Innovation and
Diversification
Driving Growth
2020 ANNUAL REPORT
$288M
Initial portion of U.S.
government contract
awarded in 2021 for
nitrile rubber patient
exam gloves, with
potential contract
value up to $576M
Healthcare contracts awarded in 2020 by U.S. government
agencies for Powered Air Purifying Respirator (PAPR) Systems
$220M
TABLE OF CONTENTS
01 At a Glance
02 Message to Shareholders
04 AirBoss Consolidated
08 AirBoss Defense Group
12 Airboss Rubber Solutions
14 AirBoss Engineered Products
16 ESG
18 Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
39 Consolidated Financial
Statements
43 Notes to Consolidated
Financial Statements
35 Management’s Responsibility
72 Board of Directors
for Financial Reporting
36 Auditors’ Report to the
Shareholders of AirBoss of
America Corp.
73 Corporate Information
At aGlance
In 2020, even in the face of the global challenges presented by COVID-19,
AirBoss generated record financial performance following closing of the transaction
to merge its defense business with Critical Solutions International, Inc. creating
AirBoss Defense Group.
REVENUES $M
REVENUES BY GEOGRAPHY 2020
‘20 HIGHLIGHTS
Generated record net sales, EBITDA
and EPS;
Increased cash balance by $87
million and ended the year in a net
cash position;
Achieved step change in scale of
operations and widened aperture of
opportunity for healthcare and defense
business through the creation of
AirBoss Defense Group ("ADG").
Obtained:
• In 2020, PAPR system contracts with
FEMA, HHS, and the VA in the U.S.
valued at nearly $220 million
• In Q1 2021, contract for nitrile
rubber patient examination gloves
from HHS valued at up to
$576 million
Appointed Frank Ientile to the role of
Chief Financial Officer; and
Welcomed Stephen M. Ryan to
the board of directors, 3rd new
director added to the Board over last
20 months
181
102
101
117
129
114
73
125
120
83
2018
2019
2020
AirBoss Defense Group -
Major Healthcare Contracts
Engineered Products
Rubber Solutions
AirBoss Defense Group
US
Canada
Other
ADJUSTED EBITDA $M
DILUTED EPS
$1.35
74
26
32
32
$0.37
$0.40
2018
2019
2020
2018
2019
2020
EBITDA
EBITDA - Major Healthcare Contracts
RETURNS
DIVIDENDS $ (C$0.28 PER SHARE)
35.4%
35.1%
9.5%
8.3%
2019
2020
2018
2019
2020
7.9%
7.2%
2018
Return on Capital Empoyed
Return on Equity
A N N U A L R E P O R T
11
Message to
Shareholders
2020 presented businesses, governments and communities globally with significant
challenges. Throughout our 30-year plus year operating history AirBoss has prioritized innovation
and diversification across and within individual operating segments, to focus on products in
which we have competitive advantages, increase our ownership of the value chain where and
when appropriate, and act as a natural hedge against economic and industry cycles. This
approach was the basis for our creation of AirBoss Defense Group at the beginning of 2020, which
not only resulted in a step change in the scale of AirBoss but enabled us to capitalize on the
unique set of opportunities presented in the last 12 months, and produce the strongest financial
performance in our history.
This success is a credit to the enormous contributions of
our employees who in the face of the COVID-19 pandemic
kept our essential segments operating, helped our
customers succeed, supported our ongoing investment in
innovation and met surging demand for our suite of
survivability solutions. We simply could not have
accomplished all we did in 2020 without their
extraordinary efforts.
Solidifying the Survivability Platform
We started the year on a positive note, completing the
transaction that created AirBoss Defense Group (“ADG”)
through the combination of our existing defense business
with that of Critical Solutions International, Inc. (“CSI”),
with us owning 55%. Early in 2020, we received strong
confirmation of the expected synergies between AirBoss’
suite of products and CSI’s strong marketing
capabilities, receiving a $96 million order for PAPRs from
the Federal Emergency Management Agency in the U.S.
The entire AirBoss team across all groups and divisions
was mobilized to quickly ramp up and get this
desperately needed protective equipment to those who
needed it most - frontline medical personnel. We
completed the contract on time and on budget, and by
the last week we were manufacturing approximately
10,000 PAPRs and 100,000 filters per week across
multiple U.S. facilities. Recognizing our unmatched
domestic manufacturing capacity, we received in July a
$121 million order for PAPRs and related peripherals
from the Department of Health and Human Services
(“HHS”), the largest contract in our history to that point.
We are on track to complete this contract, on time and on
budget, in April 2021.
Based on the growing strength of the broader survivability
platform and its near- and longer-term potential, we
elected to purchase the remaining 45% minority interest
in ADG in the fourth quarter so that we would fully benefit
from its greater contribution in the year ahead and
beyond. This decision has proved prescient.
Although AirBoss has a long history of successfully
delivering against multi-year U.S. and international
government contracts, we have now established a
reputation for being able to deliver large volumes of
critical products against highly compressed timeframes.
Reinforcing our status as a trusted supplier to the U.S.
government through the FEMA and HHS contracts played
a critical role in helping us to secure a contract for nitrile
patient examination gloves from the HHS valued at up to
$576 million, which we announced in the first quarter
of 2021.
In addition to our growing solutions for healthcare, we
continue to advance and develop a number of next-
generation technologies, including the BlastGauge®
blast overpressure measurement system, which we
expect to contribute to growth over the mid- and longer-
term. In the first quarter of 2021, we announced our
intention to acquire 100% of BlackBox Biometrics, the
developer of the BlastGauge® System. Additionally, we
continue to improve our latest generation low burden gas
mask. The gas mask won recent contract awards for
Australia and Canada and won the technical competition
for European NATO countries though was edged out on
pricing. We are working on lowering costs in preparation
for a potential upcoming U.S. competition, which could
be worth more than $1 billion over an extended timeline,
and potential for supply to other European countries.
2
Rubber Solutions Poised to Return to Growth
In 2019, we invested heavily in the AirBoss Rubber
Solutions ("ARS") segment, adding new mixing lines and
inaugurating a new, state-of-the-art technical centre. We
expect these investments to pay off down the road as our
core priority for the business remains growing our
capabilities in higher margin, specialty compounds that
address a broader array of customer needs beyond our
traditional strength in black rubber. Although COVID-19
impacted overall volumes in 2020, we saw volumes
recover close to pre-pandemic levels by the end of the
year. As the pandemic recedes and broader business
conditions stabilize, we anticipate being able to return to
steadily growing volumes over the mid- and longer-term
as we continue to take market share and roll out new
specialty compounds.
Diversifying Engineered Products for the Future
Our AirBoss Engineered Products ("AEP") business likewise
faced challenges in the face of COVID-19 as automakers
and Tier 1 parts suppliers elected to temporarily shutter
operations during the second quarter of the year. Despite
these challenges we were able to rapidly pivot, certifying
AEP to help fulfill the large PAPR awards we received, in
addition to helping produce other molded rubber defense
products. Our traditional focus on light trucks, SUV’s and
minivans helped our work volumes recover ahead of
industry levels once key customers re-started their
operations mid-year. The robotic work cell we sourced in
2019 and installed and tested in the first half of the year
was in full production in the third quarter of 2020. This
investment in advanced manufacturing is expected to
allow us to drive improved margins as we automate the
production of more commoditized products and we are
sourcing a second system. The expanded AEP team also
continues to execute on our strategy to identify new anti-
noise vibration and harshness opportunities in the
recreational and light and heavy commercial vehicle
markets, and other non-automotive markets. In 2020,
we saw some initial progress on this initiative with
approximately 10% of net sales coming from non-
automotive sources.
NET LEVERAGE*
2.4
2.2
1.9
1.9
1.7
1.5
1.3
Significant Financial Flexibility to Grow
Our record financial performance in 2020 means we
exited the fiscal year with our strongest balance sheet in
years and a net cash position. Going forward, we expect
this will offer us significant flexibility to grow through a
combination of organic initiatives and acquisitions. This
includes adding new solutions for the healthcare and
military markets to our growing survivability platform,
developing or acquiring specialty rubber compounds
and/or mixing capabilities and further diversifying our
engineered products beyond the automotive sector. In
combination, we expect these initiatives to deliver
repeatable, long-term growth.
Seeking Out Sustainability
In recent years we have begun to increasingly focus on the
sustainability of our business, assessing our
environmental footprint, social license and initiatives and
our approach to governance. We believe each of these
elements are increasingly important to a growing range of
stakeholders including suppliers, customers, investors
and employees. Given the steadily growing emphasis on
each of these areas, we have taken the preliminary step of
identifying benchmarks and mapping out a formal
environmental, social and governance (ESG) strategy to
guide us in the years ahead. We look forward to updating
all stakeholders as we embark on this next phase of our
growth as an organization.
Well Positioned to Advance
In closing, we want to thank our employees for their hard
work and dedication during a difficult and uncertain
time. We also want to recognize our customers and
suppliers; we are emerging stronger knowing what we
can accomplish in partnership. We also want to
acknowledge the wise counsel of our new and existing
board members, who have helped shape our overall
strategy. Our investments in innovation and
diversification over the last few years are paying
increasing dividends. Despite the challenges we faced in
2020, we have moved into 2021 at a significantly greater
scale, on a stronger financial footing with a clear vision
to drive continued future growth. We look forward to
reporting on our progress in the year ahead and beyond.
(0.1)
2013
2014
2015
2016
2017
2018
2019
2020
*Net debt less lease liabilities as at Dec. 31 / LTM EBITDA
P.G. Schoch
Chairman and CEO
Chris Bitsakakis
President and COO
A N N U A L R E P O R T
3
Engineering
Engineering
Understanding how to
Understanding how to
develop products
develop products
designed to withstand
designed to withstand
and perform in the most
and perform in the most
challenging environments
challenging environments
Applications
Applications
Thousands of
Thousands of
products suited to
products suited to
a range of
a range of
applications and
applications and
sectors globally
sectors globally
Chemistry
Chemistry
Constantly testing and
Constantly testing and
evaluating individual
evaluating individual
ingredients to ensure
ingredients to ensure
outperformance and
outperformance and
reduce environmental
reduce environmental
impact
impact
A
A CONSISTENT
CONSISTENT
CYCLE OF INNOVATION,
CYCLE
VA
AATION,
OF INNOV
TION,
C
IMPROVEMENT AND
IMPROVEMENT AND
EFFICIENCY
EFFICIENCY
EFFICIENCY
ring
Manufacturing
Manufactur
Latest technology and scalable
nd scalable
Latest technology an
re efficiency
infrastructure ensur
infrastructure ensure efficiency
y of even
and on-time delivery of even
and on-time delivery
ber
high volumes of rubber
high volumes of rub
mpounding
Com
Compounding
Decades of compounding
es of compounding
Decad
ise ensures
expertise ensures
expertise ensures
stency at scale in
consistency at scale in
consistency at scale in
he most complex
even the most complex
even the most complex
cations
applications
applic
Expertise, Innovation
and Diversification is Building a Global Leader
4
A commitment to innovation,
diversification and vertical integration
have enabled AirBoss to consistently
outperform the industry.
KEY COMPETITIVE ADVANTAGES
Innovation
State-of-the-art technical/R&D centre supports development of next-generation
compounds addressing increasingly complex customer requirements
Scale
500 million turn pounds of annual capacity spanning 2,000+ black,
white/coloured and speciality compounds
Vertically Integrated
Single customer contact from design to distribution
Quality
Decades of compounding expertise supported by a dedicated quality
control laboratory
Consistency
Modern equipment and rigorous testing ensures consistency within
and between batches
Diversification
Investments in technical facilities and manufacturing equipment is
supporting a growing number of compounds that can be produced
Stability
25-year history of in-house manufacturing for a diverse,
blue-chip customer base
AIRBOSS REVENUES VS U.S. ANNUAL MANUFACTURERS' VALUE OF SHIPMENTS
OF PLASTICS AND RUBBER PRODUCTS (REBASED TO 2000)
6.0
5.0
4.0
3.0
2.0
1.0
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
AirBoss Revenues
Annual Manufacturers' Value of Shipments of Plastics and Rubber Products (Source: U.S. Federal Reserve)
A N N U A L R E P O R T
5
1994
1996
1999
2006
‘89
Founded as IATCO,
commercializing a
range of non-
pneumatic, off road
rubber tires
Changed name to
AirBoss of America
Corp.
Acquired Kitchener,
ON-based International
Technical Rubber
Manufacturing Inc., a
custom rubber mixer
Acquired Quebec-based
Acton International, a
leader in protective
rubber wear for military
and civil operations
Opened Scotland Neck,
NC rubber mixing facility
adding 50 million
pounds of annual
capacity
Innovation and
Diversification
have Driven Profitable Growth through
Multiple Economic Cycles
6
2013
2015
2019
2020
‘21
Acquired Auburn Hills,
MI-based Flexible
Products Co., a provider
of anti- vibration
solutions to the North
American auto market
Acquired Landover,
MD-based Immediate
Response Technologies,
LLC, a manufacturer of
gas mask filters, PAPRs,
shelters and isolation
systems
Rubber mixing capacity
grows to 500 million
pounds annually
Inaugurated new R&D
technical centre in
Kitchener, ON
Established ADG,
combining Critical
Solutions International,
Inc. and AirBoss Defense
Awarded largest
individual contract in
Company history - $121
million from US Dept. of
Health and Human
Services
Forecasting
another
record
financial
performance.
AirBoss' Financial
Performance
COVID-19 RECESSION
GREAT RECESSION
DOT.COM RECESSION
1996
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E
Revenues
Diluted EPS
Note: 2021E represents midpoint of the Company’s outlook for 2021 revenues and Adjusted earnings per diluted share; prior years are IFRS net income (loss) per
diluted share. The 2021 outlook is as of March 16, 2021 and is subject to a number of risk factors and accounting assumptions, as outlined in the Company’s
March 16, 2021 press release ‘AirBoss Announces Positive Outlook for 2021 Fueled by Strong Organic Sales’ available on SEDAR and airboss.com
A N N U A L R E P O R T
7
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
-
$2.20
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$-
-$0.20
2002
2006
2008
2011
‘99
Acquired Quebec-based
Acton International, a
leader in protective
rubber wear for military
and civil operations
Launched new CBN
glove
3rd generation CBRN
boots into production
First gas mask sales
to Canadian DND
Canadian and U.S.
military contracts
awarded for injection
molded overboots
ADG is Survivability
ADG is an umbrella survivability group that provides healthcare,
defense, security and other customers around the world with a
growing and diversified portfolio of products that span the
survivability spectrum.
Innovative Protective
Solutions
When AirBoss acquired Landover, MD-based Immediate Response Technologies LLC in 2015, it gained
innovative filter technology applicable to a range of products for use by healthcare professionals, first
responders and soldiers.
As part of previous military and government contract wins and in the face of the COVID-19 pandemic,
AirBoss has successfully deployed an array of solutions that leverage this filter technology designed to keep
those on the front line of a chemical, nuclear, radiological or biological (“CBRN”) incident safe. ADG
deploys these filters as part of multiple systems, supplying replacements as needed, which can generate a
recurring, multi-year revenue stream for the Company.
8
2015
2018
2020
Acquired Landover, MD-
based Immediate
Response Technologies,
LLC, a manufacturer of
gas mask filters, PAPRs,
shelters and isolation
systems
Won tenders from
Canadian and
Australian militaries for
new low-burden gas
mask valued at up to
$33 million
Announced $220M in
orders to supply PAPRs to
the U.S. government
Announced an additional
US$22.0 million in
contracts across the
survivability portfolio for
multiple parties in North
America and internationally
Remaining (45%) minority
interest in AirBoss Defense
Group acquired by AirBoss
of America
‘21
Announced intention to
acquire BlackBox Biometrics,
Inc. developer of the
BlastGauge® System
Received contract from HHS for
nitrile patient examination gloves
valued at up to $576 million
Powered Air Purifying Respirator
(“PAPR”) System
The FlexAir™ PAPR system is a compact, lightweight
Powered Air Purifying Respirator system with an onboard
lithium-ion battery installed in the waist-mounted blower
unit. The design permits the use of two high efficiency
particulate filters at a time providing protection against
particulates, aerosols and biohazards, offering a very
high level of defense against viruses like COVID-19.
Wearers are protected by having contaminated air
purified by filtration media mounted on the PAPR blower
unit and delivered via a lightweight breathing hose to the
user’s head cover.
Low Burden Gas Mask
Constructed using a proprietary AirBoss rubber
formulation, the Low Burden Gas Mask (“LBM”) offers
24 hours of protection against a variety of weaponized
chemical and biological threats as well as toxic
industrial chemicals and offers an array of features
designed to maximize operating efficiency.
A N N U A L R E P O R T
9
Expanding a Diversified
Survivability Platform
The formation of ADG has created the full value chain of a survivability platform, combining decades
long experience, expertise and innovation in manufacturing and engineering design with new marketing,
distribution and supply chain management expertise for a broadened customer-base across the globe.
It has also expanded AirBoss's global leadership in rubber CBRN protective equipment with complementary
counter-explosive and route clearance products.
Husky 2G Vehicle System
The Husky is a blast-survivable, mission configurable
vehicle platform that deploys a range of radar and sensor
systems for countermine and non-conventional explosive
detection. Husky systems have survived more than 8,000
blasts without a single soldier fatality.
Status: Approximately 1,500 Husky systems deployed to
military customers globally.
Recent Wins: Contract extension with foreign militaries
valued at up to $35.6 million (Q4 2020); $5.8 million
contract for ground penetrating radar and other
accessories to the Egyptian military (Q4 2020).
10
Blast Gauge®
Description: The Blast Gauge® System is a lightweight
wearable system of small, low-profile sensors that
measure blast overpressure experienced by military
personnel. Data is captured, wirelessly transmitted and
stored for analysis by medical personnel, facilitating
decisions regarding duty readiness of personnel. The
system has a one-year field life and is replaced annually,
potentially creating a recurring revenue stream for ADG.
Status: Currently in field testing with the US Department
of Defense.
Recent Wins: Received initial order of 10,000 units
from US Department of Defense to support ongoing
field testing.
VISION FOR GROWTH
ADG is focused on delivering on contracts it has already won and securing potential new contracts from a strong pipeline
of near term opportunities, with a combined valued at more than $1B.
ADG intends to drive further growth by cross marketing its broad platform of products to its global customer-base,
generating recurring revenues from consumables required for its increasingly large base of products, developing or
sourcing next generation survivability products to bring to market, and winning new defense contracts. The company
expects to supplement organic growth with acquisitions.
NET SALES $M
GROSS PROFIT $M
EBITDA $M
4
181
117
2
64
3
73
3
83
2017
2018
2019
2020
ADG External Net Sales
ADG External Net Sales from
Major Healthcare Contracts
Inter-Segment Net Sales
A N N U A L R E P O R T
79
12
19%
2017
21%
16
2018
26%
22
26%
33
2019
2020
ADG
ADG - Major Healthcare Contracts
% of Net Sales
(ex Major Healthcare Contracts)
74
26
21%
17
20%
11
15%
2018
2019
2020
7
11%
2017
ADG
ADG - Major Healthcare Contracts
% of Net Sales
(ex Major Healthcare Contracts)
11
1997
1999
2006
‘96
Opened Scotland Neck, NC
rubber mixing facility
adding 50 million pounds
of annual capacity
Made improvements in
Kitchener, ON facility
Established global supply
chain for critical chemicals
Acquired Kitchener,
ON-based International
Technical Rubber
Manufacturing Inc.,
a custom rubber mixer
Started rubber
compounding in
Kitchener, ON including
synthetic, natural,
non-marking, mixed
and industrial rubber
Rubber mixing capacity
grows to 200+ million
pounds annually
Leader in Custom Rubber Compounding
As one of North America’s largest custom compounding companies,
ARS manufactures customized rubber-based formulations, and helps
its customers solve problems and discover superior rubber-based
solutions that can improve their bottom lines.
Innovating
the Next Generation of Specialty Compounds
In 2019, AirBoss undertook an array of initiatives designed to innovate beyond its traditional black
rubber compounding business. This included inaugurating a new technical/R&D centre capable of
developing and testing a broader array of specialty compounds that are specific to individual customer
needs. This new state-of-the-art facility employs leading-edge technology and facilitates collaborative
development of compounds that address an increasingly complex set of customer challenges. In 2019, the
Company also added new white/colour and specialty tilt mixing lines in Kitchener, ON, adding a range of
new compounds it is able to offer customers.
DIVERSIFIED CUSTOMER BASE
The Company maintains a diversified customer base and
provides rubber for a range of industrial and resource
applications, including on and off the road tires and related
retreading compounds, conveyor belts, as well as for its own
use in anti-noise, vibration and harshness and defense
applications. This significant diversification among end
1 Vyas, et al., Military Medicine, Volume 181, Issue 10, October 2016, pages
markets and customers better positions the Company to
1240-1247. https://doi.org/10.7205/MILMED-D-15-00585
weather volatility in industry and broader economic cycles.
12
Defense 3% Other 4%
Niche 3%
Industrial 5%
Anti-Vibration 6%
Infrastructure 6%
OTR/Retread 21%
Track 8%
Major Tires 18%
2 Leo Shane III, Military Times, July 25, 2017
https://www.militarytimes.com/news/pentagon-congress/2017/07/25/
ptsd-disability-claims-by-vets-tripled-in-the-last-decade/
Resources 12%
Conveyor Belts 14%
ARS VOLUME PER SECTOR
2012
2019
‘20
Major refurbishment
of Scotland Neck, NC
facility completed to
support increased
volumes
Upgraded high-volume
black rubber line and
installed white/colour
and specialty tilt mixing
lines in Kitchener, ON
Added second mixing
line in Scotland Neck, NC
Inaugurated new R&D
technical centre in
Kitchener, ON
White/colour and specialty tilt mixing
lines in full operation
Rubber mixing capacity grows to 500
million pounds annually
Inaugurated new Quality Assurance lab
in Kitchener, ON
VISION FOR GROWTH
ARS has traditionally focused on customers’ needs for
larger volumes of compounded black rubber, which prior
to the COVID-19 pandemic allowed production to grow at
a compound annual growth rate in excess of 10%, ahead
of broader industry levels. While net sales at ARS
dropped in 2020 on a temporary COVID-related drop in
tire rubber tolling volumes, in recent years management
has increasingly focused on supplementing that growth
by meeting a broader range of customer needs, including
for white and coloured rubber as well less commoditized,
specialty compounds.
AirBoss is focused on both increasing existing customer
penetration and gaining market share by helping
customers access a broader range of rubber
compounding capabilities through a single supplier.
While much of ARS’ historical growth has come from
organic initiatives, including investments in capacity
and innovation, AirBoss believes there are opportunities
to grow through acquisition by targeting regional
expansion of all product lines, including both large
volume and niche specialty rubber.
RUBBER LBS SOLD & NET SALES
GROSS PROFIT $M
EBITDA $M
17
115
19
104
114
120
18
106
101
21
87
94
19
20
19
17
19
15
16
14
15%
14%
15%
16%
12%
12%
14%
12%
2017
2018
2019
2020
2017
2018
2019
2020
2017
2018
2019
2020
External Net Sales $M
Inter-Segment Net Sales $M
Rubber Lbs. Sold M (excludes internal)
Gross Profit
% of Net Sales
EBITDA
% of Net Sales
A N N U A L R E P O R T
13
2014
2017
‘13
Integrated Flexible
Products into AirBoss
New management hired
to focus on strategy to
diversify into
non-automotive and
improve profitability
through operational
efficiency and innovation
Acquired Auburn Hills,
MI-based Flexible
Products Co., a provider
of anti-vibration
solutions to the North
American auto market
Established Kuala
Lumpur, Malaysia
manufacturing joint
venture
Innovator in Anti-Vibration Components
As one of the industry’s leading custom molders, AEP
manufactures customized rubber-based products used
across the automotive, electric vehicle, heavy truck & off-
highway, industrial, and defense industries.
Focus on
Innovation
In 2019, AirBoss made a preliminary investment in
advanced manufacturing technologies by sourcing a
cutting edge, “lights out” robotic work cell that could be
used to produce lower margin parts quickly and
efficiently, permitting allocation of skilled labour to
higher margin, more technically advanced products.
Despite the pandemic, the first cell was installed, tested
and moved into regular operation in the third quarter of
2020. The new cell automates repetitious tasks and ensures
consistent quality and low variability between batches.
Following a positive evaluation of the first cell, AirBoss is
sourcing a second cell for its Auburn Hills, MI facility.
14
2018
2019
‘20
Steel tariffs introduced
that negatively
impacted margins
Rolled out advanced
manufacturing
technologies including
automated presses
Launched strategy to
facilitate expansion into
non-auto noise, vibration
and harshness
applications for light and
heavy vehicles
Installed “lights out” robotic work cell
in Auburn Hills, MI facility to improve
productivity and margins
Certified to produce rubber-molded
defense products and PAPRs
Expansion into non-auto products
Launching first hydrobushings for use
in passenger vehicles and light
commercial trucks
DIVERSIFICATION
AEP has traditionally focused on the passenger auto and
light truck sectors, which in recent years has accounted
for virtually all net sales. In 2019, AirBoss established a
non-automotive team to identify opportunities to
diversify into solutions for recreational and light and
heavy commercial vehicles. Vehicles of all types face
significant challenges reducing noise, vibration and
harshness. AirBoss is focused on balancing the
contribution from the automotive sector with a growing
array of applications. For 2020, approximately 10% of
net sales came from non-automotive sources.
VISION FOR GROWTH
Increasing pricing pressure from offshore automotive
parts supply, increases in steel tariffs, and customer
givebacks have driven margin erosion at AEP for several
years. In the near term, AirBoss is focused on returning
AEP to operating profitability through diversification of
sales into non-auto sectors, innovation to drive
continuous efficiencies, and rationalization of
unprofitable business.
Over the longer term, AirBoss is targeting growth by
developing highly engineered and therefore higher
margin solutions in sectors where they are required,
potentially including renewable energy, marine, rail,
construction equipment and appliances.
NET SALES $M
GROSS PROFIT $M
132
129
125
12
102
15
12%
10
8%
6
5%
5
5%
2017
2018
2019
2020
2017
2018
2019
2020
Inter-Segment Net Sales (Defense)
External Net Sales
Gross Profit
% of Net Sales
A N N U A L R E P O R T
EBITDA $M
9
4
7%
3%
0
0%
2017
2018
2019
EBITDA
% of Net Sales
-1%
-1
2020
15
Building our
Sustainability Future
AirBoss recognizes that a growing number of stakeholder groups, including customers,
suppliers, employees and shareholders, are increasingly focused on how the Company performs
from a sustainability perspective. In recent years, management has begun to integrate improved
Environmental, Social and Governance (“ESG”) practices into the business. In late 2020, AirBoss
took a step toward formalizing its ESG initiatives and is currently in the process of introducing
metrics and frameworks based on the Task Force on Climate-related Financial Disclosures (“TCFD”)
and the Sustainability Accounting Standards Board (“SASB”) reporting standards.
AirBoss sources its natural rubber from large,
commercial plantations that sustainably harvest sap
which is then processed in slabs of rubber. AirBoss also
endeavors to minimize the amount of scrap rubber
produced both internally and by customers by developing
methods to reuse any waste, off cuts and “out-of-spec”
product in the production of new compounds.
ENVIRONMENTAL
AirBoss’ facilities in Kitchener, ON,
Scotland Neck, NC, and Auburn Hills
Michigan are ISO 14001:2015
certified. ISO 14001:2015 is intended
for use by organizations seeking to
manage their environmental
responsibilities in a systematic
manner that contributes to the
environmental pillar of sustainability.
16
AirBoss collaborated with Tyromer Inc. to implement an
innovative commercial scrap tire rubber crumb de-
vulcanization system. Historically, scrap vulcanized
rubber has been difficult to recycle because of the strong
bonds created during the vulcanization process. Tyromer
uses a supercritical carbon dioxide-assisted, thermal-
mechanical extrusion process to convert scrap tire rubber
into Tire-Derived Polymer (“TDP”). The process uses no
de-vulcanizing chemicals or chemical solvents and is
99% efficient. The proprietary process also preserves the
recycled product’s ability to form new bonds when it is
vulcanized. The TDP is used in creation of new
compounds that include recycled content and perform
like new rubber.
SOCIAL
AirBoss strives to work hand in hand with all
stakeholders including the surrounding communities, the
government, individual and institutional investors, and
customers. Analysis of the impact our facilities have on
the neighboring communities is conducted regularly and
decisions are made to help manage this impact.
AirBoss’ systems are agile to accommodate changing
demands from all its stakeholders. Creating a fair and
diverse work force in all its locations is a high priority for
the organization, along with having effective and
efficient personnel to generate optimal success.
Customers and stakeholders play an integral role in the
decisions that AirBoss makes.
For the year ended December 31, 2020, and despite the
impact of the COVID-19 pandemic, the Company's total
head count grew from 1,203 at December 31, 2019 to
1,318 in 2020, a 9.6% increase.
GOVERNANCE
AirBoss believes that operating with integrity is critical to
the creation of long-term shareholder value. AirBoss’
governance objectives and policies ensure that not only
governmental and regulatory requirements are met, but
also that there is a framework for ongoing improvement
and development.
Over the last 20 months AirBoss has added three new
directors to its board, including Stephen M. Ryan in 2020,
bringing fresh perspectives and specific industry
expertise to bear. Seven of eight directors on the board
are independent.
A N N U A L R E P O R T
17
2020
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of AirBoss of America
Corp. (“AirBoss” or the “Company”) has been prepared as of March 9, 2021 and should be read in conjunction with the
Consolidated Financial Statements and Notes for the year ended December 31, 2020 prepared in accordance with International
Financial Reporting Standards (“IFRS”). All dollar amounts are shown in thousands of US dollars, except per share amounts,
unless otherwise specified. Additional information regarding the Company, including its Annual Information Form, can be found
on SEDAR at www.sedar.com and on the Company’s website at www.airboss.com.
FORWARD-LOOKING INFORMATION
Certain statements contained or incorporated by reference herein, including those that express management’s expectations or
estimates of future developments or AirBoss’ future performance, constitute “forward-looking looking information” or “forward-looking
statements” within the meaning of applicable securities laws, and can generally be identified by words such as “will”, “may”, “could”
“expects”, “believes”, “anticipates”, “forecasts”, “plans”, “intends” or similar expressions. These statements are not historical facts
but instead represent management’s expectations, estimates and projections regarding future events and performance.
Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions
that, while considered reasonable by management at the time the statements are made, are inherently subject to significant
business, economic and competitive risks, uncertainties and contingencies. AirBoss cautions that such forward-looking information
involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss’ actual financial results,
performance or achievements to be materially different from its estimated future results, performance or achievements expressed
or implied by the forward-looking information. Numerous factors could cause actual results to differ materially from those in the
forward-looking information, including without limitation: impact of general economic conditions, notably including its impact on
demand for rubber solutions and products; dependence on key customers; global defense budgets, notably in the Company’s
target markets, and success of the Company in obtaining new or extended defense contracts; cyclical trends in the tire and
automotive, construction, mining and retail industries; sufficient availability of raw materials at economical costs; weather conditions
affecting raw materials, production and sales; AirBoss’ ability to maintain existing customers or develop new customers in light of
increased competition; AirBoss’ ability to successfully integrate acquisitions of other businesses and/or companies or to realize on
the anticipated benefits thereof; changes in accounting policies and methods, including uncertainties associated with critical
accounting assumptions and estimates; changes in the value of the Canadian dollar relative to the US dollar; changes in tax laws
and potential litigation; ability to obtain financing on acceptable terms; environmental damage and non-compliance with
environmental laws and regulations; impact of global health situations; potential product liability and warranty claims and equipment
malfunction. COVID-19 could also negatively impact the Company’s operations and financial results in future periods. There is
increased uncertainty associated with future operating assumptions and expectations as compared to prior periods. As such, it is
not possible to estimate the impacts COVID-19 will have on the Company’s financial position or results of operations in future
periods. While the direct impacts of COVID-19 are not determinable at this time, the Company has a credit facility as at December
31, 2020 that can provide financing up to $60,000. This list is not exhaustive of the factors that may affect any of AirBoss’ forward-
looking information.
All of the forward-looking information in this Annual Report is expressly qualified by these cautionary statements. Investors are
cautioned not to put undue reliance on forward-looking information. All subsequent written and oral forward-looking information
attributable to AirBoss or persons acting on its behalf are expressly qualified in their entirety by this notice. Forward-looking
information contained herein is made as of the date of this Interim Report and, whether as a result of new information, future events
or otherwise, AirBoss disclaims any intent or obligation to update publicly the forward-looking information except as required by
applicable laws. Risks and uncertainties about AirBoss’ business are more fully discussed under the heading “Risk Factors” in our
most recent Annual Information Form and are otherwise disclosed in our filings with securities regulatory authorities which are
available on SEDAR at www.sedar.com.
18
AirBoss of America Corp.
MD&A (cont’d)
OVERALL PERFORMANCE
Recent Highlights
(In US dollars)
• Grew net sales by 54.1% for the fourth quarter of 2020 ("Q4 2020") to $132.2 million vs $85.8 million in the fourth quarter of
2019 ("Q4 2019") and by 52.9% to $501.6 million in 2020 vs $328.1 million in 2019;
•
Increased Adjusted EBITDA by 259.6% to $32.8 million in Q4 2020 vs $9.1 million in Q4 2019, and by 228.0% to $105.6
million in 2020 vs $32.2 in 2019;
• Grew diluted EPS by 436.4% to $0.59 in Q4 2020 (Q4 2019: $0.11), and by 206.8% to $1.35 for 2020 (2019: $0.44);
•
Increased Adjusted EPS to $0.59 in Q4 2020 (Q4 2019: $0.12) and to $1.45 in 2020 (2019 - $0.47);
• Finished Q4 2020 with a Net Debt to EBITDA ratio of (0.09)x;
• Paid a quarterly dividend of C$0.07 per common share for a total annual payment of C$0.28;
• Completed acquisition of 100% ownership of AirBoss Defense Group effective October 26, 2020 by purchasing 45% minority
interest held by Critical Solutions Holdings, LLC;
• Continued delivery against a $121.0 million contract from the U.S. Department for Health and Human Services ("HHS") with
the completion of the FlexAir™ PAPR systems ("PAPR's") portion of the contract, and the remaining fulfillment of filters, and
related accessories expected to be completed by early Q2 of 2021;
• Announced that AirBoss Defense Group was awarded an additional US$22.0 million in contracts across its survivability portfolio
for multiple parties in North America and internationally;
• Continued to strengthen the Board with the appointment of Stephen Ryan to the Board of Directors, the third new Director
added to the Board over the past 18 months; and
• Announced that AirBoss Defense Group has agreed to acquire Blackbox Biometrics, developer of the Blast Gauge System of lightweight
wearable blast overpressure sensors which have been outfitted on U.S. Special Forces, Army, and SWAT teams across the U.S.
Selected Financial Information
In thousands of US dollars, except share data
For years ended December 31
2020
2019
2018
Financial results:
Net sales
Profit
Profit attributable to owners of the Company
Adjusted Profit attributable to owners of the Company2
Earnings per share (US$)
– Basic
– Diluted
Adjusted earnings per share2 (US$)
– Basic
– Diluted
EBITDA2
Adjusted EBITDA2
Net cash from operating activities
Free cash flow2
Dividends declared per share (CAD$)
Capital additions
Financial position:
Total assets
Term loan and other debt1
Net Debt2
Shareholders’ equity
Outstanding shares*
*26,908,802 at March 9, 2021
501,572
56,262
33,703
36,087
1.40
1.35
1.50
1.45
103,211
105,595
104,399
89,965
0.28
15,606
328,126
10,219
10,219
10,948
0.44
0.44
0.47
0.47
32,082
32,196
11,706
(7,775)
0.28
26,700
316,603
8,536
8,536
8,926
0.37
0.37
0.38
0.38
25,675
26,065
19,867
11,632
0.28
8,476
367,369
90,734
(9,718)
194,588
26,908,802
249,664
74,144
59,481
125,979
23,392,442
232,528
62,956
44,859
121,483
23,392,442
1Term loan and other debt includes $13,482 of lease liabilities (2019: $14,542; 2018: $235)
2Non-IFRS Financial Measures
A N N U A L R E P O R T
19
2020
MD&A (cont’d)
NON-IFRS FINANCIAL MEASURES
This MD&A is based on reported income in accordance with International Financial Reporting Standards (“IFRS”) and on the
following non-IFRS financial measures:
EBITDA (Earnings before interest income, interest expense, income taxes, depreciation, amortization and impairment)
Adjusted EBITDA
Adjusted profit attributable to owners of the Company
Adjusted earnings per share
Free cash flow
Net debt
The above terms are non-IFRS financial measures and are derived from the consolidated financial statements but do not have a
standardized meaning prescribed by IFRS and are not necessarily comparable to similar measure presented by other issuers.
The Company discloses these terms for use in financial measurements made by interested parties and investors to monitor the ability
of the Company to generate cash from operations for debt service, to finance working capital and capital expenditures, potential
acquisition and to pay dividends. These terms are not a measure of performance under IFRS and should not be considered in
isolation or as a substitute for net income under IFRS.
A reconciliation of Profit to EBITDA and Adjusted EBITDA is presented below:
In thousands of US dollars
2019
2018
2020
EBITDA:
Profit
Finance costs
Depreciation, amortization, and impairment
Income tax expense
EBITDA
AirBoss Defense Group ("ADG") transaction fees
Insurance provision
Adjusted EBITDA
56,262
3,368
21,014
22,567
103,211
2,384
–
105,595
10,219
3,831
13,716
4,316
32,082
1,401
(1,287)
32,196
8,536
2,921
10,966
3,252
25,675
390
–
26,065
A reconciliation of Profit attributable to owners of the Company to Adjusted profit attributable to owners of the Company and
Adjusted earnings per share is presented below:
In thousands of US dollars
2020
2019
2018
Adjusted profit attributable to owners of the Company:
Profit attributable to owners of the Company
ADG transaction fees
Insurance provision
Adjusted profit attributable to owners of the Company
Basic weighted average number of shares outstanding
Diluted weighted average number of shares outstanding
Adjusted earnings per share (in US dollars):
Basic
Diluted
A reconciliation of loans and borrowings to Net debt is presented below:
In thousands of US dollars
Net debt:
Loans and borrowings - current
Loans and borrowings - non-current
Leases included in loans and borrowings
Cash and cash equivalent
Net debt
33,703
2,384
–
36,087
24,032
24,901
1.50
1.45
10,219
1,401
(672)
10,948
23,392
23,445
0.47
0.47
8,536
390
–
8,926
23,345
23,383
0.38
0.38
2020
2019
2018
27,083
63,651
(13,482)
(86,970)
(9,718)
5,358
68,786
(14,542)
(121)
59,481
3,794
59,162
(235)
(17,862)
44,859
20
AirBoss of America Corp.
MD&A (cont’d)
A reconciliation of net cash provided by operating activities to free cash flow is presented below:
In thousands of US dollars
2020
2019
2018
Free cash flow:
Net cash provided by operating activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from government grant
Free cash flow
Basic weighted average number of shares outstanding
Diluted weighted average number of shares outstanding
Free cash flow per share (in US dollars):
Basic
Diluted
104,399
(14,215)
(719)
500
89,965
24,032
24,901
3.74
3.61
11,706
(17,261)
(2,220)
–
(7,775)
23,392
23,445
(0.33)
(0.33)
19,867
(7,264)
(971)
–
11,632
23,345
23,383
0.50
0.50
OVERVIEW
This was a transformative year for AirBoss as the creation and eventual 100% acquisition of AirBoss Defense Group resulted in
our defense business becoming a significant contributor to the AirBoss portfolio while executing on the biggest survivability
contracts in its history. Despite the extensive challenges associated with COVID-19, the company was focused on supporting
its customers, employees and stakeholders during the pandemic while delivering on its highest sales, EBITDA and EPS in its
history. This was a record breaking year for AirBoss, and we believe poises the Company for continued success in the future.
The timing for the continued recovery in volumes will be subject, at least in part, to a stable and sustained re-opening of
businesses across North America, which could be difficult to predict, especially in light of the current COVID-19 impacts globally
and across North America, which remains a key market for the Company.
Despite the continued second wave of the COVID-19 pandemic, AirBoss has continued to take the necessary steps, including
risk mitigation plans within the Company’s supply chain, to strive to reduce any potential impact to its business and that of
customers, by identifying alternative raw material sources both domestically and internationally while providing a safe work
environment for its employees.
While this past year had many obstacles and challenges, AirBoss was able to continue to take advantage of opportunities
supporting its strong trajectory for the year. The Company’s strong results were driven by the delivery and completion of a large
personal protective equipment (“PPE”) award from FEMA, which was completed mid-year and this strong performance was
further augmented by the deliveries under the PPE contract for HHS which provided a strong financial backdrop to offset the
COVID-19 related impact on the Rubber Solutions and Engineered Products segments which did experience progressive
recoveries in the latter part of the year.
Despite the pandemic disruptions experienced in the Rubber Solutions and Engineered Products segments, AirBoss continued
its capital investment in its support of longer-term growth with investments in a series of key strategic initiatives across the
business in 2020 with a dual focus on innovation and diversification. Capital expenditures for 2020 were $14.9 million dollars
(excluding leases). Capital expenditures are expected to remain strong as AirBoss continues to invest in its future well above
historical levels.
For the Rubber Solutions segment, areas of investment continued to build from the record capital spend in 2019 with the
successful implementation of the automated small ingredient weighment system. While this segment saw progressive traction
in each of the quarters in the latter half of the year, development and sales in colored rubber continued to grow in line with the
margin expansion strategy with new customers while continuing to develop new compounds, proprietary compounds, and
continuous improvement on existing compounds. The continued focus on operational excellence supported the new mixing lines
in Kitchener, ON and Scotland Neck, NC that, in addition to increasing annual capacity by 20 and 50 million pounds, respectively,
supported production of a broader array of compounded products (white and color), as well as provided enhanced flexibility in
attracting and fulfilling new business. The Company has also made further inroads in utilization of the “tilt” mixer, which should
support the production of increasingly specialized, higher margin compounds, further diversifying AirBoss’ offering and enhancing
penetration with both existing and new customers. In Kitchener, AirBoss continued to invest in its R&D expertise and lab capital
to support enhanced collaboration with customers and better reflect the Company’s focus on innovative R&D and proprietary
technical solutions.
Within the Engineered Products segment, 2020 was a transformative year as the business dealt with the significant challenge
of temporarily suspended operations due to COVID-19 at the end of the first quarter and into the second quarter, aligned with
pending re-starts by key customers that began in mid-May. The Company managed variable costs within the Engineered Products
business, flexing overhead to mirror the impact of their key customers. Management also accelerated the plan to begin producing
certain molded defense products at the Auburn Hills, MI facility, as well as PAPRs, which supported the return to work for some
staff as well as continued execution against existing defense contracts. These measures helped utilize, and offset the impact of,
temporarily shuttered manufacturing capacity in the anti-noise, vibration and harshness business, which was substantially ramped
back up to historical levels in the fourth quarter. AirBoss also continues to push ahead with the new robotic work cell fully installed
as well as the diversification of its product lines into sectors adjacent to the automotive space. Management is continuing to
address key challenges in the anti-vibration business, focusing on margin improvement with targeted cost management, improved
pricing strategies and investments in advanced manufacturing. Over the medium and longer-term, the team is focused on
launching new products that diversify initially into opportunities adjacent to the automotive space, increasingly across a range
of sectors where more highly engineered anti-noise, vibration and harshness solutions are required including, renewable energy,
marine, rail and appliances.
A N N U A L R E P O R T
21
2020
MD&A (cont’d)
On January 1, 2020 AirBoss announced a transaction to create AirBoss Defense Group (“ADG”) through the merger of the
AirBoss defense business with privately-owned Critical Solutions International, with AirBoss owning 55% of this new group.
While management knew there were numerous synergies associated with transaction, including the creation of a strong platform
with the scale, capabilities and flexibility to act on an array of growth opportunities, ADG executed on its biggest year in its
history, culminating in AirBoss acquiring the remaining 45% of the group in Q4 of 2020. The Company’s record results for 2020
were driven by sales in its survivability platform with the completion of the PPE award from FEMA, completed in July followed
up with the deliveries under the PPE contract for HHS which provided a strong financial backdrop to offset the COVID-19 related
impacts in the other segments. In addition, ADG remains focused on fulfilling contracts in its core portfolio including the MALO
contract award from the U.S. Department of Defense. ADG continues to advance next-generation products like Blast Gauge®
and a new version of the low-burden mask through focused development and testing.
As part of its go-forward strategy for the Company, management is focused on four core priorities:
1. Growing the core Rubber Solutions segment by positioning it as a specialty supplier of choice in the consolidating North
American market, with a growing focus on building defensible leadership positions in selected compounds;
2. Leveraging ADG’s enhanced scale and capabilities to pursue an array of growth and value-creation opportunities in the broader
survivability solutions segment serving both defense and first responder markets;
3. Driving improved performance from the anti-vibration business through a combination of disciplined cost containment, client
relationship expansion, new product development and sector diversification; and
4. Targeting additional acquisition opportunities across the business with a focus on adding new compounds and products,
technical capabilities, and geographic reach into selected North American and international markets.
AirBoss continues to generate meaningful returns to shareholders through a stable quarterly dividend, while driving improved
profitability and simultaneously investing in core areas of the business to expand a solid foundation that will support long-term growth.
RESULTS OF OPERATIONS – For years ended December 31, 2020 compared to 2019
NET SALES
Consolidated net sales for the year ended December 31, 2020 increased by 52.9% to $501,572, compared with 2019 due largely
to the FEMA and HHS contracts, supported by the completion of the ADG transaction. This increase was partially offset by softness
in the Rubber Solutions and Engineered Products segments, primarily due to the impact of the COVID-19 pandemic.
In thousands of US dollars
Net Sales
Increase (decrease) $
Increase (decrease) %
2020
2019
Rubber
Solutions
119,090
137,517
(18,427)
(13.4)
Engineered
AirBoss
Products Defense Group
302,278
114,557
85,577
124,887
216,701
(10,330)
253.2
(8.3)
Inter-segment
net sales
(34,353)
(19,855)
(14,498)
73.0
Total
501,572
328,126
173,446
52.9
Rubber Solutions
Net sales for the year ended December 31, 2020 decreased by 13.4%, to $119,090, from $137,517 in 2019. The decrease in net
sales was principally due to an 8.4% decrease in volume (measured in pounds shipped).
The decrease in net sales was reflected across a number of sectors given the impact of COVID-19 and was primarily in the conveyor
belt, tolling and energy sectors. This was partially offset by increases in the industrial and hose sectors.
Tolling volumes for the year ended December 31, 2020 decreased by 15.1%, compared with 2019. Non-tolling volumes for the year
ended December 31, 2020 also decreased compared with 2019, down 6.6%. The decrease in volume was primarily in Oil & gas,
and conveyor belt applications.
Engineered Products
Net sales in the Engineered Products segment decreased by 8.3%, to $114,557, from $124,887 in 2019. The decrease was across
all product lines as a result of the COVID-19 pandemic, which resulted in the partial shutdown during Q2 2020 of the Auburn Hills,
Michigan plant. This was partially offset by the pivot to certain molded defense products during the year.
AirBoss Defense Group
Net sales in the AirBoss Defense Group segment increased by 253.2% to $302,278, from $85,577 in 2019. The increase was
primarily the result of the completion of the large contract from FEMA and continued successful delivery of the HHS contract noted
above which is expected to continue until Q2 of 2021. In addition, there were higher sales for other products in the defense portfolio
and Critical Solutions International, Inc. ("CSI") sales stemming from the ADG transaction that were not included in 2019.
22
AirBoss of America Corp.
MD&A (cont’d)
GROSS PROFIT
For the year ended December 31, 2020, consolidated gross profit was up by $87,168 to $135,922. Gross profit as a percentage
of net sales increased to 27.1% from 14.9% in 2019. The increase in gross profit was driven by higher volume from ADG and
partially offset by lower volumes in the Rubber Solutions and Engineered Products segments. These increases were primarily
as a result of strong ADG performance and CSI gross profit that were not included in 2019, in conjunction with managing
overhead costs and receipt of government-directed wage subsidies.
In thousands of US dollars
Gross Profit
Increase (decrease) $
% net of sales
Rubber
Solutions
18,552
20,459
(1,907)
15.6
14.9
Engineered
Products
5,337
6,456
(1,119)
4.7
5.2
AirBoss
Defense Group
112,033
21,839
90,194
37.1
25.5
2020
2019
2020
2019
Total
135,922
48,754
87,168
27.1
14.9
Rubber Solutions
For the year ended December 31, 2020, gross profit for Rubber Solutions was $18,552 (15.6% of net sales), down $1,907
compared to $20,459 (14.9% of net sales) in 2019. The decrease was primarily a result of lower volume partially offset by
managing overhead costs in conjunction with receipt of government-directed wage subsidies.
Engineered Products
Gross profit for the year ended December 31, 2020 in the Engineered Products segment was $5,337 (4.7% of net sales), down $1,119
compared with $6,456 (5.2% of net sales) in 2019. The decrease in gross profit was primarily a result of lower volumes in the anti-noise,
vibration and harshness business discussed above partially offset by increases in molded defense sales, operational cost containment
and managing overhead costs.
AirBoss Defense Group
Gross profit at AirBoss Defense Group for the year ended December 31, 2020 was $112,033 (37.1% of net sales), up $90,194
compared with $21,839 (25.5% of net sales) in 2019. The increase was primarily due to higher volume driven by new business awards
and CSI gross profit stemming from the ADG transaction that were not included in the comparable period in 2019, while the Canadian
operations were supported by government-directed wage subsidies.
OPERATING EXPENSES
Consolidated operating expenses for the year ended December 31, 2020 increased by $23,337 to $53,725 compared with
2019. The increase was primarily due to CSI operating expenses stemming from the ADG transaction that were not incurred
in the comparable period in 2019, impairment charges of $2,827, higher administrative costs, professional fees associated
with the ADG transaction, a lower foreign exchange gain, and an insurance settlement associated with a fire that occurred at
the plant in Scotland Neck, North Carolina, which reduced costs in 2019. These increases were offset by government-directed
wage subsidies. As a percentage of net sales, operating expenses for the year ended December 31, 2020 increased marginally
to 10.7% from 9.3% in 2019.
In thousands of US dollars
Operating Expenses
Increase $
% net of sales
2020
2019
2020
2019
Rubber
Solutions
7,100
5,976
1,124
6.0
4.3
Engineered
Products
12,503
10,762
1,741
10.9
8.6
AirBoss
Defense Group
24,187
9,823
14,364
8.0
11.5
Corporate
9,935
3,827
6,108
N/A
N/A
Total
53,725
30,388
23,337
10.7
9.3
Rubber Solutions
Rubber Solutions' operating expenses for the year ended December 31, 2020 increased by 18.8%, to $7,100, compared with
$5,976 in 2019. The increase was primarily due to receipt of insurance proceeds in 2019 related to a fire at the Scotland Neck,
North Carolina facility. In 2019 the Company received payments of $1,159 to cover expenses and damage to assets and $128
to cover business interruption losses and recorded an impairment charge of $366 related to assets lost or damaged in the fire.
In addition there higher IT costs associated with a new ERP implementation. These increases were partially offset by
government-directed wage subsidies.
Engineered Products
Engineered Product's operating expenses for the year ended December 31, 2020 increased by 16.2% to $12,503. The increase
was due to higher administration costs and a $743 impairment charge to write down assets no longer in use.
AirBoss Defense Group
AirBoss Defense Group's operating expenses for the year ended December 31, 2020 increased by 146.2% to $24,187. 2019 did
not include costs from CSI of $9,033 and the remaining increase was primarily due to the impairment charges of $2,006 noted in
Q3, M&A transaction advisory fees, higher R&D costs, and higher administration costs, partially offset by government-directed
wage subsidies and a larger foreign exchange gain.
Unallocated Corporate Costs
Unallocated corporate costs for the year ended December 31, 2020 increased by $6,108 from 2019. The increase was
principally due to professional fees associated with the ADG transaction of $2,384 (2019: $1,401), a foreign exchange loss
(compared to a gain in the comparable period) resulting in an unfavorable net change of $1,622, and higher administration costs
that were partially offset by government-directed wage subsidies.
A N N U A L R E P O R T
23
2020
MD&A (cont’d)
FINANCE COST
Finance costs in 2020 were $3,368 (2019: $3,831). The decrease was primarily due to lower interest expense on the term
debt and a decrease in unrealized mark-to-market losses compared to the comparable period, partially offset by higher mark-
to-market settlement payments, increased amortization of deferred finance fees, and increased lease interest expense.
INCOME TAX EXPENSE
For the year ended December 31, 2020, the Company recorded an income tax expense of $22,567 (2019: $4,316) or an effective
income tax rate of 28.6% (29.7% in 2019). The effective tax rate decreased due to differences in US state income tax rates.
In thousands of US dollars
Expected statutory rate
Foreign rate differential
Effect of permanent differences
Change in tax rates and new legislation
Filing differences
Deductible temporary differences not recognized
Other
Effective tax rate
Tax expense
Rate
2020
20,889
(890)
374
(186)
3
2,367
10
22,567
2019
3,852
456
(286)
26
(100)
667
(299)
4,316
2020
26.50%
(1.13%)
0.47%
(0.24%)
0.00%
3.00%
0.01%
28.61%
2019
26.50%
3.14%
(1.97%)
0.18%
(0.69%)
4.59%
(2.06%)
29.69%
NET INCOME AND EARNINGS PER SHARE
Net income in 2020 amounted to $56,262, compared with $10,219 in 2019. The basic and fully diluted net earnings per share were
$1.40 (2019: $0.44) and $1.35 (2019: $0.44) based on basic and fully diluted shares outstanding of 24,031,845 (2019: 23,392,442)
and 24,900,755 (2019: 23,445,894), respectively. The increase in net income and earnings per share was due to higher gross profit
offset by higher operating expenses and income tax expense, as discussed above.
QUA RTERLY INFORMATION
In thousands of US dollars
Quarter Ended
2020
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
2019
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Fourth Quarter 2020 Results
Net Sales
Profit (loss)
Earnings (loss) per share
Diluted
Basic
132,180
162,745
112,450
94,197
85,762
77,173
82,616
82,575
15,902
11,646
6,675
(520)
2,457
1,525
3,311
2,926
0.61
0.50
0.29
(0.02)
0.11
0.07
0.14
0.13
0.59
0.47
0.27
(0.02)
0.11
0.07
0.14
0.12
NET SALES
Consolidated net sales for Q4 2020 increased by 54.1% to $132,180, from $85,762 in Q4 2019, with increases in AirBoss
Defense Group and the Engineered Products segment partially offset by decreases in the Rubber Solutions segment, for the
reasons outlined below.
Rubber Solutions
Net sales for Q4 2020 in the Rubber Solutions segment decreased 2.9% to $31,728, from $32,689 in Q4 2019. Tolling
volume was down 13.0%, while non-tolling volume was up 6.6% driven by the OTR retread and industrial sectors. In tolling
applications, the Company only realizes net sales on the provision of compounding services for customer-supplied material,
versus non-tolling where AirBoss also supplies the raw material inputs that are reflected in net sales.
The decrease in net sales for Q4 2020 was primarily in the conveyor belt, mining and oil & gas sectors and partly offset by
the OTR/retread and industrial sectors.
24
AirBoss of America Corp.
MD&A (cont’d)
Engineered Products
Engineered Products net sales for Q4 2020 increased by 12.2% to $33,150 compared with Q4 2019. The increase was
across several product lines and in particular the muffler hangers, bushings, spring insulator product lines and molded
defense products.
AirBoss Defense Group
AirBoss Defense Group's net sales for Q4 2020 increased by 168.6% to $76,769 compared with Q4 2019. The increase
was primarily the result of the large contract from HHS (commenced in August, 2020), to provide PAPR’s, filters and related
accessories as part of the U.S. government's response to the COVID-19 pandemic. In addition, there were higher sales of
masks and boots related to other defense customers and CSI sales stemming from the ADG transaction that were not
included in 2019.
GROSS PROFIT
Consolidated gross profit for Q4 2020 increased to $40,255 (30.5% of net sales) from $13,246 (15.4% of net sales) in Q4 2019,
with increases in AirBoss Defense Group partially offset by decreases in the Rubber Solutions and Engineered Products
segments.
Rubber Solutions
Gross profit at Rubber Solutions for Q4 2020 was $3,873 (12.2% of net sales), compared with $4,444 (13.6% of net sales)
in Q4 2019. The decrease in gross profit was principally due to mix and higher material costs partially offset by government-
directed wage subsidies.
Engineered Products
Gross profit at Engineered Products for Q4 2020 decreased by $884 to $368 (1.1% of net sales) compared with $1,252 (4.2%
of net sales) in Q4 2019. The decrease was primarily a result of mix, partially offset by operational cost containment and
managing overhead costs.
AirBoss Defense Group
AirBoss Defense Group's gross profit for Q4 2020 increased by $28,464 to $36,014 compared with Q4 2019.The increase was
primarily due to higher volume associated with new business awards, while the Canadian operations were supported by
government-directed wage subsidies
OPERATING EXPENSES
Consolidated operating expenses for Q4 2020 increased by $3,718, compared with Q4 2019. The increase was primarily due to CSI
operating expenses stemming from the ADG transaction that were not incurred in Q4 2019, and higher administrative costs and M&A
transaction advisory fees. These increases were offset by a larger foreign exchange gain, government-directed wage subsidies to
support businesses impacted by COVID-19, and lower professional fees associated with the ADG transaction. As a percentage of net
sales, operating expenses in Q4 2020 were marginally better than Q4 2019.
INCOME TAX EXPENSE
Tax expense for Q4 2020 increased by $5,992 compared to Q4 2019. Income tax expense increased due to higher pre-tax
income.
A N N U A L R E P O R T
25
2020
MD&A (cont’d)
RECAST REPORTING SEGMENTS
Following the merger between the AirBoss Defense business and CSI on January 1, 2020, the Company realigned the
organizational and governance structures of its businesses to align them more closely with the nature of the Company’s
operations. Such realignment gave rise to changes in how the Company presents information for financial reporting and
management decision-making purposes and resulted in a change in the Company’s reporting segments. Consequently, as
of January 1, 2020, the Company’s operating segments are organized into the following reportable segments:
• Rubber Solutions - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding
related chemicals.
• Engineered Products - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts.
• AirBoss Defense Group - Includes the manufacture and distribution of personal protection and safety products, primarily for
CBRN-E threats, and the manufacture of semi-finished rubber related products
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.
The Rubber Solutions segment will consist of the former rubber solutions segment, excluding the Company’s industrial products
business line (which is now part of the AirBoss Defense Group Segment).The Engineered Products segment will only consist
of the Company's anti-vibration business. AirBoss Defense Group consists of the defense businesses and the Company’s
industrial products business line.
Recast historical financial information regarding the results of each reportable segment is included below.
Three-months ended
March 31
Rubber
Solutions
Engineered
Products
AirBoss
Defense Group
Unallocated
Corporate Costs
Total
In thousands of US dollars
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Segment net sales
35,964
33,188 31,017
33,517 21,004 19,034
Inter-segment net sales
(4,570)
(4,487)
–
–
(840)
(703)
External net sales
31,394
28,701
31,017
33,517 20,164 18,331
–
–
–
–
–
–
87,985 85,739
(5,410)
(5,190)
82,575 80,549
Depreciation, amortization,
and impairment
Segment measure of
profit (loss)
Finance costs
Income tax expense
Net Income
Segment assets
Segment liabilities
Capital additions
886
886
1,133
896
970
953
43
16
3,032
2,751
3,565
3,008
(958)
1,160
2,946
2,081
(690)
(1,482)
4,863
4,767
956
981
2,926
499
1,070
3,198
74,879 72,105
72,981
68,090 80,440 76,162 11,748
11,565 240,048 227,922
19,646 13,635
18,144
11,812 12,212
7,634 67,762 74,752 117,764 107,833
2,268
705
374
266
474
602
118
43
3,234
1,616
Three-months ended
June 30
Rubber
Solutions
Engineered
Products
AirBoss
Defense Group
Unallocated
Corporate Costs
Total
In thousands of US dollars
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Segment net sales
35,493 34,056 32,614 33,850 19,195 20,132
Inter-segment net sales
(4,161)
(5,164)
–
–
(525)
(1,077)
External net sales
31,332 28,892 32,614 33,850 18,670 19,055
–
–
–
–
–
–
87,302 88,038
(4,686)
(6,241)
82,616 81,797
1,306
865
1,147
948
1,127
958
43
19
3,623
2,790
5,098
3,017
(999)
722
2,696
2,307
(1,059)
(1,761)
5,736
4,285
1,124
1,301
671
954
3,311
2,660
75,191 71,109 73,873 68,996 81,627 78,691
6,288 12,835 236,979 231,631
17,309 15,572 15,175 13,420 12,488
8,206 67,601 72,923 112,573 110,121
2,470
155
512
217
1,372
594
362
165
4,716
1,131
Depreciation, amortization,
and impairment
Segment measure of
profit (loss)
Finance costs
Income tax expense
Net Income
Segment assets
Segment liabilities
Capital additions
26
AirBoss of America Corp.
MD&A (cont’d)
Three-months ended
September 30
In thousands of US dollars
Segment net sales
Inter-segment net sales
External net sales
Depreciation, amortization,
and impairment
Segment measure of
profit (loss)
Finance costs
Income tax expense
Net Income
Segment assets
Segment liabilities
Capital additions
Three-months ended
December 31
In thousands of US dollars
Segment net sales
Inter-segment net sales
External net sales
Depreciation, amortization,
and impairment
Segment measure of
profit (loss)
Finance costs
Income tax expense
Net Income
Segment assets
Segment liabilities
Capital additions
Rubber
Solutions
Engineered
Products
2019
2018
2019
2018
AirBoss
Defense Group
2018
2019
Unallocated
Corporate Costs
2018
2019
Total
2019
2018
33,371 33,528 31,708 30,968 16,795 18,495
(4,337)
(885)
29,034 29,195 31,708 30,968 16,431 17,610
(4,333)
(364)
–
–
–
–
–
–
–
–
81,874 82,991
(4,701)
(5,218)
77,173 77,773
951
892
1,165
937
1,208
850
45
18
3,369
2,697
920
(772)
(729)
3,227
1,251
3,173
(1,026)
2,653
743
563
1,347
74,069 68,951 73,222 67,348 81,230 77,190 11,407 13,193 239,928 226,682
8,011 63,623 72,071 115,168 105,115
22,984 12,838 16,756 12,195 11,805
1,043
559
1,389
2,626
901
200
1,525
5,635
3,392
(765)
705
295
148
190
–
Rubber
Solutions
Engineered
Products
2019
2018
2019
2018
AirBoss
Defense Group
2018
2019
Unallocated
Corporate Costs
2018
2019
Total
2019
2018
32,690 32,291 29,547 31,013 28,583 18,750
(4,250)
(809)
28,440 27,530 29,547 31,013 27,775 17,941
(4,761)
(808)
–
–
–
–
–
–
–
–
90,820 82,054
(5,058)
(5,570)
85,762 76,484
1,049
915
1,197
898
1,395
898
51
17
3,692 2,728
3,115
(1,578)
(1,051)
2,646
(758) 5,124 2,149
5,141 3,004
850 1,008
1,834
665
2,457 1,331
76,720 77,160 79,471 66,197 89,226 76,301 4,247 12,870 249,664 232,528
20,560 20,376 24,314 12,821 14,153 9,507 64,658 68,341 123,685 111,045
4,686
22 13,115
2,739
1,596
(1,502)
8,232
2,839
970
855
548
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company expects to fund its 2021 operating cash requirements, including required working capital investments, capital
expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing
capacity. The Company’s operating revolving loan facility provides financing up to $60,000 (2019: $60,000). As at December
31, 2020, $732 was drawn against the revolving credit facility to issue letters of credit.
For the period ended December 31, 2020, $104,399 (2019: $11,706) of cash was provided by operations, $8,545 (2019:
$19,481) was used for investing activities and $9,586 (2019: $9,996) was used in financing activities. Cash and cash
equivalents increased by $86,849 from $121 to $86,970, adjusted for the effect of exchange rate fluctuations on cash held.
Operating activities
For the year ended December 31, 2020, cash provided by operating activities increased by $92,693 compared to 2019. The increase
was due to a $46,043 increase in profit, higher non-cash expenses of $27,028 and a $39,749 increase in cash provided by net
working capital. The increases were partially offset by increased tax payments of $20,492 and higher interest payments of $365.
Cash provided by working capital for the year ended December 31, 2020 increased to $28,176 (2019: used $11,573) as a
result of the following factors:
• Cash from accounts receivable was $2,808 due to focused efforts to collect receivable balances and AirBoss Defense Group's
collection of a large shipment that was outstanding at December 31, 2019; partially offset by increased sales at AirBoss
Defense Group due to the delivery of FlexAir™ PAPR systems to HHS;
• Cash used for Inventory was $169 due to increased inventory at the Rubber Solutions segment in anticipation of shortages
and price increases in early 2021, partially offset by reduced inventory at AirBoss Defense Group' industrial products business
due to higher sales in the quarter;
• Cash used for prepaid expenses was $1,304 due to deposits for raw material purchases and tooling revenue to be billed in 2021;
• Cash from accounts payable was $26,891 due to obligations related to contracts the HHS contract and increased inventory
at the Rubber Solutions segment.
A N N U A L R E P O R T
27
2020
MD&A (cont’d)
Investing Activities
Property, Plant and Equipment
For the year ended December 31, 2020, the following investments were made in each segment:
Rubber Solutions made investments of $3,348. This included $2,228 to support growth initiatives, $143 on cost savings initiatives,
and the remaining spend was to replace or upgrade existing property, plant and equipment.
Engineered Products made investments of $5,297. This included $3,335 on cost savings initiatives and $1,782 to support growth
initiatives, and the remaining spend was to replace or upgrade existing property, plant and equipment.
AirBoss Defense Group made investments of $5,070. This included $3,983 to support growth initiatives, $205 on cost savings
initiatives, and the remaining spend was to replace or upgrade existing property, plant and equipment.
Intangible assets
The Company invested $719, made up of $86 of product development costs for the defense business and the balance for new
financial reporting and new ERP software.
Financing activities
The Company’s current credit facilities are comprised of a $60,000 revolving facility, a term loan (with interest at LIBOR plus
applicable margins from 175 to 275 basis points, depending on covenants), and an accordion feature of up to an additional
$50,000 of availability, upon the satisfaction of customary conditions for such features. The term loan is amortized by specific
installments of quarterly principal payments, along with monthly interest payments. The credit facility includes terms to replace
LIBOR with a suitable replacement as that issue develops. The replacement of LIBOR is not expected to have an impact on the
consolidated financial statements.
In March 2019 the calculation of one of the loan covenants on the Company's credit facilities was amended on a prospective basis.
In December 2019 the maturity of the credit facilities was extended from December 2020 to January 2021. In January 2020 the
Company signed an amended and restated credit agreement in connection with the merger between AirBoss' defense business
and Critical Solutions International, Inc. The amended and restated credit agreement matures in January 2023 and otherwise
carries similar terms as the existing credit agreement.
Deferred financing fees, less accumulated amortization have been deducted against the term loan for presentation purposes.
The fees are being amortized over the term of the credit facilities and $614 (2019: $306) has been amortized and is included in
finance costs.
Interest expense on the term debt was $1,439 (2019: $2,581).
Commitments and contractual obligations
The Company’s contractual obligations as at December 31, 2020 are summarized below:
Term loan
Forgivable loan from US government
Due to former non-controlling interest
Lease liabilities
Purchase obligations
Total
2021
3,807
6,464
15,000
1,812
15,361
42,444
2022
3,750
–
–
1,520
–
5,270
Payments Due In
2024
2023
48,750
–
–
1,455
–
50,205
–
–
–
1,403
–
1,403
2025 Thereafter
Total
–
–
–
1,340
–
1,340
–
–
–
5,952
–
5,952
56,307
6,464
15,000
13,482
15,361
106,614
Government assistance
During 2020, Rubber Solutions recognized grants of $15 (2019: $118) as a reduction of expenses and $500 as a reduction of capital
assets (2019: nil).
Scientific research and investment tax credits of $1,177 were recognized in 2020 (2019: $537); research and development costs were
reduced accordingly.
On May 1, 2020, the Company received a $6,422 loan pursuant to the Paycheck Protection Program (the “PPP”) under Division A,
Title I of the CARES Act, to fund certain payroll and business expenses of the Company’s Michigan and North Carolina operations.
This loan bears interest at 1.0% and matures on May 1, 2022 and may be prepaid at any time prior to maturity with no prepayment
penalties. Funds from the loan may only be used for payroll costs, group health care benefits, rent, and utilities. The Company used
the entire loan amount for qualifying expenses. The loan may be forgiven if they are used for qualifying expenses as described in the
CARES Act.
In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) for Canadian employers
affected by COVID-19, retroactive to March 15, 2020. CEWS provides a wage subsidy to eligible employers based on certain criteria,
including demonstration of revenue declines as result of COVID-19. The Company recorded the subsidy as a reduction to cost of sales
and operating expenses in the consolidated statement of profit.
Dividends
A quarterly dividend of $0.07 per share was declared on November 10, 2020 and paid on January 15, 2021. Total dividends
declared during the year were $0.28 per common share compared to $0.28 per common share in 2019.
Outstanding shares
As at December 31, 2020 the Company had 26,908,802 common shares outstanding.
28
AirBoss of America Corp.
MD&A (cont’d)
TRANSACTIONS WITH RELATED PARTIES
During the year, the Company paid rent for the corporate office of CAD $180 (2019: CAD $180) to a company controlled by
the CEO and Chairman of the Company.
During the year, the Company paid fees for the use of a facility in South Carolina of approximately $29 (2019: $28) to a company
in which the CEO and Chairman is an officer.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management includes directors, CEO, President and COO, CFO, and senior management. The compensation expense to key
management for employee services is shown below:
December 31
In thousands of US dollars
Salaries and other short term benefits
Share-based payment expense
2020
4,840
2,200
7,040
2019
4,154
352
4,506
The amounts disclosed in this table are the amounts recognized as operating expenses for accounting purposes during the
period and do not necessarily represent amounts receivable or received in cash.
Key management own 20.5% of the outstanding common shares as at December 31, 2020 (2019: 26.3%).
During 2014, the Company provided a share purchase loan of CAD $1,000 to the former Vice-Chair to purchase common
shares of the Company that was repaid in November 2019. In December 2016, the Company provided a share purchase loan
of CAD $250 to the former Chief Financial Officer that was repaid in June 2020. In March 2018, the Company provided a share
purchase loan of CAD $500 to the President and Chief Operating Officer. On June 28, 2019, the Company provided share
purchase loans of CAD $300 to the Executive Vice President, General Counsel; CAD $92 to the President and Chief Operating
Officer; and CAD $100 to the former Vice-President Human Resources that was repaid in April 2020. All loans are due upon
the earlier of the disposition date of all or proportionate to any part of the pledged securities or the fifth anniversary of the
issuance date. All share purchase loans issued prior to 2019 bear interest at 1% annually and all subsequent loans share
purchase loans bear interest at 2% annually. In all cases, loans are full recourse and interest is due and payable semi-annually.
In total, 86,807 shares of the Company having a fair value of $1,075 were pledged as collateral on these loans. At December
31, 2020, the loan receivables of $704, including accrued interest, were included in other assets. During the year interest of
$15 was paid (2019: $9).
NEW STANDARDS ADOPTED
Amendments to IFRS 9, Financial Instruments (“IFRS 9”) and IAS 39, Financial Instruments: Recognition and
Measurement (“IAS 39”)
On September 26, 2019, the IASB issued amendments for some of its requirements for hedge accounting in IFRS 9,
Financial Instruments and IAS 39, Financial Instruments: Recognition and Measurement, as well as the related standards on
disclosures, IFRS 7, Financial Instruments: Disclosures. The amendments were effective from January 1, 2020. The
amendments modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty
caused by interest rate benchmark reform in the following areas:
- the ‘highly’ probable requirement,
- prospective assessments,
- retrospective assessments (for IAS 39), and
- eligibility of risk components.
The adoption of amendments to IFRS 9 and IAS 39 did not have a material impact on the consolidated financial statements.
Amendments to IFRS 16, Leases
On May 28, 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The amendments are
effective for annual periods beginning on or after June 1, 2020, with earlier adoption permitted. The amendments exempt
lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct
consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions
as if they were not lease modifications. It applies to COVID-19-related rent concessions that reduce lease payments due on
or before June 30, 2021.
A N N U A L R E P O R T
29
2020
MD&A (cont’d)
FUTURE ACCOUNTING STANDARDS
Amendments to IAS 1, Presentation of Financial Statements
The amendments clarify the classification of liabilities as current or non-current. For the purposes of non-current classification,
the amendments remove the requirement for a right to defer settlement of a liability for at least twelve months to be
unconditional. Instead, such a right must have substance and exist at the end of the reporting period in order to qualify for non-
current classification. The amendments are effective from January 1, 2023 and the Company is assessing the impact of adopting
these amendments on its consolidated financial statements.
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures
Under the amendments a company will not have to derecognize the carrying amount of financial instruments for changes
required by the ongoing reform of inter-bank offered rates and other interest rate benchmarks, but change the effective interest
rate to reflect the new benchmark rate. The amendments are effective January 1, 2021. This amendment is not expected to
have a material impact on the consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The Company’s preparation of financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, net sales and expenses. The Company’s estimates are based upon historical experience
and on various other assumptions that are believed to be reasonable under the circumstances. The results of the Company’s
ongoing evaluation of these estimates form the basis for making judgments about the carrying value of assets and liabilities
and the reported amounts for net sales and expenses. Actual results may differ from these estimates under different
assumptions. These estimates and assumptions are affected by management’s application of accounting policies.
The Company’s critical accounting policies are those that affect our Consolidated Financial Statements materially and involve
a significant level of judgment by the Company. A summary of the significant accounting policies, including critical accounting
policies, is set forth in Note 3 to the Consolidated Financial Statements. The Company’s critical accounting estimates include
valuation of accounts receivable and inventory, valuation of goodwill and other long-lived assets, accounting for income taxes,
and government assistance.
Valuation of Accounts receivable
As at December 31, 2020, AirBoss Defense Group recorded a $453 allowance for impairment and the Rubber Solutions
segment recorded a $297 allowance for impairment.
Valuation of inventory
The majority of the Company’s products are manufactured against orders and inventory on hand is primarily raw materials or
finished goods awaiting shipment or customer release.
A provision for obsolete inventory is established based on materials on hand that can no longer be used for customer orders
based on a review of historical and forecasted sales, as well as a technical review to see if such materials can be reworked.
Management reviews the carrying cost of its inventory to ensure it is measured at the lower of cost and net realizable value by
examining current replacement cost and the quoted pricing to customers over the estimated time frame to consume the
inventory on hand and irrevocable commitments.
The Company’s provision for obsolete inventory and the write-down of inventory to net realizable value may require an
adjustment should any of the above factors change.
At December 31, 2020, a reserve for impaired inventory in the Rubber Solutions segment represents $1,219 (2019: $1,200).
AirBoss Defense Group maintains a provision of $5,048 (2019: $1,826) and the Engineered Products segment maintains a
provision of $190 (2019: $564).
Valuation of Goodwill
The Company reviews and evaluates goodwill for impairment when an indicator of impairment exists in the associated cash
generating units, but at least on an annual basis. In determining whether impairment has occurred in one of the Company’s cash
generating units, management compares the cash generating unit’s carrying value to its recoverable amount based on value in
use. Value in use was determined by the future cash flows generated from the continuing use of the unit. The calculations are most
sensitive to the discount rate and growth rate. Determination of growth rate is based on a number of assumptions arising from the
most current financial performance of each cash generating unit, the upcoming annual budget for each reporting unit and the
historical variability of earnings. Other factors, such as any foreign exchange volatility and volatility in world markets for rubber and
carbon black can also materially alter our expectations. Accordingly, management’s judgment is required to determine whether
these factors at any one point in time and in light of business initiatives, suggest a major change, positive or negative, to the
prospects of the business and, therefore, to the valuation of goodwill. No impairment charge was required in 2020 or 2019.
30
AirBoss of America Corp.
MD&A (cont’d)
Other Long-lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in economic and other
circumstances indicate that the carrying value of such assets may not be fully recoverable. The net recoverable value of an
asset, or cash generating unit, is calculated as the higher of an asset’s or cash generating unit’s fair value less costs to sell
and its value in use. Future net cash flows are developed using assumptions that reflect the planned course of action for an
asset given management’s best estimate of the most probable set of economic conditions. Inherent in these assumptions are
significant risks and uncertainties. In the view of management, there are no indicators of impairment based on assumptions
which they believe to be reasonable and no impairment charge was recorded in 2020 or 2019.
Accounting for Income Taxes
The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Consolidated
Financial Statements. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for
the current year and future tax liabilities and assets for the future tax consequences of events that have been recognized in the
Consolidated Financial Statements or tax returns. In determining both the current and deferred components of income taxes, the
Company interprets tax legislation in a variety of jurisdictions, as well as makes assumptions about the expected timing of the reversal
of deferred tax assets and liabilities and recognition of deferred tax assets is based on a probable criteria. If its interpretations differ
from those of tax authorities or if the timing of reversals is not as anticipated, the provision or relief for income taxes could increase
or decrease in future periods. Additional information regarding our accounting for income taxes is contained in Note 14 to the
Consolidated Financial Statements. Deferred tax assets have been recorded relating to loss carry-forward amounts when
management believes it is more likely than not that these will be used before expiration.
Government Assistance
Management evaluates its best estimates of the amount of government assistance receivable at each reporting date as an offset
against the related expense or capital expenditure, under the terms of agreements or based on its interpretation of existing
government programs. If its interpretations differ from those of the relevant tax authorities or program administrators, the amount
recoverable may increase or decrease in future periods.
FINANCIAL INSTRUMENTS
Foreign exchange hedge
At December 31, 2020, the Company had contracts to sell USD $16,031 from January 2021 to July 2021 for Canadian dollars
("CAD") $21,200. The fair value of these contracts, representing an unrealized gain of $620, are included in trade and other
receivables, including derivatives on the statement of financial position. The unrealized changes in fair value, representing a gain
of $362 (2019: gain of $1,254), are recorded on the statement of profit as other income (expense).
Interest rate swap
In December 2020, the Company entered into an interest rate swap agreement for a notional amount of $28,125 amortizing
down to $24,375 at maturity on January 1, 2023. Swap interest is calculated and settled on a monthly basis based on the
difference between the floating rate of USD LIBOR and the fixed rate of 0.265%. This swap agreement replaces an old swap
agreement that matured in December 2020 that calculated interest based on the difference between the floating rate of USD
LIBOR and the fixed rate of 1.69%. At December 31, 2019 the notional amount of the old swap agreement was $28,000.
During 2020, interest expense on the swap agreements was $264 (2019: income of $179).
At December 31, 2020, the fair value of this agreement, representing a loss of $57 (2019: loss of $19), is included in loans and
borrowings on the statement of financial position. The change in the fair value, representing a loss of $37 (2019: loss of $453),
is recorded on the statement of profit as finance costs.
The Company entered into these interest rate swap agreements in order to fix the interest rate on a portion of its term loan and
does not hold it for trading or speculative purposes.
RISK FACTORS
Impact of Economic Cycle
The demand for the Company’s products can vary in accordance with general economic cycles and the economic conditions of
the industry sectors that are served by the Company. In addition, a number of such industry sectors are cyclical in nature. The
Company is particularly sensitive to trends in the defense, automotive, tire, energy generation, construction, mining and
transportation industries because these industries are significant markets for the Company’s business and are highly cyclical.
In a severe economic slowdown, prices for coal, copper and other mined materials may fall, affecting demand for conveyor
belting, off-road retread tires and other rubber products manufactured by our customers from rubber compounds manufactured
by the Rubber Solutions segment. At AirBoss Defense Group, the timing and size of orders from government defense
departments worldwide is highly dependent on the political climate in the applicable jurisdiction, the broader geopolitical climate
and their impact on defense budgeting and spending and a significant decline in defense budget and spending from current levels
could have a material adverse effect on the profitability of AirBoss Defense Group. The global automotive industry is also cyclical,
with the potential for regional differences in timing of expansion and contraction. A significant decline in automobile production
volumes for the North American market from current levels could have a material adverse effect on the profitability of our
Engineered Products segment.
A N N U A L R E P O R T
31
2020
MD&A (cont’d)
Political Uncertainty and Policy Change
Certain of the business sectors in which we and our customers operate, particularly in the AirBoss Defense Group and Engineered
Products segments, are highly globalized industries. Election of protectionist governments or implementation of protectionist trade
policies could negatively impact the movement of goods, services and people across borders, including within North America.
Uncertainty created by rapidly changing political circumstances may impact our ability to plan effectively for our businesses over the
short- and medium-terms, until such time as policy changes or new laws, if any, are implemented. For example, such uncertainty may
affect plans relating to establishing operations in new locations (directly or through joint ventures) or potential acquisitions. A material
variation between our planning assumptions and actual outcomes could have a material adverse effect on our profitability and financial
condition.
Dependence on Key Customers and Contracts
From time to time, a significant portion of the Company’s sales for a given period may be represented by a relatively small
number of customers. Net sales from one customer represent approximately 19% (2019: 9%) of consolidated net sales in
2020. Five customers represented 48% (2019: 31%) of consolidated net sales in 2020. While the Company continues to work
on diversification of its customer base in all segments, there is no assurance of continued success and shifts in market share
away from these top customers could adversely impact our profitability.
Raw Materials and Inventory
The Company depends on various outside sources of supply for raw materials used in the production of its products, the price
and availability of which are subject to market conditions. As a result, any shortage of such raw materials could potentially
delay delivery of our products or supplies, increase our costs and decrease our profitability. The Company maintains multiple
supply sources in different areas of the world to mitigate the risk of shortages or price increases experienced in certain, but not
all, markets. However, there can be no assurance that such multiple supply sources can be maintained in the future and multiple
sources cannot overcome a global shortage in a particular raw material, should one occur.
Historically, raw material markets have been extremely volatile with key materials doubling or halving in price within a relatively
short period, and the Company does not expect such volatility to cease. Excess inventory or shortages of raw material could
prove costly to the Company in these markets.
The Company does not have long-term supply contracts with its suppliers and purchases most raw materials on a purchase
order basis. The price of many raw materials, such as carbon black, synthetic and natural rubber, chemicals for rubber mixing,
steel and silicone is directly or indirectly affected by factors such as exchange rates and the price of oil and, in the case of natural
rubber, weather conditions that impact harvest seasons. Although the Company attempts to pass price changes in raw materials
on to its customers, it may not always be able to adjust its prices, especially in the short-term, to recover the costs of increased
raw material prices. Conversely, if raw material prices decrease significantly and rapidly, the Company may be at risk to recover
the cost of any inventory purchased based on demand at higher prices.
The following table approximates the financial impact (assuming changes are not passed along to its customers) on the
Company of a 10% increase in the cost of its most critical raw materials based upon purchases made in the respective years:
in millions of US dollars
Natural and synthetic rubber
Chemicals (Rubber mixing)
Steel
Carbon black
Silicone
Earnings before tax
2020
(4.81)
(2.70)
(2.28)
(1.90)
(0.81)
(12.50)
2019
(3.38)
(2.40)
(3.24)
(1.84)
(0.86)
(11.72)
Competition and Price Pressure
The Company competes directly against major North American and international companies in the custom rubber compounding,
anti-vibration and industrial rubber product market segments. Some of these companies have strong established competitive
positions in these markets, including having a direct local presence in international markets where the Company does not, and
may be sheltered by domestic tariffs. In the case of rubber compounding, the industry leader may have greater resources,
both financial and technical, than the Company and has long-standing relationships with some of the Company’s prospective
customers using well-established marketing and distribution networks. Furthermore, the customers of several industry sectors
are price sensitive and thus, certain of the more commodity-like products in our businesses can be affected by severe price
pressure, which in turn could adversely impact our profitability in those areas.
Contract-related Risks
Contracts from many of our customers, particularly in the Rubber Solutions and Engineered Products segments, consist of
individual purchase orders or blanket orders under umbrella supply agreements. In these cases, there is no obligation on any
customer to continue to issue individual purchase orders and most umbrella supply agreements do not impose minimum
purchase requirements and also permit the customer to terminate blanket orders at any time. The termination of blanket orders
could result in the Company incurring various pre-production, engineering and other costs that we may not recover from our
customer and which could have an adverse impact on our profitability. In addition, it is difficult to predict accurately when
opportunities to win contract awards for defense products from the United States, Canadian or other foreign governments will
arise and how long the contract tender to award and subsequent commencement of production process will take. A prolonged
tender process without a corresponding award could also result in the Company incurring various pre-production, engineering
and other costs that we may not recover and which could have an adverse impact on our profitability.
32
AirBoss of America Corp.
MD&A (cont’d)
Currency Exposure
The Company has net sales and expenses denominated in both Canadian (“CAD”) and US (“USD”) dollars. In addition, the cost
to the Company of certain key raw materials and other expense items and the competitiveness of prices charged by the
Company for its products will be indirectly affected by currency fluctuations. Changes in the value of the Canadian dollar relative
to the US dollar could have a material positive or adverse effect on the Company’s results of operations.
The Company reviews its currency exposure positions from time to time and reacts accordingly by increasing or decreasing
the proportion of operating or term loan borrowings denominated in CAD funds as a natural balance sheet hedge or establishing
forward contracts to purchase CAD funds to manage its foreign exchange risk related to cash-flows. However, there is no
assurance that such strategies will be successful or cost effective and the profitability of the Company’s business could be
adversely affected by currency fluctuations.
The following table approximates the following impact on the Company of a $0.10 decrease in the value of one CAD dollar in
the Company’s USD functional currency (million):
in millions of US dollars
Sales (1)
Purchases (2)
Earnings before tax
2020
(3.9)
5.2
2019
(2.4)
6.8
(1) Based upon Canadian dollar-denominated sales
(2) Based upon Canadian dollar-denominated debt repayments, purchases and expenses
Health, Safety and the Environmental
The Company’s operations are subject to extensive health, safety and environmental (HSE) regulations by federal, provincial,
state and local authorities. The Company employs individuals who undertake manufacturing activity and handle various
substances in its manufacturing process, the nature of which may expose the Company to risks of causing or being deemed liable
for injury or environmental or other damages. The Company regularly assesses its policies and procedures relating to workplace
safety in its production facilities. While its use of potentially hazardous materials is limited, the Company ensures that its
operations are conducted in a manner that minimizes such risks and maintains insurance coverage considered reasonable by
management. To date, no regulatory authority has required the Company to pay any material fines or remediation expenses in
connection with any alleged violation of HSE regulations. However, there can be no assurance that future personal injury or
environmental damage will not occur or that personal injury or environmental damage due to prior or present practices will not
result in future liabilities. While management believes that the Company is in substantial compliance with all material HSE
government requirements relating to its operations, changes in government laws and regulations are ongoing and may make
HSE compliance increasingly expensive. It is not possible to predict future costs, which may be incurred to meet such obligations.
Impacts of Global Health Situations
Global health situations can have an impact on the Company’s operations and we continue to monitor the impact of COVID-19
(Coronavirus). The duration and scope of the continued outbreak is not known with any certainty and the Company is unable to
accurately project the ultimate impact on the business. However, if the outbreak continues for an extended period of time, AirBoss
may experience supply chain disruptions, in particular given production delays throughout the world, a decline in sales activities,
and reductions in operations and workforce.
Product Liability and Warranty Claims
As a manufacturer of rubber-based and other products, products which are used in vehicles and products which are worn by
individuals in the defense and first responder communities, the Company faces a risk of product liability and warranty claims from
its direct customers and, in some cases, from end-users of its products. Although the Company carries commercial general liability
insurance of the types, and in the amounts it believes to be reasonable by industry standards, any claim which is successful and
is not covered by insurance or which exceeds the policy limit could have a material adverse effect on the Company and its results.
Capacity and Equipment
Our rubber compounding facilities have an annual capacity to process approximately 500 million turn pounds.
The Company remains committed to continuous maintenance and upgrading of its equipment. Critical equipment remains not only
in a high state of repair, but is also technologically up to date so that the Company is able to ensure the reliability of supply to its
customers at competitive prices and at a high quality standard.
The Company has made regular investments in capacity and efficiency across its operations and should additional equipment be
required to fulfill any substantial increases in sales, the Company expects that it can be readily sourced in the market, however
any material failure of our equipment or inability to purchase additional required equipment could have a material adverse effect
on the Company.
Production Disruptions
Our production facilities, and those of our subcontractors, are subject to risk of shut-down caused by fire, natural disaster or other
catastrophic event, pandemic, labour conflicts or other forces or events beyond our control, or could result from a disruption of
supply of source materials from suppliers and sub-suppliers. Any prolonged shut-down of one or more of our production facilities
or that of our subcontractors could result in a materially negative impact on our profitability.
A N N U A L R E P O R T
33
2020
MD&A (cont’d)
Acquisitions and Integration
As part of our growth strategy, we will continue to pursue acquisitions in areas we have identified as consistent with such strategy.
However, there can be no assurance that we will identify suitable targets for acquisition or be able to acquire suitable targets
successfully. In addition, there is also a risk that the Company may not be able to successfully integrate any acquisition or achieve
all or any of the anticipated synergies of such acquisitions or to do so within the anticipated timelines, any of which could adversely
impact our profitability and financial condition.
Key Personnel
The Company’s future success largely depends on its ability to recruit, retain and develop qualified managers and other key
personnel. If key persons leave the Company and successors cannot be recruited or if the Company is unable to attract qualified
personnel, this could have a negative impact on our profitability and financial condition.
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the fiscal year of the Company, an evaluation was carried out under the supervision of and with the participation
of the Company’s management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures. Based
on that evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were
effective as of December 31, 2020, the end of the period covered by management’s discussion and analysis, to ensure that material
information relating to the Company and its consolidated subsidiaries would be made known to them by officers within those entities.
The Company’s CEO and its CFO are responsible for establishing and maintaining the Company’s disclosure controls and
procedures. The Disclosure Committee, composed of senior managers of the Company, assists the CEO and CFO in evaluating
the information and appropriateness of material subject to public disclosure.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the most recent period, there have been no changes in the Company’s existing policies and procedures and other
processes that comprise its internal control over financial reporting, that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management has designed internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the
reliability of the Company’s financial reporting and its compliance with IFRS in its consolidated financial statements. The
CEO/Chairman and the CFO have supervised management in the evaluation of the design and effectiveness of the Company’s
internal controls over financial reporting as at December 31, 2020 and believe the design and effectiveness of the internal
controls to be effective.
34
AirBoss of America Corp.
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of AirBoss of America Corp. and all the information in the annual report
are the responsibility of management and have been approved by the Board of Directors. The financial statements have been
prepared by management, in accordance with IFRS. When alternate accounting methods exist, management has chosen
those it deems most appropriate in the circumstances. Financial statements are not precise since they include certain amounts
based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that
the financial statements are presented fairly, in all material respects. Management has prepared the financial information
presented in this annual report and has ensured that it is consistent with that presented in the financial statements.
AirBoss of America Corp. maintains systems of internal accounting and administrative controls consistent with reasonable cost.
Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate
and the Company’s assets are appropriately accounted for and adequately safeguarded.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for reviewing and approving the
financial statements. The Board carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board and all members are outside directors. The Committee meets periodically with
management, as well as the external auditors, to discuss internal controls over the financial reporting process, auditing matters
and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities and to review the annual
report, the financial statements and the external auditors’ report. The Committee reports its findings to the Board for
consideration when approving the financial statements for issuance to the shareholders. The Committee also considers the
engagement or re-appointment of the external auditors for review by the Board and approval by the shareholders.
KPMG LLP, the Company’s external auditors, who are appointed by the shareholders, audited the consolidated financial
statements as of and for the years ended December 31, 2020 and December 31, 2019 in accordance with Canadian generally
accepted auditing standards to enable them to express to the shareholders their opinion on the consolidated financial
statements. KPMG LLP has full and free access to the Audit Committee.
March 9, 2021
P. Gren Schoch
Chairman and Chief Executive Officer
Frank Ientile
Chief Financial Officer
A N N U A L R E P O R T
35
2020
Independent Auditors’ Report
the consolidated statements of financial position as at end of December 31, 2020 and end of December 31, 2019
the consolidated statements of profit and comprehensive income for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
To the Shareholders of AirBoss of America Corp.
Opinion
We have audited the consolidated financial statements of AirBoss of America Corp. (the Entity), which comprise:
•
•
•
•
• and notes to the consolidated financial statements, including a summary of significant accounting policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position
of the Entity as at end of December 31, 2020 and end of December 31, 2019, and its consolidated financial performance and
its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.
Evaluation of impairment of goodwill
Description of the matter
We draw attention to Notes 2(d), 3(e)(i) and 9 to the financial statements. The goodwill balance included in intangible assets
is $35,053 thousand. The Entity performs goodwill impairment testing at least annually and whenever events or changes in
circumstances indicate that the carrying amount of the cash-generating unit likely exceeds its recoverable amount. The
allocation of goodwill is made to those cash-generating units or groups of cash-generating units that are expected to benefit
from the business combination in which the goodwill arose, identified according to operating segment. The recoverable amount
of the cash-generating unit is based on value in use, which is determined by discounting the future cash flows generated from
the continuing use of the cash-generating unit. In determining the estimated recoverable amount of the cash-generating unit,
the Entity’s key assumptions include projected sales and margins, discount rates and the terminal multiple.
Why the matter is a key audit matter
We identified the evaluation of the impairment of goodwill as a key audit matter. This matter represented significant auditor
judgement due to the high degree of estimation uncertainty in determining the recoverable amount. In addition, the involvement
of those with specialized skills and knowledge was required in performing and evaluating the results of our audit procedures
due to the sensitivity of the recoverable amount to changes in key assumptions.
How the matter was addressed in the audit
The following are the primary procedures we performed to address this key audit matter:
We assessed the Entity’s ability to accurately forecast by comparing the Entity’s projected sales and margins used in the prior
year impairment test to actual results.
We compared the Entity’s projected sales and margins to actual results. We took into account changes in conditions and
events, affecting each cash-generating unit or cash-generating group to assess the adjustments made in arriving at the
projected assumptions.
We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness of
(1) the discount rates and (2) the terminal multiple. The discount rates for the cash-generating units were compared against a
range that was independently developed using publicly available market data for comparable entities. The terminal multiple was
compared against independently developed multiples using publicly available market data for comparable entities and overall
macro-economic conditions.
Evaluation of acquisition-date fair value of intangible assets
Description of the matter
We draw attention to Notes 2(d) and 4 to the financial statements. The Entity acquired intangible assets through a business
combination. The acquisition date fair value for the customer relationships was $17,900 thousand and brand was $6,000
thousand. The Entity’s key assumptions in determining the acquisition-date fair value for the customer relationships and brand
include revenue forecasts, estimated annual attrition rates, discount rates and royalty rate.
36
AirBoss of America Corp.
Why the matter is a key audit matter
We identified the evaluation of the acquisition-date fair value of intangible assets as a key audit matter. This matter represented
significant auditor judgment due to the estimation uncertainty in determining the fair value of the customer relationships and
the brand. In addition, the involvement of those with specialized skills and knowledge was required in performing and evaluating
the results of our audit procedures due to the sensitivity of the fair value to possible changes in key assumptions in the models.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We compared the Entity’s revenue forecasts by comparing to historical results to assess the Entity’s ability to accurately
forecast. We took into account changes in conditions and events to assess the Entity’s revenue forecasts. We evaluated the
estimated annual customer attrition rates to historical attrition rates.
In addition, we involved valuation professionals with specialized skills and knowledge, who assisted with
• Assessment of the valuation approaches used by the Entity to calculate the fair value of the customer relationships and the brand
• Evaluation of the discount rates by comparing to a discount rate range that was independently developed using the capital
asset pricing model and weighted average cost of capital
• Evaluation of the royalty rate by comparing it against publicly available market data for comparable entities.
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be
entitled “Glossy Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we
conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled
“Glossy Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we
will perform on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International
Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
A N N U A L R E P O R T
37
2020
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
• The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events
or conditions may cause the Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
• Determine, from the matters communicated with those charged with governance, those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our auditors’ report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors’ report is William J. Stephen.
Vaughan, Canada
March 9, 2021
38
AirBoss of America Corp.
Consolidated Statement of Financial Position
In thousands of US dollars
Note
December 31, 2020
December 31, 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables, including derivatives
Prepaid expenses
Inventories
Current income taxes receivable
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred Income tax assets
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Loans and borrowings
Trade and other payables
Provisions
Current taxes payable
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee benefits
Provisions
Deferred income tax liabilities
Total non-current liabilities
Total liabilities
EQUITY
Share capital
Contributed surplus
Retained earnings
Total equity
Total liabilities and equity
5, 11
6
16
7, 8
9
16
10
8, 12
13
16
8, 12
19
13
16
14
14
86,970
68,602
6,176
45,525
1,452
208,725
81,254
71,774
3,973
1,643
158,644
367,369
27,083
74,295
573
747
102,698
63,651
664
2,058
3,710
70,083
121
68,890
4,689
41,996
1,611
117,307
80,169
49,935
846
1,407
132,357
249,664
5,358
43,590
103
753
49,804
68,786
510
626
3,959
73,881
172,781
123,685
87,060
1,578
105,950
194,588
367,369
39,579
1,262
85,138
125,979
249,664
The notes on pages 43 to 71 are an integral part of these consolidated financial statements.
Commitments (note 18), subsequent event (note 23).
On behalf of the Board
P.G. Schoch
Director
Robert L. McLeish
Director
A N N U A L R E P O R T
39
2020
Consolidated Statement of Profit and Comprehensive income
For the year ended December 31
In thousands of US dollars
Note
2020
2019
Net Sales
Cost of sales
Gross profit
General and administrative expenses
Selling and marketing expenses
Research and development expenses
Other income (expenses)
Operating expenses
Results from operating activities
Finance costs
Profit before income tax
Income tax expense
Profit and total comprehensive income for the year
Profit attributable to:
Owners of the Company
Non-controlling interest
Earnings per share
Basic
Diluted
6
3
17
12, 19
16
15
15
501,572
(365,650)
135,922
(42,425)
(6,332)
(2,657)
(2,311)
(53,725)
82,197
(3,368)
78,829
(22,567)
56,262
33,703
22,559
56,262
1.40
1.35
328,126
(279,372)
48,754
(25,016)
(5,294)
(1,907)
1,829
(30,388)
18,366
(3,831)
14,535
(4,316)
10,219
10,219
–
10,219
0.44
0.44
The notes on pages 43 to 71 are an integral part of these consolidated financial statements.
40
AirBoss of America Corp.
Consolidated Statement of Changes in Equity
Attributable to equity holders of the Company
In thousands of US dollars
Balance at January 1, 2019
Impact of change in accounting policy
Adjusted balance at January 1, 2019
Profit and comprehensive income for the period
Contributions by and distributions to owners
Stock options expensed
Share options forfeited
Dividends to equity holders
Total contributions by and distributions to owners
Share Contributed Retained
Earnings
Surplus
Capital
Non-
controlling
interest
Total
39,579
–
39,579
–
1,157
–
80,747
(904)
121,483
(904)
1,157
–
79,843
10,219
120,579
10,219
Total
equity
121,483
(904)
120,579
10,219
170
(65)
(4,924)
–
–
–
–
–
–
–
–
–
–
–
170
(65)
–
105
–
–
(4,924)
170
(65)
(4,924)
(4,924)
(4,819)
–
(4,819)
Balance at December 31, 2019
39,579
1,262
85,138
125,979
–
125,979
In thousands of US dollars
Attributable to equity holders of the Company
Share Contributed Retained
Earnings
Surplus
Capital
Non-
controlling
interest
Total
Total
equity
Balance at January 1, 2020
Profit and comprehensive income for the period
39,579
–
1,262
–
85,138
33,703
125,979
33,703
–
22,559
125,979
56,262
Contributions by and distributions to owners
Stock options expensed
Share options exercised
Share options forfeited
Acquisition of subsidiary (note 4)
Acquisition of non-controlling interest (note 4)
Settlement of deferred share units
Dividends to equity holders
–
(5)
–
–
47,419
67
–
644
(44)
(284)
13,655
(13,655)
–
–
–
–
–
–
(7,844)
–
(5,047)
644
(49)
(284)
13,655
25,920
67
(5,047)
–
–
–
23,538
(46,097)
–
–
644
(49)
(284)
37,193
(20,177)
67
(5,047)
Total contributions by and distributions to owners
47,481
316
(12,891)
34,906
(22,559)
12,347
Balance at December 31, 2020
87,060
1,578
105,950
194,588
–
194,588
The notes on pages 43 to 71 are an integral part of these consolidated financial statements.
A N N U A L R E P O R T
41
2020
Consolidated Statement of Cash Flows
For the year ended December 31
In thousands of US dollars
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortization of intangible assets
Impairment of assets
Finance costs
Unrealized foreign exchange losses (gains)
Share-based payment expense
SRED tax credits
Current income tax expense
Deferred income tax recovery
Other
Change in inventories
Change in trade and other receivables
Change in prepaid expenses
Change in trade and other payables
Change in provisions
Net change in non-cash or working capital balances
Interest paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Cash acquired on acquisition of subsidiary
Grant from government
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Repayment of borrowings
Principal payments for lease liabilities
Payment of debt refinancing fees
Proceeds from new debt
Exercise of stock options (net of withholding taxes)
Repayment of share purchase loan
Issuance of share purchase loans
Share repurchases
Interest received on share purchase loans
Dividends paid
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at January 1
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at December 31
Note
2020
2019
56,262
10,219
7
9
12, 19
13, 14
17
16
16
7
9
10
10
14
12,400
5,787
2,827
3,368
(684)
2,203
(1,177)
25,943
(3,376)
118
103,671
(169)
2,808
(1,304)
26,891
(50)
28,176
(2,729)
(24,719)
104,399
4,498
500
1,391
(14,215)
(719)
(8,545)
(8,750)
(1,741)
(717)
6,432
(50)
248
–
(178)
15
(4,845)
(9,586)
86,268
121
581
86,970
10,415
2,935
366
3,831
(1,327)
386
(537)
6,272
(1,956)
(4)
30,600
(1,893)
(11,597)
(286)
2,336
(133)
(11,573)
(3,094)
(4,227)
11,706
–
–
–
(17,261)
(2,220)
(19,481)
(3,750)
(1,614)
(128)
–
–
764
(364)
–
9
(4,913)
(9,996)
(17,771)
17,862
30
121
The notes on pages 43 to 71 are an integral part of these consolidated financial statements.
42
AirBoss of America Corp.
Notes to Consolidated Financial Statements ("CFS")
For the years ended December 31, 2020 and 2019
(Amounts in thousands of US dollars, except per share amounts, unless otherwise specified)
NOTE 1 REPORTING ENTITY
AirBoss of America Corp. is a public company listed on the Toronto Stock Exchange, incorporated and domiciled in Ontario.
Its registered office is located at 16441 Yonge Street, Newmarket, Ontario, Canada. AirBoss of America Corp. and its
subsidiaries are together referred to, in these consolidated financial statements, as the "Company” or "AirBoss". The Company
has operations in Canada and the US and is involved primarily in the manufacture of high-quality rubber-based products to
resource, military, health care, government, automotive and industrial markets (see Note 20).
Subsidiaries are consolidated based on control which is assessed on whether the Company has power over an investee,
exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns.
List of Subsidiaries
Set out below is a list of operating subsidiaries of the Company.
Operating Subsidiaries
Jurisdiction
Ownership % 2020 (2019)
AirBoss Rubber Compounding (NC) Inc. ("ANC")
North Carolina
SunBoss Chemicals Corp.
AirBoss Flexible Products Co. ("AFP")
AirBoss Defense Group Ltd. ("ADG Canada")
(formerly AirBoss Engineered Products Inc.)
AirBoss Defense Group, LLC ("ADG USA")
(formerly Immediate Response Technologies, LLC)
Critical Solutions International, Inc. ("CSI")
Ontario
Michigan
Quebec
Delaware
Texas
100% (100%)
100% (100%)
100% (100%)
100% (100%)
100% (100%)
100% (nil)
Following the merger between the Company's defense businesses and CSI on January 1, 2020 (see note 4, AirBoss Defense
Group Transactions), the Company realigned the organizational and governance structures of its businesses to align them
more closely with the nature of the Company’s operations. Such realignment gave rise to changes in how the Company presents
information for financial reporting and management decision-making purposes and resulted in a change in the Company’s
reporting segments. Consequently, as of January 1, 2020, the Company’s operating segments are organized into the following
reportable segments:
• Rubber Solutions - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding
related chemicals.
• Engineered Products - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts.
• AirBoss Defense Group - Includes the manufacture and distribution of personal protection and safety products, primarily for
CBRN-E threats, and the manufacture of semi-finished rubber related products
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.
The Rubber Solutions segment consists of the former rubber solutions segment, excluding the Company’s industrial products
business line (which is now part of the AirBoss Defense Group Segment).The Engineered Products segment only consists of
the Company's anti-vibration business. AirBoss Defense Group consists of the defense businesses and the Company’s
industrial products business line. The Company owned 55% of AirBoss Defense Group from January 1, 2020 until October 25,
2020 and acquired the remaining 45% ownership interest on October 26, 2020 (see note 4).
COVID-19
In March 2020, the World Health Organization declared COVID-19 a global pandemic. The impact of COVID-19 has been felt
throughout the world, with significant disruptions to business operations, supply chains and customer demand; the imposition
of quarantines; as well as considerable general concern and uncertainty. While a majority of the Company’s operations have
fallen within essential businesses classifications and have continued to operate throughout the pandemic, the Engineered
Product segment’s OEM customers shut down their operations in mid-March and as a result, the Company temporarily idled
its automotive related operations from March through mid-May.This suspension had a negative impact on the segment’s
profitability and cash flows. A phased restart of the automotive operations began in May 2020, and continued into the second
half of the year as OEMs began producing vehicles again. The ultimate business and economic impacts of COVID- 19 will
depend on a variety of factors, including the possibility of future shutdowns, impacts on customers and suppliers, the rate at
which economic conditions return to pre-COVID levels, any continued or future governmental orders or lock-downs due to any
future wave of COVID-19, the potential for a recession in key markets due to the effect of the pandemic, and on the demand
for the respective products that the Company and its customers produce.
A N N U A L R E P O R T
43
2020
Notes to CFS (cont’d)
NOTE 2 BASIS OF PREPARATION
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The Consolidated financial statements were authorized for issue by the Board of Directors on March 9, 2021.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material items
in the statement of financial position:
• certain property, plant and equipment was re-measured at fair value on the adoption of IFRS
•
•
forward contracts are measured at fair value
liabilities for cash settled share-based payment arrangements are initially and thereafter measured at fair value
• equity settled share-based payment arrangements are measured at fair value at the grant date
•
•
recognition of future income taxes on foreign exchange differences where the currency of the tax basis on non-monetary
assets and liabilities differ from the functional currency
the employee benefit liability is recognized as the net total of the plan assets, at fair value, less the present value of the defined
benefit obligation.
(c) Functional and presentation currency
These consolidated financial statements are presented in US dollars (“USD”), which is the Company’s functional currency. All
financial information presented in USD has been rounded to the nearest thousand, except where otherwise indicated.
(d) Use of estimates and judgments
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Significant areas requiring the use of estimates include valuation of accounts receivable, inventory,
intangible assets, accounting for income taxes, share-based payments, measurement of post-retirement benefits and fair value
of assets acquired through business combination. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimates are revised and in any future periods affected.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts
recognized in the consolidated financial statements is included in the following notes:
Note 4 – fair value of assets acquired in a business combination
Note 5 – trade and other receivables
Note 6 – inventories
Note 8 – leases
Note 9 – intangible assets
Note 16 – income taxes
Note 17 – government assistance
Information about assumptions and estimation uncertainties that have a significant risk resulting in a material adjustment within
the next financial year are included in the following notes:
Note 9 – intangible assets - key assumptions used in value-in-use calculations;
Note 13 – provisions;
Note 14 – capital and other components of equity;
Note 16 – income taxes;
Note 18 – commitments and contingencies; and
Note 19 – post retirement benefits.
44
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements.
(a) Basis of consolidation
(i) Business combinations
The Company measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-
controlling interest in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and
liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized
immediately in profit or loss. The Company elects to measure, on a transaction-by-transaction basis, non-controlling interest
either at its fair value or at its proportionate share of the recognized amount of the identifiable net assets at the acquisition date.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Company incurs in connection
with a business combination are expensed as incurred.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. The accounting policies of subsidiaries have been changed, when necessary, to align them
with the policies adopted by the Company.
(iii) Transactions eliminated on consolidation
Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are
eliminated in preparing the consolidated financial statements.
(b) Foreign currency
(i) Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are
presented in USD, which is the Company's functional and presentation currency.
(ii) Foreign currency transactions
Transactions in foreign currencies are translated to functional currencies at exchange rates at the dates of the transactions, or
valuation where items are re-measured. Monetary assets and liabilities denominated in a currency other than the functional
currency are translated to the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss
on the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities
are recognized in profit or loss on the income statement. Non-monetary items that are measured in terms of historical cost in
a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange gains and losses
are presented on a net basis in the income statement within other income (expense).
(c) Financial instruments
(i) Financial assets and liabilities
The Company recognizes financial assets and financial liabilities initially at fair value and subsequently measures these at
either fair value or amortized cost based on the following classifications:
Fair value through profit or loss (FVTPL):
Financial assets and financial liabilities purchased or incurred, respectively, with the intention of generating earnings in the
near term, and derivatives other than cash flow hedges, are classified as FVTPL. This category includes derivative assets and
derivative liabilities that do not qualify for hedge accounting. For items classified as FVTPL, the Company initially recognizes
such financial assets on the consolidated statement of financial position at fair value and recognizes subsequent changes in
the consolidated statements of profit. Transaction costs incurred are expensed in the consolidated statement of profit. The
Company does not currently hold any liabilities designated as FVTPL.
Fair value through other comprehensive income (FVTOCI):
This category includes the Company’s investments in equity securities. Subsequent to initial recognition, they are measured
at fair value on the consolidated statement of financial position and changes therein are recognized in other comprehensive
income. When an investment is derecognized, the accumulated gain or loss in other comprehensive income is transferred to
the statement of profit.
Amortized cost:
The Company classifies financial assets held to collect contractual cash flows at amortized cost, including cash and cash
equivalents, trade and other receivables, and share purchase loans. The Company initially recognizes the carrying amount of
such assets on the consolidated statements of financial position at fair value plus directly attributable transaction costs, and
subsequently measures these at amortized cost using the effective interest rate method, less any impairment losses.
Financial liabilities that are not classified as FVTPL include trade and other payables and long-term debt. These financial
liabilities are recorded at amortized cost on the consolidated statement of financial position.
A N N U A L R E P O R T
45
2020
Notes to CFS (cont’d)
(ii) Impairment of financial assets
The Company uses the forward looking “expected credit loss” model to determine the allowance for impairment as it relates to
trade and other receivables. The Company’s allowance is determined by historical experiences, and considers factors including
the aging of the balances, the customer’s credit worthiness, and updates based on the current economic conditions, expectation
of bankruptcies, and the political and economic volatility in the markets/location of customers.
(iii) Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows and benefits from the asset expire or
are settled. The difference between the carrying amount of the financial asset and the sum of consideration received and receivable
is recognized in the consolidated statements of profit.
Financial liabilities are derecognized when obligations under the contract expire, are discharged or cancelled. The difference
between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the
consolidated statements of profit.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when,
the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle
the liability simultaneously.
(iv) Derivative financial instruments
The Company holds stand-alone derivative financial instruments to reduce its foreign currency risk exposures. Such derivatives
are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value and changes therein are recognized immediately in the consolidated statements
of profit.
(d) Property, plant and equipment
(i) Recognition and measurement
Land and buildings comprise mainly manufacturing facilities and offices. Items of property, plant and equipment are measured
at historical cost (net of government grants) less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes
the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their
intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing
costs. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases
of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalized
as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and are recognized net within other income in profit or loss.
(ii) Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item or
recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.
(iii) Depreciation
Land is not depreciated. For other property, plant and equipment, depreciation is calculated over the depreciable amount,
which is the cost of an asset, revalued amount or other amount substituted for cost, less its residual value.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of property,
plant and equipment, with certain manufacturing equipment being depreciated on a units of production basis since this most
closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
• buildings
• plant and manufacturing equipment
• vehicles
•
furniture, office, lab and computer equipment
15-40 years
5-15 years
3-5 years
3-5 years
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
46
AirBoss of America Corp.
Notes to CFS (cont’d)
(e) Intangible assets
(i) Goodwill
Goodwill that arises upon the acquisition of a business is included in intangible assets. At initial recognition, goodwill is measured
as the excess of purchase price over the fair value of identifiable net assets.
In respect of acquisitions prior to January 1, 2010, goodwill is included on the basis of its deemed cost, the amount recorded
prior to the transition to IFRS.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested at least annually for impairment and
whenever events or changes in circumstances indicate that the carrying amount of the cash-generating unit likely exceeds its
recoverable amount. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the
purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that
are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.
(ii) Customer Relationships
Customer Relationships that arise upon the acquisition of a business are included in intangible assets. At initial recognition,
customer relationships are measured at fair value based on total sales to customers, estimating an annual attrition rate and
future growth based on current market conditions and historical data.
(iii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognized in profit or loss as incurred.
Investment tax credits and other related government assistance are recorded as a reduction of R&D department costs.
Investment tax credits related to capital assets reduce property, plant and equipment accordingly.
Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically
and commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to
complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour,
overhead costs that are directly attributable to preparing the asset for its intended use and borrowing costs on qualifying assets.
Other development expenditure is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.
(iv) Other intangible assets
Other intangible assets that are acquired or developed by the Company and have finite useful lives, are measured at cost less
accumulated amortization and accumulated impairment losses. Costs associated with annual licenses and maintaining
computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the
design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets
when there is an ability to use the software product and it can be demonstrated how the software product will generate probable
future economic benefits.
Directly attributable costs that are capitalized as part of the software product include the incremental software development or
contracted employee costs. Other development expenditures that do not meet these criteria are recognized as an expense as
incurred.
(v) Subsequent expenditures
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset
to which it relates. All other expenditures, including expenditures on internally generated goodwill and intellectual property, are
recognized in profit or loss as incurred.
(vi) Amortization
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other
than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption
of the future economic benefits embodied in the asset. Amortization is calculated over the cost of the asset, or other amount
substituted for cost, less its residual value.
The estimated useful lives for the current and comparative periods are as follows:
• software
• capitalized development costs
• customer relationships
• brands, patents and trademarks
5 years
3-5 years
10 years
10 years
A N N U A L R E P O R T
47
2020
Notes to CFS (cont’d)
Inventories
(f)
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average
cost principle and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress,
cost includes an appropriate share of production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs to sell. Impairment
charges are recorded against cost of sales, when it is determined the net realizable value is less than cost.
(g) Employee benefits:
(i) Other long-term employee benefits
The Company provides certain employees with post retirement life insurance benefits that are unfunded. The expected costs of
these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit
pension plans. These obligations are valued annually by independent qualified actuaries. The Company’s net obligation in
respect of long-term employee benefits, other than pension plans, is the amount of future benefits that employees have earned
in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The discount
rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the
Company’s obligations. Any actuarial gains and losses are recognized in other comprehensive income and retained earnings in
the period in which they arise.
(ii) Defined Contribution Plan
US operating subsidiaries of AirBoss maintain 401(k) defined contribution plans for their respective employees. The Company and
its Canadian operating subsidiaries maintain registered and unregistered defined contribution plans for their employees.
Contributions to these plans are expensed as incurred.
(iii) Multi-Employer Pension Plan
The Company contributes to the Steel Workers Pension Trust, a defined benefit multi-employer pension plan (MEPP) under
the terms of collective-bargaining agreements that cover its union-represented employees in the State of Michigan. Defined
benefit MEPPs are accounted for as defined contribution plans as adequate information to account for the Company's
participation in the plan is not available due to the size and number of contributing employees in the plan. The risks of
participating in a MEPP are different from participation in a single-employer plan in the following aspects:
(a) Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
(b)
(c)
participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those
plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
(iv) Bonus Plan
The Company recognizes a liability for unpaid bonuses and an expense for all bonuses, based on a formula that takes into
consideration the profit attributable to the Company’s shareholders, after certain adjustments. The Company recognizes a
provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(v) Defined Benefit plan
The Company provided designated employees with defined post-employment benefits based upon their years of service. A
defined benefit plan is a post-employment benefit plan other than a defined contribution plan. These benefits are accrued by
the Company and remain unfunded unless certain events occur. The Company’s net obligation, in respect of defined benefit
pension plans, is calculated by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets (if
any) are deducted. The discount rate is the yield at the reporting date on high-quality corporate bonds that have maturity dates
approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits
are expected to be paid.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
The Company recognizes all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive
income and reports them in retained earnings.
Settlements are approved by the Board of Directors and any difference between the final cash settlement and the Company’s
net obligation, are recognized at that time as a gain or loss to the current Statement of Income.
(h) Provisions
Provisions for environmental restoration and legal claims are recognized when: the Company has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the
amount has been reliably estimated.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as
finance cost.
48
AirBoss of America Corp.
Notes to CFS (cont’d)
(i) Net Sales:
(i) Goods Sold
Net sales from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received
or receivable, net of returns, trade discounts and volume rebates. Net sales for production of finished goods is recognized at
the point in time control of the goods is transferred to the customer. Control of finished goods production transfers upon shipment
to, or receipt by, customers depending on the terms of the contract. Generally, the buyer has no right of return except if the
product did not comply with the agreed upon specifications.
(ii) Services
Net sales for tolling services is recognized over time as value is added to the raw materials which are controlled and provided
by the customer.
(j) Government assistance
Government assistance is recognized as a reduction of the related expense or cost of the asset acquired in the period the
expenditure is recognized, unless the conditions for receiving the assistance are met after the related expenditure has been
recognized. In this case, the assistance is recognized when it becomes receivable.
(k) Lease payments
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted
for certain remeasurements of the lease liability. When a right-of-use asset meets the definition of investment property, it is
presented in investment property. The right-of-use asset is initially measured at cost, and subsequently measured at fair value,
in accordance with the Company’s accounting policies.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental
borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The Company applied judgment to determine the lease term for a lease contract running month-to-month, which significantly
affects the amount of lease liability and right-of-use asset recognized.
(l) Finance income and finance costs
Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value
through profit or loss. Interest income is recognized, as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of
financial assets at fair value through profit or loss, impairment losses recognized on financial assets and the financing
component of employee benefits. Borrowing costs that are not directly attributable to the acquisition, construction or production
of a qualifying asset are recognized in profit or loss using the effective interest method.
(m) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except
to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or
substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Current tax also
includes any tax arising from dividends.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries and jointly controlled entities
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized
for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively
enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities
will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions
and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve
a series of judgments about future events. New information may become available that causes the Company to change its
judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period
that such a determination is made.
(n) Segment reporting
Segment results that are reported to the Company’s CEO (the chief operating decision maker) include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis. Operating segments are aggregated if they are
similar and demonstrate similar economic characteristics. Unallocated items comprise mainly corporate assets (primarily the
Company’s headquarters), and head office expenses.
A N N U A L R E P O R T
49
2020
Notes to CFS (cont’d)
(o) Share-based payments
In 2015, the shareholders approved the Company’s 2015 Omnibus Incentive Plan (“Omnibus Plan”). The Omnibus Plan is a share-
based compensation plan, under which the entity receives services from directors, employees and certain advisors as consideration
for equity instruments of the Company. The fair value of the services received in exchange for the grant of the equity awards is
recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the awards granted.
Under the Omnibus Plan, the Company can issue restricted stock units, performance share units, deferred share units and stock
options pursuant to the terms and conditions of the Omnibus Plan and the related award agreements entered into thereunder.
Non-market vesting conditions are included in assumptions about the number of equity awards that are expected to vest. The total
expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period, the entity revises its estimates of the number of equity awards that are expected to
vest based on the non-market vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity. Unless net settled, when options are exercised the Company issues new
shares. The proceeds received, together with the amount recorded in contributed surplus, are credited to share capital when the
options are exercised. The beneficiary can elect to convert the fair value of the vested options to the market value of shares on a
cash-less basis on the exercise date. Liabilities related to performance share units are settled through cash payment, and liabilities
related to deferred share units are settled through the issuance of shares, or equivalent cash value, at the Company’s sole discretion.
The dilutive effect of outstanding equity awards is reflected as additional share dilution in the computation of diluted earnings per share.
(p) New Standards adopted
Amendments to IFRS 9, Financial Instruments (“IFRS 9”) and IAS 39, Financial Instruments: Recognition and
Measurement (“IAS 39”)
On September 26, 2019, the IASB issued amendments for some of its requirements for hedge accounting in IFRS 9, Financial
Instruments and IAS 39, Financial Instruments: Recognition and Measurement, as well as the related standards on disclosures,
IFRS 7, Financial Instruments: Disclosures. The amendments were effective from January 1, 2020. The amendments modify
some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by interest rate
benchmark reform in the following areas:
- the ‘highly’ probable requirement,
- prospective assessments,
- retrospective assessments (for IAS 39), and
- eligibility of risk components.
The adoption of amendments to IFRS 9 and IAS 39 did not have a material impact on the consolidated financial statements.
Amendments to IFRS 16, Leases
On May 28, 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The amendments are
effective for annual periods beginning on or after June 1, 2020, with earlier adoption permitted. The amendments exempt
lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct
consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as
if they were not lease modifications. It applies to COVID-19-related rent concessions that reduce lease payments due on or
before June 30, 2021.This amendment did not have a material impact on the consolidated financial statements.
(q) Future Accounting Standards
Amendments to IAS 1, Presentation of Financial Statements
The amendments clarify the classification of liabilities as current or non-current. For the purposes of non-current classification,
the amendments remove the requirement for a right to defer settlement of a liability for at least twelve months to be
unconditional. Instead, such a right must have substance and exist at the end of the reporting period in order to qualify for non-
current classification. The amendments are effective from January 1, 2023 and the Company is assessing the impact of adopting
these amendments on its consolidated financial statements.
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures
Under the amendments a company will not have to derecognize the carrying amount of financial instruments for changes
required by the ongoing reform of inter-bank offered rates and other interest rate benchmarks, but change the effective interest
rate to reflect the new benchmark rate. The amendments are effective January 1, 2021. This amendment is not expected to
have a material impact on the consolidated financial statements.
50
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 4 AIRBOSS DEFENSE GROUP TRANSACTIONS
On January 1, 2020, the Company closed the previously announced transaction to form the AirBoss Defense Group segment
("ADG") through the merger of its AirBoss Defense businesses and other operations in Acton Vale, Quebec with CSI. CSI is a
U.S.-based company and is the leading global supplier of route clearance vehicles; countermine capability and survivability
products to U.S. and foreign military forces. This merger created a dedicated defense player better positioned to capitalize on
emerging opportunities arising from the current geopolitical environment by combining AirBoss Defense’s strengths in
manufacturing and engineering design with CSI's expertise in global marketing and distribution of defense products. The merger
also diversified the Company's product offerings and provides significant cross-selling opportunities to an increasingly global
combined customer base.
The Company contributed the shares of ADG Canada and the membership interests of ADG USA to newly formed Canadian and
U.S. entities that formed AirBoss Defense Group, in exchange for a note receivable of $45,000 and equity interests. Critical
Solutions Holdings Inc. ("CSH") contributed all the shares of CSI and transferred a $15,000 receivable from CSI in exchange for
equity interests. Following these transactions AirBoss owned 55% of the equity in ADG and a $60,000 Vendor Takeback Notes
due from ADG, with the remaining 45% of the equity interest in ADG owned by CSH. The acquisition of control of the CSI
business has been accounted for as a business combination and recognized at fair value. The sale of a non-controlling interest
in the Company's former ADG Canadian and US businesses resulted in a gain of $13,655, which is recognized in other equity.
Acquisition-related costs
The Company incurred acquisition-related costs of $2,384 on professional fees and due diligence costs in 2020 and $1,401 in
2019 related to this transaction. These costs have been included in “general and administrative expenses”.
Identifiable assets acquired and liabilities assumed
The following table summarizes the recognized amounts of identifiable assets acquired and liabilities assumed at the acquisition
date on the basis of management’s estimates of fair values as follows:
In thousands of US dollars
Fair value of assets acquired:
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Inventories
Property, plant, and equipment
Customer relationships
Brand
Other intangible assets
Investments
Total assets
Value of liabilities assumed:
Trade and other payables
Vendor Takeback Note
Total liabilities assumed
Net assets acquired
4,498
2,203
184
3,360
1,335
17,900
6,000
2,150
493
38,123
3,758
15,000
18,758
19,365
The fair value of CSI's intangible assets (customer relationships, brand and patented technology) have been measured through
an independent valuation based on the following key assumptions: revenue forecasts, estimated annual attrition rates, discount
rates and a royalty rates and using the following methodologies: Relief From Royalty, Multi Period Excess Earnings, and Cost
Avoidance.
A N N U A L R E P O R T
51
2020
Notes to CFS (cont’d)
Goodwill
Goodwill arising from the acquisition has been recognized as follows:
In thousands of US dollars
Consideration transferred:
NCI, based on their proportionate interest in ADG Canada, ADG USA and CSI
Paid in capital on dilution of ownership interest in ADG Canada and ADG USA
Vendor Takeback Note transferred from CSH
Less: Fair value of net assets acquired
Goodwill
23,538
13,655
(15,000)
(19,365)
2,828
Non-controlling interest ("NCI") was measured using the fair value method.
The goodwill is attributable mainly to the skills and technical talent of CSI’s work force, and the synergies expected to be
achieved from integrating CSI into AirBoss Defense Group.
Acquisition of non-controlling interest in ADG
On October 26, 2020, the Company acquired the 45% ownership of AirBoss Defense Group held by CSH in return for 3.5
million shares of the Company having a fair value of $47,597 (less issuance costs of $178) and $20,000 (see note 12), with
$5,000 paid at closing, and installments of $5,000 paid at each three-month anniversary. The fair value of the Company's
shares issued was based on the listed share price at October 23, 2020 of CAD $17.87 per share. The excess of the total
consideration over the carrying value of the non-controlling interest of $46,097 was accounted in the contributed surplus of
$13,655 and retained earnings of $7,844.
NOTE 5 TRADE AND OTHER RECEIVABLES
December 31
In thousands of US dollars
Trade receivables
Less: expected credit loss
Other receivables
Impairment losses
The aging of trade receivables at the reporting date was:
December 31
In thousands of US dollars
Within terms
Past due 0-30 days
Past due 31-120 days
The continuity of the allowance for impairment was:
For the year ended December 31
In thousands of US dollars
Balance at January 1
Impairment loss recognized
Collected
Balance at December 31
2020
66,692
(750)
65,942
2,660
68,602
2019
67,900
(481)
67,419
1,471
68,890
2020
2019
Gross
Impairment
Gross
Impairment
49,544
12,621
4,527
66,692
–
–
(750)
(750)
50,875
12,769
4,256
67,900
2020
(481)
(755)
486
(750)
–
–
(481)
(481)
2019
(399)
(296)
214
(481)
52
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 6 INVENTORIES
December 31
In thousands of US dollars
Raw materials and consumables
Work in progress
Finished goods
Inventory in transit
Provisions
An inventory charge of $2,867 (2019: charge of $735) was included in cost of sales.
NOTE 7 PROPERTY, PLANT AND EQUIPMENT
2020
33,147
3,743
14,229
863
51,982
(6,457)
45,525
2019
30,371
3,435
11,368
412
45,586
(3,590)
41,996
Land and
buildings
Plant and
equipment1
Furniture
and equipment
Under
construction
Total
5,406
109,838
In thousands of US dollars
Cost
Balance at January 1, 2019
Recognition of right-of-use asset
on adoption of IFRS 16
Additions
Disposals
Transfers
19,419
7,019
9,127
(12)
687
Balance at December 31, 2019
36,240
Acquisition of subsidiary
Government grant
Disposals
Transfers
–
1,602
–
(1,933)
4,898
82,812
–
4,527
(616)
2,645
89,368
–
10,482
–
(1,176)
4,156
Balance at December 31, 2020
40,807
102,830
Accumulated depreciation
Balance at January 1, 2019
Depreciation for the period
Disposals
Transfers
Balance at December 31, 2019
Depreciation for the period
Impairment
Disposals
Transfers
7,314
2,362
(12)
21
9,685
2,530
–
(562)
2,824
Balance at December 31, 2020
14,477
41,652
8,204
(507)
(192)
49,157
9,450
820
(1,171)
(2,846)
55,410
2,201
225
340
(251)
120
2,635
1,335
293
–
(70)
(374)
3,819
1,629
215
(252)
171
1,763
420
–
(29)
22
2,176
–
10,590
–
(3,465)
12,531
–
2,510
(500)
–
(8,680)
5,861
–
–
–
–
–
–
–
–
–
–
(1) includes right of use assets. See note 8 for additional details.
Carrying amounts
In thousands of US dollars
At December 31, 2019
At December 31, 2020
Land and
buildings
26,555
26,330
Plant and
equipment
Furniture
and equipment
Under
construction
40,211
47,420
872
1,643
12,531
5,861
Depreciation expense of $11,774 (2019: $9,910) was charged to costs of sales, $541 (2019: $445) was charged to general and
administrative expense and $85 (2019: $60) was charged to research and development expenses.
A N N U A L R E P O R T
53
7,244
24,584
(879)
(13)
140,774
1,335
14,887
(500)
(3,179)
–
153,317
50,595
10,781
(771)
–
60,605
12,400
820
(1,762)
–
72,063
Total
80,169
81,254
2020
Notes to CFS (cont’d)
During 2020, the Company reviewed operations at AirBoss Defense Group's Acton Vale facility which resulted in a change in
the expected usage of certain molding and tooling equipment that were previously amortized over units of production basis.
The equipment is now expected to remain in production for one more year. The effect of this change increased depreciation
expense included in cost of sales by $1,323.
Impairment
The Engineered Products segment will make investments to replace certain equipment to improve production efficiency. The
equipment to be replaced was taken out of production and is no longer in use. Management estimated the equipment’s
recoverable amount was nil and the Company recorded an impairment loss of $743. In addition, the Rubber Solutions segment
removed an asset from service and recorded a $77 impairment charge.
NOTE 8 LEASES
The Company leases some of its plants, offices, and equipment. The majority of the Company's leases are for buildings, which
have remaining terms between 1 and 8 years.
Right-of-Use Assets
In thousands of US dollars
Cost
Balance at January 1, 2019
Lease additions
Lease extensions
Balance at December 31, 2019
Lease additions
Balance at December 31, 2020
Accumulated depreciation
Balance at January 1, 2019
Depreciation
Balance at December 31, 2019
Depreciation
Balance at December 31, 2020
Carrying amount at December 31, 2019
Carrying amount at December 31, 2020
Land and
buildings
Equipment
Total
7,020
–
6,505
13,525
–
13,525
–
1,310
1,310
1,465
2,775
12,215
10,750
467
714
–
1,181
671
1,852
–
161
161
304
465
1,020
1,387
7,487
714
6,505
14,706
671
15,377
–
1,471
1,471
1,769
3,240
13,235
12,137
Lease Liabilities
Interest expense on lease liabilities of $685 (2019: $449) is included in Finance Costs.
Cash outflow related to leases was $2,426 (2019: $2,063).
The future undiscounted contractual lease payments are as follows:
In thousands of US dollars
Total
2021
2022
2023
2024
2025 Thereafter
Lease payments
16,404
2,426
2,047
1,909
1,795
1,673
6,554
54
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 9 INTANGIBLE ASSETS
In thousands of US dollars
Cost
Balance at January 1, 2019
Purchases
Transfers
Balance at December 31, 2019
Acquisition of subsidiary
Purchases
Impairment
Disposals
Balance at December 31, 2020
Accumulated Amortization
Balance at January 1, 2019
Amortization for the year
Transfers
Balance at December 31, 2019
Amortization for the year
Disposals
Balance at December 31, 2020
Carrying amounts
At December 31, 2019
At December 31, 2020
Goodwill
Customer
Relationships
Brands,
Software and
Patents and Development
costs
Trademarks
32,225
–
–
32,225
2,828
–
–
–
35,053
–
–
–
–
–
–
–
32,225
35,053
28,250
–
–
28,250
17,900
–
–
–
46,150
12,612
2,825
–
15,437
4,702
–
20,139
12,813
26,011
1,532
926
–
2,458
8,150
86
(2,007)
–
8,687
–
–
–
–
819
–
819
2,458
7,868
5,285
1,311
(95)
6,501
–
633
–
(173)
6,961
4,046
110
(94)
4,062
266
(209)
4,119
2,439
2,842
Total
67,292
2,237
(95)
69,434
28,878
719
(2,007)
(173)
96,851
16,658
2,935
(94)
19,499
5,787
(209)
25,077
49,935
71,774
Amortization expense of $5,787 (2019: $2,935) was charged to general and administrative expense. Remaining amortization
for customer relationships acquired is 3 to 9 years and patents and trademarks is 4 to 9 years.
Goodwill
December 31
In thousands of US dollars
Defense business within AirBoss Defense Group
Engineered Products
2020
24,988
10,065
35,053
2019
22,160
10,065
32,225
Impairment
The AirBoss Defense Group segment has been working on the development of certain next generation portfolio products for several
years. The product development pipeline has been re-prioritized and revised as a result of the Company’s response to the COVID-19
pandemic, particularly with respect to improved manufacturability and enhanced features of its core product portfolio. As such, the
Company has determined that certain product development costs for predecessor products will no longer form part of the survivability
platform. Management estimated the recoverable amount of these development costs was nil and the Company has recorded an
impairment loss of $2,007.
Goodwill
Goodwill is allocated to those Cash Generating Units that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Company at which management monitors goodwill. As at December 31,
2020 and December 31, 2019, there was no goodwill impairment.
Recoverable amount
Recoverable amount was based on value in use. Value in use was determined by discounting the future cash flows generated
from the continuing use of the cash generating unit.
Key assumptions used in value-in-use calculations
The calculations of value in use for the Cash Generating Units are most sensitive to the following assumptions:
• Discount rate used 11.7 to 13.6% determined using risk-adjusted returns from comparable companies adjusted for the
Company's capital structure.
• Terminal multiple based on market capitalization
• Projected sales and margins used to extrapolate cash flows beyond the budget date
Cash flows were projected based on past experience, actual operating results and the business plan for a one-year period. Cash
flows for a further four-year period were extrapolated using projected sales and a growth rate for operating expenses based
on past experiences and future growth trends.
Net sales and margins in the business plan were budgeted based on discussions with customers, contracts on-hand and
industry information, past experience and trends, as well as continuous improvement initiatives. The anticipated annual net sales
have been based on expected growth levels (net of the inflationary effect of rising raw material prices).
The values assigned to the key assumptions represent management’s assessment of future trends in the defense and
engineered products industries, which are based on both external sources and internal sources (historical data). Material
changes to these assumptions could cause the carrying amount of goodwill to exceed its net recoverable amount.
A N N U A L R E P O R T
55
2020
Notes to CFS (cont’d)
NOTE 10 OTHER ASSETS
In thousands of US dollars
Balance at January 1, 2019
Accrued interest
Interest paid
Repayment of loan
New loan issuances
Effect of movements in exchange rates
Balance at December 31, 2019
Acquired on acquisition of subsidiary (note 4)
Accrued interest
Interest paid
Repayment of loan
Effect of movements in exchange rates
Balance at December 31, 2020
Share purchase
loan
Other
1,284
16
(9)
(764)
364
70
961
–
11
(15)
(248)
(5)
704
446
–
–
–
–
–
446
493
–
–
–
–
939
Total
1,730
16
(9)
(764)
364
70
1,407
493
11
(15)
(248)
(5)
1,643
NOTE 11 DERIVATIVES NOT DESIGNATED IN A FORMAL HEDGING RELATIONSHIP
Foreign exchange hedge
At December 31, 2020, the Company had contracts to sell USD $16,031 from January 2021 to July 2021 for Canadian dollars
("CAD") $21,200. The fair value of these contracts, representing an unrealized gain of $620, are included in trade and other
receivables, including derivatives on the statement of financial position. The unrealized changes in fair value, representing a
gain of $362 (2019: gain of $1,254), are recorded on the statement of profit as other income (expense).
At December 31, 2019, the Company had contracts to sell USD $19,715 from January 2020 to November 2020 for CAD
$26,200. The fair value of these contracts, representing an unrealized gain of $457 are included in trade and other receivables
including derivatives on the statement of financial position.
Interest rate swap
In December 2020, the Company entered into an interest rate swap agreement for a notional amount of $28,125 amortizing down
to $24,375 at maturity on January 1, 2023. Swap interest is calculated and settled on a monthly basis based on the difference
between the floating rate of USD LIBOR and the fixed rate of 0.265%. This swap agreement replaces an old swap agreement that
matured in December 2020 that calculated interest based on the difference between the floating rate of USD LIBOR and the fixed
rate of 1.69%. At December 31, 2019 the notional amount of the old swap agreement was $28,000.
During 2020, interest expense on the swap agreements was $264 (2019: income of $179).
At December 31, 2020, the fair value of this agreement, representing a loss of $57 (2019: loss of $19), is included in loans and
borrowings on the statement of financial position. The change in the fair value, representing a loss of $37 (2019: loss of $453), is
recorded on the statement of profit as finance costs.
The Company entered into these interest rate swap agreements in order to fix the interest rate on a portion of its term loan and
does not hold it for trading or speculative purposes.
NOTE 12 LOANS AND BORROWINGS
December 31
In thousands of US dollars
Non-current
Term debt
Lease liabilities
Less: deferred financing
Current
Term debt
Forgivable loan from US government (note 17)
Due to former non-controlling interest (note 4)
Lease liabilities
December 31
In thousands of US dollars
Term debt
Forgivable loan from US government (note 17)
Due to former non-controlling interest (note 4)
Lease liabilities
Subtotal
Less principal due within one year
Less deferred financing
56
2020
2019
52,500
11,670
(519)
63,651
3,807
6,464
15,000
1,812
27,083
2020
56,307
6,464
15,000
13,482
91,253
(27,083)
64,170
(519)
63,651
56,250
12,953
(417)
68,786
3,769
–
–
1,589
5,358
2019
60,019
–
–
14,542
74,561
(5,358)
69,203
(417)
68,786
AirBoss of America Corp.
Notes to CFS (cont’d)
The Company’s current credit facilities are comprised of a $60,000 revolving facility, a term loan (with interest at LIBOR plus
applicable margins from 175 to 275 basis points, depending on covenants), and an accordion feature of up to an additional
$50,000 of availability, upon the satisfaction of customary conditions for such features. The term loan is amortized by specific
installments of quarterly principal payments, along with monthly interest payments. The credit facility includes terms to replace
LIBOR with a suitable replacement as that issue develops. The replacement of LIBOR is not expected to have an impact on
the consolidated financial statements.
In March 2019 the calculation of one of the loan covenants on the Company's credit facilities was amended on a prospective
basis. In December 2019 the maturity of the credit facilities was extended from December 2020 to January 2021. In January
2020 the Company signed an amended and restated credit agreement in connection with the merger between AirBoss' defense
business and Critical Solutions International, Inc. The amended and restated credit agreement matures in January 2023 and
otherwise carries similar terms as the existing credit agreement.
Deferred financing fees, less accumulated amortization have been deducted against the term loan for presentation purposes.
The fees are being amortized over the term of the credit facilities and $614 (2019: $306) has been amortized and is included in
finance costs.
Interest expense on the term debt was $1,439 (2019: $2,581).
Principal repayments on the loans and borrowings are as follows:
In thousands of US dollars
2025 Thereafter
Total
2024
2022
2023
2021
Term loan
Forgivable loan from US government
Due to former non-controlling interest
Lease liabilities
56,307
6,464
15,000
13,482
91,253
3,807
6,464
15,000
1,812
27,083
3,750
–
–
1,520
5,270
48,750
–
–
1,455
50,205
–
–
–
1,403
1,403
–
–
–
1,340
1,340
–
–
–
5,952
5,952
As at December 31, 2020, $732 was drawn against the revolving credit facility to issue letters of credit (2019: nil drawn).
All obligations under the current credit facility and related loan documentation are secured by a first charge against all of the
Company’s present and after acquired property in favor of the lenders.
At December 31, 2020 the Company is not in default, nor has it breached any terms of the credit agreement relating to the current
credit facilities.
The carrying amount and fair value of the borrowings are as follows:
In thousands of US dollars
Term debt
Forgivable loan from US government
Due to former non-controlling interest
Lease liabilities
Carrying amount
Fair value
2020
55,788
6,464
15,000
13,482
2019
59,602
–
–
14,542
2020
56,239
6,447
14,847
15,041
2019
60,027
–
–
14,927
The fair value of current borrowings approximate the carrying amount, as the impact of discounting at current market rates will
not have a material impact. The fair values are based on cash-flows discounted using a rate based on the borrowing rate of
1.90% (2019: 3.48%) for the term loan and lease liabilities.
NOTE 13 PROVISIONS
In thousands of US dollars
Balance at January 1, 2019
Impact of change in accounting policy
Provisions accrued during the year
Payments during the year
Forfeitures during the year
Foreign exchange
Balance at December 31, 2019
Less amount due within one year
Provisions accrued during the year
Payments during the year
Forfeitures during the year
Foreign exchange
Balance at December 31, 2020
Less amount due within one year
A N N U A L R E P O R T
Site
restoration
Performance
awards and
Deferred
stock units
Lease
incentives
74
–
–
–
–
–
74
–
74
–
–
–
–
74
–
74
481
–
313
(133)
(32)
26
655
(103)
552
1,936
(117)
(93)
176
2,557
(573)
1,984
199
(199)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
754
(199)
313
(133)
(32)
26
729
(103)
626
1,936
(117)
(93)
176
2,631
(573)
2,058
57
2020
Notes to CFS (cont’d)
Performance Awards
The Company has issued certain executives with an aggregate of 201,210 performance awards pursuant to the terms and
conditions of the Omnibus Plan. Each performance award entitles the holder to receive on vesting a cash payment equal to the
product of (a) the fair market value of a common share as of the vesting date and (b) a performance factor between 0.5 and 1.5,
based on the level of achievement of predetermined performance objectives over the vesting period generally. The performance
awards vest three years following the grant date.
Performance stock units
January 1
New issuances
Forfeitures
Settlements
December 31
2020
83,998
191,233
(46,906)
(27,115)
201,210
2019
114,908
26,643
(14,563
(42,990)
83,998
During 2020, the Company recognized as employee costs $1,149 (2019: $74) related to the plan.
Deferred Stock Units
The Company has issued deferred stock units (“DSUs”) to non-executive directors pursuant to the terms and conditions of the
Omnibus Plan. Each vested DSU entitles the holder to receive, on redemption, either: (a) one common share; (b) a cash payment
equal to the fair market value of a common share as of the redemption date; or (c) a combination of both cash and common shares,
at the sole discretion of the Company. The redemption of a DSU occurs only following the termination of a holder’s service as
director and will occur on either: (a) a date selected by a recipient following the termination of their services as a director (which
can be no earlier than 10 days, and no later than one year, after the service termination date); or (b) a date selected by the Company
following the death of the recipient while still serving as director (which can be no later than 90 days following the death of the
recipient). Under the terms of compensation for independent directors of the Company approved by the Compensation Committee
and Board in 2016, commencing with the second quarter of 2016 and for each subsequent quarter while he or she remains a
director, each independent director is to be granted a number of DSUs having a fair market value equal to CAD $6.25. The fair
market value of each DSU is equal to the volume-weighted average trading price of a Common Share on the TSX for the 5 trading
days preceding the relevant grant date. In addition to this fixed amount of DSUs, independent directors are able to elect to be paid
all or a portion of all other director’s fees in DSUs in lieu of cash, using the same calculation of fair market value as for the fixed
amount of DSUs, to be granted on a quarterly basis. All DSUs issued to independent directors vest three months following the
relevant grant date. The compensation expense is accrued over the vesting period with a corresponding increase in liabilities in the
amount which represents the fair value of the amount payable to the independent director in respect of the DSUs.
Deferred stock units
January 1
New issuances
Settlements
December 31
2020
72,672
31,976
(7,588)
97,060
2019
43,088
29,584
–
72,672
During 2020, the Company recognized as employee costs $694 (2019: $207) related to DSUs issued under the Omnibus Plan.
58
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 14 CAPITAL AND OTHER COMPONENTS OF EQUITY
Share Capital and Contributed Surplus
Share Capital: Authorized - Unlimited number of Class A shares without par value designated as common shares.
Unlimited number of Class B preference shares without par value and issuable in series subject to the filing or articles of
amendment. The directors may fix, from time to time before such issue, the number of shares that is to comprise each series
and the designations, rights, privileges, restrictions and conditions attaching to each series.
Under the Omnibus plan, a maximum of 10% of issued and outstanding shares are available for issuance under any type of
share-based compensation plan. As at December 31, 2020, 988,394 shares are available (2019: 1,744,370).
Issued share capital is as follows:
In thousands of shares
January 1
Issued to acquire subsidiary
Exercise of share options
Settlement of deferred share units
December 31
2020
23,392
3,500
9
8
26,909
2019
23,392
–
–
–
23,392
Issuance of common shares
During 2020, 23,974 options were exercised resulting in the issuance of 8,772 common shares (2019: nil options exercised).
In November 2020, the Company renewed its normal course issuer bid ("NCIB") to purchase up to 500,000 of its common
shares, representing approximately 3.8% of the Company's public float. The Company purchased nil shares (2019: nil) under
its NCIB in 2020.
Capital and other components of equity
Contributed surplus
Contributed surplus is comprised of the difference between the book value per share and the purchase price paid for shares
acquired for cancellation by the Company and stock-based compensation of employees and non-employees.
Stock Options
The term of an option shall not exceed 10 years from the date of grant. Options granted to directors and officers of the Company,
which were outstanding at December 31, 2020, are as follows:
Range of exercise
price ($CAD)
5.14
9.49
10.98
11.56
12.26
16.30
16.69
17.53
Options
outstanding
Quantity
Weighted
average
contract life
Options
exercisable
Quantity
1,314,235
151,258
33,200
3,999
2,992
25,000
66,370
8,372
1,605,426
4.23
3.41
1.86
2.22
1.22
4.42
0.25
4.87
–
35,262
24,900
1,510
2,587
–
66,370
–
130,629
Options granted and outstanding:
A summary of the status of the Company’s stock option plan as of December 31, 2020 and 2019 and changes during the years
then ended, is presented below:
Outstanding beginning of year
Granted
Exercised
Forfeited
Outstanding end of year
A N N U A L R E P O R T
2020
Weighted average
exercise price
($CAD)
12.26
5.38
10.80
8.24
6.42
Quantity
438,204
1,616,925
(23,974)
(425,729)
1,605,426
Quantity
519,272
197,261
–
(278,329)
438,204
2019
Weighted average
exercise price
($CAD)
13.25
9.49
–
12.14
12.26
59
2020
Notes to CFS (cont’d)
Inputs for measurement of grant date fair values
The grant date fair value of all options were measured based on the Black-Scholes model. Expected volatility is estimated by
considering historic average share price volatility. The inputs used in the measurement of the fair values at grant date of the
share-based payment plans are the following:
Fair value of share options and assumptions
In Canadian dollars
November 2020
June 2020
March 2020
May 2019
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected annual dividend rate
Risk-free interest rate (based on
government bonds)
$
$
$
4.67
16.68
17.53
39.4%
5 years
1.7%
0.5 %
$
$
$
5.06
16.68
16.30
39.7%
5 years
1.7%
0.4%
$
$
$
0.66
4.84
5.14
32.6%
5 years
5.8%
0.8%
$
$
$
2.04
9.58
9.49
30.7%
5 years
2.9%
1.5%
The stock options issued vest as follows:
Vested at December 31, 2020
2020
2021
2022
2023
Stock option expense
Quantity
130,629
385,517
376,812
375,567
336,901
1,605,426
During 2020, the Company recognized as employee costs $360 (2019: $105) relating to option grants in general and administrative
expenses of the statement of income.
Dividends
Dividends on common shares were paid to shareholders of record quarterly in 2020 and in 2019 as follows:
Shareholder of record at:
$CAD/share
Date Paid
$CAD/share
Date Paid
2020
2019
March 31
June 30
September 30
December 31
0.07
April 15, 2020
July 15, 2020
0.07
0.07 October 15, 2020
January 15, 2021
0.07
0.28
0.07
0.07
0.07
0.07
0.28
April 15, 2019
July 15, 2019
October 15, 2019
January 15, 2020
The dividend payable at December 31, 2020 was $1,479 (2019: $1,261).
60
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 15 EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted earnings per share:
For the year ended December 31
In thousands of US dollars except per share amounts
Numerator for basic and diluted earnings per share:
Net income
Denominator for basic and diluted earnings per share:
Basic weighted average number of shares outstanding
Dilution effect of stock options
Dilution of effect of deferred stock units
Diluted weighted average number of shares outstanding
Net income per share:
Basic
Diluted
2020
33,703
24,032
787
82
24,901
1.40
1.35
2019
10,219
23,392
–
53
23,445
0.44
0.44
As of December 31, 2020, 74,742 options (2019: 438,204) were excluded from the diluted weighted average number of common
shares calculation as their effect would have been anti-dilutive.
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options was based
on quoted market prices for the period during which the options were outstanding.
NOTE 16 INCOME TAXES
The provision for income taxes differs from the amount computed by applying the Canadian statutory income tax rate to income
before income taxes for the following reasons:
For the year ended December 31
In thousands of US dollars
Combined federal and provincial statutory income tax
Foreign tax differential
Effect of permanent differences
Change in tax rates and new legislation
Difference arising on filing and assessments
Deductible temporary differences not recognized
Other
Total expense
The components of the provision for income taxes are as follows:
Current
Deferred
Total
2020
20,889
(890)
374
(186)
3
2,367
10
22,567
25,943
(3,376)
22,567
2019
3,852
456
(286)
26
(100)
667
(299)
4,316
6,272
(1,956)
4,316
The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities
are as follows:
December 31
In thousands of US dollars
Deferred income tax assets:
Non-capital income tax loss carry-forwards
Deferred income tax deductions relating to long-term liabilities
Equity Compensation
Alternative minimum tax
Capital assets
Reserve
Other
Deferred income tax liabilities:
Capital assets
Other
Net deferred income tax liabilities
Recorded on the consolidated statement of financial position:
Deferred income tax assets
Deferred income tax liabilities
Net
A N N U A L R E P O R T
2020
2,400
191
647
–
122
6,289
101
9,750
(9,350)
(137)
(9,487)
263
3,973
(3,710)
263
2019
4,327
150
164
49
138
–
541
5,369
(8,418)
(64)
(8,482)
(3,113)
846
(3,959)
(3,113)
61
2020
Notes to CFS (cont’d)
In assessing the recognition of deferred income tax assets, management considers whether it is more likely than not that some
portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is
dependent upon the generation of future taxable income during the period in which the temporary differences are deductible.
Management considers the scheduled reversals of deferred income tax liabilities, the character of the income tax asset and
the tax planning strategies in making this assessment. Management would not recognize deferred income tax assets if the more
likely than not realization criterion is not met.
The Company has $42,935 of unused tax losses (2019: $29,147) available to offset future income taxes in the US. Losses
incurred prior to 2018 were set to expire starting 2037, while losses incurred in 2018 and after can be carried forward indefinitely.
The aggregate amount of taxable temporary differences associated with investments in subsidiaries, branches and associated
and interests in joint ventures, for which no deferred income tax liabilities have been recognized, is $32,304 (2019: deductible
temporary differences of $28,553).
Deferred tax assets have not been recognized in respect of the following items, because it is not probable that future taxable
profit will be available against which the Company can use the benefits therefrom.
December 31
In thousands of US dollars
Gross amount
2020
Tax effect
Gross amount
2019
Tax effect
Capital losses
Operating losses
Deductible temporary differences
918
31,850
17,691
50,459
142
6,688
3,759
10,589
918
980
–
1,898
142
229
–
371
NOTE 17 GOVERNMENT ASSISTANCE
During 2020, Rubber Solutions recognized grants of $15 (2019: $118) as a reduction of expenses and $500 as a reduction of
capital assets (2019: nil).
Scientific research and investment tax credits of $1,177 were recognized in 2020 (2019: $537); research and development costs
were reduced accordingly.
On May 1, 2020, the Company received a $6,422 loan pursuant to the Paycheck Protection Program (the “PPP”) under Division
A, Title I of the CARES Act, to fund certain payroll and business expenses of the Company’s Michigan and North Carolina
operations. This loan bears interest at 1.0% and matures on May 1, 2022 and may be prepaid at any time prior to maturity with
no prepayment penalties. Funds from the loan may only be used for payroll costs, group health care benefits, rent, and utilities.
The Company used the entire loan amount for qualifying expenses. The loan may be forgiven if they are used for qualifying
expenses as described in the CARES Act.
In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) for Canadian employers
affected by COVID-19, retroactive to March 15, 2020. CEWS provides a wage subsidy to eligible employers based on certain criteria,
including demonstration of revenue declines as result of COVID-19. The Company applied for CEWS and recorded the subsidy as
a reduction to cost of sales and operating expenses of $7,216 and $1,654, respectively, in the consolidated statement of profit.
NOTE 18 COMMITMENTS AND CONTINGENCIES
Commitments
The Company has purchase commitments of $15,361 (2019: $10,770) for raw materials. Delivery on these commitments is
expected in 2021.
Litigation
No legal provisions are recognized at December 31, 2020 and 2019.
NOTE 19 POST RETIREMENT BENEFITS
The Company provides post retirement life insurance benefits to eligible retirees (“Benefit Plan”). The post-retirement life
insurance benefits under the other benefit plan are for non-unionized and unionized employees of ADG Canada, which are
unfunded defined benefit plans covering life insurance.
The methods of accounting, assumptions and frequency of valuations for Benefit Plan are similar to those used for defined
benefit pension schemes. This plan is funded through proceeds from an insurance policy. Total estimated contribution to this
plan for the next fiscal year is $18. This plan is unfunded as such there is no plan asset to be disclosed. At December 31, 2020,
the weighted average duration of the defined benefit obligation was 11 years (2019: 12 years).
The Benefit Plan exposes the Company to actuarial risks, such as interest rate risk and longevity risk.
December 31
In thousands of US dollars
Statement of Financial Position obligations for Benefit Plan
Statement of Profit charge for Benefit Plan
2020
664
43
2019
510
43
62
AirBoss of America Corp.
Notes to CFS (cont’d)
December 31
In thousands of US dollars
Present value of unfunded obligation and Liability
in the Statement of Financial Position
Movement in the defined benefit
obligation is as follows:
At January 1
Current service cost
Interest cost
Benefit payment
Actuarial loss
Foreign currency translation
At December 31
The amounts recognized in the
Statement of Profit is as follows:
Post-retirement benefits expense
Interest cost
Foreign currency translation
Expense
2020
664
510
3
14
(94)
218
13
664
136
15
13
164
2019
510
474
2
17
(41)
34
24
510
2
17
24
43
The current service charge was included in “general and administrative expense” and the interest cost is included in “finance
costs” in the income statement.
December 31
In thousands of US dollars
The principal actuarial valuation
assumptions used were as follows:
Discount rate
Mortality
Retirement age:
Percentage of members with spouses at retirement
2020
2019
2.35%
3.00%
CPM
mortality table
projected
with scale MI-
2017 for the
private sector
CPM
mortality table
projected
with scale MI-
2017 for the
private sector
N/A
N/A
A N N U A L R E P O R T
63
2020
Notes to CFS (cont’d)
The sensitivity of the Benefit Plan to changes in assumptions is set out below. The sensitivity analysis was performed by
changing each assumption individually. If actual changes occur, some of these assumptions are likely to be correlated and result
in a combined impact.
Fiscal Year ending December 31
Effect of an increase of 1%
Post-employment benefit obligation
Effect of a decrease in 1%
Post-employment benefit obligation
Mortality Sensitivity Analysis
Effect of an increase of 10% on mortality rates
Post-employment benefit obligation
Effect of a decrease of 10% on mortality rates
Post-employment benefit obligation
Defined Contribution Plan
2020
(66)
83
7
(8)
2019
(56)
70
1
(1)
AirBoss of America Corp. maintains a registered retirement savings plan defined contribution plan for all of their employees.
Total contribution and expense to this plan for 2020 were $420 (2019: $341).
AFP maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during 2020
were $512 (2019: $430).
ANC maintains a 401(k) plan for its employees. Total contributions and expense to this plan during 2020 were $78 (2019: $69).
ADG USA maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during
2020 were $106 (2019: $90).
ADG Canada employees are covered under various registered and unregistered defined contribution plans. Total contribution
and expense to these plans for 2020 were $217 (2019: $179).
CSI maintains a 401(k) defined contribution plan for its employees. Total contribution and expense to these plans for 2020
were $271.
Multi-Employer Pension Plan
AFP contributes to the Steel Workers Pension Trust, a multi-employer defined benefit pension plan under the terms of collective-
bargaining agreements that cover its union-represented employees in the State of Michigan. The risks of participating in a
multi-employer plan are different from participation in a single-employer plan in the following aspects:
(a) Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
(b)
(c)
participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those plans
an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
During 2020, the Company made contributions of $257 (2019: $273) to the multi-employer pension plan. The unfunded vested
benefit ratio was 12.8% at December 31, 2020 (2019: 17.0%). The Steel Workers Pension Trust was in a net deficit at December
31, 2020 and the Company’s portion of the deficit was unknown. The collective bargaining agreement requires that the Company
contributes $0.40 for each hour worked by eligible employees during the preceding wage month.
64
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 20 SEGMENTED INFORMATION
Following the merger between the AirBoss Defense business and CSI on January 1, 2020, the Company realigned the
organizational and governance structures of its businesses to align them more closely with the nature of the Company’s
operations. Such realignment gave rise to changes in how the Company presents information for financial reporting and
management decision-making purposes and resulted in a change in the Company’s reporting segments. Consequently, as of
January 1, 2020, the Company’s operating segments are organized into the following reportable segments:
• Rubber Solutions - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding
related chemicals
• Engineered Products - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts
• AirBoss Defense Group - Includes the manufacture and distribution of personal protection and safety products, primarily for
CBRN-E threats, and the manufacture of semi-finished rubber related products
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.
The Rubber Solutions segment will consist of the former rubber solutions segment, excluding the Company’s industrial products
business line (which is now part of the AirBoss Defense Group Segment).The Engineered Products segment will only consist of the
Company's anti-vibration business. AirBoss Defense Group consists of the defense businesses and the Company’s industrial products
business line.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit
before finance costs and income tax, as included in the internal management reports that are reviewed by the Company’s
CEO/Chairman and President. Segment profit is used to measure performance as management believes that such information is the
most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Transfer pricing
is based on third-party rates.
Comparative period segment disclosures have been recast to reflect the changes in the Company’s reporting segments. Information
regarding the results of each reportable segment is included below. Inter-company amounts, which represent items purchased from
different segments, have been presented within the segment disclosure and are eliminated to arrive at the consolidated amounts.
For the year ended
December 31
Rubber
Solutions
Engineered
Products
AirBoss
Defense Group
Unallocated
Corporate Costs
Total
In thousands of US dollars
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Segment net sales
119,090 137,517 114,557 124,887 302,278 85,577
Inter-segment net sales
(17,824)
(17,318)
(12,254)
–
(4,275)
(2,537)
External net sales
101,266 120,199 102,303 124,887 298,003 83,040
–
–
–
– 535,925 347,981
– (34,353)
(19,855)
– 501,572 328,126
Depreciation, amortization,
and impairment
Segment measure of
profit (loss)
Finance costs
Income tax expense
Profit
Segment assets
Segment liabilities
Capital additions
3,351
4,192
5,837
4,642 11,488 4,700
338
182 21,014 13,716
11,452 14,482
(7,166)
(4,307) 87,846 12,018
(9,935)
(3,827) 82,197 18,366
(3,368)
(3,831)
(22,567)
(4,316)
56,262 10,219
82,150 76,720 75,597 79,471 198,450 89,226 11,172 4,247 367,369 249,664
25,856 20,560 22,788 24,314 42,396 14,153 81,741 64,658 172,781 123,685
3,840 10,869
5,665 10,507
5,455
4,001
646
1,323 15,606 26,700
A N N U A L R E P O R T
65
2020
Notes to CFS (cont’d)
Geographical segments
The Company operates manufacturing facilities and sales offices in the US and Canada, selling primarily in North American markets.
In presenting information on the basis of geographical segments, segment net sales is based on the geographical location of
customers. Segment assets are based on the geographical location of the assets. Non-current assets include property, plant
and equipment, software, goodwill, future income taxes and other assets.
For the year ended December 31
In thousands of US dollars
Canada
United States
Other countries
2020
2019
Net sales
Non-current assets
Net sales Non-current assets
62,686
409,728
29,158
501,572
45,357
113,287
–
158,644
62,522
235,898
29,706
328,126
48,429
83,082
–
131,511
Major customers
Net sales from one customer represent approximately 19% (2019: 9%) of consolidated net sales in 2020. Five customers
represented 48% (2019: 31%) of consolidated net sales in 2020.
Major Products
In thousands of US dollars
Rubber Solutions
Tolling
Mixing
Engineered Products
AirBoss Defense Group
Defense
Industrial
2020
2019
7,315
93,951
101,266
102,303
271,429
26,574
298,003
501,572
9,729
110,470
120,199
124,887
54,657
28,383
83,040
328,126
NOTE 21 RELATED PARTIES
Related Party Transactions
During the year, the Company paid rent for the corporate office of CAD $180 (2019: CAD $180) to a company controlled by
the CEO and Chairman of the Company.
During the year, the Company paid fees for the use of a facility in South Carolina of approximately $29 (2019: $28) to a company
in which the CEO and Chairman is an officer.
66
AirBoss of America Corp.
Notes to CFS (cont’d)
Transactions with key management personnel
Key management includes directors, CEO, President and COO, CFO, and senior management. The compensation expense
to key management for employee services is shown below:
December 31
In thousands of US dollars
Salaries and other short-term benefits
Share-based payment expense
2020
4,840
2,200
7,040
2019
4,154
352
4,506
The amounts disclosed in this table are the amounts recognized as operating expenses for accounting purposes during the
period and do not necessarily represent amounts receivable or received in cash.
Key management own 20.5% of the outstanding common shares as at December 31, 2020 (2019: 26.3%).
During 2014, the Company provided a share purchase loan of CAD $1,000 to the former Vice-Chair to purchase common
shares of the Company that was repaid in November 2019. In December 2016, the Company provided a share purchase loan
of CAD $250 to the former Chief Financial Officer that was repaid in June 2020. In March 2018, the Company provided a share
purchase loan of CAD $500 to the President and Chief Operating Officer. On June 28, 2019, the Company provided share
purchase loans of CAD $300 to the Executive Vice President, General Counsel; CAD $92 to the President and Chief Operating
Officer; and CAD $100 to the former Vice-President Human Resources that was repaid in April 2020. All loans are due upon
the earlier of the disposition date of all or proportionate to any part of the pledged securities or the fifth anniversary of the
issuance date. All share purchase loans issued prior to 2019 bear interest at 1% annually and all subsequent loans share
purchase loans bear interest at 2% annually. In all cases, loans are full recourse and interest is due and payable semi-annually.
In total, 86,807 shares of the Company having a fair value of $1,075 were pledged as collateral on these loans. At December
31, 2020, the loan receivables of $704, including accrued interest, were included in other assets. During the year interest of
$15 was paid (2019: $9).
NOTE 22 FINANCIAL INSTRUMENTS
Financial risk management
The Company's activities result in exposure to a variety of financial risks, including risks related to commodity prices, currency
fluctuation, interest rates, credit and liquidity.
Market Risk
Commodity prices and supplies
The Company’s financial performance depends on certain outside sources for raw materials, including carbon black, synthetic
and natural rubber, chemicals for rubber mixing, steel and silicone used in the production of its products. The price and
availability of these raw materials are subject to fluctuations from such factors as weather, exchange rates, the price of oil,
changes in industry production capacity, changes in world inventory levels and other factors beyond the Company's control.
The Company manages its commodity price and supply risk by matching purchase commitments to its customers’ requirements
during term of the price quote, generally ranging from 1 to 3 months and maintains supply sources in different areas of the world.
The Company does not enter into commodity contracts other than to meet the Company’s expected usage and sale
requirements; such contracts are not settled net.
The following table approximates the financial impact, (assuming changes are not passed along to its customers), on the
Company of a 10% increase in the cost of its most critical raw materials based upon purchases made in the respective years:
in millions of US dollars
Natural and synthetic rubber
Chemicals (Rubber mixing)
Steel
Carbon black
Silicone
Earnings before tax
2020
2019
(4.81)
(2.70)
(2.28)
(1.90)
(0.81)
(12.50)
(3.38)
(2.40)
(3.24)
(1.84)
(0.86)
(11.72)
A N N U A L R E P O R T
67
2020
Notes to CFS (cont’d)
A portion of the Company's products are sold at prices denominated in CAD dollars or based on prevailing CAD dollar prices;
most of the raw material purchases are denominated in US dollars and a significant portion of its operational costs and expenses
are incurred in Canadian dollars. Therefore, an increase in the value of the US dollar relative to the Canadian dollar decreases
the net sales in US dollar terms realized by the Company from sales made in Canadian dollars, partially offset by lower
Canadian dollar operational costs/expenses, which decreases operating margin and the cash flow available to fund operations.
The net Canadian monetary assets of its Canadian operations represent a currency risk as the balances are re-measured at
the month end spot rate creating an unrealized exchange gain or loss.
The Company manages its currency risk relating to monetary assets and liabilities denominated in Canadian dollars by
increasing or decreasing the proportion of operating or term loan denominated in Canadian funds or forward currency contracts.
The Rubber Solution segment’s profit and loss is somewhat naturally hedged in that sales denominated in US dollars offset
US dollar expenses and debt service costs.
The following table approximates the following impact on the Company of a $0.10 decrease in the value of one Canadian dollar
in US currency:
in millions of US dollars
Sales (1)
Purchases (2)
Earnings before tax
2020
2019
(3.9)
5.2
(2.4)
6.8
(1) Based upon Canadian dollar-denominated sales
(2) Based upon Canadian dollar-denominated purchases and expenses
Interest Rate Risk
The Company’s interest rate risk mainly arises from the interest rate impact on cash and floating rate debt. Canadian dollar
borrowings are on a fixed rate basis. The US dollar borrowings are on a variable rate basis. The Company has no formal policy to
manage a certain proportion of borrowings on a fixed rate basis.
In December 2020, the Company entered into an interest rate swap agreement for a notional amount of $28,125 amortizing down
to $24,375 at maturity on January 1, 2023. Swap interest is calculated and settled on a monthly basis based on the difference
between the floating rate of USD LIBOR and the fixed rate of 0.265%. This swap agreement replaces an old swap agreement that
matured in December 2020 that calculated interest based on the difference between the floating rate of USD LIBOR and the fixed
rate of 1.69%. At December 31, 2019 the notional amount of the old swap agreement was $28,000.
During 2020, interest expense on the swap agreements was $264 (2019: income of $179).
At December 31, 2020, the fair value of this agreement, representing a loss of $57 (2019: loss of $19), is included in loans and
borrowings on the statement of financial position. The change in the fair value, representing a loss of $37 (2019: loss of $453), is
recorded on the statement of profit as finance costs.
The Company entered into these interest rate swap agreements in order to fix the interest rate on a portion of its term loan and does
not hold it for trading or speculative purposes.
At the reporting date, the interest profile of the Company’s interest-bearing financial instruments was:
December 31
In thousands of US dollars
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial liabilities
Total
2020
2019
1,324
(28,539)
(55,788)
(83,003)
1,418
(14,542)
(60,000)
(73,124)
Fair value sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates for the year would have increased or decreased net income and equity by:
In thousands of US dollars
2020
Variable rate instruments
2019
Variable rate instruments
Net income and equity
100bp increase
100bp decrease
7
(213)
(7)
213
This analysis assumes that all other variables, in particular foreign exchange rates, remain constant.
68
AirBoss of America Corp.
Notes to CFS (cont’d)
Credit Risk
The Company held cash and cash equivalents of $86,970 at December 31, 2020 (2019: $121), which represents its maximum
credit exposure on these assets. The cash and cash equivalents are held with bank and financial institution counterparties,
which are rated A- to AA-, based on Standard and Poor’s ratings.
The Company sells its products to a variety of customers under various payment terms in the normal course of its operations
and therefore is exposed to credit risks. The Company’s exposure to credit risk is influenced by general economic conditions,
the default risk of the industry and the relative concentration of business. A majority of the Company’s trade receivables are
derived from sales to distributors and manufacturers who have been transacting with the Company for over five years. In
monitoring credit risk, the Company considers industry, volume and aging trends (see note 5), maturity and other relevant factors.
The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended
when deemed necessary. Purchase limits established for certain accounts represent the maximum open balance permitted
without approval from the CEO. The Company maintains reserves for potential credit losses relating to specific exposures, and
any such losses to date have been within management’s expectations. Net sales from one customer represent approximately
19% (2019: 9%) of consolidated net sales in 2020. Five customers represented 48% (2019: 31%) of consolidated net sales in
2020.The loss of any such customers or the delay or cancellation of any orders under certain high-volume contracts could have
a significant impact on the Company.
The Company believes that its five significant customers are credit worthy and has not recorded a provision for credit risk relating
to these accounts.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under normal and stressed conditions.
The Company manages liquidity by maintaining adequate cash balances, having appropriate lines of credit available and
monitoring cash requirements to meet expected operational expenses, including debt service and capital requirements. In
addition, the Company maintains a facility permitting the Company an accordion feature of up to an additional US $50,000
availability, upon the satisfaction of customary conditions for such features. At year end, the Company had cash of $86,970 and
drawn $723 against its $60,000 revolving credit facilities (2019: cash of $121 and unused facility of $60,000).
Fair value of financial instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, share purchase loans, convertible
promissory note, demand loan, accounts payable and accrued liabilities, interest rate swap, term loan and other debt and foreign
exchange hedges. The fair values of cash and cash equivalents, accounts receivable, share purchase loans, convertible promissory
note, demand loan, accounts payable and accrued liabilities, interest rate swap and foreign exchange hedges, as recorded in the
consolidated balance sheets approximate their carrying amounts due to the short-term maturities of these instruments. The fair value
of the long-term loan has been discounted using current market interest rates.
The carrying value and fair value are as follows:
December 31, 2020
In thousands of US dollars
Cash and cash equivalents
Trade and other accounts receivable
Foreign Exchange Hedge
Share Purchase loans
Total financial assets
Trade and other payables
Interest rate swap
Loans and borrowings
Total financial liabilities
Amortized
cost
Fair value
through profit
and loss
86,970
68,602
–
704
156,276
74,295
–
90,677
164,972
–
–
620
–
620
–
57
–
57
Total
carrying
amount
86,970
68,602
620
704
156,896
74,295
57
90,677
165,029
Total fair
value
86,970
68,602
620
704
156,896
74,295
57
92,574
166,926
A N N U A L R E P O R T
69
2020
Notes to CFS (cont’d)
December 31, 2019
In thousands of US dollars
Cash and cash equivalents
Trade and other accounts receivable
Foreign Exchange Hedge
Share Purchase loans
Total financial assets
Trade and other payables
Interest rate swap
Loans and borrowings
Total financial liabilities
Amortized
cost
Fair value
through profit
and loss
121
68,890
–
961
69,972
44,047
–
74,125
118,172
–
–
457
–
457
–
19
–
19
Total
carrying
amount
121
68,890
457
961
70,429
44,047
19
74,125
118,191
Total fair
value
121
68,890
457
961
70,429
44,047
19
75,215
119,281
The fair value of the share purchase loans and long-term loan has been based on market interest rate (level 2) in 2020 and 2019.
The Company has not disclosed the fair values for financial instruments (trade and other accounts receivable and other liabilities)
as their carrying amounts approximate their fair values (level 3). There were no reclassifications between classes of financial assets
and financial liabilities in 2020 and 2019. There were no transfers between levels of the fair value hierarchy in 2020 and 2019.
Capital Management
The Company has defined its capital as follows:
December 31
In thousands of US dollars
Loans and borrowings
less: leases included in loans and borrowings
less: cash and cash equivalents
Net debt
Shareholders’ equity
2020
90,734
(13,482)
(86,970)
(9,718)
194,588
184,870
2019
74,144
(14,542)
(121)
59,481
125,979
185,460
The Company's business is cyclical and it experiences significant changes in cash flow over the business cycle. In addition, the
Company's financial performance can be materially influenced by changes in the relative value of the Canadian and US dollar.
The Company's fundamental objective in managing capital is to ensure adequate liquidity and financial flexibility at all times, but
particularly at the bottom of the business cycle and in a strong Canadian dollar environment. The Company constantly monitors
and assesses its financial performance in order to ensure that its net debt levels are prudent, taking into account the anticipated
direction of the business cycle. When reviewing financing decisions, the Company considers the impact of debt and equity
financing on its existing and future shareholders.
The Company has established a $60,000 committed revolving line of credit that provides liquidity and flexibility when capital
markets are restricted.
Key management currently own 20.5% of the outstanding shares of the Company. Each director is required to hold shares
having a value equal to three times their annual retainer fee in order to align objectives with that of shareholders. There is no
plan to extend availability of options beyond key management and senior employees. The Company has a dividend policy to
provide an additional return to shareholders; the decision to pay dividends is reviewed quarterly.
In November 2020, the Company renewed its normal course issuer bid ("NCIB") to purchase up to 500,000 of its common
shares, representing approximately 3.8% of the Company's public float. The Company purchased nil shares (2019: nil) under
its NCIB in 2020.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
70
AirBoss of America Corp.
Notes to CFS (cont’d)
NOTE 23 SUBSEQUENT EVENT
On March 8, 2021, CSI agreed to acquire 100% ownership of BlackBox Biometrics, Inc. (“B3”). CSI currently holds a 2.5%
minority interest in B3 and exclusive sales rights of the Blast Gauge System to the U.S. military. CSI will acquire B3 for up to
$27,000, to be satisfied through $7,000 in cash upon closing and up to $20,000 in royalties over eight years, based on revenues
earned from B3 products. The transaction is subject to customary closing conditions and is expected to close during the second
quarter of 2021.
NOTE 24 RECLASSIFICATION OF COMPARATIVE AMOUNTS
Certain comparative amounts for the prior period have been reclassified to conform to current period presentation. Such
reclassifications had no effect on net income or shareholders' equity.
A N N U A L R E P O R T
71
2020
Corporate Information
Board of Directors
Mary Matthews, CPA, CA, ICD.D. (1) (2) (3)
Toronto, Ontario
Robert L. McLeish (1) (2) (3)
Aurora, Ontario
Port Carling, Ontario
Brian A. Robbins (1)
President and CEO, Exco Technologies Limited
Aurora, Ontario
Anita Antenucci
Upperville, Virginia
P. Grenville Schoch
Chairman and CEO, AirBoss of America Corp.
Aurora, Ontario
David Camilleri (1)
Waterloo, Ontario
Alan J. D. Watson (2) (3)
Sydney, Australia
Stephen Ryan (2)
Washington, D.C.
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of Corporate Governance Committee
72
AirBoss of America Corp.
Corporate Information
Solicitors
CORPORATE OFFICE
Davies Ward Phillips & Vineberg LLP
Toronto, Ontario
Auditors
KPMG LLP
Toronto, Ontario
Transfer Agent And Registrar
Computershare Investor Services, Inc.
Toronto, Ontario
Stock Symbol Toronto Stock Exchange: BOS
Web Site Address: www.airboss.com
Email Address: info@airboss.com
Our Annual Meeting is Thursday, May 13, 2021
at 9:00am at: AirBoss Rubber Solutions
101 Glasgow Street, Kitchener, Ontario
AirBoss of America Corp.
16441 Yonge Street
Newmarket, Ontario, Canada L3X 2G8
Telephone: 905-751-1188
Facsimile: 905-751-1101
Chairman and CEO:
P. G. (Gren) Schoch
President and Chief Operating Officer:
Chris Bitsakakis
Chief Financial Officer:
Frank Ientile
.
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A N N U A L R E P O R T
Paper is FSC® Certified, Rainforest Alliance Certified™
and 10% Post-Consumer recycled content & fibre.
73