    Enerflex Ltd., its natural gas compression and processing equipment

    subsidiary, to existing shareholders by means of a tax-deferred

    divestiture for Canadian tax purposes. After the spinoff, Toromont's

    remaining operations will include the business of Toromont CAT,

    Battlefield - The CAT Rental Store and CIMCO. The proposed corporate

    reorganization would be implemented through a court approved Plan of

    Arrangement and is subject to regulatory and shareholder approval. If

    approved, the spinoff is expected to be completed in the spring or early

    summer of 2011.



"We should continue the pattern of steady improvement at Enerflex in the fourth quarter that we have experienced this year to date," continued Mr. Ogilvie. "Increased bookings are driving higher shop loading, and coupled with savings from integration, will eventually lead to better results. CIMCO and the Equipment Group are expected to continue to deliver good results as the underlying economy and specific markets we serve continue to strengthen. Much higher backlogs will provide momentum for both Groups so that we expect to enter 2011 with a significantly better outlook than we had entering 2010."

Quarterly Conference Call and Webcast

Interested parties are invited to join the quarterly conference call with investment analysts, in listen-only mode, on Tuesday, November 9, 2010 at 5:00 p.m. (ET). The call may be accessed by telephone at 1-866-223-7781 (toll free) or 416-340-8018 (Toronto area). A replay of the conference call will be available until Tuesday, November 23, 2010 by calling 1-800-408-3053 or 416-695-5800 and quoting passcode 3102015.

Both the live webcast and the replay of the quarterly conference call can be accessed at www.toromont.com.

About Toromont

Toromont Industries Ltd. operates through two business segments: The Equipment Group and the Compression Group. The Equipment Group includes one of the larger Caterpillar dealerships by revenue and geographic territory in addition to industry leading rental operations. The Compression Group is a global leader specializing in the design, engineering, fabrication, and installation of compression systems for natural gas, coal-bed methane, fuel gas and carbon dioxide in addition to process systems and CIMCO industrial and recreational refrigeration systems. Both Groups offer comprehensive product support capabilities. This press release and more information about Toromont Industries can be found on the Web at www.toromont.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") comments on the operations, performance and financial condition of Toromont Industries Ltd. ("Toromont" or the "Company") as at and for the three-month and nine-month periods ended September 30, 2010, compared to the preceding year. This MD&A should be read in conjunction with the attached unaudited interim consolidated financial statements and related notes for the three-month and nine-month periods ended September 30, 2010, the annual MD&A contained in the 2009 Annual Report and the audited annual consolidated financial statements for the year ended December 31, 2009.

The consolidated results of operations of Enerflex Systems Income Fund have been included in the Consolidated Statement of Earnings from January 20, 2010. Prior period amounts do not include financial results of Enerflex Systems Income Fund operations. Enerflex is reported as part of the Compression Group.

The operations of Syntech have been sold effective September 1, 2010. This MD&A has been prepared on a continuing operations basis, with Syntech reflect as a discontinued operation. Additional disclosure has been provided in Note 3 to the unaudited interim consolidated financial statements.

This MD&A contains certain forward-looking information. Please refer to the "Advisory" section of this MD&A for important information regarding forward-looking information.

The consolidated financial statements reported herein have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") and are reported in Canadian dollars. The information in this MD&A is current to November 8, 2010.

Additional information is contained in the Company's filings with Canadian securities regulators, including the Company's 2009 Annual Report and 2010 Annual Information Form. These filings are available on SEDAR at www.sedar.com and on the Company's website at www.toromont.com.

ACQUISITION OF ENERFLEX SYSTEMS INCOME FUND

On January 20, 2010, the Company completed its offer for the units of Enerflex Systems Income Fund ("ESIF"). ESIF is a supplier of products and services to the global oil and gas production industry, and has operations in Canada, Australia, the Netherlands, Germany, Pakistan, the United Arab Emirates, Indonesia and Malaysia.

This transaction brought together ESIF and Toromont Energy Systems, to create a stronger organization named Enerflex Ltd. ("Enerflex"), better able to serve customers and compete in both North American and international markets. The new Enerflex benefits from more comprehensive global market coverage and a broader suite of products as well as a more robust capital structure. Toromont also expects to realize attractive synergies and cost savings through the elimination of excess fabrication capacity, overlapping service facilities, and duplicate general and administration expenses.

The total consideration paid to acquire ESIF was approximately $700 million, including units acquired prior to the take-over bid, units acquired in the take-over bid and a second step transaction.

CONSOLIDATED RESULTS OF OPERATIONS




                                           Three months ended September 30

$ thousands, except per share

 amounts                                  2010           2009     % change

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Revenues                          $    619,440   $    429,922           44%

Cost of goods sold                     487,140        328,072           48%

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Gross profit                           132,300        101,850           30%

Selling and administrative

 expenses                               86,445         54,473           59%

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Operating income                        45,855         47,377           (3%)

Interest expense                         7,281          1,922          279%

Interest and investment income            (331)        (1,438)         (77%)

Gain on available-for-sale

 financial assets                            -              -            -

Equity earnings from affiliates           (140)             -          n/m

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Income before income taxes              39,045         46,893          (17%)

Income taxes                            12,847         14,970          (14%)

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Earnings from continuing

 operations                             26,198         31,923          (18%)

Losses on discontinued operations          (99)             -          n/m

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Net earnings                      $     26,099   $     31,923          (18%)

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Earnings per share (basic)        $       0.34   $       0.50          (32%)

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Key ratios:

Gross profit as a % of revenues           21.4%          23.7%

Selling and administrative

 expenses as a % of revenues              14.0%          12.7%

Operating income as a % of

 revenues                                  7.4%          11.0%

Income taxes as a % of income

 before income taxes                      32.9%          31.9%





                                            Nine months ended September 30

$ thousands, except per share

 amounts                                  2010           2009     % change

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Revenues                          $  1,622,537   $  1,371,754           18%

Cost of goods sold                   1,288,878      1,062,991           21%

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Gross profit                           333,659        308,763            8%

Selling and administrative

 expenses                              239,917        172,232           39%

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Operating income                        93,742        136,531          (31%)

Interest expense                        22,000          6,365          246%

Interest and investment income          (1,593)        (3,442)         (54%)

Gain on available-for-sale

 financial assets                      (18,627)             -          n/m

Equity earnings from affiliates           (330)             -          n/m

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Income before income taxes              92,292        133,608          (31%)

Income taxes                            27,498         44,442          (38%)

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Earnings from continuing

 operations                             64,794         89,166          (27%)

Losses on discontinued operations       (1,498)             -          n/m

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Net earnings                      $     63,296   $     89,166          (29%)

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Earnings per share (basic)        $       0.83   $       1.38          (40%)

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Key ratios:

Gross profit as a % of revenues           20.6%          22.5%

Selling and administrative

 expenses as a % of revenues              14.8%          12.6%

Operating income as a % of

 revenues                                  5.8%          10.0%

Income taxes as a % of income

 before income taxes                      29.8%          33.3%



Note - 2009 amounts do not include the financial results of ESIF operations,

which have been included in the consolidated financial statements from date

of acquisition, January 20, 2010.



Revenues increased by 44% in the third quarter and 18% through September 2010 compared to the same periods in the prior year on higher revenues in both operating groups. Equipment Group revenues were up 21% in the quarter and 13% year-to-date, driven by higher new and used equipment sales and product support activities. Compression Group revenues were up 71% in the third quarter and 23% through September as continued growth in Canadian recreational refrigeration, together with revenues from the acquired business more than offset declines in certain Canadian and international markets. Economic conditions generally and natural gas compression markets specifically, have shown improvement from the low point reported in the third quarter of 2009.

Significant volatility in the rate of exchange between the Canadian and U.S. dollar has also had a meaningful impact on revenue trends. The Canadian dollar averaged $0.96 in the third quarter and through September 2010, representing 6% and 13% increases from the averages seen in the comparable periods of 2009. Impacts of these trends include:




--  The Canadian/U.S. dollar exchange rate impacts reported revenues on the

    translation of the financial statements of foreign subsidiaries. Simple

    translation of the U.S. dollar reduced reported revenues by $4 million

    in the third quarter of 2010 and $43 million in the year-to-date versus

    2009. Net income was also reduced by $0.3 million and $2.5 million,

    respectively due to translation.

--  Nearly all of the equipment and parts sold in the Equipment Group are

    sourced in U.S. dollars. The Canadian dollar sales prices generally

    reflect changes in the rate of exchange. The impact on equipment

    revenues is not readily estimable as it is largely dependent on when

    customers order the equipment versus when it was sold. Bookings in a

    given period would more closely follow period-over-period changes in

    exchange rates. Sales of parts come from inventories maintained to

    service customer requirements. As a result, constant parts replenishment

    means that there is a lagging impact of changes in exchange rates.

--  In the Compression Group, revenues from foreign subsidiaries are

    impacted by the translation of results, noted above. Sales in Canada are

    largely impacted by the same factors as those impacting the Equipment

    Group.



Gross profit margins in the third quarter and through September 2010 were lower than reported in the comparable periods of 2009. Gross profit margins in the Equipment Group in 2009 benefited from the rapid devaluation of the Canadian dollar, which was not repeated in 2010. Within the Compression Group, lower shop utilization contributed to reduced gross profit margins in the current year.

Selling and administrative expenses increased by $32.0 million in the third quarter of 2010 and $67.7 million year-to-date versus the comparable periods of 2009. Most of the increase was due to the recurring costs assumed with the acquisition. Selling and administrative expenses in 2010 also included costs related to the acquisition and integration of ESIF of $0.9 million in the quarter and $8.5 million year-to-date. Amortization of identifiable intangible assets recorded on acquisition added $2.9 million and $8.1 million in expense in the quarter and year-to-date respectively. Selling and administrative expenses as a percentage of revenues were 14.0% in the third quarter of 2010 and 14.8% year-to-date versus 12.7% and 12.6% in the comparable periods of 2009.

Operating income decreased 3% in the third quarter and 31% through September 2010 compared to the similar period in 2009 as higher expense levels and lower gross margins more than offset higher revenues.

Interest expense was $5.4 million higher in the quarter and $15.6 million higher through September 2010 compared to the similar periods of 2009. The increase in expense resulted primarily from interest on a $450 million term loan facility sourced to finance the acquisition of ESIF. Interest on this facility totalled $5.4 million in the quarter and $14.6 million through September.

Earnings in the first quarter of 2010 included a gain of $18.6 million ($16.3 million after tax and $0.22 per share) related to units of ESIF purchased by Toromont during 2009. These assets were previously designated as available for sale and unrealized gains were included in Other Comprehensive Income ("OCI"). The amount of the gain represents the difference in value between actual cash cost of the units and the fair market value of the units on the acquisition date of January 20, 2010. Under Canadian accounting standards, the gain in OCI is required to be reclassified out of OCI and into net earnings on acquisition of the related business.

The effective income tax rate through the first nine months of 2010 is lower than that in the comparable periods of 2009 reflecting the favourable capital gains tax rate used for the unrealized gain on units reclassified out of OCI and into income on acquisition. Excluding this, the effective income tax rate is higher in 2010 reflecting a change in distribution of taxable income and loss by tax jurisdiction.

Effective September 1, 2010, certain assets of Syntech, acquired as part of the ESIF acquisition and included in the Compression Group, were sold at book value. The financial statements for 2010 have been restated to reflect Syntech as a discontinued operation.

Net earnings were down 18% in the third quarter and 29% through September 2010 compared to the similar periods of 2009, largely reflecting lower gross margins and higher expenses post acquisition. Basic earnings per share ("EPS") were $0.34 for the quarter and $0.83 year-to-date, down 32% and 40% from the respective comparable periods of 2009, both reflecting lower earnings and a higher number of shares outstanding.

Comprehensive income for the third quarter was $24.7 million, comprised of net earnings of $26.1 million and other comprehensive loss of $1.4 million. The other comprehensive loss arose on the reclassification to earnings of unrealized gains on cash flow hedges.

Comprehensive income through September 2010 was $44.9 million, comprised of net earnings of $63.3 million and other comprehensive loss of $18.4 million. The other comprehensive loss arose from the reclassification to earnings of unrealized gains on available-for-sale financial assets in the period of $15.6 million and a loss on translation of self-sustaining foreign operations of $3.0 million.

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. Previously, corporate overheads were allocated to the business segments based on operating income. The change in allocation method has been applied prospectively from January 1, 2010. Prior periods have not been restated as the impact is insignificant. Interest expense and interest and investment income are not allocated.

Results of Operations in the Equipment Group




                Three months ended September   Nine months ended September

                             30                             30

                                           %                              %

$ thousands         2010       2009   change       2010       2009   change

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Equipment sales

and rentals

 New            $120,668   $ 94,959       27%  $286,288   $237,275       21%

 Used             43,455     29,766       46%   105,712     85,781       23%

 Rental           43,134     40,032        8%    99,845     99,471        -

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Total equipment

 sales and

 rentals         207,257    164,757       26%   491,845    422,527       16%

Power

 generation        2,565      2,501        3%     7,692      7,210        7%

Product support   73,766     66,371       11%   225,224    212,600        6%

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Total revenues  $283,588   $233,629       21%  $724,761   $642,337       13%

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Operating

 income         $ 30,984   $ 24,608       26%  $ 72,214   $ 65,883       10%

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Key ratios:

Product support

 revenues as a

 % of total

 revenues           26.0%      28.4%               31.1%      33.1%

Group total

 revenues as a

 % of

 consolidated

 revenues           45.8%      54.3%               44.7%      46.8%

Operating

 income as a %

 of revenues        10.9%      10.5%               10.0%      10.3%



Results in the third quarter of 2010 continued to strengthen after an extended period of weaker market conditions dampened results through 2009 and into the first quarter of 2010. Stronger results in the third quarter continue the positive trend first experienced in the second quarter of 2010.

New equipment sales were 27% higher in the third quarter of 2010 and 21% higher through September compared to the similar periods of 2009 on higher unit sales. Many market segments, notably heavy construction and industrial, were higher.

Used equipment sales were 46% higher in the quarter and 23% higher in the nine month period ended September 30.

Rental revenues were 8% higher in the quarter bringing year-to-date revenues to a level comparable to 2009 after a slower start to 2010. Rental rates have been consistently lower this year due to very competitive market conditions; however equipment utilization has improved through the second and third quarters of 2010 leading to the increased rental revenues.

Power generation revenues from Toromont-owned plants increased 3% in the quarter and 7% through September 30, 2010 compared to the similar periods of the prior year, reflecting increased operating hours and higher average prices for electricity.

Product support revenues were 11% higher in the third quarter and 6% higher through the first nine months of 2010 compared to the similar periods of 2009. On a constant dollar basis (adjusted for all pricing adjustments including those for foreign exchange), product support revenues were up 14% and 11% respectively.

Operating income was up 26% in the third quarter of 2010 compared to the similar period of 2009 reflecting the 21% increase in revenues. Gross margins and expense ratios were marginally improved from the third quarter of 2009.

Operating income was 10% higher through September 2010 compared to the prior year on the 13% increase in revenues. Gross margins declined 1.9 percentage points from the prior year. Gross margins during the first half of 2009 benefitted from lagging costs associated with foreign currency hedges during a period of rapid devaluation of the Canadian dollar. Selling and administrative expenses increased 2% compared to the prior year, compared to a 13% increase in revenues, reflecting continued focus on expense control.




Bookings ($ millions)                  2010            2009        % change

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Q1                          $           135 $            78              74%

Q2                          $           138 $           107              28%

Q3                          $           228 $           105             118%

September ytd               $           501 $           290              73%





                              September 30,    December 31,   September 30,

                                       2010            2009            2009

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Backlog ($ millions)        $           219 $           110 $           111



Equipment bookings and backlog benefited from a significant order of $125 million received from Detour Gold Corporation for a fleet of mining trucks and support equipment, to be delivered in 2011 and 2012. Bookings on a year-to-date basis are up 73%, reflecting increased activity in mining, power systems and construction.

Results of Operations in the Compression Group




              Three months ended September    Nine months ended September

                           30                              30

                                         %                               %

$ thousands       2010       2009   change        2010       2009   change

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Package sales

 and rentals

Natural gas

 compression  $126,746   $ 97,400       30%   $352,869   $408,570      (14%)

Process and

 fuel gas

 compression    67,406     26,385      155%    151,981    106,670       42%

Refrigeration

 systems        30,276     24,360       24%     80,913     65,301       24%

Compression

 rentals         7,948      3,416      133%     24,002     11,916      101%

Other           12,318          -      n/m      35,328          -      n/m

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Total package

 sales and

 rentals       244,694    151,561       61%    645,093    592,457        9%

Product

 support        91,158     44,732      104%    252,683    136,960       84%

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Total

 revenues     $335,852   $196,293       71%   $897,776   $729,417       23%

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Operating

 income       $ 14,871   $ 22,769      (35%)  $ 21,528   $ 70,648      (70%)

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Key ratios:

Product

 support

 revenues as

 a % of total

 revenues         27.1%      22.8%                28.1%      18.8%

Group total

 revenues as

 a % of

 consolidated

 revenues         54.2%      45.7%                55.3%      53.2%

Operating

 income as a

 % of

 revenues          4.4%      11.6%                 2.4%       9.7%



Note - 2009 amounts do not include the financial results of ESIF operations,

which have been included in the consolidated financial statements from date

of acquisition, January 20, 2010.



Toromont completed its acquisition of ESIF on January 20, 2010. The results for the Compression Group for 2010 include the former ESIF business units from the date of acquisition.

The integration of the legacy business into the new Enerflex is well advanced. The leadership team is in place, with management from both predecessor companies filling out the senior positions. The Canadian product support business has been fully integrated and all of the Canadian resident sales, engineering, fabrication and administrative personnel have been merged. As expected, operations in the U.S. and international locations have been largely unaffected.

Actions taken through to the date of this MD&A have reduced 310 employee positions and eliminated 320,000 sq. ft. of excess capacity. Cost savings achieved through these actions is estimated at $30 million on an annualized basis. Continued focus is being placed on facilities requirements, surplus real estate and excess inventory and these efforts are expected to reduce capital employed and lead to additional cost savings.

Due to the advanced stage of integration of the Canadian operations achieved to date, it is not possible to clearly associate trends to either of the two predecessor organizations. Generally, weak fundamentals in the global natural gas compression and related markets have translated to reduced revenues in 2010 on a pro forma basis. On a reported basis, the lower revenues in the current period have been more than offset in total, by the increased revenues derived from the acquisition.

Natural gas package revenues were up 30% in the quarter, benefiting from increased revenues from the acquired operations. Revenues generated in the US were relatively strong in the quarter, while international markets declined year-over-year.

Natural gas package revenues were down 14% through September 2010 compared to 2009. The stronger Canadian dollar resulted in a decrease of $26 million on translation of revenues derived at foreign operations. Sales of natural gas compression packages from US operations were down 33% on a US dollar basis due to significantly lower market activity in the first half of 2010. Sales from Canadian operations were significantly higher on revenues added by the acquisition, more than offsetting declines in the legacy businesses.

Process and fuel gas compression systems revenues were up 155% and 42% in the quarter and through September 2010 respectively.

Refrigeration systems revenues were up 24% in the third quarter and on a year-to-date basis compared to the similar period of 2009. Recreational refrigeration in Canada has seen good growth due to the Federal Recreational Infrastructure in Canada program, while the markets for industrial refrigeration in Canada and refrigeration generally in the US have remained challenged.

Rental revenues increased in the quarter and through September 2010 due to the addition of the rental operation of the acquired ESIF business.

Other revenues include revenues from businesses acquired in the acquisition of ESIF, including combined heat and power and project engineering.

Product support revenues increased 104% in the third quarter of 2010 and 84% through September 2010 compared to 2009 as the acquisition of ESIF resulting in significantly expanded operations. Refrigeration product support revenues were relatively unchanged from the prior year for the quarter and year-to-date.

The Compression Group reported operating income of $14.9 million in the third quarter of 2010 compared to $22.8 million in the similar period of 2009. Through September, operating income was $21.5 million compared to $70.6 million in the similar period of 2009. The decrease in both periods reflects the higher fixed overheads and excess capacity in fabrication facilities which continued to be under absorbed on lower activity levels on a combined pro forma basis. Transaction related costs and restructuring activities resulted in $0.9 million expense in the third quarter of 2010, $8.5 million through September. Amortization related to identifiable intangible assets recorded on acquisition totalled $2.9 million in the quarter and $8.1 million year-to-date.




Bookings ($ millions)                  2010            2009        % change

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Q1                          $           188 $            81             132%

Q2 (i)                      $           208 $           111              87%

Q3                          $           354 $            86             311%

September ytd               $           750 $           278             170%



                              September 30,    December 31,   September 30,

                                       2010            2009            2009

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Backlog ($ millions)        $           590 $           301 $           298



(i)  The 2010 number has been increased from the previous report to properly

reflect Q2 bookings

Note - 2009 amounts do not include the financial results of ESIF operations,

which have been included in the consolidated financial statements from date

of acquisition, January 20, 2010.



Compression bookings were up significantly year-over-year, reflecting the larger integrated Enerflex business and success in certain key markets. Recreational refrigeration bookings were up 36% on a year-to-date basis with strong order activity in Canadian recreational markets significantly due to the Recreational Infrastructure Canada program. Industrial refrigeration bookings were down 32% through the same time frame on weaker economic conditions. Backlogs at September 30, 2010 were up from those reported at September 30 and December 31, 2009. Approximately $140 million in backlog was assumed on acquisition of ESIF.

Subsequent to the end of the quarter, Enerflex announced orders from QGC PTY Ltd. totalling a record USD $193 million for natural gas compression and process equipment for use in the Queensland Curtis LNG project and domestic Australian natural gas compression. These orders are not included in the bookings or backlog figures reported above.

CONSOLIDATED FINANCIAL CONDITION

At September 30, 2010, the ratio of total debt net of cash to equity was 0.33:1, within the Company's targeted range. Total assets were $2.3 billion at September 30, 2010, compared with $1.4 billion at December 31, 2009. Total assets purchased in the acquisition of ESIF were approximately $1 billion.

Working Capital

The Company's investment in non-cash working capital was $431.4 million at September 30, 2010. The major components, along with the changes from December 31, 2009, and September 30, 2009 are identified in the following table. The September 30, 2010 balances reflect the acquisition of working capital of ESIF.




            September   December                  September

                   30         31      Change             30      Change

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

$ thousands      2010       2009          $    %       2009          $    %

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



Accounts

 receivable $ 465,422  $ 244,759  $ 220,663   90% $ 259,076  $ 206,346   80%

Inventories   480,939    373,110    107,829   29%   428,201     52,738   12%

Income

 taxes, net     3,735     16,967    (13,232) -78%     8,227     (4,492) -55%

Future

 income tax

 assets        38,612     34,326      4,286   12%    39,577       (965)  -2%

Derivative

 financial

 instruments      490       (874)     1,364  n/m     (2,364)     2,854  n/m

Other

 current

 assets        17,569      6,037     11,532  n/m     12,033      5,536   46%

Accounts

 payable and

 accrued

 liabilities (346,827)  (228,436)  (118,391)  52%  (205,530)  (141,297)  69%

Dividends

 payable      (12,305)    (9,728)    (2,577)  26%    (9,709)    (2,596)  27%

Deferred

 revenue     (209,097)   (89,810)  (119,287) 133%   (99,640)  (109,457) 110%

Current

 portion of

 long-term

 debt          (6,889)   (14,044)     7,155  -51%   (14,276)     7,387  -52%

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

Total non-

 cash

 working

 capital    $ 431,649  $ 332,307  $  99,342   30% $ 415,595  $  16,054    4%

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

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



Note - 2009 amounts do not include the financial results of ESIF operations,

which have been included in the consolidated financial statements from date

of acquisition, January 20, 2010.

n/m equals not meaningful



Accounts receivable as at September 30, 2010 reflect higher trailing activity levels. Revenues in both operating groups were higher in the third quarter of 2010 than in the third quarter of 2009 and the fourth quarter of 2009. Higher revenues will generally result in higher accounts receivable balances. Collection efforts continue to be a focus. Equipment Group days sales outstanding are marginally improved from this time last year.

There are a number of significant factors which need to be considered in comparing inventory balances at these three points in time. One factor is seasonality which leads to a build of inventories early in a calendar year in preparation for anticipated deliveries through the latter part of the year. The other factor is the ESIF acquisition completed in early 2010, which included inventories of approximately $136 million.

Income taxes receivable reflects refunds to be received for prior taxation years' corporate income tax as well as amounts owing for current corporate income taxes less installments made to date. The amount receivable in 2010 is lower than in 2009 as higher tax refunds have been received.

Future income tax assets reflect differences between income tax and accounting.

Derivative financial instruments represent the fair value of foreign exchange contracts and embedded derivatives. Fluctuations in the value of the Canadian dollar have led to a cumulative net gain of $0.5 million as at September 30, 2010. This is not expected to affect net income, as the unrealized gain will offset future losses on the related hedged items.

Accounts payable and accrued liabilities at September 30, 2010 were higher than at both September 30 and December 31, 2009 on higher activity levels, including purchases of inventories. Extended terms of payment have been offered by certain suppliers.

Dividends payable were higher at September 30, 2010 compared to both September 30 and December 31, 2009 reflecting the higher number of shares outstanding after the acquisition. Approximately 11.9 million shares were issued as partial consideration in the acquisition of ESIF, representing an increase in the number of shares outstanding from December 31, 2009 of 18%. The quarterly dividend rate was increased by the Board of Directors during the third quarter of 2010. The new quarterly rate of $0.16 per share was affected with the October 1, 2010 dividend payment, compared to $0.15 per share dividend for each quarter through 2009.

Deferred revenues represent billings to customers in excess of revenue recognized. In the Compression Group, deferred revenues arise on progress billings in advance of revenue recognition. Deferred revenues increased as a result of the acquisition. In the Equipment Group, deferred revenues arise on sales of equipment with residual value guarantees, extended warranty and other customer support agreements as well as on progress billings on long-term construction contracts.

The current portion of long-term debt reflects scheduled principal repayments due through to June 30, 2011. Subsequent to quarter-end, the Company refinanced its term loan facility and credit facility. Please refer to further discussion under the title "Sources of Liquidity" in this MD&A and to Note 22 to the unaudited interim consolidated financial statements.

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

In August 2010, the Company renewed its normal course issuer bid (NCIB) with the Toronto Stock Exchange (TSX). Pursuant to the NCIB, the Company may purchase for cancellation up to 5,597,914 of its common shares during the 12-month period commencing August 31, 2010 and ending August 30, 2011. The total shares that may be purchased under this issuer bid represents 10% of Toromont's issued and outstanding common shares in the public float. The actual number of shares purchased and the timing of any such purchases will be determined by Toromont. All shares purchased under the NCIB will be cancelled. Shareholders may contact our Corporate Secretary to obtain, without charge, a copy of our notice to the TSX regarding the NCIB.

No shares were repurchased through September 2010. The Company purchased and cancelled 43,400 shares for $0.9 million (average cost of $19.77 per share) in the first quarter of 2009. The shares were purchased for an amount higher than their weighted average book value per share ($1.97 per share) resulting in a reduction of retained earnings of $0.8 million.

Outstanding Share Data

As at the date of this MD&A, the Company had 76,910,476 common shares and 2,384,010 share options outstanding.

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 credit facilities.

Toromont arranged a term loan facility in January 2010 in connection with the acquisition of ESIF. Borrowings of $450 million were drawn down under this facility, with principal repayments of $16.875 million due quarterly and a lump sum final repayment due in July 2011 (eighteen month term). In addition to the required quarterly repayment of $16.875 million, the Company made a voluntary repayment, without penalty, of $83.125 million during the third quarter of 2010.

The Company had available $225 million in bank credit in Canada and US$20 million in bank credit in the United States, provided through committed credit facilities. There were no amounts drawn on either of the facilities as at any of the above reporting dates. The US$20 million facility matures in July 2011. At September 30, 2010, standby letters of credit issued under these facilities utilized $65 million of the credit lines (December 31, 2009 - $33 million; September 30, 2009 - $38 million).

Effective November 5, 2010, the Company completed a refinancing of its Canadian committed credit facility. The new committed credit facility, with a maturity date of June 30, 2012, provides $600 million in available financing and includes covenants, restrictions and events of default that are substantially the same as the corresponding provisions in Toromont's previous facilities. In conjunction with the new financing, the $333.125 million outstanding under the term loan facility was repaid in full and cancelled using proceeds of the new financing and cash. Debt incurred under the new facility is unsecured and ranks parri passu with debt outstanding under Toromont's existing debentures. Outstanding loans under the facility bear interest at a rate equal to the Canadian prime rate plus a specified margin ranging from 50 to 175 basis points. Toromont intends to utilize this facility primarily through the issuance of bankers' acceptances with acceptance fees ranging from 150 to 275 basis points. The applicable margin or acceptance fee will, in each case, be determined based on Toromont's leverage ratio.

At September 30, 2010, $333.1 million or 70% of the Company's total debt portfolio was subject to movements in floating interest rates, with maturity in 2011. The remaining $144.1 million or 30% of long-term debt carried interest at fixed rates. This debt matures at various dates through to 2019 with a current weighted average interest rate of 5.2%.

The Company expects that cash from operations, cash and cash equivalents on hand and currently available credit facilities will be more than sufficient to fund requirements for debt repayments, investments in working capital and capital assets over the next twelve months.

Principal Components of Cash Flow

Cash from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table:




                             Three months ended           Nine months ended

                                   September 30                September 30

$ thousands                  2010          2009          2010          2009

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



Cash, beginning of

 period               $   159,067   $    62,150   $   206,957   $   137,274

Cash, provided by

 (used in):

  Operations               35,897        43,992        93,720       126,492

  Change in non-cash

   working capital

   and other               15,436        44,262        25,403       (57,427)

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

 Operating activities      51,333        88,254       119,123        69,065

 Investing activities      (4,690)      (20,740)     (356,268)      (56,940)

 Financing activities    (118,439)      (22,840)      117,107       (42,575)

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

(Decrease) increase

 in cash in the

 period                   (71,796)       44,674      (120,038)      (30,450)

Effect of foreign

 exchange on cash

 balances                  (1,128)       (1,457)         (776)       (1,457)

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

Cash, end of period   $    86,143   $   105,367   $    86,143   $   105,367

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

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



Note - 2009 amounts do not include the financial results of ESIF operations,

which have been included in the consolidated financial statements from date

of acquisition, January 20, 2010.



Cash Flows from Operating Activities

Operating activities provided $51.3 million in the third quarter of 2010 compared to $88.3 million in the comparable period of 2009. Net earnings adjusted for items not requiring cash were down 18% on lower operating margins including expenses related to the acquisition of ESIF. Non-cash working capital and other provided $15.4 million in the quarter compared to $44.3 million in the similar period of 2009. The components and changes in working capital are discussed in more detail in this MD&A under the heading "Consolidated Financial Condition."

Through September 2010, operating activities provided $119.1 million compared to $69.1 million in the comparable period of 2009. While net earnings adjusted for items not requiring cash was down 26%, working capital management activities have been stronger.

Cash Flows from Investing Activities

Investing activities in the third quarter of 2010 used $4.7 million and comprised the following items:




--  Proceeds on sale of discontinued operations, Syntech, of $3.5 million

    cash and $3.5 million note receivable;

--  Gross rental fleet additions of $5.9 million, directed largely at the

    Equipment Group; and

--  Additions to property, plant and equipment of $6.7 million.



Investing activities through September 2010 used $356.3 million and comprised the following items:




--  Cash used as partial payment for the ESIF acquisition in the first

    quarter of 2010 of $292.5 million, net of cash acquired;

--  Net rental fleet additions of $7.8 million, directly largely at the

    Equipment Group;

--  Additions to property, plant and equipment of $59.4 million; and

--  Proceeds on sale of discontinued operations, Syntech of $3.5 million

    cash and $3.5 million note receivable.



Investments in property, plant and equipment through September 2010 were related largely to on-going construction of a gas processing facility in Oman. This facility and related 'build-own-operate-maintain' customer agreement, was acquired as part of the acquisition of ESIF. The facility, with a net book value at September 30, 2010 of $49 million, is expected to be operational within the fourth quarter of 2010.

Investing activities in 2009 included cash used for purchase of units of ESIF.

Cash Flows from Financing Activities

Financing activities used $118.4 million in the third quarter of 2010. Repayments of long-term debt totalled $107.1 million and included an additional principal re-payment on the term loan credit facility in advance of its refinancing. Dividends used $11.5 million in the third quarter.

Through September 2010, financing activities provided $117.1 million on a net increase in long-term debt of $147.4 million. Long-term debt increased $443 million borrowings (net of financing costs) under a new term loan facility entered into to acquire ESIF. Through September 2010, repayments of $295.7 million of long-term debt have been made, including repayment of $164.9 million in ESIF's senior secured notes payable and bank facilities, including penalties, which were required to be repaid subsequent to completing the acquisition. Dividends used $32.8 million in the period.

Dividends paid to common shareholders were up 19% in the third quarter and through September 2010, reflecting the higher number of shares outstanding as a result of the acquisition.

There were no shares purchased under the normal course issuer bid (NCIB) during 2010. Through September 2009, 43,400 shares were purchased and cancelled under the Company's NCIB at a cost of $858.

OUTLOOK

Toromont entered 2010 with reduced backlogs as many of its end markets continued to deal with the adverse economic conditions experienced through 2009.

The global markets for compression and processing equipment have been slow to recover from the recession and liquidity crisis. In North America, low natural gas prices continue to discourage investment.

Enerflex is continuing to reduce costs. We expect that revenue growth generated by recent bookings should eventually produce operating profits more in line with our expectations and the results traditionally achieved by the predecessor companies.

Canadian recreational refrigeration markets have held up well due to governmental stimulus spending, moderated by challenging conditions in industrial refrigeration. CIMCO is on target to deliver a standout year.

The Equipment Group has seen a steady increase in business and we expect to see this continue as long as the economic recovery continues.

With the recent strength in bookings and backlogs, our outlook for the remainder of this year and next year is improving.

On November 8, 2010, Toromont announced its intention to spin off Enerflex Ltd., its natural gas compression and processing equipment supply subsidiary, to existing shareholders by means of a tax-deferred divestiture for Canadian tax purposes. We believe this transaction will provide compelling long term value for our shareholders. Both companies will be leaders in their respective markets and this spinoff will position each for more robust growth opportunities and enhanced profitability.

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 and new short- and long-term financing facilities. The Company's credit ratings provide reasonable access to capital markets to facilitate future debt issuance




             Remainder

Payments due        of

 by Period        2010     2011     2012    2013    2014 Thereafter    Total

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



Long-term

 Debt

 - principal $       - $  6,904 $334,420 $ 1,372 $ 1,471 $  133,039 $477,206

 - interest      6,077   17,859   12,283   6,895   6,796      7,635   57,545

Operating

 Leases          5,802   14,351   10,959   8,393   6,917     14,727   61,149

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

             $  11,879 $ 39,114 $357,662 $16,660 $15,184 $  155,401 $595,900

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

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



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 2009 annual audited consolidated financial statements.




$ thousands, except per

 share amounts                   Q4 2009     Q1 2010     Q2 2010     Q3 2010

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



Revenues

  Equipment Group            $   239,009 $   176,635 $   264,538 $   283,588

  Compression Group              213,829     249,838     312,086     335,852

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

 Total revenues              $   452,838 $   426,473 $   576,624 $   619,440

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

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



Net earnings - continuing

 operations                  $    31,350 $    16,227 $    22,369 $    26,198

Net earnings                 $    31,350 $    15,365 $    21,832 $    26,099



Per share information:



Earnings per share -

 continuing operations

Basic                        $      0.48 $      0.22 $      0.29 $      0.34

Diluted                      $      0.48 $      0.22 $      0.29 $      0.34



Earnings per share

Basic                        $      0.48 $      0.21 $      0.28 $      0.34

Diluted                      $      0.48 $      0.21 $      0.28 $      0.34



Dividends per share          $      0.15 $      0.15 $      0.15 $      0.16

Weighted average common

 shares outstanding - Basic

 (in thousands)                   64,771      73,866      76,881      76,896



Note - 2009 amounts do not include the financial results of

Enerflex operations, which have been included in the consolidated

financial statements from date of acquisition, January 20, 2010.



$ thousands, except per

 share amounts                   Q4 2008     Q1 2009     Q2 2009     Q3 2009

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



Revenues

  Equipment Group            $   303,904 $   191,693 $   217,015 $   233,629

  Compression Group              305,800     265,966     267,158     196,293

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

 Total revenues              $   609,704 $   457,659 $   484,173 $   429,922

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

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



Net earnings                 $    49,110 $    23,718 $    33,525 $    31,923



Per share information:



Basic earnings per share     $      0.76 $      0.37 $      0.51 $      0.50

Diluted earnings per share   $      0.76 $      0.37 $      0.51 $      0.50

Dividends per share          $      0.14 $      0.15 $      0.15 $      0.15

Weighted average common

 shares outstanding - Basic

 (in thousands)                   64,865      64,678      64,698      64,718



Note - 2009 amounts do not include the financial results of Enerflex

operations, which have been included in the consolidated financial

statements from date of acquisition, January 20, 2010.



Interim period revenues and earnings historically reflect some seasonality.

The Equipment Group has historically had a distinct seasonal trend in activity levels. Lower revenues are recorded during the first quarter due to winter shutdowns in the construction industry. The fourth quarter has typically been the strongest quarter due in part to the timing of customers' capital investment decisions, delivery of equipment from suppliers for customer-specific orders and conversions of equipment on rent with a purchase option. This pattern has been changing in recent years given changes in economic conditions, product availability and other market specific factors, such that the seasonality impact in the second, third and fourth quarter has been relatively neutral.

The Compression Group also has historically had a distinct seasonal trend in activity levels due to well-site access and drilling patterns, which reflect weather conditions in Canada. Generally, higher revenues are reported in the fourth quarter of each year. The Company expects that the geographic and product mix diversification will mitigate this 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.

RISKS AND RISK MANAGEMENT

In the normal course of business, Toromont is exposed to risks that may potentially impact its financial results in either or both 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.

There have been no material changes to the operating and financial risk assessment and related risk management strategies as described in the Company's 2009 Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting policies used in the preparation of the accompanying unaudited interim consolidated financial statements are consistent with those used in the Company's 2009 audited annual consolidated financial statements and described in Note 1 therein, except for the changes in accounting policies described in the following section.

The preparation of financial statements in conformity with Canadian GAAP 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. There have been no material changes to the critical accounting estimates as described in the Company's 2009 Annual Report.

CHANGES IN ACCOUNTING POLICIES

Business Combinations

Effective January 1, 2010, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements, and Section 1602 Non-controlling Interests. Section 1582 specifies a number of changes, including an expanded definition of a business, a requirement to measure all business acquisitions at fair value, a requirement to measure non-controlling interests at fair value, and a requirement to recognize acquisition-related costs as expenses. Section 1601 establishes the standards for preparing consolidated financial statements. Section 1602 specifies that non-controlling interests be treated as a separate component of equity, not as a liability or other item outside of equity. These new standards are harmonized with International Financial Reporting Standards (IFRS). The new standards will become effective in 2011, however early adoption is permitted. The Company has early adopted Section 1582, Section 1601 and Section 1602 effective from January 1, 2010.

The Company had reported deferred transaction costs of $9,035 as at December 31, 2009. These costs were charged to opening retained earnings, net of tax of $1,129, as a result of the change in accounting policy.

FUTURE ACCOUNTING STANDARDS

Financial Instruments Recognition and Measurement

In June 2009, the CICA amended Handbook Section 3855 - Financial Instruments - Recognition and Measurement ("Section 3855") to clarify the application of the effective interest method after a debt instrument has been impaired and when an embedded prepayment option is separated from its host debt instrument at initial recognition for accounting purposes. The amendments are applicable for the Company's interim and annual financial statements for its fiscal year beginning January 1, 2011. Earlier adoption is permitted. At March 31, 2010, the Company had no debt instruments to which the Section 3855 amendments would be applicable.

Multiple Deliverable Revenue Arrangements

On December 24, 2009, the CICA issued EIC Abstract 175 - Multiple deliverable revenue arrangements ("EIC-175"). EIC-175 addresses the accounting by a vendor for arrangements under which it will perform multiple revenue generating activities and how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. EIC-175 is applicable to revenue arrangements with multiple deliverables entered into or materially modified on or after January 1, 2011. Earlier adoption is permitted. The Company does not anticipate early adopting EIC-175. The Company plans to adopt revenue recognition principles in accordance with IFRS effective January 1, 2011 and does not anticipate that this adoption will have a material impact on the Company's consolidated financial statements.

INTERNATIONAL FINANCIAL REPORTING STANDARDS

International Financial Reporting Standards (IFRS) will be required in Canada for publicly accountable enterprises for fiscal years beginning on or after January 1, 2011. The first financial statements to be presented on an IFRS basis will be for the quarter ended March 31, 2011. At that time, comparative data will be presented on an IFRS basis, including an opening balance sheet as at January 1, 2010.

Project Management

The Company's conversion project commenced in 2008 and consists of four phases:




1.  Diagnostic - Prepare an in-depth identification and analysis of

    differences between Canadian GAAP and IFRS.

2.  Design and planning - Prepare an implementation plan including

    identifying process, system and financial reporting controls changes

    required for the conversion to IFRS.

3.  Solution development - Address identified GAAP differences to confirm

    nature and impact of differences and to select accounting policies and

    transition choices.

4.  Implementation - Develop process for dual reporting in 2010 and full

    convergence in 2011, including consideration of information systems,

    internal controls over financial reporting and disclosure controls and

    procedures.



Investments in training and resources have been made throughout the transition period to facilitate a timely conversion.

The Company's IFRS transition project is on schedule. We are in the solution development and implementation phase and have established issue-specific work teams to focus on quantification of impact, generating options and making recommendations in the identified risk areas. Quarterly updates are provided to the Audit Committee. The following table indicates the key elements of the Company's plan for transitioning to IFRS and the progress made against each activity.




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

Key Activity                            Status

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

Accounting Policies and Procedures

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

Identify differences between IFRS       Completed

and the Company's existing policies

and procedures

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

Analyze and determine which IFRS 1      Transitional exemptions analyzed and

exemptions will be taken on             decisions preliminarily approved by

transition to IFRSs                     senior management and presented to

                                        the Audit Committee in August 2010.

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

Analyze and select ongoing policies     Initial accounting policy selections

where alternatives are permitted        preliminarily approved by senior

                                        management and presented to the

                                        Audit Committee in August 2010.

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

Revise accounting policy and            Revisions to accounting manuals are

procedures manuals                      being drafted as work on each area

                                        of IFRS progresses.

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

Financial Statement Preparation

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

Preparation of Opening Balance Sheet    Significant progress made during the

on transition to IFRS as at January     third quarter of 2010.  Audit

1, 2010 including required              procedures have commenced on the

reconciliations                         opening balance sheet.  Management

                                        anticipates that quantitative

                                        opening balance sheet impacts will

                                        be finalized in the fourth quarter

                                        of 2010.

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

Prepare 2010 comparative interim        Preparation of 2010 comparative

financial statements and note           financials is well underway.

disclosures in compliance with IFRSs    External auditor review procedures

                                        have commenced on 2010 comparative

                                        financials.  Management anticipates

                                        that the 2010 quarterly comparative

                                        preparation and review process will

                                        be finalized in early 2011.

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

Training and Communication

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

Design and implement IFRS training      Key employees involved with

to affected personnel and  to our       implementation have completed in-

external stakeholders                   depth training and attend update

                                        courses each year.  High level

                                        'overview' training provided to

                                        financial personnel in all business

                                        units.

                                        Communication to external

                                        stakeholders has been ongoing

                                        through our MD&A disclosures.

                                        Further refinement of expected

                                        impacts of the IFRSs conversion will

                                        occur in each period up to adoption

                                        of IFRSs

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

Systems

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

Identify changes required to IT         Required changes to IT systems have

systems for dual reporting and          been identified and implemented.

additional data gathering, and          Currently being tested.

implement solutions                     Additional data required for IFRS

                                        has been implemented within the

                                        company's financial information

                                        system and will continue to be

                                        tested and refined through to early

                                        2011

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

Control Environment

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

For all changes to policies and         Relevant controls are being assessed

procedures identified, assess           as each work stream progresses.

effectiveness of internal controls

over financial reporting and

disclosure controls and procedures

and implement any necessary changes

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

Other Business Impacts

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

Identify other potential impacts of     Identification of impacts of

conversion to IFRS                      transition to IFRS is on-going.

                                        Adoption of IFRSs is not expected to

                                        have any material impact on the

                                        company's contracts

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



Transitional Impacts

IFRS 1 - First-Time Adoption of Intenational 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. Most adjustments required on transition to IFRS will be made retrospectively against opening retained earnings as of the date of the first comparative balance sheet presented which will be January 1, 2010.

The following are the key transitional provisions which are expected to be adopted on January 1, 2010 and which will have an impact on the Company's financial position on transition. It is not an exhaustive list.




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

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 will

                                        elect, on transition to IFRS, to

                                        apply the elective exemption such

                                        that transactions entered into prior

                                        to the transition date will not be

                                        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.

                                        Expected transition impact: None

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

Property, Plant and Equipment           Choices: The Company may elect to

                                        report items of property, plant and

                                        equipment in its opening balance

                                        sheet 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 will

                                        not elect to report any items of

                                        property, plant and equipment in its

                                        opening balance sheet on the

                                        transition date, at a deemed cost

                                        instead of the actual cost that

                                        would be determined under IFRSs. The

                                        Company will instead report the

                                        items at cost

                                        Expected transition impact: None

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

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 will

                                        elect 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.

                                        Expected transition impact: Not

                                        significant

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

Employee 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 will

                                        elect to recognize all cumulative

                                        actuarial gains and losses at the

                                        date of transition.

                                        Expected transition impact: Increase

                                        total liabilities, increase future

                                        income tax assets and decrease

                                        retained earnings

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

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 will

                                        elect to reclassify all cumulative

                                        translation gains and losses at the

                                        date of transition to retained

                                        earnings.

                                        Expected transition impact:

                                        Reclassification of all cumulative

                                        translation gains and losses in OCI

                                        results in a charge to retained

                                        earnings of $15,954.

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

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 will

                                        elect to capitalize borrowing costs

                                        on all qualifying assets commencing

                                        on January 1, 2010.

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



Accounting Policy Changes

In addition to the one time transitional impacts described above, 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 Area           Key Difference from GAAP  Status

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

Employee Benefits         Under Canadian GAAP, the  The Company has elected

                          Company applies the       to record actuarial

                          'corridor' method of      gains and losses arising

                          accounting, whereby       from its defined benefit

                          actuarial gains and       pension plans in OCI.

                          losses are deferred and   This will likely reduce

                          amortized over time.      the Company's income

                          Under IFRS, a Company     statement expense

                          may elect to recognize    associated with the

                          actuarial gains and       defined benefit pension

                          losses:                   plans as actuarial

                          - In full, as they        losses are no longer

                          arise, in the income      amortized, and increase

                          statement                 variability in OCI.

                          - Over a longer period,

                          using the  'corridor'

                          method, or

                          - In full as they arise,

                          outside profit or loss,

                          in OCI

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

Stock Based Compensation  The valuation of stock    The impact of these

                          options under IFRS        changes is not

                          requires individual       anticipated to be

                          'tranche based'           significant.

                          valuations for those

                          option plans with graded

                          vesting, whilst Canadian

                          GAAP allows a single

                          valuation for all

                          tranches.

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

Impairment of Assets      IFRS requires impairment  The Company has

                          testing to be done at     identified more cash

                          the smallest              generating units than

                          identifiable group of     the reporting units

                          assets that generate      currently used to assess

                          cash inflows that are     for impairment under

                          largely independent of    Canadian GAAP.

                          cash inflows from other   Whether the Company will

                          groups of assets ('cash   be materially impacted

                          generating unit'),        by this change will

                          rather than the           depend upon the facts at

                          reporting unit level      the time of each

                          considered by Canadian    impairment test.

                          GAAP.                     Impairment calculations

                          IFRS requires the         have been prepared and

                          assessment of asset       are currently being

                          impairment to be based    reviewed.

                          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.

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

Borrowing Costs           Under IFRSs, borrowing    The impact of this

                          costs will be             policy change will be

                          capitalized to assets     dependent on the

                          which take a substantial  magnitude of capital

                          time to develop or        spend on qualifying

                          construct using a         assets in the future.

                          capitalization rate       Generally, this will

                          based on all of the       reduce finance costs and

                          company's outstanding     increase property, plant

                          third-party debt.         and equipment balances

                                                    and associated

                                                    depreciation for those

                                                    assets.

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

Financial Statement       IFRS requires             Financial statement

presentation and          significantly more        formats have been

Disclosure                disclosure than GAAP for  drafted for both interim

                          certain standards.        and annual reporting

                                                    purposes.  Formats and

                                                    disclosures will be

                                                    revised through to early

                                                    2011.

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



The International Accounting Standards Board (IASB) work plan anticipates the completion of several projects in calendar years 2010 and 2011. The projects on financial instruments, post-employment benefits, financial statement presentation, revenue recognition and leases are most relevant to the Company's IFRS transition plans. Management will be monitoring any changes to these standards closely.

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 designed the Company's disclosure controls and procedures ("DC&P") in order to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would have been known to them and by others within those entities.

Additionally, they have designed internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reporting in accordance with GAAP.

The control framework used in the design of both DC&P and ICFR is the internal control integrated framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The design and maintenance of adequate disclosure controls and procedures and internal control over financial reporting include controls, policies and procedures of ESIF effective from the date of acquisition, January 20, 2010.

There have been no significant changes in the design of the Company's internal controls over financial reporting during the three-month period ended September 30, 2010 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 designed the Company's disclosure controls and procedures and internal controls over financial reporting, they expect that these controls and procedures may not prevent all errors and fraud. A control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met.

NON-GAAP 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 Canadian GAAP. 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 Canadian GAAP.

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.

Working Capital and Non-Cash Working Capital

Working capital is defined as current assets less current liabilities. Non-cash working capital is defined as working capital less cash and equivalents.

Bookings and Backlog

Bookings represent new orders for the supply of equipment which management believe are firm. Bookings do not include rental, operating or service contracts. Bookings also include contract changes and cancellations received during the period. Within the Equipment Group, backlog arises on items that are not in inventory, items with long delivery times and as a result of specified customer delivery requests. This occurs primarily in specialized areas such as mining and marine power systems. Within the Compression Group, backlog arises due to the time required for engineering, sourcing of direct materials and fabrication, as well as specific customer requests for delivery. Backlog represents the unearned portion of revenue on orders that are in process and have not been completed at the specified date. Closing backlog is not a guarantee of future revenues and provides no information about the timing on which future revenue may be recorded.

There is no direct comparable measure for bookings or backlog in GAAP.

ADVISORY

Statements and information herein that are not historical facts are "forward-looking information". Words such as "plans", "intends", "outlook", "expects", "anticipates", "estimates", "believes", "likely", "should", "could", "will", "may" and similar expressions often identify forward-looking information and statements. Forward looking statements and information may include, without limitation, statements regarding the operations, business, financial condition, liquidity, expected financial results, performance, obligations, market conditions, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Toromont and its business units.

Forward-looking information and statements contained herein are based on, among other things, Toromont management's current assumptions, expectations, estimates, objectives, plans and intentions regarding projected revenues and expenses, the economic, industry and regulatory environments in which Toromont operates or which could affect its activities, Toromont's ability to attract and retain customers as well as Toromont's operating costs and raw materials supply. By their nature, forward-looking information and statements, and the factors upon which they are based, are subject to risks and uncertainties which may be beyond Toromont's ability to control or predict. Actual results or events could differ materially from those expressed or implied by forward-looking information and statements. Factors that could cause actual results or events to differ from current expectations include, among others: business cycle risk, including general economic conditions in the countries in which Toromont operates; risk of commodity price changes including precious and base metals and natural gas; risk of changes in foreign exchange rates, including the Cdn$/US$ exchange rate; risk of the termination of distribution or original equipment manufacturer agreements; risk of equipment product acceptance and availability of supply; risk of increased competition; credit risk related to financial instruments; risk of additional costs associated with warranties and maintenance contracts; interest rate risk on financing arrangements; risk of availability of financing; risk of environmental regulation; risks related to the integration of ESIF's operations with those of Toromont; and risks related to the realization of identified synergies. Additional information on these factors and other risks and uncertainties that could cause actual results or events to differ from current expectations can be found in the "Risks and Risk Management" and "Outlook" section of this MD&A and the "Risks and Risk Management" and "Outlook" sections of Toromont's MD&A for the year ended December 31, 2009. 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 forward-looking information and statements.

Forward-looking information and statements contained herein about prospective results of operations, financial position or cash flows are presented for the purpose of assisting Toromont's shareholders in understanding managements' current view regarding those future outcomes and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on the forward-looking information and statements contained herein, which are given as of the date of this document, and not to use such information and statements for anything other than their intended purpose. Toromont disclaims any obligation or intention to update or revise any forward-looking information or statement, whether the result of new information, future events or otherwise, except as required by applicable law.




TOROMONT INDUSTRIES LTD.



CONSOLIDATED BALANCE SHEETS

(unaudited)



                             September 30      December 31     September 30

($ thousands)                        2010             2009             2009

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



Assets

Current assets

 Cash and cash equivalents $       86,143   $      206,957   $      105,367

 Accounts receivable              465,422          244,759          259,076

 Inventories (note 5)             480,939          373,110          428,201

 Income taxes receivable            5,316           16,967            9,596

 Future income taxes               38,612           34,326           39,577

 Derivative financial

  instruments                       1,623                -                -

 Other current assets              17,569            6,037           12,033

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

Total current assets            1,095,624          882,156          853,850



Property, plant and

 equipment                        355,174          186,491          187,215

Rental equipment                  233,178          183,175          191,160

Future income taxes                34,727                -                -

Other assets (note 6)              13,308           78,045           50,768

Intangible assets (note 7)         36,038                -                -

Goodwill                          496,106           34,800           34,800

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

Total assets               $    2,264,155   $    1,364,667   $    1,317,793

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

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



Liabilities

Current liabilities

 Accounts payable and

  accrued liabilities

  (note 8)                 $      359,132   $      238,164   $      215,239

 Deferred revenues                209,097           89,810           99,640

 Current portion of long-

  term debt (note 9)                6,889           14,044           14,276

 Income taxes payable               1,581                -            1,369

 Derivative financial

  instruments                       1,133              874            2,364

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

Total current liabilities         577,832          342,892          332,888



Deferred revenues                  10,992           13,386           15,105

Derivative financial

 instruments                          186                -                -

Long-term debt (note 9)           466,724          144,051          144,051

Accrued pension liability             783            2,351            2,420

Future income taxes                18,923            7,924            4,681



Shareholders' equity

Share capital (note 10)           463,603          132,261          130,192

Contributed surplus (note

 11)                               11,428           10,012           10,057

Retained earnings                 732,436          712,418          690,796

Accumulated other

 comprehensive loss (note

 12)                              (19,056)            (628)         (12,397)

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

Shareholders' equity

 before non-controlling

 interest                       1,188,411          854,063          818,648

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

Non-controlling interest              304                -                -

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

Shareholders' equity            1,188,715          854,063          818,648

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

Total liabilities and

 shareholders' equity      $    2,264,155   $    1,364,667   $    1,317,793

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

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



See accompanying notes





TOROMONT INDUSTRIES LTD.



CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited)



                             Three months ended           Nine months ended

                                   September 30                September 30

$ thousands, except

 per share amounts           2010          2009          2010          2009

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



Revenues              $   619,440   $   429,922   $ 1,622,537   $ 1,371,754

Cost of goods sold        487,140       328,072     1,288,878     1,062,991

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

Gross profit              132,300       101,850       333,659       308,763

Selling and

 administrative

 expenses                  86,445        54,473       239,917       172,232

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

Operating income           45,855        47,377        93,742       136,531

Interest expense            7,281         1,922        22,000         6,365

Interest and

 investment income           (331)       (1,438)       (1,593)       (3,442)

Gain on available for

 sale financial

 assets on business

 acquisition                    -             -       (18,627)            -

Equity earnings from

 affiliates                  (140)            -          (330)            -

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

Income before income

 taxes                     39,045        46,893        92,292       133,608

Income taxes               12,847        14,970        27,498        44,442

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

Earnings from

 continuing

 operations                26,198        31,923        64,794        89,166

Losses from

 discontinued

 operations (note 3)          (99)            -        (1,498)            -

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

Net Earnings          $    26,099   $    31,923   $    63,296   $    89,166

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

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



Basic earnings per

 share

  Continuing

   operations         $      0.34   $      0.50   $      0.85   $      1.38

  Discontinued

   operations                   -             -         (0.02)            -

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

                      $      0.34   $      0.50   $      0.83   $      1.38

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

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



Diluted earnings per

 share

  Continuing

   operations         $      0.34   $      0.50   $      0.85   $      1.38

  Discontinued

   operations                   -             -         (0.02)            -

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

                      $      0.34   $      0.50   $      0.83   $      1.38

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

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



Weighted average

 number of shares

 outstanding

 Basic                 76,896,069    64,718,162    75,895,887    64,698,354

 Diluted               77,096,497    64,931,554    76,151,736    64,844,261



See accompanying notes





.








TOROMONT INDUSTRIES LTD.



CONSOLIDATED STATEMENTS OF

 RETAINED EARNINGS

(Unaudited)



                                   Three months ended    Nine months ended

                                      September 30          September 30

($ thousands)                         2010       2009       2010       2009

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



Retained earnings, beginning of

 period                          $ 718,643  $ 668,582  $ 712,418  $ 631,522

Change in accounting policy

 (note 2)                                -          -     (7,906)         -

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

                                 $ 718,643  $ 668,582  $ 704,512  $ 631,522

Net earnings                        26,099     31,923     63,296     89,166

Dividends                          (12,306)    (9,709)   (35,372)   (29,120)

Shares purchased for

 cancellation (note 10)                  -          -          -       (772)

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

Retained earnings, end of period $ 732,436  $ 690,796  $ 732,436  $ 690,796

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



See accompanying notes







TOROMONT INDUSTRIES LTD.



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



                                      Three months ended September 30, 2010



                                     Before                          Net of

                                     Income          Income          Income

$ thousands                           Taxes           Taxes           Taxes

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



Net earnings                                                  $      26,099

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



Other comprehensive income

 (loss):



Change in fair value of

 derivatives designated as

 cash flow hedges             $      (1,625)  $         573   $      (1,052)



(Gains) losses on derivatives

 designated as cash flow

 hedges transferred to net

 income in the current period           (51)             20             (31)



Unrealized loss on

 translation of financial

 statements of self-

 sustaining foreign

 operations                            (344)              -            (344)



Reclassification to net

 income of gain on available-

 for-sale financial assets as

 a result of business

 acquisition                              -               -               -

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



Other comprehensive income

 (loss)                       $      (2,020)  $         593   $      (1,427)

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



Comprehensive income                                          $      24,672

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

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







                                       Nine months ended September 30, 2010



                                     Before                          Net of

                                     Income          Income          Income

$ thousands                           Taxes           Taxes           Taxes

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



Net earnings                                                  $      63,296

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



Other comprehensive income

 (loss):



Change in fair value of

 derivatives designated as

 cash flow hedges             $      (1,166)  $         420   $        (746)



(Gains) losses on derivatives

 designated as cash flow

 hedges transferred to net

 income in the current period         1,476            (515)            961



Unrealized loss on

 translation of financial

 statements of self-

 sustaining foreign

 operations                          (3,028)              -          (3,028)



Reclassification to net

 income of gain on available-

 for-sale financial assets as

 a result of business

 acquisition                        (18,705)          3,090         (15,615)

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



Other comprehensive income

 (loss)                       $     (21,423)  $       2,995   $     (18,428)

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



Comprehensive income                                          $      44,868

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

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





                                      Three months ended September 30, 2009



                                     Before                          Net of

                                     Income          Income          Income

$ thousands                           Taxes           Taxes           Taxes

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



Net earnings                                                  $      31,923

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



Other comprehensive (loss)

 income:



Change in fair value of

 derivatives designated as

 cash flow hedges             $      (2,925)  $       1,023   $      (1,902)



Losses (gains) on derivatives

 designated as cash flow

 hedges transferred to net

 income in the current period         1,466            (513)            953



Unrealized loss on

 translation of financial

 statements of self-

 sustaining foreign

 operations                         (13,193)              -         (13,193)



Unrealized (loss) gain on

 financial assets designated

 as available-for-sale                 (336)             56            (280)

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



Other comprehensive (loss)

 income                       $     (14,988)  $         566   $     (14,422)

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



Comprehensive income                                          $      17,501

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

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







                                       Nine months ended September 30, 2009



                                     Before                          Net of

                                     Income          Income          Income

$ thousands                           Taxes           Taxes           Taxes

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



Net earnings                                                  $      89,166

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



Other comprehensive (loss)

 income:



Change in fair value of

 derivatives designated as

 cash flow hedges             $      (5,771)  $       2,019   $      (3,752)



Losses (gains) on derivatives

 designated as cash flow

 hedges transferred to net

 income in the current period          (530)            186            (344)



Unrealized loss on

 translation of financial

 statements of self-

 sustaining foreign

 operations                         (20,252)              -         (20,252)



Unrealized (loss) gain on

 financial assets designated

 as available-for-sale                1,260            (208)          1,052

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



Other comprehensive (loss)

 income                       $     (25,293)  $       1,997   $     (23,296)

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



Comprehensive income                                          $      65,870

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

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





See accompanying notes





TOROMONT INDUSTRIES LTD.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



                             Three months ended           Nine months ended

                                   September 30                September 30

($ thousands)                2010          2009          2010          2009

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



Operating activities

 Net earnings         $    26,099   $    31,923   $    63,296   $    89,166

 Items not requiring

  cash and cash

  equivalents

  Depreciation and

   amortization            23,919        15,789        65,029        43,169

  Equity earnings

   from affiliates           (140)            -          (330)            -

  Stock-based

   compensation               771           566         2,260         1,767

  Accrued pension

   liability               (1,376)           59        (1,568)           98

  Future income taxes     (11,240)       (2,570)       (8,373)       (2,386)

  Gain on sale of

   rental equipment,

   property, plant

   and equipment           (2,136)       (1,775)       (7,967)       (5,322)

  Gain on available-

   for-sale financial

   instruments on

   business

   acquisition                  -             -       (18,627)            -

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

                           35,897        43,992        93,720       126,492

 Net change in non-

  cash working

  capital and other

  (note 18)                15,436        44,262        25,403       (57,427)

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

Cash provided by

 operating activities      51,333        88,254       119,123        69,065

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



Investing activities

 Additions to:

  Rental equipment         (5,932)       (8,240)      (36,319)      (30,768)

  Property, plant and

   equipment               (6,717)       (2,811)      (59,400)      (15,692)

  Investments                   -       (19,265)            -       (35,489)

 Proceeds on disposal

  of:

  Rental equipment          6,461         6,104        28,537        20,988

  Property, plant and

   equipment                2,736         4,398         3,246         5,003

 Disposal of

  discontinued

  operations (note 3)       3,500             -         3,500             -

 Increase in other

  assets                   (4,738)         (926)       (3,299)         (982)

 Business

  acquisition, net of

  cash (note 4)                 -             -      (292,533)            -

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

Cash used in

 investing activities      (4,690)      (20,740)     (356,268)      (56,940)

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



Financing activities

 Decrease in term

  credit facility

  debt                          -        (5,985)            -             -

 Issue of long-term

  debt                          -             -       450,000             -

 Repayment of other

  long-term debt         (107,144)       (7,416)     (295,699)      (15,148)

 Financing costs                -             -        (6,951)            -

 Dividends                (11,535)       (9,708)      (32,794)      (28,456)

 Shares purchased for

  cancellation                  -             -             -          (858)

 Cash received on

  exercise of stock

  options                     240           269         2,551         1,887

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

Cash (used in)

 provided by

 financing activities    (118,439)      (22,840)      117,107       (42,575)

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

 Effect of exchange

  rate changes on

  cash denominated in

  foreign currency         (1,128)       (1,457)         (776)       (1,457)

 (Decrease) increase

  in cash and cash

  equivalents             (71,796)       44,674      (120,038)      (30,450)

 Cash and cash

  equivalents at

  beginning of period     159,067        62,150       206,957       137,274

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

 Cash and cash

  equivalents at end

  of period           $    86,143   $   105,367   $    86,143   $   105,367

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

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



 Cash and cash

  equivalents at end

  of period

  Cash                                            $    86,143   $    33,373

  Cash equivalents                                          -        71,994

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

                                                  $    86,143   $   105,367

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

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

Supplemental cash

 flow information

 (note 18)



See accompanying notes





TOROMONT INDUSTRIES LTD.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(unaudited)

($ thousands except where otherwise indicated)





1.  Significant accounting policies



The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) for the preparation of interim financial statements. The accounting policies used in the preparation of these unaudited interim consolidated financial statements are consistent with those used in the Company's 2009 audited annual consolidated financial statements, except for the change in accounting policies described in Note 2. These unaudited interim consolidated financial statements do not include all disclosures required by GAAP for annual financial statements, and accordingly should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2009.




2.  Changes in accounting policies



Current Accounting Changes

Business Combinations

Effective January 1, 2010, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements, and Section 1602 Non-controlling Interests. Section 1582 specifies a number of changes, including an expanded definition of a business, a requirement to measure all business acquisitions at fair value, a requirement to measure non-controlling interests at fair value, and a requirement to recognize acquisition-related costs as expenses. Section 1601 establishes the standards for preparing consolidated financial statements. Section 1602 specifies that non-controlling interests be treated as a separate component of equity, not as a liability or other item outside of equity. These new standards are harmonized with International Financial Reporting Standards (IFRS). The new standards will become effective in 2011, however early adoption is permitted. The Company has early adopted these standards effective from January 1, 2010.

The Company had deferred transaction costs of $9,035 as at December 31, 2009. These costs were charged to opening retained earnings in 2010, net of tax of $1,129, as a result of the change in accounting policy.

Future Accounting Changes

Financial Instruments - Recognition and Measurement

In June 2009, the CICA amended Handbook Section 3855 Financial Instruments - Recognition and Measurement to clarify the application of the effective interest method after a debt instrument has been impaired and when an embedded prepayment option is separated from its host debt instrument at initial recognition for accounting purposes. The amendments are applicable for the Company's interim and annual financial statements for its fiscal year beginning January 1, 2011. Earlier adoption is permitted. At September 30, 2010, the Company had no debt instruments to which the Section 3855 amendments would be applicable.

Multiple Deliverable Revenue Arrangements

On December 24, 2009, the CICA issued EIC Abstract 175 - Multiple Deliverable Revenue Arrangements. EIC-175 addresses the accounting by a vendor for arrangements under which it will perform multiple revenue generating activities and how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. EIC-175 is applicable to revenue arrangements with multiple deliverables entered into or materially modified on or after January 1, 2011. Earlier adoption is permitted. The Company does not anticipate early adopting EIC-175. The Company plans to adopt revenue recognition principles in accordance with IFRS effective January 1, 2011 and does not anticipate that this adoption will have a material impact on the Company's consolidated financial statements.

International Financial Reporting Standards

Canadian GAAP will be converged with IFRS effective January 1, 2011. The transition from Canadian GAAP to IFRS will be applicable for the Company for the first quarter of 2011 when the Company will prepare both the current and comparative financial information using IFRS.




3.  Discontinued operations



Effective September 1, 2010, the Company sold certain assets and the operations of Syntech Enerflex, an electrical, instrumentation and controls business. Syntech was a component of the January 20, 2010 acquisition of Enerflex Systems Income Fund; however it was considered not to be core to the future growth of the Company.

Total consideration received was $7.0 million comprised of $3.5 million in cash and $3.5 million in a note receivable due in twelve equal monthly installments, plus interest, commencing January 2011. Net assets disposed of, including transactions costs, also equaled $7.0 million, comprised of $6.0 million of non-cash working capital and $1.0 million of capital assets.

The results of discontinued operations included the following:




                                Three months ended         Nine months ended

                                      September 30              September 30

                                2010          2009        2010          2009

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



Revenues                 $    10,058   $         - $    41,887   $         -

Loss before income taxes        (133)            -      (2,003)            -





4.  Business acquisition



On January 20, 2010, the Company completed its offer for the units of Enerflex Systems Income Fund ("ESIF"). ESIF is a supplier of products and services to the global oil and gas production industry, and has operations in Canada, Australia, the Netherlands, the United States, Germany, Pakistan, the United Arab Emirates, Indonesia and Malaysia. ESIF has been integrated with the Company's existing natural gas and process compression business, Toromont Energy Systems, and is continuing under the name Enerflex Ltd. ("Enerflex"). This acquisition creates a stronger organization, better able to serve customers and compete globally. The financial results of Enerflex are included in the Compression Group.

Toromont purchased ESIF pursuant to a take-over bid (the "Offer") to acquire all of the outstanding trust units (the "Trust Units") of ESIF and all of the issued and outstanding class B limited partnership units (the "Exchangeable LP Units" and, together with the Trust Units, the "Units") of Enerflex Holdings Limited Partnership ("Enerflex LP"),

Pursuant to the Offer, Toromont acquired 39,583,074 Trust Units and 2,640,692 Exchangeable LP Units on January 20, 2010. Toromont acquired 1,907,500 Trust Units in the subsequent Tax Efficient Subsequent Acquisition on February 26, 2010. In both the Offer and the Tax Efficient Subsequent Acquisition (collectively referred to as the "Acquisition"), Toromont offered the holders of Units the opportunity to elect to receive as consideration either $14.25 in cash or 0.5382 of a common share of Toromont plus $0.05 in cash per Unit, in each case subject to pro ration.

In total, Toromont paid approximately $315.5 million in cash and issued approximately 11.9 million Toromont common shares for the Units acquired in the Acquisition. The cost to Toromont to purchase all of the Units of ESIF is noted below. For accounting purposes, the cost of Toromont's common shares issued in the Acquisition was calculated based on the average share price traded on the TSX on the respective dates of acquisition.

Prior to the Acquisition, Toromont owned 3,902,100 Trust Units which were purchased with a cash cost of $37.8 million ($9.69 per unit). Prior to the date of acquisition, Toromont designated its investment in ESIF as available-for-sale and as a result the units were measured at fair value with the changes in fair value recorded in Other Comprehensive Income ("OCI"). On acquisition, the cumulative gain on this investment was reclassified out of OCI and into the statement of earnings. The fair value of this investment was included in the cost of purchase outlined below. The fair value of these units at January 20, 2010 was $56.4 million.




Purchase price

Units owned by Toromont prior to Offer                      $         56,424

Cash consideration                                                   315,539

Issuance of Toromont common shares                                   328,105

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

Total                                                       $        700,068

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

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



The Acquisition is accounted for as a business combination with Toromont as the acquirer of ESIF. The Acquisition has been accounted for using the purchase method of accounting. Results from ESIF have been consolidated from the acquisition date, January 20, 2010. Given the advanced stage of integration of the operations it is impracticable to determine the amount of revenue and net income of the acquired company since acquisition date.

Cash used in the investment is determined as follows:




Cash consideration                                         $        315,539

less cash acquired                                                  (23,006)

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

                                                           $        292,533

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

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



The purchase cost was allocated to the underlying assets acquired and liabilities assumed based upon their fair value at the date of acquisition. The Company determined the fair values based on discounted cash flows, market information, independent valuations and management's estimates.

The preliminary allocation of the purchase price is as follows:




Purchase price allocation

 Cash                                                      $         23,006

 Non-cash working capital                                           125,742

 Property, plant and equipment                                      135,400

 Rental equipment                                                    67,587

 Other long term assets                                              24,315

 Intangible assets with a definite life

  Customer relationships                                             38,400

  Other                                                               5,700

 Long term liabilities                                             (181,388)

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

Net identifable assets                                              238,762

Residual purchase price allocated to goodwill                       461,306

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

                                                           $        700,068

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

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



Non-cash working capital includes accounts receivable of $109 million, representing gross contractual amounts receivable of $115 million less management's best estimate of the contractual cash flows not expected to be collected of $6 million.

Factors that contributed to a purchase price that resulted in the recognition of goodwill include: the existing ESIF business; the acquired workforce; time-to-market benefits of acquiring an established manufacturing and service organization in key international markets such as Australia, Europe and the Middle East; and the combined strategic value to the Company's growth plan. The amount assigned to goodwill is not expected to be deductible for tax purposes.

Changes to the purchase price allocation during the quarter resulted in an increase in goodwill of $8,722 . The adjustments to the preliminary purchase price allocation during the three and nine-month periods ended September 30, 2010 are noted below.




                                            Three-months  Nine-months ended

                                         ended September      September 30,

                                                30, 2010               2010

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



Non-cash working capital                $         (6,382)  $         (7,364)

Property, plant and equipment                          -              1,900

Rental equipment                                       -             (1,485)

Other long-term assets                            (2,340)             3,029

Long-term liabilities                                  -               (214)

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

Net adjustment                          $         (8,722)  $         (4,134)

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

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



Final valuations of certain items are not yet complete due to the inherent complexity associated with valuations. Therefore the purchase price allocation is preliminary and subject to adjustment over the course of 2010 on completion of the valuation process and analysis of resulting tax effects.

Acquisition-related costs, primarily for advisory services, were incurred during the year ended December 31, 2009 and during the nine month period ended September 30, 2010 in the amount of $9,035 and $2,559 respectively. No costs were incurred in the three-month period ended September 30, 2010. Costs incurred and deferred at December 31, 2009 have been charged to opening retained earnings on adoption of CICA Section 1582 (see note 2). Costs incurred during the nine-month period ended September 30, 2010 were included in selling and administrative expenses in the unaudited consolidated interim statement of earnings.

The consolidated revenues and pre-tax earnings for the nine-month period ended September 30, 2010 as though the acquisition date had been January 1, 2010, excluding purchase accounting adjustments and one-time costs related to change of control, are estimated at $1,651 million and $94 million respectively. These are unaudited pro forma figures and are not necessarily indicative of the combined results that would have been attained had the acquisition taken place at January 1, 2010, nor is it necessarily indicative of future results.




5.  Inventories



                                  September 30    December 31   September 30

                                          2010           2009           2009

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



Equipment                        $     187,564  $     164,744  $     204,755

Repair and distribution parts          106,122         74,809         83,262

Direct materials                        66,831         75,740         93,614

Work-in-process                        120,422         57,817         46,570

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

                                 $     480,939  $     373,110  $     428,201

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

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



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 the third quarter and first nine months of 2010 were $260 million and $712 million respectively (2009 - $183 million and $511 million respectively). The amount charged to the income statement and included in cost of goods sold for write down of inventory for valuation issues during the quarter and first nine months of 2010 were $12.0 million and $9.9 million respectively (2009 - $7.9 million and $11.6 million, respectively).




6.  Other long-term assets



                                  September 30    December 31   September 30

                                          2010           2009           2009

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



Equipment sold with guaranteed

 residual values                 $       9,060  $      10,940  $      12,706

Investment in affiliate                  3,714              -              -

Investment in Enerflex units                 -         56,502         36,749

Deferred transaction costs                   -         10,160            899

Other long-term assets                     534            443            414

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

                                 $      13,308  $      78,045  $      50,768

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

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



Toromont, as a result of its acquisition of ESIF, owns a 40% investment in Total Production Services Inc. Investments in entities where the Company exercises significant influence are accounted for using the equity method. These investments are recorded at cost plus the Company's share of income or loss to date less dividends received.




7.  Intangible assets



                                                  Accumulated

as at September 30, 2010        Acquired Value   Amortization Net Book Value

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



Customer relationships           $      38,400  $       5,068  $      33,332

Other                                    5,700          2,994          2,706

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

                                 $      44,100  $       8,062  $      36,038

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

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



Intangible assets are related to the acquisition of ESIF in January 2010. Intangible assets are recorded at cost and are amortized on a straight-line basis over their estimated economic lives. Customer relationships are being amortized over 5 years. Other intangibles include long-term contracts, distribution agreements and order backlog. These assets are being amortized over periods ranging from 1 to 3 years.




8.  Accounts payable and accrued liabilities



                                  September 30    December 31   September 30

                                          2010           2009           2009

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



Accounts payable and accrued

 liabilities                     $     346,827  $     228,436  $     205,530

Dividends payable                       12,305          9,728          9,709

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

Total accounts payable and

 accrued liabilities             $     359,132  $     238,164  $     215,239

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

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



9.  Long-term debt



                                 September 30     December 31   September 30

                                         2010            2009           2009

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



Term loan facility              $     333,125   $           -  $           -

Senior debentures                     144,051         155,999        155,998

Notes payable                              30           2,096          2,329

Debt issuance costs, net of

 amortization                          (3,593)              -              -

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

Total long-term debt                  473,613         158,095        158,327

Less current portion                    6,889          14,044         14,276

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

                                $     466,724   $     144,051  $     144,051

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

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



All debt is unsecured.

Toromont established a term loan facility in January 2010 in connection with the acquisition of ESIF. Borrowings of $450 million were drawn down under this facility, with principal repayments of $16.875 million due quarterly beginning June 30, 2010, and a lump sum final repayment due in July 2011 (eighteen month term). Debt issuance costs of $6.9 million were adjusted against the carrying value of the debt. In addition to the required quarterly repayment of $16.875 million, the Company made a voluntary repayment, without penalty, of $83.125 million during the third quarter of 2010.

The Company had available $225 million in bank credit in Canada and US$20 million in bank credit in the United States, provided through committed credit facilities. There were no amounts drawn on either of the facilities as at any of the above reporting dates. The US$20 million facility matures in July 2011.

Subsequent to quarter-end (see also Note 22), Toromont refinanced the Canadian committed credit facility and repaid the outstanding term loan debt. The new committed credit facility, with a maturity date extending until June 30, 2012, provides $600 million in financing.

Senior secured notes payable assumed in the acquisition of ESIF in the amount of $100.6 million were required to be repaid under the terms of the term loan facility. These notes were repaid subsequent to completing the acquisition. A premium of $11.3 million was paid in connection with the repayment of these notes, and was included in the fair value of liabilities assumed for purposes of the purchase price allocation. Borrowings under ESIF's bank facility were also repaid following completion of the acquisition. The repayment of ESIF's senior secured notes and bank facility were also funded through the drawings on the term loan facility.

Scheduled principal repayments and interest payments on long-term debt are as follows:




                                                      Principal     Interest

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



2010                                                $         -  $     6,077

2011                                                      6,904       17,859

2012                                                    334,420       12,283

2013                                                      1,372        6,895

2014                                                      1,471        6,796

2015 to 2019                                            133,039        7,635

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

                                                    $   477,206  $    57,545

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

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



At September 30, 2010, standby letters of credit issued utilized $65 million of the credit lines (December 31, 2009 - $33 million; September 30, 2009 - $38 million).




10. Share capital



The changes in the common shares issued and outstanding during the period were as follows:




                               Three months ended          Nine months ended

                               September 30, 2010         September 30, 2010

                         Number of         Common   Number of         Common

                            Common          Share      Common          Share

                            Shares        Capital      Shares        Capital

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



Balance, beginning of

 period                 76,890,317  $     463,290  64,867,467  $     132,261

Issue of shares re

 Enerflex acquisition            -              -  11,875,250        327,947

Exercise of stock

 options                    13,900            313     161,500          3,395

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

Balance, end of period  76,904,217  $     463,603  76,904,217  $     463,603

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

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



Normal Course Issuer Bid

Toromont renewed its NCIB program in 2010. The current issuer bid allows the Company to purchase up to approximately 5.6 million of its common shares in the 12 month period ending August 30, 2011, representing 10% of common shares in the public float, as estimated at the time of renewal. The actual number of shares purchased and the timing of any such purchases will be determined by Toromont. All shares purchased under the bid will be cancelled.

The Company did not purchase any shares under the normal course issuer bid in the first nine months of 2010. In the nine-month period ended September 30, 2009, the Company purchased and cancelled 43,400 shares for $858 (average cost of $19.77 per share) under its NCIB program.




11. 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:




                             Three months ended           Nine months ended

                                   September 30                September 30

                             2010          2009          2010          2009

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



Contributed surplus,

 beginning of period  $    10,731   $     9,586   $    10,012   $     8,978

Stock-based

 compensation                 771           566         2,260         1,767

Value of compensation

 cost associated with

 exercised options            (74)          (95)         (844)         (688)

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

Contributed surplus,

 end of period        $    11,428   $    10,057   $    11,428   $    10,057

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

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



12. Accumulated other comprehensive Income



The changes in accumulated other comprehensive income were as follows:




                             Three months ended           Nine months ended

                                   September 30                September 30

                             2010          2009          2010          2009

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



Balance, beginning of

 period               $   (17,629)  $     2,025   $      (628)  $    10,899

Other comprehensive

 loss                      (1,427)      (14,422)      (18,428)      (23,296)

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

Balance, end of

 period               $   (19,056)  $   (12,397)  $   (19,056)  $   (12,397)

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

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



Accumulated other comprehensive income was comprised of the following amounts:




                              Before income                   Net of income

                                      taxes    Income taxes           taxes

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



As at September 30, 2010



Unrealized losses on

 translation of financial

 statements of self-

 sustaining foreign

 operations                   $     (18,981)  $           -   $     (18,981)



Lossess on foreign exchange

 derivatives designated as

 cash flow hedges                      (130)             55             (75)

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

                              $     (19,111)  $          55   $     (19,056)

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

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





As at December 31, 2009



Unrealized losses on

 translation of financial

 statements of self-

 sustaining foreign

 operations                   $     (15,954)  $           -   $     (15,954)



Unrealized gain on financial

 assets designated as

 available-for-sale                  18,705          (3,090)         15,615



Losses on foreign exchange

 derivatives designated as

 cash flow hedges                      (439)            150            (289)

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

                              $       2,312   $      (2,940)  $        (628)

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

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





As at September 30, 2009



Unrealized losses on

 translation of financial

 statements of self-

 sustaining foreign

 operations                   $     (12,897)  $           -   $     (12,897)



Unrealized gain on financial

 assets designated as

 available-for-sale                   1,260            (208)          1,052



Losses on foreign exchange

 derivatives designated as

 cash flow hedges                      (848)            296            (552)

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

                              $     (12,485)  $          88   $     (12,397)

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

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



13. Financial instruments



Categories of financial assets and liabilities

The carrying values of the Company's financial instruments are classified into the following categories:




                               September 30     December 31    September 30

                                       2010            2009            2009

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



Held for trading (1)          $      86,143   $     206,957   $     105,367

Loans and receivables (2)     $     468,922   $     244,759   $     259,076

Available for sales assets

 (3)                          $           -   $      56,502   $      36,749

Other financial liabilities

 (4)                          $     832,745   $     396,259   $     373,566

Derivatives designated as

 effective hedges (5) - loss  $         (75)  $        (440)  $        (848)

Derivatives designated as

 held for trading (6) - gain

 (loss)                       $         379   $        (434)  $      (1,516)



(1)  Comprised of cash and cash equivalents. All held for trading assets

     were designated as such upon initial recognition.

(2)  Comprised of accounts receivable and notes receivable.

(3)  Comprised of investments in marketable securities, reported in other

     assets.

(4)  Comprised of accounts payable and accrued liabilities and long-term

     debt.

(5)  Comprised of the Company's foreign exchange forward contracts

     designated as hedges

(6)  Comprised of the Company's foreign exchange forward contracts that are

     not designated as hedges for accounting purposes.



Fair Value Measurements

There has been no change during the nine months ended September 30, 2010 in the designation of the Company's financial instruments from that disclosed in the Company's 2009 annual audited consolidated financial statements.

The estimated fair values of cash and cash equivalents, accounts receivable, notes receivable, accounts payable and accrued liabilities, borrowings under the bank term facility and notes payable approximate their respective carrying values due to the liquid nature of the asset or liability.

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 September 30, 2010 under the same conditions. The financial institution's credit risk is also taken into consideration in determining fair value. Fair value measurement of derivative financial instruments is classified as Level 2 in the hierarchy of fair value measurements.

Marketable securities are measured at quoted market prices which is classified as Level 1 in the hierarchy of fair value measurements.

The fair value of senior debentures is measured using the discounted cash flow method, a generally accepted valuation technique. The discount factor is based on market rates for debt with similar terms and remaining maturities and that has been adjusted for our credit quality. The Company has no plans to prepay these instruments prior to maturity. Fair value measurement of the senior debentures is classified as Level 2 in the hierarchy of fair value measurements. Fair value and carrying value of senior debentures are outlined below:




                                                Fair Value    Carrying value

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



as at September 30, 2010                  $        152,238  $        144,051

as at December 31, 2009                   $        156,993  $        155,998



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 September 30, 2010.




                                     Average

                        Notional    Exchange

                          Amount        Rate                        Maturity

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

Canadian dollar

 denominated

 contracts



Purchase

 contracts          USD  197,652 $    1.0413    October 2010 to October 2012

                    EUR    6,188 $    1.3703   October 2010 to December 2010



Sales contracts     USD   54,024 $    1.0319   October 2010 to December 2011

                    EUR    3,977 $    1.4128        October 2010 to May 2011



Australian

 dollar

 denominated

 contracts

Purchase

 contracts          USD    3,555 $    1.1296  November 2010 to December 2011



Management estimates that a net gain of $304 would be realized if the contracts were terminated on September 30, 2010. Certain of these forward contracts are designated as cash flow hedges, and accordingly, a loss of $75 has been included in other comprehensive income. This loss is not expected to affect net income as the losses will be reclassified to net income within the next twelve months and will offset gains recorded on the underlying hedged items, namely foreign denominated accounts payable and accounts receivable. A gain of $379 on forward contracts not designated as hedges is included in net income which offsets losses recorded on the foreign-denominated items, namely accounts payable and accounts receivable.

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.

Risks arising from financial instruments and risk management

In the normal course of business, Toromont is exposed to financial risks that may potentially impact its operating results in one or both 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 and interest rates. The Company does not enter into derivative financial agreements for speculative purposes.

Currency risk

The Company's currency exposure has increased from December 31, 2009 with the acquisition of ESIF. Enerflex has significant international exposure through export from its Canadian operations as well as a number of foreign subsidiaries, the most significant of which are located in Australia, the Netherlands and the United Arab Emirates.

The types of foreign exchange risk and the Company's related risk management strategies are as follows:

Transaction exposure

The Canadian operations of the Company source the majority of its products and major components from the United States. Consequently, reported costs of inventory and the transaction prices charged to customers for equipment and parts are affected by the relative strength of the Canadian dollar. The Company mitigates exchange rate risk by entering into foreign currency contracts to fix the cost of imported inventory where appropriate. In addition, pricing to customers is customarily adjusted to reflect changes in the Canadian dollar landed cost of imported goods.

The Company also sells compression packages in foreign currencies, primarily the U.S. dollar, the Australian dollar and the Euro and enters into foreign currency contracts to reduce these exchange rate risks.

The Company maintains a conservative hedging policy whereby all significant transactional currency risks are identified and hedged.

Translation exposure

The Company's earnings from and net investment in, self-sustaining foreign subsidiaries are exposed to fluctuations in exchange rates. The currencies with the most significant impact are the US dollar, Australian dollar and the Euro.

All of the Company's foreign operations are considered self-sustaining. Accordingly, assets and liabilities are translated into Canadian dollars using the exchange rates in effect at the balance sheet dates. Unrealized translation gains and losses are deferred and included in accumulated other comprehensive income. The cumulative currency translation adjustments are recognized in income when there has been a reduction in the net investment in the foreign operations.

Earnings at foreign operations are translated into Canadian dollars each period at current exchange rates for the period. As a result, fluctuations in the value of the Canadian dollar relative to these other currencies will impact reported net income. Such exchange rate fluctuations have historically not been material year-over-year relative to the overall earnings or financial position of the Company. The following table shows the effect on net income before tax for the nine-month period ended September 30, 2010 of a 5% weakening of the Canadian dollar against the US dollar, Euro and Australian dollar, everything else being equal. A 5% strengthening of the Canadian dollar would have an equal and opposite effect. This sensitivity analysis is provided as an indicative range in a volatile currency environment.




Fluctuation of 5%               USD         Euro           AUD         Total

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



Net income before tax   $     1,509  $      (183)  $      (258)  $     1,068



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 September 30, 2010 and for the nine-month period then ended. The following table shows Toromont's sensitivity to a 5% weakening of the Canadian dollar against the US dollar, Euro and Australian dollar. A 5% strengthening of the Canadian dollar would have an equal and opposite effect.




Cdn dollar weakens by 5%          USD         Euro          AUD        Total

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



Financial instruments

 held in foreign

 operations:

Other comprehensive

 Income                   $     1,615  $       412  $     1,100  $     3,127



Financial instruments

 held in Canadian

 operations:

Net earnings              $     1,731  $        77  $         8  $     1,816

Other comprehensive

 Income                   $     3,499  $       109  $       138  $     3,746



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 self-sustaining 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 balance sheet 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, natural gas production and transportation, chemical and petrochemicals, food and beverage, and governmental agencies that are not concentrated in any specific geographic area. These specific industries may be affected by economic factors that may impact accounts receivable. Management does not believe that any single industry or particular geographic region represents significant credit risk. Credit risk concentration with respect to trade receivables is mitigated by the Company's large customer base.

As at September 30, 2010, $32 million or 6.8% of accounts receivable were outstanding for more than 90 days from original invoice. The movement in the Company's allowance for doubtful accounts is identified below.




                     Three months ended Sept 30   Nine months ended Sept 30

                             2010          2009          2010          2009

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



Balance, beginning of

 period               $     9,459   $    10,656   $     7,096   $     9,774

Change in foreign

 exchange rates               (46)         (160)          (26)         (386)

Provisions and

 revisions, net             3,364         1,435         5,706         1,887

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

Balance, end of

 period               $    12,776   $    11,276   $    12,776   $    11,276

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

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



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

In relation to its debt financing, the Company is exposed to changes in interest rates, which may impact on the Company's borrowing costs. Floating rate debt exposes the Company to fluctuations in short-term interest rates. As at September 30, 2010, $333.1 million or 70% of the Company's total debt portfolio was subject to movements in floating interest rates. A 1.0% increase in interest rates, all things being equal, would reduce income before taxes by $3.3 million on an annualized basis.

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 September 30, 2010.

Liquidity risk

Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with financial liabilities. As at September 30, 2010, the Company was holding cash and cash equivalents of $86 million and had unutilized lines of credit of $181 million.

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 2010, 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.




14. Earnings per share ("EPS")



Basic earnings per share is calculated by dividing the net earnings available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated to reflect the effect of exercising outstanding stock options applying the treasury stock method, which assumes that all outstanding stock option grants are exercised, if dilutive, and the assumed proceeds are used to purchase the Company's common shares at the average market price during the period.




                   Three months ended September  Nine months ended September

                                             30                           30

                             2010          2009          2010           2009

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



Net earnings

 available to

 common

 shareholders        $     26,099  $     31,923  $     63,296   $     89,166

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

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Weighted average

 common shares

 outstanding           76,896,069    64,718,162    75,895,887     64,698,354

Dilutive effect of

 stock option

 conversion               200,428       213,392       255,849        145,907

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

Diluted weighted

 average common

 shares outstanding    77,096,497    64,931,554    76,151,736     64,844,261

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

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



Basic earnings per

share

 Continuing

  operations         $       0.34  $       0.50  $       0.85   $       1.38

 Discontinued

  operations                    -             -         (0.02)             -

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                     $       0.34  $       0.50  $       0.83   $       1.38

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



Diluted earnings

per share

 Continuing

  operations         $       0.34  $       0.50  $       0.85   $       1.38

 Discontinued

  operations                    -             -         (0.02)             -

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

                     $       0.34  $       0.50  $       0.83   $       1.38

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

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



In the three-month period ended September 30, 2010, 991,920 outstanding stock options with an exercise price range of $26.15 to $29.71 were excluded from the calculation of diluted EPS as these options were anti-dilutive. The diluted EPS calculations for the nine-month period ended September 30, 2010 excluded 946,920 outstanding stock options with an exercise price range of $27.70 to $29.71 as they were anti-dilutive. The diluted EPS calculations for the three and nine-month periods ended September 30, 2009 excluded 907,240 outstanding stock options with an exercise price range of $23.34 to $28.84 as they were anti-dilutive.




15. 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 Company policy that no more than 1% of outstanding shares or approximately 770,000 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.

A reconciliation of the outstanding options is as follows:




                                               Nine Months ended September 3

                                                  2010

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

                                              Weighted              Weighted

                                               Average               Average

                                 Number of    Exercise Number of    Exercise

                                   Options       Price   Options       Price

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



Options outstanding, beginning

 of period                       1,961,809  $    22.91 1,917,599  $    21.62

Granted                            610,050       29.71   508,000       22.05

Exercised                         (161,500)      15.58  (154,660)      11.97

Forfeited                          (20,090)      21.25  (158,600)      25.07

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Options outstanding, end of

 period                          2,390,269  $    25.11 2,112,339  $    22.17

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Options exercisable, end of

 period                          1,053,233  $    22.76 1,044,337  $    19.64

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The following table summarizes stock options outstanding and exercisable as at September 30, 2010:




                               Options Outstanding     Options Exercisable

                                 Weighted   Weighted                Weighted

Range of                          Average    Average                 Average

Exercise             Number     Remaining   Exercise       Number   Exercise

Prices          Outstanding  Life (years)      Price  Outstanding      Price

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$16.59 -

 $23.34             912,829           3.1      20.61      549,309      19.66

$24.58 -

 $29.71           1,477,440           4.7      27.89      503,924      26.15

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Total             2,390,269           4.1$     25.11    1,053,233$     22.76

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The fair value of the stock options granted during the period was determined at the time of grant using the Black-Scholes option pricing model with the following assumptions:




                                             Nine Months ended September 30

                                                     2010              2009

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

Weighted average fair value price per

 option                                   $          6.59   $          4.55

Expected life of options (years)                     5.84              5.80

Expected stock price volatility                      25.0%             25.0%

Expected dividend yield                               2.0%              2.7%

Risk-free interest rate                               2.6%              2.0%

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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 management incentive award or fees, respectively, in deferred share units. In addition, the Board may grant discretionary DSUs to executives. As at September 30, 2010, 86,143 units were outstanding at a value of $2,416 (December 31, 2009 - 68,723 units at a value of $1,882; September 30, 2009 - 66,485 units at a value of $1,516). The Company records the cost of the DSU Plan as compensation expense.




16. Employee future benefits



The Company sponsors pension arrangements for substantially all of its employees, primarily through defined contribution plans in Canada and a 401(k) matched savings plan in the United States. Certain unionized employees do not participate in company-sponsored plans, and contributions are made to these retirement programs in accordance with respective collective bargaining agreements. In the case of defined contribution plans, regular contributions are made to the individual employee accounts, which are administered by a plan trustee in accordance with the plan document. The cost of pension benefits for defined contribution plans are expensed as the contributions are paid.

Approximately 150 employees are included in defined benefit plans. Pension benefit obligations under the defined benefit plans are determined periodically by independent actuaries and are accounted for using the accrued benefit method using a measurement date of December 31.

The net pension expense recorded for the periods are presented below.




                                Three months ended         Nine months ended

                                      September 30              September 30

                                 2010         2009         2010         2009

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



Defined benefit plans     $       438  $       562  $     1,327  $     1,693

Defined contribution

 plans                          3,699        2,300       10,529        6,851

401(k) matched savings

 plans                            190          206          617          777

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



Net pension expense       $     4,327  $     3,068  $    12,473  $     9,321

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

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



17. Capital Management



The Company defines capital as the aggregate of shareholders' equity (excluding accumulated other comprehensive income) 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 equity ratio of 0.5:1, 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 above capital management criteria can be illustrated as follows:




                               September 30     December 31    September 30

                                       2010            2009            2009

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



Shareholders' equity          $   1,188,411   $     854,063   $     818,648

Accumulated other

 comprehensive loss                  19,056             628          12,397

Long-term debt                      473,613         158,095         158,327

Cash and cash equivalents           (86,143)       (206,957)       (105,367)

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

Capital under management      $   1,594,937   $     805,829   $     884,005

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

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



Net debt as a % of capital

 under management                        24%            n/m               6%

Net debt to equity ratio             0.33:1             n/m          0.06:1



n/m - not meaningful, cash exceeds long-term debt at December 31, 2009



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 period.

There were no changes in the Company's approach to capital management during the period.




18. Supplemental cash flow information



                             Three months ended           Nine months ended

                                   September 30                September 30

                             2010          2009          2010          2009

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



Net change in non-

 cash working capital

 and other

 Accounts receivable  $   (37,964)  $    38,050   $  (111,439)  $   115,983

 Inventories               12,830        58,295        23,338        71,159

 Accounts payable and

  accrued liabilities       3,647       (40,155)       92,720      (217,453)

 Other                     36,923       (11,928)       20,784       (27,116)

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

                      $    15,436   $    44,262   $    25,403   $   (57,427)

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

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





Cash paid during the

 period for:

 Interest             $     4,829   $     1,475   $    16,961   $     6,323

 Income taxes         $    (3,719)  $    11,613   $    12,470   $    59,855



19. Commitments



Certain land and buildings and equipment are leased under several non-cancellable operating leases that require minimum annual payments as follows:




Remainder of 2010                                           $          5,802

2011                                                                  14,351

2012                                                                  10,959

2013                                                                   8,393

2014                                                                   6,917

2015 and thereafter                                                   14,727

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                                                            $         61,149

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



20. Segmented financial information



The Company has two reportable operating segments, each supported by the corporate office. The Equipment Group includes one of the world's largest Caterpillar dealerships by revenue and geographic territory in addition to industry leading rental operations. The Compression group of segments, collectively, is a global leader specializing in the design, engineering, fabrication, and installation of compression systems for natural gas, coal bed methane, fuel gas and carbon dioxide in addition to process systems and industrial and recreational refrigeration systems. Both groups offer comprehensive product support capabilities. 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. Previously, corporate overheads were allocated to the business segments based on operating income. Due to the operating loss reported by the Compression Group in the quarter, management determined that it would be appropriate to reconsider this allocation approach. The change in allocation method has been applied prospectively from January 1, 2010. Prior periods have not been restated as the impact is insignificant.

The accounting policies of the reportable operating segments are the same as those described in Note 1 - Significant Accounting Policies.




              Equipment Group     Compression Group       Consolidated

Three months

 ended

 September

 30              2010      2009      2010      2009        2010        2009

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



Equipment

 /package

 sales       $164,123  $124,725  $224,428  $148,145  $  388,551  $  272,870

Rentals        43,134    40,032     7,948     3,416      51,082      43,448

Product

 support       73,766    66,371    91,158    44,732     164,924     111,103

Power

 Generation     2,565     2,501         -         -       2,565       2,501

Other               -         -    12,318         -      12,318           -

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

Revenues     $283,588  $233,629  $335,852  $196,293  $  619,440  $  429,922

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

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



Operating

 Income      $ 30,984  $ 24,608  $ 14,871  $ 22,769  $   45,855  $   47,377

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

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



Operating

 income as a

 % of

 revenues        10.9%     10.5%      4.4%     11.6%        7.4%       11.0%

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

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





              Equipment Group     Compression Group       Consolidated

Nine months

ended

September 30     2010      2009      2010      2009        2010        2009

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



Equipment

 /package

 sales       $392,000  $323,056  $585,763  $580,541  $  977,763  $  903,597

Rentals        99,845    99,471    24,002    11,916     123,847     111,387

Product

 support      225,224   212,600   252,683   136,960     477,907     349,560

Power

 generation     7,692     7,210         -         -       7,692       7,210

Other               -         -    35,328         -      35,328           -

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

Revenues     $724,761  $642,337  $897,776  $729,417  $1,622,537  $1,371,754

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

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



Operating

 Income      $ 72,214  $ 65,883  $ 21,528  $ 70,648  $   93,742  $  136,531

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

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



Operating

 income as a

 % of

 revenues        10.0%     10.3%      2.4%      9.7%        5.8%       10.0%

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

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





Selected balance sheet information:




                      Equipment Group              Compression Group

               September December September  September   December  September

                      30       31        30         30         31         30

                    2010     2009      2009       2010       2009       2009

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



Goodwill        $ 13,000 $ 13,000  $ 13,000 $  483,106 $   21,800 $   21,800

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

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



Identifiable

 assets         $665,427 $599,358  $645,972 $1,504,177 $  459,572 $  495,754

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

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



Corporate

 assets



Total assets





                                        Consolidated

                           September            December           September

                                  30                  31                  30

                                2010                2009                2009

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



Goodwill         $           496,106 $            34,800 $            34,800

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

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



Identifiable

 assets          $         2,169,604 $         1,058,930 $         1,141,726

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

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



Corporate

 assets                       94,551             305,737             176,067

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

Total assets     $         2,264,155 $         1,364,667 $         1,317,793

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

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



Operating income from rental operations for the quarter ended September 30, 2010 was $8.7 million (2009 - $7.1 million). For the nine months ended September 30, 2010, operating income from rental operations was $16.8 million (2009 - $12.7 million)




21. Seasonality of business



Interim period revenues and earnings historically reflect seasonality in the Equipment Group. The first quarter is typically the weakest due to winter shutdowns in the construction industry while the fourth quarter has historically been the strongest quarter due to higher conversions of equipment on rent with a purchase option, however this pattern has changed somewhat in recent years such that the seasonal impact on the second, third and fourth quarter has been relatively neutral. Within Canadian Compression Group, the fourth quarter tends to be the strongest due to higher activity levels resulting from well-site access and drilling patterns.




22. Subsequent Event



Credit Facility Refinancing

Effective November 5, 2010, the Company completed a refinancing of its Canadian committed credit facility. The new committed credit facility, with a maturity date of June 30, 2012, provides $600 million in available financing and includes covenants, restrictions and events of default that are substantially the same as the corresponding provisions in Toromont's previous facilities. In conjunction with the new financing, the $333.125 million outstanding under the term loan facility was repaid in full and cancelled using proceeds of the new financing and cash. Debt incurred under the new facility is unsecured and ranks parri passu with debt outstanding under Toromont's existing debentures. Outstanding loans under the facility bear interest at a rate equal to the Canadian prime rate plus a specified margin ranging from 50 to 175 basis points. Toromont intends to utilize this facility primarily through the issuance of bankers' acceptances with acceptance fees ranging from 150 to 275 basis points. The applicable margin or acceptance fee will, in each case, be determined based on Toromont's leverage ratio.

Enerflex Spinoff

On November 8, 2010, Toromont announced its intention to spin off Enerflex Ltd., its natural gas compression and processing equipment supply subsidiary, to existing shareholders by means of a tax-deferred divestiture for Canadian tax purposes. After the spinoff, Toromont's remaining operations will include the business of Toromont CAT, Battlefield - The CAT Rental Store and CIMCO. The proposed corporate reorganization would be implemented through a court approved Plan of Arrangement and is subject to regulatory and shareholder approval. If approved, the spinoff could be completed in the spring or early summer of 2011.

Contacts:

Toromont Industries Ltd.

Robert M. Ogilvie

Chairman and Chief Executive Officer

(416) 667-5554



Toromont Industries Ltd.

Paul R. Jewer

Vice President Finance and Chief Financial Officer

(416) 667-5638

www.toromont.com



Source: Toromont Industries Ltd.

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