STRENGTHENING
THE CORE
2024 ANNUAL REPORT
TABLE OF CONTENTS
01 AirBoss 2024 at a Glance
03 Key Highlights from 2024
04 Message to Our Shareholders
06 Future Outlook:
AirBoss Rubber Solutions (ARS)
08 Future Outlook:
AirBoss Manufactured Products (AMP)
09 Navigating Economic Uncertainty &
Addressing Tariff Risks
10 Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
27 Consolidated Financial
Statements
A N N U A L R E P O R T
1
AIRBOSS 2024 AT A GLANCE:
2024 WAS A YEAR
OF STRATEGIC
ADAPTATION AND
OPERATIONAL
RESILIENCE.
AIRBOSS OF AMERICA CORP. ("AIRBOSS") OR (THE "COMPANY") TOOK
DECISIVE ACTIONS IN AN EFFORT TO STABILIZE PROFITABILITY, SECURE
MAJOR DEFENSE CONTRACTS, AND ENHANCE COST EFFICIENCIES IN THE FACE
OF MACROECONOMIC HEADWINDS AND SHIFTING MARKET DYNAMICS WHICH
LED TO A DECLINE IN REVENUE.
2
AIRBOSS MANUFACTURED PRODUCTS (AMP) SAW A STRONG RESURGENCE
IN ITS DEFENSE BUSINESS, SECURING A BACKLOG OF OVER $200 MILLION
IN NEW DEFENSE AWARDS, INCLUDING AN $82.3M CONTRACT FOR
MOLDED AIRBOSS LIGHTWEIGHT OVERBOOTS (MALO). MEANWHILE,
AIRBOSS RUBBER SOLUTIONS (ARS) NAVIGATED A CHALLENGING DEMAND
ENVIRONMENT BY FOCUSING ON EFFICIENCY IMPROVEMENTS AND
DRIVING REVENUE FROM HIGHER-MARGIN PRODUCTS, ENABLING HIGHER
PROFITABILITY DESPITE LOWER SALES IN 2024 COMPARED TO 2023.
DESPITE TRADE POLICY UNCERTAINTIES, THREATS OF TARIFFS, AND INFLATIONARY
PRESSURES CAUSING MARKET VOLATILITY, AIRBOSS STRENGTHENED ITS FINANCIAL
FOUNDATION BY SECURING A NEW $125M CREDIT FACILITY, IMPLEMENTING ADDITIONAL
COST-SAVING INITIATIVES, AND POSITIONING ITSELF FOR A RETURN TO GROWTH IN 2025.
A N N U A L R E P O R T
3
$0
$100
$200
$300
$400
$500
$600
$700
2022
2023
2024
EXTERNAL NET SALES1
($MM)
$477
$426
$387
$45.3
$26.8
$21.9
$(31.9)
$(41.7)
$(20.4)
$(12.5)
$12.6
$(6.4)
$0
$10
$20
$30
$40
-$50
-$40
-$30
-$20
-$10
$50
$60
$70
ADJUSTED PROFIT1
PROFIT TO SHAREHOLDERS
($MM)
$0
$20
$40
$60
$80
$100
$120
ADJUSTED EBITDA1
($MM)
2022
2023
2024
2022
2023
2024
2022
2023
2024
1. Adjusted EBITDA and Adjusted Profit are non-IFRS
financial measures. Please see our financial
disclosures below and on page 12 of this Annual
Report for further information.
DEFENSE SECTOR RECOVERY:
Awarded $82.3M U.S. Government contract and
secured a defense backlog exceeding $200M.
FINANCIAL RESTRUCTURING:
Secured $125M in new credit facilities.
REVENUE:
$387M (-9.2% YoY) | Net loss: $20.4M
(improved from $41.7M loss in 2023).
TARIFF RISKS:
U.S. import tariffs could impact operations; however,
multiple contingency plans have been activated in an
effort to reduce their impact.
SILICONE:
In an effort to continue the recent margin expansion
results through specialty compounding, ARS launched
its first silicone production line in Michigan,
expanding the product breadth available through our
custom compounding operations.
AS AIRBOSS MOVES INTO 2025,
THE COMPANY REMAINS FOCUSED ON
GROWTH IN SPECIALTY COMPOUNDING,
OPERATIONAL EFFICIENCY
IMPROVEMENTS, DEFENSE SECTOR
EXPANSION, AND STRATEGIC RISK
MITIGATION TO DRIVE LONG-TERM
VALUE FOR STAKEHOLDERS.
KEY RECENT HIGHLIGHTS
4
MESSAGE TO OUR
SHAREHOLDERS
DEAR SHAREHOLDERS,
2024 WAS A YEAR THAT TESTED THE RESILIENCE AND ADAPTABILITY OF AIRBOSS OF
AMERICA CORP. IN THE FACE OF MACROECONOMIC HEADWINDS, GEOPOLITICAL
UNCERTAINTIES, AND INDUSTRY-WIDE CHALLENGES, WE REMAINED COMMITTED TO
OPERATIONAL EFFICIENCY, FINANCIAL DISCIPLINE, AND STRATEGIC EXPANSION.
WHILE REVENUES DECLINED AMID ONGOING MARKET SOFTNESS, WE TOOK DECISIVE
STEPS TO STRENGTHEN OUR FOUNDATION FOR THE FUTURE.
One of our most significant achievements in 2024
was the continued recovery of our defense business.
The award of an $82.3M U.S. Government contract
for our Molded AirBoss Lightweight Overboots (MALO)
builds on previously secured contracts for isolation
gowns and the Bandolier system, reinforcing our
position as a trusted supplier to military and first
responder communities around the world. This
momentum signals stronger opportunities for growth
in 2025, while we begin the new year with a robust
backlog anchoring the growth at AMP.
At ARS, we saw softness in demand, particularly in
our tolling business as market softness drove the
large tire makers to insource more of their compound
requirements. Despite these challenges, we generated
higher gross profits on lower sales due to the gradual
product mix shift to specialty compounding, including
the launch of AirBoss' first silicone line in Michigan
in an effort to further expand our product portfolio.
In AMP, softness in the automotive sector impacted our
rubber molded products division, but we continued to
drive operational efficiencies, cost-cutting measures,
and new contract execution to offset these headwinds.
Financially, we improved our net loss to $20.4M,
nearly halving the $41.7M loss from 2023 with
defense products poised to reinforce this improvement
trend into 2025. We secured $125M in new senior
credit facilities, bolstering our liquidity while
maintaining a prudent approach to cost management
and capital allocation.
However, as we look ahead to 2025, we remain
highly vigilant of external risks, particularly the
impact of U.S. import tariffs on Canadian goods as
well as the threat of further escalating tariffs and
other similar geopolitical risks. Given our cross-border
operations, we are actively reviewing contingency
plans, supply chain shifts, and cost mitigation
strategies to minimize disruptions and protect
profitability.
Despite these uncertainties, we remain confident in
AirBoss’s ability to navigate evolving market
conditions. Our defense business is growing, our
rubber solutions segment is innovating, and our
operational discipline is stronger than ever.
We would like to extend our sincerest gratitude to our
employees, partners, and investors for their
unwavering commitment. Your support fuels our drive
to build a stronger, more resilient AirBoss for the future.
We look forward to continuing this journey with you in
2025 and beyond.
Sincerely,
Chris Bitsakakis
P.G. Schoch
President and Co-CEO
Chairman and Co-CEO
A N N U A L R E P O R T
5
6
FUTURE OUTLOOK:
AIRBOSS RUBBER
SOLUTIONS
A N N U A L R E P O R T
7
A key focus for 2025 will be expanding into high-value
specialty compounding, with new investments in
advanced formulations, including silicone, color, and
medical-grade compounds. The launch of the new
silicone production line in Michigan signals a strategic
evolution toward higher-margin, more specialized
solutions, allowing ARS to serve emerging industries
such as healthcare, energy, and defense.
AS ARS MOVES INTO 2025, THE DIVISION IS WELL-
POSITIONED FOR RENEWED GROWTH, PRODUCT
INNOVATION, AND MARKET EXPANSION, SUBJECT TO
THE ONGOING RISKS PRESENTED BY THE CURRENT
GEOPOLITICAL CLIMATE. WHILE 2024 PRESENTED
CHALLENGES, ARS HAS TAKEN DECISIVE STEPS TO
STRENGTHEN ITS CORE BUSINESS, DIVERSIFY ITS
OFFERINGS, AND ENHANCE OPERATIONAL
EFFICIENCIES – LAYING THE FOUNDATION FOR A
STRONGER, MORE COMPETITIVE FUTURE.
8
A key highlight of 2024 was the $82.3M U.S. Government contract for Molded
AirBoss Lightweight Overboots (MALO), a major milestone that reinforces AirBoss’s
leadership in military and first responder protective equipment. This, along with
other secured defense contracts, strengthens AMP’s trajectory for 2025.
AS AMP ENTERS 2025, THE DIVISION IS WELL-POSITIONED FOR
EXPANSION, OPERATIONAL EFFICIENCY, AND STRONGER
MARKET PERFORMANCE, SUBJECT TO THE ONGOING RISKS
PRESENTED BY THE CURRENT GEOPOLITICAL CLIMATE. WHILE
2024 PRESENTED CHALLENGES, INCLUDING A WEAKER
AUTOMOTIVE SECTOR, AMP LEVERAGED ITS STRENGTHS IN
DEFENSE MANUFACTURING AND OPERATIONAL IMPROVEMENTS
TO SET THE STAGE FOR SUSTAINED GROWTH.
FUTURE OUTLOOK:
AIRBOSS
MANUFACTURED
PRODUCTS
A N N U A L R E P O R T
9
NAVIGATING ECONOMIC
UNCERTAINTY & ADDRESSING
TARIFF RISKS
While economic uncertainties remain, AirBoss has a strong track record of adaptability and financial
discipline. By staying agile, data-driven, and proactive, the Company is positioned to navigate these
headwinds while continuing to drive growth and shareholder value.
AS AIRBOSS OF AMERICA CORP. LOOKS AHEAD TO 2025, THE COMPANY
REMAINS PROACTIVE IN MANAGING ECONOMIC VOLATILITY,
PARTICULARLY IN RESPONSE TO THE IMPACT OF U.S. IMPORT TARIFFS
ON CANADIAN GOODS AND THE ONGOING THREAT OF FURTHER
INCREASED AND RETALIATORY TARIFFS.
TO MITIGATE THESE CHALLENGES, AIRBOSS IS ACTIVELY:
EXPLORING PRODUCTION SHIFTS:
Assessing alternative U.S.-based manufacturing
options to reduce tariff exposure while maintaining
efficient operations.
OPTIMIZING SUPPLY CHAIN STRATEGIES:
Strengthening supplier partnerships and
diversifying sourcing to minimize disruptions.
MANAGING COSTS:
Implementing efficiency projects in an effort to
offset potential tariff risks and minimize impact
to all stakeholders.
BALANCING AND FILLING OPEN CAPACITY
IN ALL PLANTS:
Maximizing domestic production to balance
supply and demand.
2024
10
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 10, 2025 and should be read in conjunction with the
Consolidated Financial Statements and Notes for the year ended December 31, 2024 prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. 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.sedarplus.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 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”, “should” 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; contract-related risks; 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; global political uncertainty; 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; AirBoss’ ability to successfully develop and execute
effective business strategies including, without limitation, the recently announced strategic transition; 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; changes in trade policies or the imposition of new tariffs, duties or
other similar restrictions which could influence the cost and flow of goods and services across borders; current and future litigation;
political uncertainty and policy change; ability to obtain financing on acceptable terms and ability to satisfy the covenants set forth
in such financing arrangements; environmental damage and non-compliance with environmental laws and regulations; impact of
global health situations; potential product liability and warranty claims and equipment malfunction. There is increased uncertainty
associated with future operating assumptions and expectations as compared to prior periods. 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 press release 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.sedarplus.com.
AirBoss of America Corp.
A N N U A L R E P O R T
11
OVERALL PERFORMANCE
Recent Highlights
(In US dollars except as otherwise noted)
• AMPs defense business awarded a contract from the U.S. Government valued at up to $82.3M for ADG Molded Lightweight
Overboots (“MALOs”); The first order under this contract, valued at approximately $30M, has been received, and deliveries
are expected to commence in the second quarter of 2025;
• ARS performed strongly despite lowers sales in 2024 by driving growth in specialty compounding, generating higher margins
in 2024 compared to 2023;
• Entered into new senior secured credit facilities consisting of an asset-based credit facility with total commitments of $125M,
following the addition of Comerica Bank to the syndicate of lenders, and a term facility of $55M;
• The Company launched its first silicone production line in Michigan, as part of an ongoing strategy to drive an increased focus
on specialty compounding;
• 2024 Adjusted EBITDA1 of $21.9 million on Adjusted Profit1 of $(12.5) million and a loss of $20.4 million; and
• Declared a quarterly dividend of C$0.035 per common share.
Selected Financial Information
In thousands of US dollars, except share data
For years ended December 31
2024
2023
2022
Financial results:
Net sales
387,024
426,025
477,155
Profit (loss)
(20,390)
(41,749)
(31,892)
Adjusted Profit1
(12,536)
(6,424)
12,558
Earnings (loss) per share (US$)
– Basic
(0.75)
(1.54)
(1.18)
– Diluted
(0.75)
(1.54)
(1.18)
Adjusted earnings per share1 (US$)
– Basic
(0.46)
(0.24)
0.46
– Diluted
(0.46)
(0.24)
0.45
EBITDA1
15,063
(11,177)
(12,769)
Adjusted EBITDA1
21,914
26,758
45,336
Net cash from operating activities
8,780
40,917
(30,775)
Free cash flow1
(1,826)
32,453
(40,964)
Dividends declared per share (CAD$)
0.175
0.370
0.400
Capital expenditures
10,632
8,505
10,192
Financial position:
Total assets
309,528
356,656
440,766
Debt2
117,390
131,092
143,642
Net Debt1
98,888
88,213
110,083
Shareholders’ equity
126,010
148,857
196,997
Outstanding shares*
27,130,556
27,130,556
27,092,041
*27,130,556 at March 10, 2025
1See Non-IFRS Financial Measures
2Debt includes $12,011 of lease liabilities (2023: $13,890; 2022: $15,007)
MD&A (cont’d)
2024
12
MD&A (cont’d)
NON-IFRS FINANCIAL MEASURES
This MD&A is based on consolidated financial statements prepared in accordance with IFRS and uses Non-IFRS Financial
Measures. Management believes that these measures provide useful information to investors in measuring the financial
performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may
not be comparable to similarly titled measures presented by other companies and should not be construed as an alternative to
other financial measures determined in accordance with IFRS. These terms are not a measure of performance under IFRS and
should not be considered in isolation or as a substitute for profit or loss under IFRS.
EBITDA and Adjusted EBITDA are non-IFRS measures used to measure the Company's ability to generate cash from operations
for debt service, to finance working capital and capital expenditures, potential acquisitions and to pay dividends. EBITDA is
defined as earnings before income taxes, finance costs, depreciation and amortization. Adjusted EBITDA is defined as EBITDA
excluding impairment costs, acquisition costs, and non-recurring costs. A reconciliation of profit (loss) to EBITDA and Adjusted
EBITDA is below.
In thousands of US dollars
2024
2023
2022
EBITDA:
Profit (loss)
(20,390)
(41,749)
(31,892)
Finance costs
12,763
5,233
5,738
Depreciation and amortization
21,012
22,345
21,905
Income tax expense (recovery)
1,678
2,994
(8,520)
EBITDA
15,063
(11,177)
(12,769)
Professional fees related to AEP negotiations
–
152
1,104
Write-down of inventory
6,049
8,031
57,001
Restructuring costs
802
3,104
–
Impairment of intangible assets
–
26,648
–
Adjusted EBITDA
21,914
26,758
45,336
In the second quarter of 2024, the Company recorded a $6,049 inventory provision related to its inventory of nitrile gloves and
medical gowns due to significant downward shifts in pricing. In 2023, the Company recorded a $8,031 inventory provision related
to its inventory of nitrile gloves due to significant downward shifts in pricing. In 2022, the Company recorded a $57,001 provision
related to its inventory of nitrile gloves due to significant downward shifts in pricing and some gloves no longer meeting the
Company’s safety standards. Costs related to these provisions are included in Cost of Sales on the Statement of Profit and Loss.
In 2023 and the second quarter of 2024, the Company completed a series of staff reductions. Costs related to this restructuring
activity are included in Other expenses on the Statement of Profit and Loss.
In 2023, the Company recognized a goodwill impairment related to the defense operations. Costs related to the impairment are
included in Other expenses on the Statement of Profit and Loss.
In late 2022, the Company negotiated improved arrangements with AMP's rubber molded products business' key suppliers and
customers to improve profitability. Professional fees related to these activities are included in General and administrative
expenses on the Statement of Profit and Loss.
Adjusted profit is a non-IFRS measure defined as profit (loss) before impairment costs, acquisition costs and non-recurring costs.
This measure and Adjusted earnings per share are used to evaluate operating results of the Company. A reconciliation of Profit
(loss) to Adjusted profit and Adjusted earnings per share is below.
In thousands of US dollars
2024
2023
2022
Adjusted profit:
Profit (loss)
(20,390)
(41,749)
(31,892)
Write-off of deferred finance costs (after tax)
1,003
–
–
Professional fees related to AEP negotiations (after tax)
–
116
844
Write-down of inventory (after tax)
6,049
6,264
43,606
Restructuring costs (after tax)
802
2,297
–
Impairment of intangible assets (after tax)
–
26,648
–
Adjusted profit
(12,536)
(6,424)
12,558
Basic weighted average number of shares outstanding
27,131
27,118
27,071
Diluted weighted average number of shares outstanding
27,131
27,118
28,109
Adjusted earnings per share (in US dollars):
Basic
(0.46)
(0.24)
0.46
Diluted
(0.46)
(0.24)
0.45
Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the
outstanding debt. A reconciliation of loans and borrowings to Net Debt is below.
In thousands of US dollars
2024
2023
2022
Net debt:
Loans and borrowings - current
5,002
2,437
2,286
Loans and borrowings - non-current
112,388
128,655
141,356
Leases included in loans and borrowings
(12,011)
(13,890)
(15,007)
Cash and cash equivalent
(6,491)
(28,989)
(18,552)
Net debt
98,888
88,213
110,083
The Company has a Net Debt to trailing twelve-month Adjusted EBITDA ratio of 4.51x (2023: 3.30x, 2022: 2.43x)
AirBoss of America Corp.
A N N U A L R E P O R T
13
MD&A (cont’d)
Free cash flow is a non-IFRS measure used to evaluate cash flow after investing in the maintenance or expansion of the Company's
business. It is defined as cash provided by operating activities, less cash expenditures on long-term assets. A reconciliation of net
cash from (used in) operating activities to free cash flow is below.
In thousands of US dollars
2024
2023
2022
Free cash flow:
Net cash from (used in) operating activities
8,780
40,917
(30,775)
Acquisition of property, plant and equipment
(9,902)
(7,256)
(8,800)
Acquisition of intangible assets
(730)
(1,249)
(1,392)
Proceeds from disposition
26
41
3
Free cash flow
(1,826)
32,453
(40,964)
Basic weighted average number of shares outstanding
27,131
27,118
27,071
Diluted weighted average number of shares outstanding
27,131
27,439
27,071
Free cash flow per share (in US dollars):
Basic
(0.07)
1.20
(1.51)
Diluted
(0.07)
1.18
(1.51)
OVERVIEW
2024 was a challenging year for AirBoss as pronounced economic headwinds impacted each segment to varying degrees, and
the Company continued to navigate obstacles related to market softness and geopolitical challenges. The Company continued
to focus on risk mitigation plans in response to these economic challenges, including managing costs and targeting continuous
improvements to help offset some of the pronounced softness experienced at both AirBoss Rubber Solutions ("ARS") and AirBoss
Manufactured Products ("AMP"). Management remains focused on the successful conversion of key opportunities to support the
future growth aligned with its strategic plan. Subject to ongoing challenges related to inflationary pressure, the global geopolitical
climate, recently-enacted tariffs and the potential for further escalating tariffs, which could disrupt trade flows, increase costs and
strain supply chains, the Company expects volume recovery to commence in mid-2025. This recovery could be particularly
impacted by the imposition of tariffs, duties or other similar restrictions. A significant portion of the products manufactured by the
Company in Canada are sold into the United States and are subject to the recently-enacted tariffs during the production process
given the cross-border nature of the Company’s business operations. The Company is actively evaluating and executing
contingency plans and reviewing all available options to try and deal with these challenges, including rebalancing production and
sales activities between the U.S. and Canada, in order to try to minimize the impacts to the Company and its customers.
ARS saw continued softness carried over from the previous quarter as customers continued to reduce orders and shutter
production earlier than anticipated as they focused on reducing inventory levels partially driven by lower demand, despite strong
performance during the earlier part of 2024. This also impacted margins unfavorably relative to the third quarter of 2024 ("Q3
2024"). In addition, the segment experienced additional softness primarily driven by volume reductions across most sectors and
saw reduced volumes compared to Q4 2023. ARS remains committed to executing on its strategy to deliver strong results with
specialized products, expanded production of a broader array of compounds (white and color), and enhanced flexibility in
attracting and fulfilling new business through identified synergies and margin expansion. As a segment, ARS also continued to
invest in research and development in 2024 to support enhanced collaboration with customers.
AMP experienced an overall volume improvement in the fourth quarter of 2024 (“Q4 2024”), primarily driven by its defense
products business and offset by continued softness in the rubber molded products business. The defense business saw
improvements in both revenue and gross profit, mainly driven by new business awards that it executed on in the quarter. The
rubber molded products operations were impacted by continued volume softness related to the original equipment manufacturers
(OEMs) shuttering production to rebalance vehicle inventory levels, which has been ongoing throughout 2024. The business
continued its focus on managing costs and a commitment to drive efficiencies and automation, as well as diversification of its
product lines into adjacent sectors. The defense business experienced some positive traction during Q4 2024 which is expected
to continue into next year, supported by the commencement of deliveries on several previously announced contracts including
some recent new awards in addition to the overhead reductions carried out earlier this year to help mitigate volume softness.
Management also continued its focus on operational improvements during the quarter and continued to work with its key
customers with a goal of leveraging opportunities aligned with its growth initiatives.
The Company’s long-term priorities consist of the following:
1. Growing the core Rubber Solutions segment by emphasizing rubber compounding as the core driver for sustainable growth
and productivity, focusing on innovation in custom rubber compounding while aiming to expand market share through organic
and inorganic means, while striving to achieve enhanced diversification by a broadening of product breadth through
technological advancements and investments in specialty compound niches;
2. Manufactured Products' growth strategy is focused on diversifying and expanding its range of rubber molded products while
simultaneously narrowing the range of defense products through a renewed focus on core competencies; and
3. Executing the strategic review of all product lines currently manufactured and sold by the Company in its Manufactured
Products segment while targeting additional acquisition opportunities with a focus on adding new compounds and products,
technical capabilities, and geographic reach into selected North American and international markets.
AirBoss continues to focus on these long-term priorities while investing in core areas of the business to expand a solid foundation
that will support long-term growth.
2024
MD&A (cont’d)
RESULTS OF OPERATIONS – For year ended December 31, 2024 compared to 2023
NET SALES
Consolidated net sales for the year ended December 31, 2024 decreased by 9.2% to $387,024, compared with 2023 primarily
due to decreased sales at Rubber Solutions across the majority of sectors and decreases in Manufactured Products’ rubber
molded products business partially offset by increases in the defense products business.
Rubber
Manufactured
Inter-segment
In thousands of US dollars
Solutions
Products
net sales
Total
Net Sales
2024
226,351
176,696
(16,023)
387,024
2023
248,395
202,290
(24,660)
426,025
Increase (decrease) $
(22,044)
(25,594)
8,637
(39,001)
Increase (decrease) %
(8.9)
(12.7)
(35.0)
(9.2)
Rubber Solutions
Net sales in the Rubber Solutions segment decreased by 8.9%, to $226,351 in 2024, from $248,395 in 2023. This was due to
softness across most sectors driven by economic headwinds. Volume was down 13.9% with decreases across the majority of
sectors given softness in many customer sectors.
Tolling volumes for the year ended December 31, 2024 decreased by 61.8%, compared with 2023. Non-tolling volumes for the year
ended December 31, 2024 decreased by 9.7% compared with 2023. The overall decrease in volume was across many sectors with
decreases in most sectors.
Manufactured Products
Net sales in the Manufactured Products segment decreased by 12.7%, to $176,696 in 2024, from $202,290 in 2023. This is primarily
due to lower sales in the molded rubber products business partially offset by improved sales in the defense products business
driven by deliveries in new contract awards.
GROSS PROFIT
For the year ended December 31, 2024, consolidated gross profit was down by $4,414 to $53,996. Gross profit as a percentage
of net sales increased to 14.0% from 13.7% in 2023. The increase in margin percentage was driven primarily by margin
expansion in the Rubber Solutions segment, margin improvements resulting from the new business awards at AMP's defense
products business, and a $2.0 million lower non-cash inventory write-down compared to the prior year, partially offset by margin
compression at AMP's rubber molded products business.
Rubber
Manufactured
In thousands of US dollars
Solutions
Products
Total
Gross Profit
2024
35,500
18,496
53,996
2023
34,947
23,463
58,410
Increase (decrease) $
553
(4,967)
(4,414)
% net of sales
2024
15.7
10.5
14.0
2023
14.1
11.6
13.7
Rubber Solutions
For the year ended December 31, 2024, gross profit for Rubber Solutions was $35,500 (15.7% of net sales), up $553 compared to
$34,947 (14.1% of net sales) in 2023. The increase was primarily a result of favorable mix and margin expansion partially offset by
decreased tolling and non-tolling volumes compared to the same period in 2023.
Manufactured Products
Gross profit for the year ended December 31, 2024 in the Manufactured Products segment was $18,496 (10.5% of net sales), down
$4,967 compared to $23,463 (11.6% of net sales) in 2023. The decrease was primarily a result of significant volume drops in the
rubber molded products business partially offset by a $2.0 million lower non-cash inventory write-down compared to the prior year. The
defense products business did see margin improvements in the latter part of the year driven by several new business awards.
OPERATING EXPENSES
Consolidated operating expenses for the year ended December 31, 2024 decreased by $31,987 to $59,945 compared with
2023. The decrease was primarily due to a $26,648 goodwill impairment charge in the prior year, $3,104 of restructuring costs
in the prior year (compared to costs of $802 in the current year), and lower legal and administrative expenses, partially offset
by a foreign exchange loss compared to a gain in the prior year. As a percentage of net sales, operating expenses for the year
ended December 31, 2024 decreased to 15.5% from 21.6% in 2023.
Rubber
Manufactured
In thousands of US dollars
Solutions
Products
Corporate
Total
Operating Expenses
2024
16,001
31,216
12,728
59,945
2023
18,621
60,507
12,804
91,932
Increase (decrease) $
(2,620)
(29,291)
(76)
(31,987)
% net of sales
2024
7.1
17.7
N/A
15.5
2023
7.5
29.9
N/A
21.6
14
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
Rubber Solutions
Rubber Solutions' operating expenses for the year ended December 31, 2024 decreased by 14.1%, to $16,001, compared with
$18,621 in 2023. The decrease was primarily due to cost management, a foreign exchange gain compared to a loss in the prior
year, and restructuring costs recorded in the prior year.
Manufactured Products
Manufactured Products' operating expenses for the year ended December 31, 2024 decreased by 48.4% to $31,216. The decrease
was due to a $26,648 goodwill impairment charge recorded in the prior year, cost-cutting measures implemented last year and lower
amortization of intangible assets, partially offset by a foreign exchange gain compared to a loss in the prior year.
Unallocated Corporate Costs
Unallocated corporate costs for the year ended December 31, 2024 decreased by $76 from 2023. The decrease was primarily
due to a restructuring cost recorded in the prior year partially offset by a foreign exchange loss compared to a gain in the
prior year.
FINANCE COST
Finance costs in 2024 were $12,763 (2023: $5,233). The increase was primarily due to a cost recovery in the prior year related
to an earn-out liability payable to former owners of an acquired business, the write-off of deferred finance costs related to loan
agreement that was repaid during the year, and increased borrowing costs from the Company's credit facilities.
INCOME TAX EXPENSE
For the year ended December 31, 2024, the Company recorded an income tax expense of $1,678 (2023: $2,994) or an effective
income tax rate of (9.0)% (2023: (7.7)%). The effective tax rates are negative due to unrecognized tax assets.
Tax expense/(recovery) Rate
In thousands of US dollars
2024
2023
2024
2023
Expected statutory rate
(4,959)
(10,272)
26.50%
26.50%
Foreign rate differential
999
1,436
(5.34%)
(3.71%)
Effect of permanent differences
273
(225)
(1.46%)
0.58%
Filing differences
5
5
(0.03%)
(0.01%)
Deductible temporary differences not recognized
4,916
12,051
(26.27%)
(31.10%)
Other
39
(1)
(0.21%)
0.00%
Effective tax rate
1,678
2,994
(8.97%)
(7.74%)
PROFIT (LOSS) AND EARNINGS (LOSS) PER SHARE
Net loss in 2024 amounted to $20,390, compared with a loss of $41,749 in 2023. The basic and fully diluted net loss per share
was $0.75 (2023: $1.54). The decreased loss was primarily due to a $26.6 million goodwill and higher inventory impairment
charges and restructuring charges in the prior year, partially offset by higher finance fees in the current year.
QUA RTERLY INFORMATION
In thousands of US dollars
Earnings (loss) per share
Quarter Ended
Net Sales
Profit (loss)
Basic
Diluted
2024
December 31, 2024
91,963
(2,616)
(0.10)
(0.10)
September 30, 2024
96,204
(3,279)
(0.12)
(0.12)
June 30, 2024
95,367
(9,568)
(0.35)
(0.35)
March 31, 2024
103,490
(4,927)
(0.18)
(0.18)
2023
December 31, 2023
92,696
(35,958)
(1.33)
(1.33)
September 30, 2023
102,195
(4,633)
(0.17)
(0.17)
June 30, 2023
114,058
(2,613)
(0.10)
(0.10)
March 31, 2023
117,076
1,455
0.05
0.05
15
Fourth Quarter 2024 Results
NET SALES
Consolidated net sales for Q4 2024 decreased by 0.8% to $91,963, from $92,696 in Q4 2023, with decreases at Rubber Solutions
partially offset by Manufactured Products for the reasons outlined below.
Rubber Solutions
Net sales for Q4 2024 in the Rubber Solutions segment decreased by 13.1% to $47,349, from $54,464 in Q4 2023. The
decrease in net sales for Q4 2024 was primarily due to softness across most sectors. Volume was down 22.5% with
decreases across the majority of sectors given softness in most customer sectors. Tolling volume was down 39.0%, while
non-tolling volume was down 21.7% driven by decreases in most 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.
Manufactured Products
Manufactured Products net sales for Q4 2024 increased by 9.4% to $48,168 compared with Q4 2023. The increase was a
result of higher volumes in the defense product business with decreases across the rubber molded product lines, driven
by production reductions across most OEMs.
GROSS PROFIT
Consolidated gross profit for Q4 2024 increased to $15,297 (16.6% of net sales) from $5,122 (5.5% of net sales) in Q4 2023,
primarily a result of an $8.0 million non-cash write-down in 2023 related to nitrile glove and isolation gown inventory in the
defense products business and improvements in the defense products business, partially offset by decreases in Rubber
Solutions and softness within AMP's rubber molded product lines.
Rubber Solutions
Gross profit at Rubber Solutions for Q4 2024 was $5,938 (12.5% of net sales), compared with $7,845 (14.4% of net sales) in
Q4 2023. The decrease in gross profit was principally due to lower volumes across most customer sectors and product mix.
Manufactured Products
Gross profit at Manufactured Products for Q4 2024 increased by $12,082 to $9,359 compared with a loss of $2,723 in Q4
2023. The increase was primarily a result of an $8.0 million non-cash write-down in 2023 related to nitrile glove and isolation
gown inventory and improved volumes and product mix in the defense product lines further supported by operational cost
improvements in the segment.
OPERATING EXPENSES
Consolidated operating expenses for Q4 2024 decreased by $26,173, compared with Q4 2023. The decrease was primarily
due to the $26,648 goodwill impairment charges noted above partially offset by a foreign exchange loss compared to a gain in
the prior year.
INCOME TAX EXPENSE
Tax expense for Q4 2024 decreased by $2,884 compared to Q4 2023 due to the derecognition of temporary differences in
Q4 2023.
2024
MD&A (cont’d)
16
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company expects to fund its 2025 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 asset-based revolving line of credit provides financing up to $100,000 (with an accordion of $50,000
upon the satisfaction of customary conditions), subject to a borrowing base calculation that is based on cash on hand, and
a percentage of eligible accounts receivable and inventory (as defined in the credit agreement). As of December 31, 2024,
the total available borrowing capacity under this facility was $79,428. As at December 31, 2024, $52,665 was drawn against
the revolving credit facility, from outstanding borrowings of $52,350 plus $315 drawn as a letter of credit. The revolving line
of credit was modified in January 2025 to provide maximum borrowings of up to $125,000 with a $25,000 accordion.
For the year ended December 31, 2024, $8,780 of cash was provided by operations (2023: $40,917), $10,606 was used for
investing activities (2023: $8,464) and $20,792 was used by financing activities (2023: $22,196). Cash and cash equivalents
decreased by $22,498 from $28,989 to $6,491, adjusted for the effect of exchange rate fluctuations on cash held.
Operating activities
For the year ended December 31, 2024, cash provided by operating activities decreased by $32,137 compared to 2023. The decrease
was primarily due to $33,095 more cash used for net working capital partially offset by a $3,764 decrease in tax payments.
Cash used for working capital for the year ended December 31, 2024 was $6,402 (2023: $26,693 cash provided) as a result of the
following factors:
• Cash provided by trade and other receivables was $3,755 due to lower sales, partially offset by increased receivables related
to new defense contracts;
• Cash provided by inventories was $974, primarily related to efforts to reduce raw materials, partially offset by building up
inventory to support new defense contracts;
• Cash provided by prepaid expenses was $76 primarily due to amortizing of insurance premiums;
• Cash used for trade and other payables was $10,413 primarily due to lower sales volumes, partially offset by increased
purchases to support new defense contracts;
• Cash used for provisions of $794 related to the payout of preferred share units, payments to former owners of an acquired
business and the balance of a provision for restructuring costs.
Investing Activities
Property, Plant and Equipment
For the year ended December 31, 2024, the following investments were made in each segment:
Rubber Solutions invested $4,364. $853 was invested in growth initiatives, $699 in cost savings initiatives, and the balance was
invested to replace or upgrade existing property, plant and equipment.
Manufactured Products invested $5,538. $567 was invested in growth initiatives, and the balance was invested to replace or
upgrade existing property, plant and equipment.
Intangible assets
The Company invested $730 on productivity software and rolling out company-wide enterprise software.
17
2024
MD&A (cont’d)
Financing activities
In November 2024, the Company entered into two secured credit facilities: an asset-based revolving line of credit; and a term loan.
The two facilities are secured against substantially all of the Company’s assets and contain cross-default provisions along with
customary financial and non-financial covenants, including minimum earnings and liquidity, and limitations on capital expenditures,
dividend payments and additional indebtedness.
The revolving line of credit provides for maximum borrowings of up to $100,000 (with an accordion of $50,000 upon the satisfaction
of customary conditions), subject to a borrowing base calculation that is based on cash on hand, and a percentage of eligible
accounts receivable and inventory (as defined in the credit agreement). As of December 31, 2024, the total available borrowing
capacity under this facility was $79,428, with outstanding borrowings of $52,350 plus $315 drawn as a letter of credit. The borrowing
base is recalculated monthly and may fluctuate based on changes in cash, accounts receivable and inventory levels. The revolving
line of credit bears interest at Secured Overnight Financing Rate (SOFR) plus applicable margins from 175 to 225 basis points,
depending on unused borrowing capacity, and matures on November 29, 2027. The revolving line of credit was modified in January
2025 to provide maximum borrowings of up to $125,000 with a $25,000 accordion with all other terms unchanged.
The term loan was for an original amount of $55,000 and matures on November 29, 2027. As of December 31, 2024, the
outstanding principal balance was $55,000. The term loan bears interest at SOFR plus applicable margins from 425 to 450 basis
points, depending on earnings. Interest and principal payments are on monthly and quarterly basis, respectively, with additional
principal payments required if the balance outstanding exceeds a borrowing base calculation that is based on appraised collateral.
Proceeds from the new facilities were used to repay the Company's previous revolving credit facility. The previous revolving facility
provided up to $150,000, bore interest at SOFR plus applicable margins from 145 to 450 basis points, depending on covenants,
and was scheduled to mature on September 23, 2026. The previous credit facility was amended during 2023 and 2024 to reduce
the available credit from $250,000; remove the $75,000 accordion; limit the quarterly dividend and capital expenditures; and
modify the calculation of certain financial covenants.
Compliance with the credit facilities require' financial covenants is dependent upon achieving revenue forecasts and maintaining
costs over the next twelve months. In the event of non-compliance, the lenders have a right to demand repayment of the amounts
outstanding or pursue other remedies if the Company cannot reach an agreement to amend or waive the covenants. As in the
past, the Company monitors its compliance with the covenants and will seek waivers and amendments, subject to lender approval
as may become necessary from time to time.
The Company incurred $2,338 of financing fees during the year and are being amortized over the term of the new credit facilities.
$1,355 of unamortized deferred financing fees related to the previous credit facility were written-off and are included in finance
costs. Amortization of deferred financing fees was $696 (2023: $454) and is included in finance costs.
Commitments and contractual obligations
The Company’s contractual obligations as at December 31, 2024 are summarized below:
Payments Due In
2025
2026
2027
2028
2029 Thereafter
Total
Revolving line of credit
–
–
52,350
–
–
–
52,350
Term debt
2,406
4,240
48,354
–
–
–
55,000
Interest rate swap
(38)
–
–
–
–
–
(38)
Lease liabilities
2,634
2,565
2,665
2,149
1,705
293
12,011
Purchase obligations
37,238
–
–
–
–
–
37,238
Total
42,240
6,805
103,369
2,149
1,705
293
156,561
Government assistance
Scientific research and investment tax credits of $429 were recognized in 2024 (2023: $920); research and development expenses
were reduced accordingly.
Dividends
A quarterly dividend of $0.035 CAD per share was declared on November 6, 2024 and paid on January 15, 2025. Total dividends
declared during the year were $0.175 CAD per common share compared to $0.370 per common share in 2023.
Outstanding shares
As at December 31, 2024 the Company had 27,130,556 common shares outstanding.
TRANSACTIONS WITH RELATED PARTIES
During the year, the Company paid $173 (2023: $162) to companies controlled by the Chairman & Co-CEO of the Company
for use of office facilities.
18
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management includes directors, Chairman & Co-CEO, President & Co-CEO, CFO, and senior management. The compensation
expense to key management for employee services is shown below:
December 31
2024
2023
Salaries and other short-term benefits
3,218
3,561
Share-based payment expense
851
820
4,069
4,381
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 20.1% of the outstanding common shares as at December 31, 2024 (2023: 20.5%).
In July 2023, the Company agreed to forgive CAD $591 of loans due from the President & Co-Chief Executive Officer by 12.5%
annually. The loans bear interest at 2% and 51,178 shares of the Company having a fair value of $136 were pledged as
collateral on these loans. At December 31, 2024, CAD $443 remains outstanding under the loans. Principal and accrued interest
totaling $312 is included in Other Assets on the consolidated statement of financial position ($395 at December 31, 2023). The
loans are due upon the earlier of the disposition date of all or proportionate to any part of the pledged securities, termination
of employment, and maturity. The loans are full recourse and interest is due and payable semi-annually. During the year, interest
payments of $7 (2023: $22) was received.
NEW STANDARDS ADOPTED
Amendments to IAS 1 Presentation of Financial Statements
The amendments to IAS 1 specify that only covenants whose compliance is assessed on or before the reporting date affect
the classification of debt as current or non-current at the reporting date. The amendments also require disclosure of information
about future covenants in the notes to the financial statements. The amendments are effective for annual reporting periods
beginning on or after January 1, 2024, with early adoption permitted. These amendments did not have a material impact on
the consolidated financial statements.
Amendments to IFRS 16 Leases
The amendment adds a requirement that measuring lease payments or revised lease payments shall not result in the
recognition of a gain or loss that relates to the right-of-use asset retained by the seller-lessee. The amendments are effective
for annual reporting periods beginning on or after January 1, 2024, with early adoption permitted. These amendments did not
have a material impact on the consolidated financial statements.
FUTURE ACCOUNTING STANDARDS
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 18 will replace IAS 1 and applies for annual reporting periods beginning on or after January 1, 2027. The new standard
will change how the Company presents and discloses its financial statements and accompanying notes by requiring defined
subtotals in the statement of profit or loss, requiring disclosure about management-defined performance measures and adding
new principles for aggregation and disaggregation of information. The Company is assessing the extent of the impact the
standard will have on its consolidated financial statements.
19
MD&A (cont’d)
2024
20
CRITICAL ACCOUNTING ESTIMATES
The Company’s preparation of consolidated 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 trade and other receivables and inventories, valuation of goodwill and other long-lived assets, accounting for income
taxes, and government assistance.
Valuation of Accounts receivable
As at December 31, 2024, Manufactured Products recorded a $40 (2023: $134) allowance for impairment and the Rubber
Solutions segment recorded a $147 (2023: $535) allowance for impairment.
Valuation of inventories
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 forecast 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, 2024, a reserve for impaired inventory in the Rubber Solutions segment represents $754 (2023: $1,574).
AirBoss Manufactured Products maintains a provision of $12,519 (2023: $15,415).
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. As at December 31, 2024, there was no goodwill impairment.
At December 31, 2023, the Company recognized a goodwill impairment related to the defense operations CGU. The carrying
amount of this CGU was determined to be higher than its recoverable amount of $73.4 million and an impairment loss of $26.6
million during 2023 was recognized.
The calculation of value-in-use is most sensitive to the following assumptions:
• Discount rate of 11.5% to 11.6% determined using risk-adjusted returns from comparable companies adjusted for the
Company's capital structure
• Terminal multiple of 5.7 based on market capitalization
• Projected average annual sales growth of 8.3% to 9.1% and margins consistent with historical performance to extrapolate
cash flows
A one percent change in the discount rate or a 1.0 change in the terminal multiple would not result in an impairment.
AirBoss of America Corp.
A N N U A L R E P O R T
21
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 2024, there are no indicators of impairment based on assumptions which they believe to
be reasonable and no impairment charge was recorded.
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 amounts 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 16 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.
FINANCIAL INSTRUMENTS
Foreign exchange hedge
At December 31, 2024, the Company had contracts to sell $14,486 from January 2025 to September 2025 for Canadian dollars
("CAD") $20,000. The fair value of these contracts, representing an unrealized loss of $586, are included in trade and other
payables, including derivatives on the consolidated statement of financial position. The unrealized changes in fair value,
representing a loss of $586 (2023: gain of $497), are recorded on the statement of profit as other expenses.
Interest rate swap
At December 31, 2024, the Company had an interest rate swap agreement(s) for a combined notional amount of $20,000
(2023: $46,000), maturing in May 2025. Swap interest is calculated and settled on a monthly basis based on the difference
between the floating rate of USD Secured Overnight Financing Rate ("SOFR") and a weighted average fixed rate of 3.84%
(2023: 4.118%).
Interest recovery on the swap agreements were $517 (2023: $381).
At December 31, 2024, the fair value of this agreement, representing a gain of $38 (2023: $252), is included in loans and
borrowings on the consolidated statement of financial position. The change in the fair value, representing a loss of $213 (2023:
gain of $200), is recorded on the consolidated statement of profit as finance costs. The Company entered into the interest rate
swap agreements to fix the interest rate on a portion of its borrowings and does not hold them for trading or speculative purposes.
Share price hedge
At December 31, 2024, the Company had contracts to reduce its exposure to the change in its share price on its share-based
compensation costs. The fair value of these agreements, representing a loss of $535 (2023: loss of $403) is included in trade and
other payables, including derivatives on the condensed consolidated statement of financial position. The change in the fair value,
representing a loss of $166 (2023: $605), is recorded on the consolidated statement of profit (loss) as other expenses. The realized
loss from the swap agreements was $61 (2023: gain of $163).
RISK FACTORS
Impact of Economic Cycle
Demand for the Company’s products is highly sensitive to general economic cycles and the economic conditions of the industry
sectors it serves. In addition, a number of our customers' 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. A
general economic slowdown or deteriorating economic conditions in our customers' specific industry sectors could have a
material adverse effect on our profitability, financial condition and long-term growth prospects.
At Manufactured Products, 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; a significant decline in defense budget and spending from current levels could have a material adverse effect on the
profitability, financial condition and long-term growth prospectus of Manufactured Products. In particular, 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, financial condition and long-term growth prospectus of our Manufactured Products segment.
2024
MD&A (cont’d)
22
Political Uncertainty and Policy Change
Certain of the business sectors in which we and our customers operate, both in the Manufactured Products' and Rubber Solutions’
segments, are either highly-globalized industries or industries which rely on the movement of goods between Canada and the
United States. The 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. In particular, the recently-enacted
tariffs and the potential for further escalating cross-border tariffs between the U.S. and Canada, as well as other countries, introduces
heightened uncertainty that could materially adversely impact our supply chains, increase production costs, and erode our
competitive positioning.
The recently-introduced tariffs and the potential for further increased tariffs on goods exported from Canada to the U.S. could
significantly raise our production costs and reduce profit margins. Retaliatory tariffs could further disrupt supply chains and restrict
our market access.
"Buy America" policies could limit the Company's ability to secure U.S. government contracts, necessitating changes in supply chain
strategies to comply with local content requirements.
Uncertainty created by rapidly changing political and trade environments 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 and particularly as tariff
negotiations, retaliatory measures, and evolving regulatory frameworks remain fluid. 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, financial condition and long-term
growth prospects.
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 the majority of 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:
Earnings before tax
In millions of US dollars
2024
2023
Natural and synthetic rubber
(6.15)
(7.27)
Chemicals (Rubber mixing)
(4.98)
(4.55)
Carbon black
(2.61)
(3.10)
Steel
(2.04)
(3.08)
Silicone
(0.49)
(0.67)
(16.27)
(18.67)
Competition and Price Pressure
The Company competes directly against major North American and international companies. 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.
Litigation
In December 2022, a statement of claim was filed in the Ontario Superior Court of Justice against AirBoss and several named
officers. The applicants under the proceeding sought an order for leave to proceed under the Securities Act (Ontario), certifying
the proceeding as a class proceeding and appointing them as representative plaintiffs. The applicants sought, among other
relief, a declaration that the Company made misrepresentations contrary to the Securities Act (Ontario) during a period
extending from November 9, 2021 to September 6, 2022, as well as unspecified damages. In May 2024, the Company
announced that the matter was settled within insurance limits, that none of the defendants admitted any liability, wrongdoing,
or fault as part of the settlement and that it did not result in any direct financial impact to the Company.
In addition to ongoing litigation, the Company may become party to litigation from time to time in the ordinary course of business
which could adversely affect our business. Should any litigation in which the Company becomes involved be determined against
the Company, such a decision could adversely affect the Company’s ability to continue operating and the market price for our
shares, and could require the use of significant resources. Even if the Company is involved in litigation and wins, litigation can
redirect significant Company resources.
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
23
Contract-related Risks
Contracts from many of our customers, in both operating 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. Customers may also cancel contracts for convenience or due to changes in political or economic
conditions, including geopolitical instability, government budget constraints or shifting procurement priorities. The termination of
blanket orders or other contracts could result in the Company incurring various pre-production, engineering and other costs that we
may not recover from our customers and which could have a material adverse impact on our financial condition and profitability.
In addition, it is difficult to accurately predict when opportunities to win contract awards for defense products and personal protective
equipment from the United States, Canadian or other foreign governments or agencies 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 a material adverse impact on our financial condition and profitability. Obtaining new contract awards from U.S.
government agencies may be adversely impacted by changes in procurement policy including "Buy American" policies.
Customers may also cancel contracts for convenience or due to changes in political or economic conditions, including geopolitical
instability, government budget constraints or shifting procurement priorities. Failing to win new contract awards or losing existing
contracts could have a material adverse impact on our financial condition or profitability.
Financing-Related Risks
The Company’s ability to secure necessary financing on acceptable terms is crucial for day-to-day operations, capital improvements,
strategic initiatives and growth. Failure to obtain, maintain or renew such financing could have a material adverse effect on the
Company’s liquidity, financial position and operations.
The Company's credit facilities require that the Company does not exceed certain ratios, including covenants related to minimum
adjusted EBITDA and liquidity requirements. The Company uses forecasts to project its future compliance with these financial
covenants and has in the past negotiated amendments to these covenants when there was a risk of default. Compliance with these
covenants is dependent on the Company's financial performance, which could be adversely affected by various factors, such as
changes in geopolitical or economic conditions, including tariffs and trade restrictions, operational results and customer contracts.
Should results for any fiscal period not meet the Company’s expectations it may request amendments of these covenants in order
to remain in compliance, though there is no guarantee such a request will be granted by the Company's lenders. Failure to obtain
such amendments could result in the Company’s lenders taking certain actions including acceleration of debt repayment, imposition
of additional restrictive covenants, increased borrowing costs or cross-default risks, which could have a material adverse effect on
the Company’s liquidity, financial position and operations.
In addition, credit availability under the Company's credit facilities is subject to asset-values, cash on hand, accounts receivable and
inventory levels, which could also be impacted by various factors, such as geopolitical or economic conditions, including tariffs and
trade restrictions, operational results and customer contracts. A decrease in credit availability could have a material adverse effect
on the Company's liquidity, financial position and operations.
Currency Exposure
The Company has net sales and expenses denominated in both CAD and 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 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 impact on the Company of a $0.10 decrease in the value of one CAD dollar in the
Company’s USD functional currency (million):
Earnings before tax
In millions of US dollars
2024
2023
Sales (1)
(1.7)
(1.7)
Purchases (2)
5.4
6.2
(1) Based upon Canadian dollar-denominated sales
(2) Based upon Canadian dollar-denominated debt repayments, purchases and expenses
The Company’s term loan (denominated in USD) is secured against certain real estate (valued in CAD) and capital equipment
fixed assets. An increase in the value of the USD to CAD decreases the value of the collateral in USD. If the value of collateral
is insufficient, the Company is required to make a principal repayment to cover the shortfall. At December 31, 2024, a $0.10
decrease in the value of one Canadian dollar in US currency would require a principal repayment of $1,797.
24
2024
MD&A (cont’d)
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. The duration and scope of future outbreaks is not
known with any certainty and the Company is unable to accurately project the ultimate impact on the business. However, if
outbreaks continue for an extended period of time, AirBoss may continue to experience supply chain and logistics challenges, in
particular given production delays throughout the world, a decline in sales activities, and reductions in operations and workforce.
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 represented approximately 10% of consolidated net sales in 2024 (2023: 9%). Five
customers represented 30% of consolidated net sales in 2024 (2023: 31%). 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.
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 over 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 and suppliers, 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
25
MD&A (cont’d)
AirBoss of America Corp.
Climate Change Risks
Extreme weather events and natural disasters
Extreme weather events such as floods and windstorms and other natural disasters caused by climate change could cause
catastrophic destruction to some of our or our suppliers’ facilities, interrupt the Company’s and its suppliers’ and customers’
operations and activities and interrupt the ability of raw materials and finished products to be received from suppliers and delivered
to customers (physical risks), which could in turn disrupt our production and/or prevent us from supplying products to our
customers. Climate change may also have indirect effects on the Company’s business by increasing the cost of (or making
unavailable) property insurance on terms the Company finds acceptable, as well as increasing the costs of maintenance, capital
replacement and expansion, energy, water and other services at the Company’s facilities. In addition to physical risks associated
with climate change, the potential future requirements that could be imposed by external stakeholders in the transition to a net-
zero economy (transition risk) may also impact the Company’s business operations. While we conduct risk assessments of our
facilities and have implemented mitigation strategies to address, such as insurance policies which protect against property damage
and business continuity risk, where practical, physical risks related to extreme weather events or natural disasters and the
frequency and severity of any such event can vary by region and cannot be predicted. A catastrophic destruction of our facilities
or those of our suppliers could have a material adverse effect on our operations and profitability.
Reputational risks
As public awareness and concern about climate change increases, consumer preferences are rapidly evolving towards
environmentally friendly and sustainable products. There is a risk that we may face reputational challenges if our products or
processes are perceived as harmful to the environment or lagging behind our peers in sustainability practices. In addition, there
is a growing emphasis on sustainable and responsible investment criteria by institutional and retail investors that could impact our
Company's attractiveness to investors. Failure to meet these evolving criteria may result in a revaluation of our Company by the
market, potentially affecting our stock price and access to capital.
Market Risks
Climate change poses risks to the stability and cost-efficiency of our global supply chain. Extreme weather events, such as floods,
hurricanes, and droughts, can disrupt production and logistics, leading to increased costs and delays. These disruptions could
impact our ability to meet customer demand and maintain competitive pricing. In addition, regulatory and societal shifts towards
a low-carbon economy could significantly alter demand for certain materials and products. Our Company may face risks associated
with shifts in demand for our products, particularly if we are unable to adapt our offerings to align with market transitions towards
sustainable alternatives.
Policy Risks
The introduction of new regulations aimed at reducing carbon emissions and greenhouse gas emissions, such as carbon pricing
mechanisms, emissions trading schemes, and stricter environmental standards, could result in significant compliance costs.
Management believes that the Company is in substantial compliance with all material environmental regulations relating to its
operations however changes to these regulations are ongoing and accordingly may make compliance increasingly expensive.
These costs may impact our profitability and require substantial capital investments to adapt our operations and products. In
addition, the Company faces the risk that the certain chemicals and raw materials which are used in the manufacturing of rubber
compounds could be restricted or prohibited from use, which the Company would have to mitigate by finding alternatives, which
could in turn increase the costs of its products and make them less attractive to customers. Further, the global transition to a low-
carbon economy could impose additional regulatory compliance costs if our business model, operations, or products do not align
with emerging regulatory requirements or incentives for low-emission technologies, which could affect our competitive positioning
and necessitate significant strategic adjustments.
Catastrophic Events
AirBoss has operations and facilities which manufacture products in Canada and the United States. Natural events (such as a
hurricane or major earthquake), terrorist attack, pandemics, epidemics, outbreaks of an infectious disease or similar events or other
catastrophic events, including adverse weather events associated with global climate change which have increased in severity
and frequency in recent years, could cause delays in developing, manufacturing or selling products. Although AirBoss conducts
risks assessments and implements mitigation, such as property and business continuity insurance, and third-party supplier
monitoring, such events that occur in major markets where AirBoss sells products could reduce the demand for our products in
those areas and, as a result, impact our sales into those markets. In either case, any such disruption could have a material adverse
effect on the Company’s business, financial condition and results of operations.
2024
MD&A (cont’d)
26
IT/Cybersecurity Risks
Although we have established and continue to enhance security controls intended to protect our IT systems and infrastructure,
there is no guarantee that such security measures will be effective in preventing unauthorized physical access or cyber-attacks.
A significant breach of our IT systems could: result in theft of funds; cause disruptions in our manufacturing operations; lead to
the loss, destruction or inappropriate use of sensitive data; or result in theft of our, our customers’ or our suppliers’ intellectual
property or confidential information. The occurrence of any of the foregoing could adversely affect our operations and/or reputation,
and could lead to claims against us that could have a material adverse effect on our profitability.
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 Chairman & Co-CEO, President and Co-CEO, and CFO, of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, our Chairman & Co-CEO, President and Co-CEO, and CFO
concluded that the design and operation of our disclosure controls and procedures were effective as of December 31, 2024, 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 Chairman & Co-CEO, President and Co-CEO, and 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 Chairman & Co-CEO, President and Co-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 to provide reasonable assurance regarding the reliability
of the Company’s financial reporting and its compliance with IFRS in its consolidated financial statements. The Chairman & Co-CEO,
President and Co-CEO, and 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, 2024 and believe the design and effectiveness of the
internal controls to be effective.
AirBoss of America Corp.
A N N U A L R E P O R T
27
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 consolidated financial statements have
been prepared by management, in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board. 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 consolidated 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, 2024 and December 31, 2023 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 10, 2025
P. Gren Schoch
Frank Ientile
Chairman and Co-Chief Executive Officer
Chief Financial Officer
2024
28
Independent Auditor's Report
To the Shareholders of AirBoss of America Corp.
Opinion
We have audited the consolidated financial statements of AirBoss of America Corp. (the Company), which comprise:
• the consolidated statement of financial position as at December 31, 2024 and December 31, 2023
• the consolidated statement of loss and comprehensive loss for the years then ended
• the consolidated statement of changes in equity for the years then ended
• the consolidated statement of cash flows for the years then ended
• and notes to the consolidated financial statements, including a summary of material accounting policy information
(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 Company as at December 31, 2024 and December 31, 2023, its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting
Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our
auditor’s report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(e) in the financial statements, which indicates that the Company’s compliance with financial
covenants is dependent upon achieving forecasted revenue and reducing costs which may be impacted by the introduction of
tariffs by the U.S. government.
As stated in Note 2(e) in the financial statements, these events or conditions indicate that a material uncertainty exists that may
cast significant doubt on the Company's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
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, 2024. 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 matter described below to be the key audit matter to be communicated in our auditor’s report.
Evaluation of impairment of goodwill
Description of the matter
We draw attention to the Notes 2(d), 3(e)(i) and 8 to the financial statements. The goodwill balance included within intangible
assets was $24,929 thousand. The Company 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 Company’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
judgment due to the high degree of estimation uncertainty in determining the recoverable amount. In addition, the involvement
of those with specialized skills and knowledge were required in performing and evaluating the results of our audit procedures
due to the sensitivity of the recoverable amount to changes in key assumptions.
AirBoss of America Corp.
A N N U A L R E P O R T
29
How the matter was addressed in the audit
The primary procedures we performed to address the key audit matter included the following:
• We assessed the Company’s ability to accurately forecast by comparing the Company’s projected sales and margins used
in the prior year impairment test to actual results.
• We compared the Company’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 ranges that were 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.
Other Information
Management is responsible for the other information. Other information comprises:
• the information included in Management’s Discussion and Analysis of Financial Condition and Results of Operations filed
with the relevant Canadian Securities Commissions.
• the information, other than the financial statements and the auditor’s report thereon, included in a document likely to be
entitled “2024 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 of Financial Condition and Results of
Operations filed with the relevant Canadian Securities Commissions as at the date of this auditor’s 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 auditor’s report. We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s report thereon, included in a document likely to be entitled
“2024 Annual Report” is expected to be made available to us after the date of this auditor’s 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 IFRS
Accounting Standards as issued by the International Accounting Standards Board, 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 Company'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 Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
2024
30
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 auditor’s 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 Company'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 Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s 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 auditor’s
report. However, future events or conditions may cause the Company 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.
• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business units within the group as a basis for forming an opinion on the group financial statements. We are
responsible for the direction, supervision and review of the audit work performed for the purposes 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 auditor’s 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 auditor’s 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 auditor’s report is Elliot Marer.
Vaughan, Canada
March 10, 2025
AirBoss of America Corp.
A N N U A L R E P O R T
31
Consolidated Statement of Financial Position
In thousands of US dollars
Note
December 31, 2024
December 31, 2023
ASSETS
Current assets
Cash and cash equivalents
6,491
28,989
Trade and other receivables, including derivatives
4, 10
69,508
73,237
Prepaid expenses
6,637
8,361
Inventories
5
57,136
64,159
Current income taxes receivable
16
2,195
8,105
Total current assets
141,967
182,851
Non-current assets
Property, plant and equipment
6, 7
83,927
84,573
Intangible assets
8
71,219
78,689
Deferred Income tax assets
16
9,702
9,702
Other assets
9, 16
2,713
841
Total non-current assets
167,561
173,805
Total assets
309,528
356,656
LIABILITIES
Current liabilities
Current portion of loans and borrowings
7, 11
5,002
2,437
Trade and other payables, including derivatives
10
57,534
68,062
Provisions
13
198
2,409
Current income taxes payable
16
552
–
Total current liabilities
63,286
72,908
Non-current liabilities
Loans and borrowings
7, 11
112,388
128,655
Employee benefits
19
385
441
Other payables
10
118
–
Provisions
13
4,264
2,735
Deferred income tax liabilities
16
3,077
3,060
Total non-current liabilities
120,232
134,891
Total liabilities
183,518
207,799
EQUITY
Share capital
14
87,992
87,992
Contributed surplus
14
6,469
5,480
Retained earnings
31,549
55,385
Total equity
126,010
148,857
Total liabilities and equity
309,528
356,656
The notes on pages 35 to 63 are an integral part of these consolidated financial statements.
Commitments and contingencies (note 18), Subsequent Events (note 23).
On behalf of the Board
P.G. Schoch
Robert L. McLeish
Director
Director
2024
Consolidated Statement of Loss and Comprehensive loss
32
For the year ended December 31
In thousands of US dollars
Note
2024
2023
Net Sales
387,024
426,025
Cost of sales
5
(333,028)
(367,615)
Gross profit
53,996
58,410
General and administrative expenses
(48,275)
(52,745)
Selling and marketing expenses
(6,312)
(8,713)
Research and development expenses
17
(3,207)
(3,124)
Other expenses
(2,151)
(27,350)
Operating expenses
(59,945)
(91,932)
Results from operating activities
(5,949)
(33,522)
Finance costs
12
(12,763)
(5,233)
Loss before income tax
(18,712)
(38,755)
Income tax expense
16
(1,678)
(2,994)
Loss and comprehensive loss
(20,390)
(41,749)
Earnings (loss) per share
Basic
15
(0.75)
(1.54)
Diluted
15
(0.75)
(1.54)
The notes on pages 35 to 63 are an integral part of these consolidated financial statements.
AirBoss of America Corp.
A N N U A L R E P O R T
Consolidated Statement of Changes in Equity
33
Attributable to equity holders of the Company
Share
Contributed
Retained
Total
In thousands of US dollars
Capital
Surplus
Earnings
equity
Balance at January 1, 2023
87,811
4,598
104,588
196,997
Loss and comprehensive loss for the year
–
–
(41,749)
(41,749)
Contributions by and distributions to owners
Share-based compensation expense
–
1,438
–
1,438
Stock options forfeited
–
(375)
(375)
Settlement of deferred share units
181
(181)
–
–
Dividends to equity holders
–
–
(7,454)
(7,454)
Total contributions by and distributions to owners
181
882
(7,454)
(6,391)
Balance at December 31, 2023
87,992
5,480
55,385
148,857
Attributable to equity holders of the Company
Share
Contributed
Retained
Total
In thousands of US dollars
Capital
Surplus
Earnings
equity
Balance at January 1, 2024
87,992
5,480
55,385
148,857
Loss and comprehensive loss for the year
–
–
(20,390)
(20,390)
Contributions by and distributions to owners
Share-based compensation expense
–
1,022
–
1,022
Stock options forfeited
–
(33)
–
(33)
Dividends to equity holders
–
–
(3,446)
(3,446)
Total contributions by and distributions to owners
–
989
(3,446)
(2,457)
Balance at December 31, 2024
87,992
6,469
31,549
126,010
The notes on pages 35 to 63 are an integral part of these consolidated financial statements.
2024
Consolidated Statement of Cash Flows
34
For the year ended December 31
In thousands of US dollars
Note
2024
2023
Cash flows from operating activities
Profit (loss) for the year
(20,390)
(41,749)
Adjustments for:
Depreciation
6, 7
12,812
13,127
Amortization of intangible assets
8
8,200
9,218
Impairment of intangible assets
8
–
26,648
Write-down of inventory
5
6,049
8,031
Finance costs
11, 19
12,763
5,233
Unrealized foreign exchange (gains) losses
98
(626)
Share-based payment expense
13, 14
1,241
1,447
SRED tax credits
17
(429)
(920)
Income tax expense
16
1,678
2,994
Impairment of share purchase loan
–
1,779
Other
41
176
22,063
25,358
Change in inventories
974
20,643
Change in trade and other receivables
3,755
21,230
Change in prepaid assets
76
968
Change in trade and other payables
(10,413)
(15,862)
Change in provisions
(794)
(286)
Net change in non-cash working capital balances
(6,402)
26,693
Interest paid
(10,289)
(10,778)
Income tax paid
3,408
(356)
Net cash provided by operating activities
8,780
40,917
Cash flows from investing activities
Proceeds from sale of asset
26
41
Acquisition of property, plant and equipment
6
(9,902)
(7,256)
Acquisition of intangible assets
8
(730)
(1,249)
Net cash used in investing activities
(10,606)
(8,464)
Cash flows from financing activities
Proceeds from loans and borrowings
55,000
–
Proceeds from operating line of credit
(66,750)
(11,000)
Principal payments for lease liabilities
(2,541)
(2,490)
Debt refinancing costs
(2,338)
(688)
Interest received on share purchase loans
7
22
Dividends paid
(4,170)
(8,040)
Net cash used in financing activities
(20,792)
(22,196)
Net (decrease) / increase in cash and cash equivalents
(22,618)
10,257
Cash and cash equivalents at January 1
28,989
18,552
Effect of exchange rate fluctuations on cash held
120
180
Cash and cash equivalents at December 31
6,491
28,989
The notes on pages 35 to 63 are an integral part of these consolidated financial statements.
AirBoss of America Corp.
A N N U A L R E P O R T
35
Notes to Consolidated Financial Statements ("CFS")
For the years ended December 31, 2024 and 2023
(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 and cross-traded on the OTCQX® Best
Market in the United States, 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 %
AirBoss Rubber Compounding (NC), LLC ("ANC")
North Carolina
100%
SunBoss Chemicals Corp.
Ontario
100%
AirBoss Silicone, LLC
Michigan
100%
AirBoss Flexible Products, LLC ("AFP")
Michigan
100%
AirBoss Defense Group Ltd. ("ADG Canada")
Quebec
100%
AirBoss Defense Group, LLC ("ADG USA")
Delaware
100%
Critical Solutions International, LLC ("CSI")
Texas
100%
Blackbox Biometrics, Inc. ("B3")
New York
100%
Ace Elastomer, LLC ("ACE")
South Carolina
100%
The Company’s operating segments are organized into the following reportable segments:
• AirBoss Rubber Solutions ("ARS") - Includes manufacturing and distribution of rubber compounds and distribution of
rubber compounding related chemicals.
• AirBoss Manufactured Products ("AMP") - Includes the manufacture and distribution of anti-noise, vibration and harshness
dampening parts, and personal protection and safety products, primarily for CBRN-E threats.
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.
ARS consists of AirBoss’ custom rubber compounding operations in Kitchener, Ontario, Rock Hill, South Carolina, Scotland
Neck, North Carolina, Auburn Hills, Michigan, and Acton Vale, Quebec. AMP consists of the Company's rubber molded product
operations in Auburn Hills, Michigan and the Company's defense businesses in Jessup, Maryland, Acton Vale, Quebec,
Rochester, New York and Charleston, South Carolina.
Notes to CFS (cont’d)
2024
36
NOTE 2 BASIS OF PREPARATION
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board.
The Consolidated financial statements were authorized for issue by the Board of Directors on March 10, 2025.
(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 trade and other receivables,
inventories, 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 – trade and other receivables
Note 5 – inventories
Note 7 – leases
Note 8 – 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 8 – 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
Note 19 – post-retirement benefits.
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
37
(e) Going Concern
The consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able
to realize its assets and discharge its liabilities in the normal course of business. If this assumption was not appropriate as at
December 31, 2024, material adjustments to the carrying value of the assets and liabilities would be necessary.
In November 2024, the Company entered into two new secured credit facilities. The facilities are secured against substantially all
of the Company’s assets and contain cross-default provisions along with customary financial and non-financial covenants, including
minimum earnings and liquidity, and limitations on capital expenditures, dividend payments and additional indebtedness. Continued
compliance with the covenants is dependent upon achieving revenue forecasts and maintaining costs. In early 2025, the U.S.
government announced plans to impose a 25% tariff on most Canadian imports which could disrupt trade flows, increase production
costs, erode competitive positioning, strain supply chains along with several other economic factors that are uncertain during this
time. These tariffs, initially set to take effect on February 4, 2025, were subsequently postponed and partially came into effect on
March 4, 2025. Additional tariffs are scheduled to take effect on April 2, 2025. A significant portion of the products manufactured by
the Company in Canada are sold into the United States and are subject to the recently-enacted tariffs during the production process
given the cross-border nature of the Company’s business operations. The introduction of tariffs could have a material impact on the
future cash flows of the business including, but not limited to, consumer demand on product imported into the United States. Such
market conditions may cause expected results to not materialize and therefore impact management’s ability to comply with
covenants. Accordingly, these events and conditions indicate that a material uncertainty exists on the Company's ability to continue
as a going concern. In the event of non-compliance, the lenders have a right to demand repayment of the amounts outstanding or
pursue other remedies if the Company cannot reach an agreement to amend or waive the covenants.
The Company is actively evaluating and executing contingency plans and reviewing all available options to try and deal with this
threat, including rebalancing production and sales activities between the U.S. and Canada, in order to minimize the impacts to
the Company and its customers. As in the past, the Company monitors its compliance with the covenants and will seek waivers
and amendments, subject to lender approval as may become necessary from time to time.
2024
Notes to CFS (cont’d)
NOTE 3 MATERIAL 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. Contingent consideration is
remeasured at fair value at each reporting date and subsequent changes in the fair value are recognized in profit or loss.
(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 information of subsidiaries is 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 consolidated 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 within other expenses in the consolidated statement of
profit (loss).
(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 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
statement of profit (loss). Transaction costs incurred are expensed in the consolidated statement of profit (loss).
38
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
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 (loss). When an investment is derecognized, the accumulated gain or loss in other comprehensive income (loss)
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 statement 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.
(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.
39
2024
Notes to CFS (cont’d)
40
(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 expenses in the
consolidated statement of profit (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
15-40 years
• plant and manufacturing equipment
5-15 years
• vehicles
3-5 years
• furniture, office, lab and computer equipment
3-5 years
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
AirBoss of America Corp.
A N N U A L R E P O R T
41
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) 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.
(iv) 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.
(v) 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
5 years
• capitalized development costs
3-5 years
• customer relationships
10-17 years
• brands, patents and trademarks
8-20 years
(f) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of manufactured 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 locations and conditions. Inventory that is not interchangeable is
determined on an individual item basis and includes expenditures incurred in acquiring the inventories, shipping and logistics
costs. 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.
Notes to CFS (cont’d)
2024
42
(g) Employee benefits:
(i) Defined Benefit plan
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) 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 participating employers.
(b) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
(c) 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.
(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.
(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. Net sales for other services are recognized upon acceptance 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.
Notes to CFS (cont’d)
AirBoss of America Corp.
A N N U A L R E P O R T
43
(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 the Chairman & Co-CEO, and President & Co-CEO (the chief operating
decision makers) 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.
44
2024
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.
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 IAS 1 Presentation of Financial Statements
The amendments to IAS 1 specify that only covenants whose compliance is assessed on or before the reporting date affect
the classification of debt as current or non-current at the reporting date. The amendments also require disclosure of information
about future covenants in the notes to the financial statements. The amendments are effective for annual reporting periods
beginning on or after January 1, 2024, with early adoption permitted. These amendments did not have a material impact on
the consolidated financial statements.
Amendments to IFRS 16 Leases
The amendment adds a requirement that measuring lease payments or revised lease payments shall not result in the
recognition of a gain or loss that relates to the right-of-use asset retained by the seller-lessee. The amendments are effective
for annual reporting periods beginning on or after January 1, 2024, with early adoption permitted. These amendments did not
have a material impact on the consolidated financial statements.
(q) Future Accounting Standards
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 18 will replace IAS 1 and applies for annual reporting periods beginning on or after January 1, 2027. The new standard
will change how the Company presents and discloses its financial statements and accompanying notes by requiring defined
subtotals in the statement of profit or loss, requiring disclosure about management-defined performance measures and adding
new principles for aggregation and disaggregation of information. The Company is assessing the extent of the impact the
standard will have on its consolidated financial statements.
A N N U A L R E P O R T
45
Notes to CFS (cont’d)
AirBoss of America Corp.
NOTE 4 TRADE AND OTHER RECEIVABLES
December 31
2024
2023
Trade receivables
68,035
71,711
Less: expected credit loss
(187)
(669)
67,848
71,042
Other receivables
1,660
2,195
69,508
73,237
Impairment losses
The aging of trade receivables at the reporting date was:
2024 2023
December 31
Gross
Impairment
Gross
Impairment
Within terms
50,170
–
52,804
–
Past due 0-30 days
12,011
–
11,722
–
Past due 31-120 days
5,854
(187)
7,185
(669)
68,035
(187)
71,711
(669)
The continuity of the allowance for impairment was:
For the year ended December 31
2024
2023
Balance at January 1
(669)
(725)
Impairment loss recognized
(120)
(765)
Collected
94
772
Written-off
508
49
Balance at December 31
(187)
(669)
NOTE 5 INVENTORIES
December 31
2024
2023
Raw materials and consumables
38,028
34,124
Work in progress
7,271
10,084
Finished goods
23,214
36,405
Inventory in transit
1,896
535
70,409
81,148
Provisions
(13,273)
(16,989)
57,136
64,159
An inventory charge of $6,181 (2023: $8,425) was included in cost of sales. In the second quarter of 2024, the Company
recorded a $6,049 inventory provision related to its inventory of nitrile gloves and medical gowns due to significant downward
shifts in pricing. The Company has an agreement to sell its remaining inventory of nitrile gloves at its current net book value.
In 2023, the Company recorded a $8,031 inventory provision related to its inventory of nitrile gloves due to significant downward
shifts in pricing.
2024
46
Notes to CFS (cont’d)
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
Land and
Plant and
Furniture
Under
buildings1
equipment1
and equipment1
construction
Total
Cost
Balance at January 1, 2023
53,951
120,791
3,005
7,677
185,424
Additions
621
634
153
7,206
8,614
Disposals
(346)
(1,325)
(31)
–
(1,702)
Transfers
813
4,305
6
(5,197)
(73)
Balance at December 31, 2023
55,039
124,405
3,133
9,686
192,263
Additions
–
2,315
116
9,769
12,200
Disposals
–
(703)
(1)
–
(704)
Transfers
1,179
9,071
55
(10,305)
–
Balance at December 31, 2024
56,218
135,088
3,303
9,150
203,759
Accumulated Depreciation
Balance at January 1, 2023
21,640
72,314
2,178
–
96,132
Depreciation for the period
3,726
9,114
287
–
13,127
Disposals
(339)
(1,196)
(30)
–
(1,565)
Transfers
–
(4)
–
–
(4)
Balance at December 31, 2023
25,027
80,228
2,435
–
107,690
Depreciation for the period
3,721
8,767
324
–
12,812
Disposals
–
(670)
–
–
(670)
Balance at December 31, 2024
28,748
88,325
2,759
–
119,832
(1) includes right of use assets. See note 7 for additional details.
Land and
Plant and
Furniture
Under
Carrying amounts
buildings
equipment
and equipment
construction
Total
Balance at December 31, 2023
30,012
44,177
698
9,686
84,573
Balance at December 31, 2024
27,470
46,763
544
9,150
83,927
Depreciation expense of $12,158 (2023: $12,416) was charged to cost of sales, $638 (2023: $688) was charged to general
and administrative expense and $16 (2023: $23) was charged to research and development expenses.
AirBoss of America Corp.
A N N U A L R E P O R T
47
Notes to CFS (cont’d)
NOTE 7 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 5 years.
Right-of-Use Assets
Land and
buildings
Equipment
Total
Cost
Balance at January 1, 2023
18,789
2,020
20,809
Lease additions
572
786
1,358
Disposals
(297)
(322)
(619)
Balance at December 31, 2023
19,064
2,484
21,548
Lease additions
–
718
718
Disposals
–
(183)
(183)
Balance at December 31, 2024
19,064
3,019
22,083
Accumulated depreciation
Balance at January 1, 2023
5,997
1,281
7,278
Depreciation
2,049
529
2,578
Disposals
(297)
(321)
(618)
Balance at December 31, 2023
7,749
1,489
9,238
Depreciation
2,021
575
2,596
Disposals
–
(183)
(183)
Balance at December 31, 2024
9,770
1,881
11,651
Carrying amounts
Balance at December 31, 2023
11,315
995
12,310
Balance at December 31, 2024
9,294
1,138
10,432
Lease Liabilities
Interest expense on lease liabilities of $633 (2023: $642) is included in Finance Costs.
Lease liabilities of $12,011 (2023: $13,890) are included in Loans and Borrowings (see note 11)
Cash outflow related to leases was $3,174 (2023: $3,132).
The future undiscounted contractual lease payments are as follows:
Total
2025
2026
2027
2028
2029 Thereafter
Lease payments
13,617
3,195
3,008
2,968
2,385
1,758
303
2024
48
Notes to CFS (cont’d)
NOTE 8 INTANGIBLE ASSETS
Brands,
Software and
Customer
Patents and
Development
Goodwill
Relationships
Trademarks
costs
Total
Cost
Balance at January 1, 2023
51,577
63,210
31,224
9,520
155,531
Additions
–
–
–
1,249
1,249
Impairment
(26,648)
–
–
–
(26,648)
Disposals
–
–
–
(69)
(69)
Transfers
–
–
–
69
69
Balance at December 31, 2023
24,929
63,210
31,224
10,769
130,132
Additions
–
–
–
730
730
Balance at December 31, 2024
24,929
63,210
31,224
11,499
130,862
Accumulated Amortization
Balance at January 1, 2023
–
30,620
6,000
5,674
42,294
Amortization for the year
–
5,294
2,799
1,125
9,218
Disposals
–
–
–
(69)
(69)
Balance at December 31, 2023
–
35,914
8,799
6,730
51,443
Amortization for the year
–
4,018
2,913
1,269
8,200
Balance at December 31, 2024
–
39,932
11,712
7,999
59,643
Carrying amounts
Balance at December 31, 2023
24,929
27,296
22,425
4,039
78,689
Balance at December 31, 2024
24,929
23,278
19,512
3,500
71,219
Amortization expense of $8,200 (2023: $9,218) was charged to general and administrative expense. Remaining amortization
for customer relationships acquired is 1 to 14 years and patents and trademarks is 1 to 17 years.
Goodwill
December 31
2024
2023
AirBoss Rubber Solutions
14,864
14,864
AirBoss Manufactured Products - rubber molded products
10,065
10,065
24,929
24,929
Goodwill is allocated to those cash-generating units ("CGUs") 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,
2024, there was no goodwill impairment. At December 31, 2023, the Company recognized a goodwill impairment related to the
defense operations CGU. The carrying amount of this CGU was determined to be higher than its recoverable amount of $73.4
million and an impairment loss of $26.6 million during 2023 was recognized. The impairment loss was fully allocated to goodwill
and included in Other Expenses.
AirBoss of America Corp.
A N N U A L R E P O R T
49
Notes to CFS (cont’d)
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
AirBoss Rubber Solutions
The calculation of value-in-use is most sensitive to the following assumptions:
• Discount rate of 11.6% determined using risk-adjusted returns from comparable companies adjusted for the Company's
capital structure.
• Terminal multiple of 5.7 based on market capitalization
• Projected average annual sales growth of 9.1% and margins consistent with historical performance to extrapolate cash flows
AirBoss Manufactured Products - rubber molded products
The calculation of value-in-use is are most sensitive to the following assumptions:
• Discount rate of 11.5% determined using risk-adjusted returns from comparable companies adjusted for the Company's
capital structure.
• Terminal multiple of 5.7 based on market capitalization
• Projected average annual sales growth of 8.3% and margins consistent with historical performance to extrapolate cash flows
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 rubber, defense and
engineered products industries, which are based on both external sources and internal sources (historical data).
NOTE 9 OTHER ASSETS
Share purchase loans1
Other
Total
Balance at January 1, 2023
2,203
446
2,649
Accrued interest
37
–
37
Interest paid
(22)
–
(22)
Loan forgiven
(56)
–
(56)
Loan impairment
(1,779)
–
(1,779)
Effect of movements in exchange rates
12
–
12
Balance at December 31, 2023
395
446
841
Tax credits
–
1,955
1,955
Accrued interest
7
–
7
Interest paid
(7)
–
(7)
Loan forgiven
(55)
–
(55)
Effect of movements in exchange rates
(28)
–
(28)
Balance at December 31, 2024
312
2,401
2,713
(1) see note 21 for additional details.
2024
50
Notes to CFS (cont’d)
NOTE 10 DERIVATIVES NOT DESIGNATED IN A FORMAL HEDGING RELATIONSHIP
Foreign exchange hedge
At December 31, 2024, the Company had contracts to sell $14,486 from January 2025 to September 2025 for Canadian dollars
("CAD") $20,000. The fair value of these contracts, representing an unrealized loss of $586, are included in trade and other
payables, including derivatives on the consolidated statement of financial position. The unrealized changes in fair value,
representing a loss of $586 (2023: gain of $497), are recorded on the statement of profit as other expenses.
At December 31, 2023, the Company had contracts to sell $14,438 from January 2024 to November 2024 for Canadian dollars
("CAD") $19,803. The fair value of these contracts, representing an unrealized gain of $497, are included in trade and other
receivables, including derivatives on the consolidated statement of financial position.
Interest rate swap
At December 31, 2024, the Company had an interest rate swap agreement(s) for a combined notional amount of $20,000 (2023:
$46,000), maturing in May 2025. Swap interest is calculated and settled on a monthly basis based on the difference between
the floating rate of USD Secured Overnight Financing Rate ("SOFR") and a weighted average fixed rate of 3.84% (2023: 4.118%).
Interest recovery on the swap agreements were $517 (2023: $381).
At December 31, 2024, the fair value of this agreement, representing a gain of $38 (2023: $252), is included in loans and
borrowings on the consolidated statement of financial position. The change in the fair value, representing a loss of $213 (2023:
gain of $200), is recorded on the consolidated statement of profit as finance costs. The Company entered into the interest rate
swap agreements to fix the interest rate on a portion of its borrowings and does not hold them for trading or speculative purposes.
Share price hedge
At December 31, 2024, the Company had contracts to reduce its exposure to the change in its share price on its share-based
compensation costs. The fair value of these agreements, representing a loss of $535 (2023: loss of $403) is included in trade
and other payables, including derivatives on the condensed consolidated statement of financial position. The change in the fair
value, representing a loss of $166 (2023: $605), is recorded on the consolidated statement of profit (loss) as other expenses.
The realized loss from the swap agreements was $61 (2023: gain of $163).
Life Insurance
In September 2024, the Company took out a life insurance policy requiring an annual premium of $103. At December 31, 2024,
the net fair values of the financial instruments of $118 are included in other payables, including derivatives on the consolidated
statement of financial position. The change in the fair value, representing a loss of $118 are recorded in Other expenses on the
consolidated statement of profit.
NOTE 11 LOANS AND BORROWINGS
December 31
2024
2023
Non-current
Revolving line of credit
52,350
119,100
Term debt
52,594
–
Interest rate swap
–
(252)
Lease liabilities
9,377
11,453
Less: deferred financing
(1,933)
(1,646)
112,388
128,655
Current
Term debt
2,406
–
Interest rate swap
(38)
–
Lease liabilities
2,634
2,437
5,002
2,437
December 31
2024
2023
Revolving line of credit
52,350
119,100
Term debt
55,000
–
Interest rate swap
(38)
(252)
Lease liabilities
12,011
13,890
Subtotal
119,323
132,738
Less principal due within one year
(5,002)
(2,437)
114,321
130,301
Less deferred financing
(1,933)
(1,646)
112,388
128,655
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
51
In November 2024, the Company entered into two secured credit facilities: an asset-based revolving line of credit; and a term
loan. The two facilities are secured against substantially all of the Company’s assets and contain cross-default provisions along
with customary financial and non-financial covenants, including minimum earnings and liquidity, and limitations on capital
expenditures, dividend payments and additional indebtedness.
The revolving line of credit provides for maximum borrowings of up to $100,000 (with an accordion of $50,000 upon the
satisfaction of customary conditions), subject to a borrowing base calculation that is based on cash on hand, and a percentage
of eligible accounts receivable and inventory (as defined in the credit agreement). As of December 31, 2024, the total available
borrowing capacity under this facility was $79,428, with outstanding borrowings of $52,350 plus $315 drawn as a letter of
credit. The borrowing base is recalculated monthly and may fluctuate based on changes in cash, accounts receivable and
inventory levels. The revolving line of credit bears interest at Secured Overnight Financing Rate (SOFR) plus applicable margins
from 175 to 225 basis points, depending on unused borrowing capacity, and matures on November 29, 2027. The revolving
line of credit was modified in January 2025 to provide maximum borrowings of up to $125,000 with a $25,000 accordion with
all other terms unchanged.
The term loan was for an original amount of $55,000 and matures on November 29, 2027. As of December 31, 2024, the
outstanding principal balance was $55,000. The term loan bears interest at SOFR plus applicable margins from 425 to 450 basis
points, depending on earnings. Interest and principal payments are on monthly and quarterly basis, respectively, with additional
principal payments required if the balance outstanding exceeds a borrowing base calculation that is based on appraised collateral.
Proceeds from the new facilities were used to repay the Company's previous revolving credit facility. The previous revolving
facility provided up to $150,000, bore interest at SOFR plus applicable margins from 145 to 450 basis points, depending on
covenants, and was scheduled to mature on September 23, 2026. The previous credit facility was amended during 2023 and
2024 to reduce the available credit from $250,000; remove the $75,000 accordion; limit the quarterly dividend and capital
expenditures; and modify the calculation of certain financial covenants.
Deferred financing fees less accumulated amortization are deducted against borrowings for presentation purposes. The
Company incurred $2,338 of financing fees during the year and are being amortized over the term of the new credit facilities.
$1,355 of unamortized deferred financing fees related to the previous credit facility were written-off and are included in finance
costs. Amortization of deferred financing fees was $696 (2023: $454) and is included in finance costs.
Principal repayments on the loans and borrowings are as follows:
Total
2025
2026
2027
2028
2029 Thereafter
Revolving line of credit
52,350
–
–
52,350
–
–
–
Term debt
55,000
2,406
4,240
48,354
–
–
–
Interest rate swap
(38)
(38)
–
–
–
–
–
Lease liabilities
12,011
2,634
2,565
2,665
2,149
1,705
293
119,323
5,002
6,805
103,369
2,149
1,705
293
As at December 31, 2024, $52,665 was drawn against the revolving credit facility, from outstanding borrowings of $52,350 plus
$315 drawn as a letter of credit. (2023: $119,100).
At December 31, 2024 the Company is not in default, nor has it breached any terms of the revolving credit facility or term loan.
The carrying amount and fair value of the borrowings are as follows:
Carrying amount Fair value
2024
2023
2024
2023
Revolving line of credit
51,182
117,454
52,350
119,100
Term debt
54,235
–
55,000
–
Interest rate swap
(38)
(252)
(38)
(252)
Lease liabilities
12,011
13,890
11,464
12,243
The fair value of the revolving credit facility and term loan approximate the gross carrying amount. The fair values of lease
liabilities are based on cash-flows discounted using a borrowing rate of 6.5% (2023: 8.0%).
NOTE 12 FINANCE COSTS
For the year ended December 31
Note
2024
2023
Interest on borrowings under credit facility
11
10,277
9,890
Interest on term debt
11
467
–
Interest on lease liabilities
7
633
642
Write-off of deferred finance fees
11
1,355
–
Amortization of deferred finance fees
10
696
454
Change in fair value of interest rate hedges
10
213
(200)
Cash settlement of interest rate hedges
13
(517)
(381)
Change in fair value of contingent consideration
13
(96)
(5,608)
Other
(265)
436
Net Finance costs
12,763
5,233
2024
52
Notes to CFS (cont’d)
NOTE 13 PROVISIONS
Payable to
former owners
Legal and
of acquired
other
Restructuring
PSUs
businesses
Total
Balance at January 1, 2023
79
–
1,279
9,298
10,656
Change in fair value of B3 provision
–
–
–
(5,608)
(5,608)
Provisions accrued (recovered)
1,650
1,333
438
–
3,421
Payments
–
(982)
(1,248)
(1,039)
(3,269)
Forfeitures
–
–
(54)
–
(54)
Foreign exchange
–
–
(2)
–
(2)
Balance at December 31, 2023
1,729
351
413
2,651
5,144
Less: amount due within one year
(1,650)
(351)
(109)
(299)
(2,409)
79
–
304
2,352
2,735
Change in fair value of B3 provision
–
–
–
(96)
(96)
Provisions accrued
–
–
252
–
252
Payments
–
(351)
(137)
(306)
(794)
Foreign exchange
–
–
(44
–
(44)
Balance at December 31, 2024
1,729
–
484
2,249
4,462
Less: amount due within one year
–
–
(123)
(75)
(198)
1,729
–
361
2,174
4,264
In the third quarter of 2023, the Company was named a defendant in legal proceedings related to a settlement agreement
associated with shipping and demurrage costs owed to a vendor by a former subcontractor of the Company. The Company is
vigorously defending this matter. The Company has a provision based on management's best estimate of the expenditure to
settle when possible outcomes are considered. The Company is occasionally named as a party in various claims and legal
proceedings, which arise during the normal course of its business. The Company reviews each of these claims, including the
nature of the claim, the amount in dispute or claimed and the availability of insurance coverage. Although there can be no
assurance that any particular claim will be resolved in the Company’s favour, management does not believe that the outcome
of any claim or potential claims of which it is currently aware will have a material adverse effect on the Company.
Performance Stock Units ("PSUs")
The Company has issued 315,447 PSUs to certain executives pursuant to the terms and conditions of the Omnibus Plan. Each
PSU 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 PSUs vest three years following the grant date.
Performance stock units
2024
2023
January 1
233,460
274,841
New issuances
128,969
131,841
Forfeitures
(6,648)
(26,745)
Settlements
(40,334)
(146,477)
December 31
315,447
233,460
During 2024, the Company recognized costs of $252 (2023: $384) related to PSUs in general and administrative expenses in
the consolidated statement of profit (loss). The Company uses Share Price hedges (see note 10) to offset PSU costs related
to the change in share price.
AirBoss of America Corp.
A N N U A L R E P O R T
53
Notes to CFS (cont’d)
NOTE 14 CAPITAL AND OTHER COMPONENTS OF EQUITY
Share Capital and Contributed Surplus
Share Capital: Authorized - Unlimited number of Class A shares without par value designated as common shares.
Unlimited number of Class B preference shares without par value and issuable in series subject to the filing or articles of
amendment. The directors may fix, from time to time before such issue, the number of shares that is to comprise each series
and the designations, rights, privileges, restrictions and conditions attaching to each series.
Under the Omnibus plan, a maximum of 10% of issued and outstanding shares are available for issuance under any type of
share-based compensation plan. As at December 31, 2024, 383,639 shares are available (2023: 603,302).
Issued share capital is as follows:
In thousands of shares
2024
2023
January 1
27,131
27,092
Settlement of deferred share units
–
39
December 31
27,131
27,131
Issuance of common shares
During 2024 and 2023, no options were exercised.
Capital and other components of equity
Contributed surplus
Contributed surplus is comprised of the difference between the book value per share and the purchase price paid for shares
acquired for cancellation by the Company and stock-based compensation of employees and non-employees.
Stock Options
The term of an option shall not exceed 10 years from the date of grant. Options granted to directors and officers of the Company,
which were outstanding at December 31, 2024, are as follows:
Options
Weighted
Options
Range of exercise
outstanding
average
exercisable
price ($CAD)
Quantity
contract life
Quantity
5.14
1,121,477
0.22
1,121,477
5.91
316,031
4.23
–
7.65
381,689
3.22
95,422
16.30
25,000
0.42
25,000
32.45
177,967
2.21
88,984
36.01
89,260
1.22
66,945
2,111,424
1,397,828
Options granted and outstanding:
A summary of the status of the Company’s stock option plan as of December 31, 2024 and 2023 and changes during the years
then ended, is presented below:
2024 2023
Weighted average
Weighted average
exercise price
exercise price
Quantity
($CAD)
Quantity
($CAD)
Outstanding beginning of year
1,956,515
10.13
1,670,409
12.23
Granted
323,036
5.91
399,445
7.65
Forfeited
(168,127)
10.31
(113,339)
32.42
Outstanding end of year
2,111,424
9.45
1,956,515
10.13
2024
54
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
May 2024
March 2023
Fair value at grant date
$2.36
$2.53
Share price at grant date
$5.79
$7.94
Exercise price
$5.91
$7.65
Expected volatility (weighted average volatility)
53.2%
50.6%
Option life (expected weighted average life)
5 years
5 years
Expected annual dividend rate
2.4%
5.0%
Risk-free interest rate (based on government bonds)
3.7%
3.0%
The stock options issued vest as follows:
Quantity
Vested at December 31, 2024
1,397,828
2025
241,237
2026
218,922
2027
174,430
2028
79,007
2,111,424
During 2024, the Company recognized employee costs of $742 (2023: $801) relating to option grants in general and
administrative expenses in the consolidated statement of profit (loss).
Deferred Stock Units
The Company has issued 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
2024
2023
January 1
153,239
134,888
New issuances
64,754
56,866
Settlements
–
(38,515)
December 31
217,993
153,239
During 2024, the Company recognized costs of $247 (2023: $262) related to DSUs in general and administrative expenses in
the consolidated statement of profit (loss).
Dividends
Dividends on common shares were paid to shareholders of record quarterly in 2024 and in 2023 as follows:
2024 2023
Shareholder of record at:
$CAD/share
Date Paid
$CAD/share
Date Paid
March 31
0.070
April 15, 2024
0.100
April 17, 2023
June 30
0.035
July 15, 2024
0.100
July 17, 2023
September 30
0.035
October 15, 2024
0.100
October 16, 2023
December 31
0.035
January 15, 2025
0.070
January 15, 2024
0.175
0.370
The dividend payable at December 31, 2024 was $660 (2023: $1,436).
AirBoss of America Corp.
A N N U A L R E P O R T
55
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
2024
2023
Numerator for basic and diluted earnings per share:
Net income (loss)
(20,390)
(41,749)
Denominator for basic and diluted earnings per share:
Basic weighted average number of shares outstanding
27,131
27,118
Diluted weighted average number of shares outstanding
27,131
27,118
Profit (loss) per share:
Basic
(0.75)
(1.54)
Diluted
(0.75)
(1.54)
As of December 31, 2024, 2,111,424 options (2023: 1,956,515 options) 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
2024
2023
Combined federal and provincial statutory income tax
(4,959)
(10,272)
Foreign tax differential
999
1,436
Effect of permanent differences
273
(225)
Change in tax rates and new legislation
405
–
Difference arising on filing and assessments
5
5
Deductible temporary differences not recognized
4,916
12,051
Other
39
(1)
Total expense
1,678
2,994
The components of the provision for income taxes are as follows:
Current
1,661
1,052
Deferred
17
1,942
Total expense
1,678
2,994
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
2024
2023
Deferred income tax assets:
Non-capital income tax loss carry-forwards
8,219
8,748
Equity compensation
435
344
Capital assets
1,895
–
Reserve
5,578
8,673
Other
177
283
16,304
18,048
Deferred income tax liabilities:
Reserve
(87)
(109)
Capital assets
(9,421)
(11,145)
Other
(171)
(152)
(9,679)
(11,406)
Net deferred income tax liabilities
6,625
6,642
Recorded on the consolidated statement of financial position:
Deferred income tax assets
9,702
9,702
Deferred income tax liabilities
(3,077)
(3,060)
Net
6,625
6,642
2024
56
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 $120,271 of unused tax losses (2023: $100,920) available to offset future income taxes in the US. $42,092
of these losses were incurred prior to 2018 and are set to expire starting 2037. Losses incurred after 2017 can be carried
forward indefinitely.
At December 31, 2024, taxable temporary differences related to investments in subsidiaries were not recognized because the
Company controls the reversal of the temporary differences and it is probable that the temporary differences will not reverse
in the foreseeable future.
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
2024
2023
Gross amount
Tax effect
Gross amount
Tax effect
Capital losses
575
72
575
72
Operating losses
88,869
19,643
83,164
18,672
Deductible temporary differences
6,394
1,427
7,542
1,716
95,838
21,142
91,281
20,460
NOTE 17 GOVERNMENT ASSISTANCE
Scientific research and investment tax credits of $429 were recognized in 2024 (2023: $920); research and development expenses
were reduced accordingly.
NOTE 18 COMMITMENTS AND CONTINGENCIES
Commitments
The Company has purchase commitments of $37,238 (2023: $20,601) for raw materials. Delivery on these commitments is
expected in 2025.
Litigation
In the third quarter of 2023, the Company was named a defendant in legal proceedings related to a settlement agreement associated
with shipping and demurrage costs owed to a vendor by a former subcontractor of the Company. The Company is vigorously
defending this matter. The Company has a $1,650 provision based on management's best estimate of the expenditure to settle when
possible outcomes are considered.
In December 2022, a statement of claim was filed in the Ontario Superior Court of Justice against AirBoss and several named
officers. The applicants under the proceeding sought an order for leave to proceed under the Securities Act (Ontario), certifying the
proceeding as a class proceeding and appointing them as representative plaintiffs. The applicants sought, among other relief, a
declaration that the Company made misrepresentations contrary to the Securities Act (Ontario) during a period extending from
November 9, 2021 to September 6, 2022, as well as unspecified damages. In May 2024, the Company announced that the matter
was settled within insurance limits, that none of the defendants admitted any liability, wrongdoing, or fault as part of the settlement
and that it did not result in any direct financial impact to the Company.
In November 2024, a court ruled in the Company’s favor and awarded approximately $3.5 million in damages, plus interest. The
counterparty in the lawsuit has since appealed that judgment, which is still pending. The Company has not recognized an asset in
relation to this ruling.
The Company is occasionally named as a party in various claims and legal proceedings, which arise during the normal course of
its business. The Company reviews each of these claims, including the nature of the claim, the amount in dispute or claimed and
the availability of insurance coverage. Although there can be no assurance that any particular claim will be resolved in the Company’s
favour, management does not believe that the outcome of any claim or potential claims of which it is currently aware will have a
material adverse effect on the Company.
AirBoss of America Corp.
A N N U A L R E P O R T
57
Notes to CFS (cont’d)
NOTE 19 POST RETIREMENT BENEFITS
The Company provides post-retirement life insurance benefits to eligible retirees (the “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 the 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, 2024,
the weighted average duration of the defined benefit obligation was 10 years (2023: 10 years).
The Benefit Plan exposes the Company to actuarial risks, such as interest rate risk and longevity risk.
December 31
2024
2023
Present value of unfunded obligation and liability
in the Consolidated Statement of Financial Position
385
441
Movement in the defined benefit obligation is as follows:
At January 1
441
408
Current service cost
1
2
Interest cost
19
20
Benefit payment
(43)
(48)
Actuarial gain
2
50
Foreign currency translation
(35)
9
385
441
At December 31
Amounts recognized in the Consolidated Statement of Profit (loss):
Post-retirement benefits expense
3
52
Interest cost
19
20
Foreign currency translation
(35)
9
Recovery
(13)
81
The current service charge was included in general and administrative expense and the interest cost is included in finance
costs in the consolidated statement of profit (loss).
December 31
2024
2023
The principal actuarial valuation assumptions used were as follows:
Discount rate
4.60%
4.65%
Mortality
CPM
CPM
mortality table
mortality table
projected
projected
with scale MI-
with scale MI-
2017 for the
2017 for the
private sector
private sector
2024
58
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
2024
2023
Effect of an increase of 1%
Post-employment benefit obligation
(34)
(39)
Effect of a decrease in 1%
Post-employment benefit obligation
42
47
Mortality Sensitivity Analysis
Effect of an increase of 10% on mortality rates
Post-employment benefit obligation
(5)
(10)
Effect of a decrease of 10% on mortality rates
Post-employment benefit obligation
6
9
Defined Contribution Plan
AirBoss of America Corp. maintains a registered retirement savings defined contribution plan for all of their employees. Total
contribution and expense to this plan for 2024 were $593 (2023: $607).
ANC maintains a 401(k) plan for its employees. Total contributions and expense to this plan during 2024 were $102 (2023: $103).
ACE maintains a 401(k) plan for its employees. Total contributions and expense to this plan during 2024 were $57 (2023: $88).
AFP maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during 2024
were $440 (2023: $480).
ADG USA maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during
2024 were $224 (2023: $136).
ADG Canada employees are covered under various registered and unregistered defined contribution plans. Total contribution
and expense to these plans for 2024 were $266 (2023: $276).
CSI maintains a 401(k) defined contribution plan for its employees. Total contribution and expense to these plans for 2024
were $46 (2023: $74).
B3 maintains a 401(k) defined contribution plan for its employees. Total contribution and expense to these plans for 2024 were
$49 (2023: $41).
Multi-Employer Pension Plan
During 2024, the Company made contributions of $263 (2023: $304) to a multi-employer pension plan. The collective bargaining
agreement requires that the Company contributes $0.50 for each hour worked by eligible employees during the preceding
wage month.
NOTE 20 SEGMENTED INFORMATION
The Company’s operating segments are organized into the following reportable segments:
• ARS - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding related chemicals.
• AMP - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts, and personal
protection and safety products, primarily for CBRN-E threats.
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.
ARS consists of AirBoss’ custom rubber compounding operations in Kitchener, Ontario, Rock Hill, South Carolina, Scotland
Neck, North Carolina, Auburn Hills, Michigan, and Acton Vale, Quebec. AMP consists of the Company's rubber molded product
operations in Auburn Hills, Michigan and the Company's defense businesses in Jessup, Maryland, Acton Vale, Quebec,
Rochester, New York and Charleston, South Carolina.
AirBoss of America Corp.
A N N U A L R E P O R T
59
Notes to CFS (cont’d)
Performance of each reportable segment is measured based on profit before finance costs and income tax, as included in the
internal management reports that are reviewed by the Company’s Chief Operating Decision Makers: the Chairman & Co-
CEO, and President & Co-CEO. 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.
Information regarding the results of each reportable segment is included below. Inter-company amounts, which represent
items purchased and sold between different segments, have been presented within the segment disclosure and are
eliminated to arrive at the consolidated amounts.
Rubber
Manufactured
Unallocated
For the year ended December 31
Solutions
Products
Corporate costs
Total
2024
2023
2024
2023
2024
2023
2024
2023
Segment net sales
226,351
248,395
176,696
202,290
–
–
403,047
450,685
Inter-segment net sales
(15,423)
(22,343)
(600)
(2,317)
–
–
(16,023)
(24,660)
External net sales
210,928
226,052
176,096
199,973
–
–
387,024
426,025
Depreciation and amortization
8,383
8,246
12,400
13,853
229
246
21,012
22,345
Segment measure of profit (loss)
19,499
16,326
(12,720)
(37,044)
(12,728)
(12,804)
(5,949)
(33,522)
Finance costs
12,763
5,233
Income tax expense
1,678
2,994
Profit (loss)
(20,390)
(41,749)
Segment assets
164,659
174,745
142,781
179,695
2,088
2,216
309,528
356,656
Segment liabilities
41,985
37,924
67,527
107,979
74,006
61,896
183,518
207,799
Capital expenditures
4,364
4,969
5,538
2,287
730
1,249
10,632
8,505
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.
2024
2023
For the year ended December 31
Net sales
Non-current assets
Net sales
Non-current assets
Canada
70,866
46,653
68,094
48,489
United States
280,489
120,908
323,242
125,316
Other countries
35,669
–
34,689
–
387,024
167,561
426,025
173,805
Major customers
Net sales from one customer represented approximately 10% of consolidated net sales in 2024 (2023: 9%). Five customers
represented 30% of consolidated net sales in 2024 (2023: 31%).
Major products
2024
2023
Rubber Solutions
Tolling
2,814
5,005
Industrial
30,077
40,301
Mixing
178,037
180,746
210,928
226,052
Manufactured Products
Anti-vibration
118,737
147,045
Defense
57,359
52,928
176,096
199,973
387,024
426,025
2024
60
Notes to CFS (cont’d)
NOTE 21 RELATED PARTIES
Related Party Transactions
During the year, the Company paid $173 (2023: $162) to companies controlled by the Chairman & Co-CEO of the Company
for use of office facilities.
Transactions with key management personnel
Key management includes directors, Chairman & Co-CEO, President & Co-CEO, CFO, and senior management. The compensation
expense to key management for employee services is shown below:
December 31
2024
2023
Salaries and other short-term benefits
3,218
3,561
Share-based payment expense
851
820
4,069
4,381
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 20.1% of the outstanding common shares as at December 31, 2024 (2023: 20.5%).
In July 2023, the Company agreed to forgive CAD $591 of loans due from the President & co-Chief Executive Officer by 12.5%
annually. The loans bear interest at 2% and 51,178 shares of the Company having a fair value of $136 were pledged as
collateral on these loans. At December 31, 2024, CAD $443 remains outstanding under the loans. Principal and accrued interest
totaling $312 is included in Other Assets on the consolidated statement of financial position ($395 at December 31, 2023). The
loans are due upon the earlier of the disposition date of all or proportionate to any part of the pledged securities, termination
of employment, and maturity. The loans are full recourse and interest is due and payable semi-annually. During the year,
interest payments of $7 (2023: $22) was received.
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:
Earnings before tax
in millions of dollars
2024 2023
Natural and synthetic rubber
(6.15)
(7.27)
Chemicals (Rubber mixing)
(4.98)
(4.55)
Carbon black
(2.61)
(3.10)
Steel
(2.04)
(3.08)
Silicone
(0.49)
(0.67)
(16.27)
(18.67)
AirBoss of America Corp.
A N N U A L R E P O R T
61
Notes to CFS (cont’d)
Foreign Exchange Risk
A portion of the Company's products are sold at prices denominated in CAD or based on prevailing CAD; most of the raw
material purchases are denominated in USD and a significant portion of its operational costs and expenses are incurred in CAD.
Therefore, an increase in the value of the USD to CAD decreases the net sales in USD terms realized by the Company from
sales made in CAD, partially offset by lower CAD operational costs/expenses, which decreases operating margin and the cash
flow available to fund operations. The net CAD 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 CAD by increasing or
decreasing the proportion of borrowings denominated in CAD or forward currency contracts. The Rubber Solution segment’s
profit and loss is somewhat naturally hedged in that sales denominated in USD offset USD 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:
Earnings before tax
in millions of dollars
2024 2023
Sales (1)
(1.7)
(1.7)
Purchases (2)
5.4
6.2
(1) Based upon Canadian dollar-denominated sales
(2) Based upon Canadian dollar-denominated expenses
The Company’s term loan (denominated in USD) is secured against certain real estate (valued in CAD) and capital equipment.
An increase in the value of the USD to CAD decreases the value of the collateral in USD. If the value of collateral is insufficient,
the Company is required to make a principal repayment to cover the shortfall. At December 31, 2024, a $0.10 decrease in the
value of one Canadian dollar in US currency would require a principal repayment of $1,797.
Interest Rate Risk
The Company’s interest rate risk mainly arises from the interest rate impact on cash and floating rate debt. CAD and USD 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.
At December 31, 2024, the Company had an interest rate swap agreement(s) for a combined notional amount of $20,000 (2023:
$46,000), maturing in May 2025. Swap interest is calculated and settled on a monthly basis based on the difference between the
floating rate of USD Secured Overnight Financing Rate ("SOFR") and a weighted average fixed rate of 3.84% (2023: 4.118%).
Interest recovery on the swap agreements were $517 (2023: $381).
At December 31, 2024, the fair value of this agreement, representing a gain of $38 (2023: $252), is included in loans and borrowings
on the consolidated statement of financial position. The change in the fair value, representing a loss of $213 (2023: gain of $200),
is recorded on the consolidated statement of profit as finance costs. The Company entered into the interest rate swap agreements
to fix the interest rate on a portion of its borrowings and does not hold them for trading or speculative purposes.
At the reporting date, the interest profile of the Company’s interest-bearing financial instruments was:
December 31
2024
2023
Fixed rate instruments
Financial assets
312
395
Financial liabilities
(11,973)
(13,638)
Variable rate instruments
Financial liabilities
(105,417)
(117,454)
Total
(117,078)
(130,697)
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 earnings before tax:
100bp increase
100bp decrease
2024
Variable rate instruments
(943)
943
2023
Variable rate instruments
(1,069)
1,069
This analysis assumes that all other variables, in particular foreign exchange rates, remain constant.
2024
62
Notes to CFS (cont’d)
Credit Risk
The Company held cash and cash equivalents of $6,491 at December 31, 2024 (2023: $28,989), 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 4), 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 Co-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 represented
approximately 10% of consolidated net sales in 2024 (2023: 9%). Five customers represented 30% of consolidated net sales in
2024 (2023: 31%). 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 creditworthy 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 $50,000
availability, upon the satisfaction of customary conditions for such features. At year end, the Company had cash of $6,491 and
had drawn $52,665 against its $100,000 revolving credit facilities (2023: cash of $28,989 and had drawn $119,100 against its
$250,000 revolving credit facilities).
Fair value of financial instruments
The Company’s financial instruments consist of cash and cash equivalents, trade and other receivables, share purchase loans, trade
and other payables, interest rate swap, revolving line of credit, other debt, and foreign exchange hedges. The fair values of cash
and cash equivalents, trade and other receivables, share purchase loans, trade and other payables, contingent consideration,
interest rate swap and foreign exchange hedges, as recorded in the consolidated statement of financial position approximate their
carrying amounts due to the short-term maturities of these instruments. The fair value of the revolving line of credit and leases
have been discounted using current market interest rates.
The carrying value and fair value are as follows:
Fair value
Total
Amortized
through profit
carrying
Total fair
December 31, 2024
cost
and loss
amount
value
Cash and cash equivalents
6,491
–
6,491
6,491
Trade and other accounts receivable
69,470
–
69,470
69,470
Interest rate swap
–
38
38
38
Share purchase loans
312
–
312
312
Total financial assets
76,273
38
76,311
76,311
Trade and other payables
56,413
–
56,413
56,413
Foreign exchange hedge
586
586
586
Share price hedge
–
535
535
535
Loans and borrowings
117,428
–
117,428
118,776
Contingent consideration
–
2,249
2,249
2,249
Total financial liabilities
173,841
3,370
177,211
178,559
AirBoss of America Corp.
A N N U A L R E P O R T
63
Notes to CFS (cont’d)
Fair value
Total
Amortized
through profit
carrying
Total fair
December 31, 2023
cost
and loss
amount
value
Cash and cash equivalents
28,989
–
28,989
28,989
Trade and other accounts receivable
73,237
–
73,237
73,237
Interest rate swap
–
252
252
252
Foreign exchange hedge
–
497
497
497
Share purchase loans
395
–
395
395
Total financial assets
102,621
749
103,370
103,370
Trade and other payables
67,659
–
67,659
67,659
Share price hedge
–
403
403
403
Loans and borrowings
131,344
–
131,344
131,091
Contingent consideration
–
2,651
2,651
2,651
Total financial liabilities
199,003
3,054
202,057
201,804
The fair values of the share purchase loans and revolving line of credit have been based on market interest rate (level 2) in 2024
and 2023. The Company has not disclosed the fair values for financial instruments (trade and other receivables 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 2024 and 2023. There were no transfers between levels of the fair value hierarchy in 2024 and 2023.
Capital Management
The Company has defined its capital as follows:
December 31
2024
2023
Loans and borrowings
117,390
131,092
less: leases included in loans and borrowings
(12,011)
(13,890)
less: cash and cash equivalents
(6,491)
(28,989)
Net debt
98,888
88,213
Shareholders’ equity
126,010
148,857
224,898
237,070
Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the
outstanding debt.
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 CAD and USD.
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 a revolving line of credit facility that provides liquidity and flexibility when capital markets are restricted. The
facility provides for maximum borrowings of up to $100,000 (increased to $125,000 in January 2025). As of December 31, 2024,
the total available borrowing capacity under this facility was $79,428, with outstanding borrowings of $52,350 plus $315 drawn
as a letter of credit.
Key management currently own 20.1% of the outstanding shares of the Company. Each Director is required to hold common
shares and/or DSUs valued, at the time(s) of purchase or issuance, as applicable, at three times the annual base cash retainer
entitlement. Directors have a period of five years from the date of their election to the Board to achieve the minimum shareholding
requirement. 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.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
NOTE 23 SUBSEQUENT EVENT
In early 2025, the U.S. government announced plans to impose a 25% tariff on most Canadian imports. These tariffs, initially set
to take effect on February 4, 2025, were subsequently postponed and partially came into effect on March 4, 2025. Additional tariffs
are scheduled to take effect on April 2, 2025. In response, the Canadian government enacted retaliatory tariffs on goods imported
from the U.S., postponing the implementation of some of its tariffs until April 2, 2025. The escalating risk of cross-border tariffs
between the U.S. and Canada, as well as other countries, introduces heightened uncertainty that could materially impact supply
chains, increase production costs, and erode competitive positioning.
2024
Corporate Information
Board of Directors
P. Grenville Schoch
Chairman and Co-Chief Executive Officer,
AirBoss of America Corp.
Aurora, Ontario
Stephen Ryan (2)
Washington, D.C.
Anita Antenucci
Upperville, Virginia
David Camilleri (1)
Waterloo, Ontario
Jo-Anne O’Connor (1)
Toronto, Ontario
Robert L. McLeish (1) (2) (3)
Port Carling, Ontario
Alan J. D. Watson (1) (2) (3)
Sydney, Australia
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of Corporate Governance Committee
64
AirBoss of America Corp.
A N N U A L R E P O R T
Corporate Information
Solicitors
Davies Ward Phillips & Vineberg LLP
Toronto, Ontario
Auditors
KPMG LLP
Vaughan, Ontario
Transfer Agent And Registrar
Computershare Investor Services, Inc.
Toronto, Ontario
Stock Symbol - Toronto Stock Exchange: BOS
Stock Symbol - OTCQX: ABSSF
Website Address: www.airboss.com
Email Address: info@airboss.com
Our Annual Meeting is Thursday, May 8, 2025
at 9:00am at: Delta Hotels Waterloo
110 Erb St. West, Waterloo, Ontario
CORPORATE OFFICE
AirBoss of America Corp.
16441 Yonge Street
Newmarket, Ontario, Canada L3X 2G8
Telephone: 905-751-1188
Facsimile: 905-751-1101
Chairman and Co-Chief Executive Officer:
P. G. (Gren) Schoch
President and Co-Chief Executive Officer:
Chris Bitsakakis
Chief Financial Officer:
Frank Ientile
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