ANNUAL
REPORT
2021
A VITAL LINK
IN HEALTHCARE
Profile
Andlauer Healthcare Group Inc. (TSX: AND) is a leading and growing supply chain management company offering a robust
platform of customized third-party logistics (“3PL”) and specialized transportation solutions for the healthcare sector. Our 3PL
services include customized logistics, distribution and packaging solutions for healthcare manufacturers across Canada. Our
specialized transportation services in Canada, including air freight forwarding, ground transportation, dedicated delivery and last
mile services, provide a one-stop shop for clients’ healthcare transportation needs. Through our complementary service offerings,
available across a coast-to-coast distribution network, we strive to accommodate the full range of our clients’ specialized supply
chain needs on an integrated and efficient basis. We also provide specialized ground transportation services, primarily to the
healthcare sector, across the 48 contiguous U.S. states.
Operational Highlights
/ We provided logistics and distribution, specialized transportation, and packaging solutions to certain of our manufacturer,
3PL provider, wholesaler and government clients that are involved in the Canadian supply of COVID-19 vaccines and
ancillary products;
/ On March 1, 2021, we acquired 100% of Skelton Canada Inc. and 49% of Skelton USA Inc. (“Skelton USA”) for total aggregate
consideration of approximately $114.7 million, before customary working capital adjustments;
/ On November 1, 2021, we acquired 100% of T.F. Boyle Transportation, Inc. and 51% of Skelton USA, increasing our aggregate
ownership of Skelton USA to 100%;
/ Subsequent to year-end, on March 1, 2022, we acquired 100% of Logistics Support Unit (LSU) Inc. for consideration of
approximately $30.0 million before customary working capital adjustments; and
/ We continued to maintain service levels across our operations, while monitoring the safety measures implemented in response
to COVID-19 to prioritize the health and safety of our personnel, clients, and suppliers.
Financial Performance
Revenue
($ millions)
Operating Income
($ millions)
EBITDA ($ millions)(1, 2)
and Margin (%)(2)
440.1
73.7
157.2
Total Comprehensive
Income(2)
($ millions)
92.8
290.0
314.3
50.9
45.0
70.6
78.9
35.7%
24.3%
25.1%
37.7
30.3
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
(1)
Defined as net income (loss) and comprehensive income (loss) for the period before: (i) income tax (recovery) expense; (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization.
(2) EBITDA, EBITDA margin and total comprehensive income for Fiscal 2021 include a gain of $37.9 million on the step acquisition of 51% of Skelton USA. Excluding the gain, EBITDA was $119.3 million, EBITDA
margin was 27.1%, and total comprehensive income was $54.9 million.
Fellow shareholders,
On behalf of the Board of Directors, management
of Andlauer Healthcare Group (“AHG”) and our team
of approximately 2,000 employees and owner/
operators across Canada and the United States, I
am pleased to present our 2021 Annual Report.
Michael Andlauer, Chief Executive Officer
Despite all the distractions and disruptions that the pandemic threw at all of us, we continued to generate
solid organic growth from our core businesses in 2021, while also generating strong incremental growth from
strategic acquisitions. Our organic growth has been driven by steady increases in customer demand across
our product lines, augmented by expansion initiatives such as the ramp up of our newest facility in Brampton,
Ontario – increasing our licensed GMP warehouse capacity – and the continuing expansion of our dedicated
and last mile delivery network, particularly in western Canada. Our ongoing role in supporting the distribution
of COVID-19 vaccines and ancillary products was even more pronounced this year, and our tuck-in acquisitions
of TDS Logistics and McAllister Courier last year also contributed to our growth. Our most impactful growth
catalysts in 2021, however, were our acquisitions of Skelton Canada, Skelton USA and Boyle Transportation.
In the first quarter of 2021, we completed the acquisitions of
100% of Skelton Canada and 49% of Skelton USA. Skelton
Canada has strengthened our specialized transportation
business segment with its nationwide reach and a truck
fleet offering validated temperature control, state-of-the-
art security systems and real-time shipment monitoring.
Skelton Canada’s particular expertise in 2°C to 8°C and
less than -20°C shipments has significantly enhanced our
service offering in this area.
Skelton USA was launched in 2017 and has been growing
rapidly since then, successfully leveraging the Skelton
brand and reputation. Our initial 49% stake in Skelton USA
marked our strategic entry into the United States, giving us
an opportunity to learn more about the much larger and
fragmented U.S. market through a minority interest in an
established operator.
As the year progressed, we saw the strong and growing
customer demand for Skelton USA’s services and gained a
better understanding of the market dynamics south of the
border. During our fourth quarter, we acquired the remaining
51% of Skelton USA, bringing our ownership to 100%. Through
this process of entering the U.S. market, we were also
presented with the opportunity to acquire Massachusetts-
based Boyle Transportation. With the U.S. market knowledge
we gained through Skelton USA, combined with our
extensive due diligence on Boyle Transportation, we seized
the opportunity.
Boyle Transportation operates throughout the 48 contiguous
United States, and to and from Canada. Boyle provides
specialized transportation services to clients in the life
sciences and government/defense sectors, with
life
science customers comprising approximately 75 percent
of its consolidated revenue. Similar to AHG and Skelton,
Letter to Shareholders (continued)
Boyle Transportation adheres to stringent quality and
security standards, employs highly trained and dedicated
in advanced
professionals, and continually
technology and equipment. Our acquisition of Boyle
Transportation closed concurrently with the step acquisition
of Skelton USA in early November. The senior management
team at Boyle Transportation has also greatly enhanced our
insights and knowledge of the U.S. market.
invests
We partially funded the acquisitions of the remaining
51 percent of Skelton USA and 100 percent of Boyle
Transportation through a bought deal offering of 3.5 million
subordinate voting shares for aggregate gross proceeds of
$168.7 million. The offering was priced at $48.20 per share,
representing a 221% premium to our $15.00 initial public
offering share price in December 2019. The bought deal
offering was comprised of 2.0 million subordinate voting
shares issued from treasury and 1.5 million subordinate voting
shares offered by Andlauer Management Group, thereby
enhancing our capital market liquidity. We appreciate the
strong support shown by our investors.
Subsequent to year end, we completed the acquisition of
Québec-based Logistics Support Unit (“LSU”), a third-party
logistics provider offering specialty pharmacy, warehousing,
distribution and order management services throughout
Canada to pharmaceutical, medical and biotechnology
clients. LSU is also the exclusive distributor of immunizing
agents for the Québec public health system. We look
forward to working with them to continue the LSU brand
and legacy as part of the AHG platform.
We are very pleased with the additions of these businesses
to our platform and how well the respective management
teams have fit in with and added to our leadership group.
We share the same focus on exceptional client service
and so many similarities in our cultures, including, first and
foremost, the absolute importance of our people.
I am proud of our team for their contributions to the successful
execution of our growth initiatives, while also managing
our day-to-day operations and the many challenges
presented by the pandemic. The ongoing collaboration of
our management team in monitoring our operations, and
our people in adhering to our pandemic safety measures,
continues to ensure the timely delivery of essential products
to hospitals, pharmacies, and clinics, including the added
responsibility of ensuring the safe and secure distribution of
COVID-19 vaccines and ancillary products.
We have delivered on each of the key elements of our
growth strategy that were outlined at the time of our
initial public offering, including: strengthening our clients’
connection to our platform by broadening our service
offering, increasing our capacity to attract both new clients
and new business, and pursuing strategic acquisitions to
further strengthen our service offering and our strategic
entry into the U.S. market, where we have now established
a strong platform for growth.
throughout
the pandemic
Our strong performance
demonstrates the resilient and essential nature of our
business. This is due to our exclusive focus on the stable and
growing healthcare sector. Spending on healthcare logistics
and transportation has been outpacing GDP growth in both
Canada and the United States, and this growth is expected
to continue, supported by favourable demographic trends,
an increasing number of healthcare and adjacent products
with unique logistical needs, and continually evolving industry
regulation. Further, demand for third-party distribution and
ancillary services is increasing as healthcare companies
focus more on their core competencies. We are uniquely
positioned in a very attractive market.
We have good momentum going into 2022. Looking
ahead, we will continue to focus on providing our clients
with exceptional service, the welfare of our employees
and drivers, and advancing our growth strategy as it
makes sense to further enhance our platform. We expect
continued growth ahead and we are well positioned to build
shareholder value over the long term.
We appreciate your confidence and continued support.
Yours in health,
Michael Andlauer
Chief Executive Officer
ANDLAUER HEALTHCARE GROUP INC.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
for the fiscal year ended December 31, 2021
March 2, 2022
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Information ..................................................................................... 3
Basis of Presentation ...................................................................................................................................................... 5
Non-IFRS Measures ....................................................................................................................................................... 5
Overview.......................................................................................................................................................................... 5
Summary of Factors Affecting Performance ............................................................................................................... 7
How We Assess the Performance of Our Business .....................................................................................................11
Selected Consolidated Financial Information .............................................................................................................15
Reconciliation of Non-IFRS Measures.........................................................................................................................17
Results of Operations ....................................................................................................................................................17
Summary of Quarterly Results ....................................................................................................................................25
Liquidity & Capital Resources .....................................................................................................................................26
Cash Flows .....................................................................................................................................................................29
Contractual Obligations ................................................................................................................................................30
Off-Balance Sheet Arrangements .................................................................................................................................31
Seasonality ......................................................................................................................................................................31
Financial Instruments ...................................................................................................................................................31
Related Party Transactions ..........................................................................................................................................32
Critical Accounting Judgements and Estimates .........................................................................................................36
Significant New Accounting Standards .......................................................................................................................37
Accounting Classifications and Fair Values ................................................................................................................38
Risk Factors ...................................................................................................................................................................38
Outstanding Share Data ................................................................................................................................................40
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting .........................................40
Additional Information .................................................................................................................................................42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This management’s discussion and analysis of financial condition and results of operations (“MD&A”) for
the three months and year ended December 31, 2021 should be read in conjunction with Andlauer Healthcare
Group Inc.’s audited annual consolidated financial statements for the fiscal year ended December 31, 2021,
along with the related notes thereto. This MD&A is presented as of March 2, 2022 and is current to that date
unless otherwise stated.
All references in this MD&A to the “Company”, “AHG”, “us”, “our” or “we” refer to Andlauer Healthcare
Group Inc., together with our direct and indirect subsidiaries, on a consolidated basis, which is referred to
as “the Company” in our financial statements. Additionally, all references to “Q4 2021” are to the three
months ended December 31, 2021; “Q3 2021” are to the three months ended September 30, 2021; “Q2 2021”
are to the three months ended June 30, 2021; “Q1 2021” are to the three months ended March 31, 2021; “Q4
2020” are to the three months ended December 31, 2020; “Q3 2020” are to the three months ended
September 30, 2020; “Q2 2020” are to the three months ended June 30, 2020; “Q1 2020” are to the three
months ended March 31, 2020; “Fiscal 2022” are to the year ending December 31, 2022; “Fiscal 2021” are
to the year ended December 31, 2021; “Fiscal 2020” are to the year ended December 31, 2020 and “Fiscal
2019” are to the year ended December 31, 2019.
Cautionary Note Regarding Forward-Looking Information
This MD&A contains forward-looking information and forward-looking statements (collectively, “forward-
looking information”) within the meaning of applicable securities laws. Forward-looking information may
relate to our future financial outlook and anticipated events or results and may include information regarding
our financial position, business strategy, growth strategies, addressable markets, budgets, operations,
financial results, taxes, dividend policy, plans, objectives and responses to the outbreak of the coronavirus
disease (“COVID-19”). Particularly, information regarding the anticipated benefits of the acquisition of LSU
(as defined below), our expectations regarding the impacts of the damaged infrastructure in British
Columbia, our expectations of future results, performance, achievements, facility expansions, leases,
platform expansions, acquisitions, public company costs, payment of dividends, prospects, financial targets
or outlook, intentions, opportunities, the markets in which we operate and the potential impact of, and
response measures to be taken with respect to, COVID-19 is forward-looking information. In some cases,
forward-looking information can be identified by the use of forward-looking terminology such as “plans”,
“targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”,
“estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not
anticipate”, “believes”, “commencing” or variations of such words and phrases or statements that certain
actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”, “occur” or “be
achieved”. In addition, any statements that refer to expectations, intentions, projections or other
characterizations of future events or circumstances contain forward-looking information. Statements
containing forward-looking information are not historical facts but instead represent management’s
expectations, estimates and projections regarding future events or circumstances.
Such forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and
changes in circumstances surrounding future expectations which are difficult to predict and many of which
are beyond the control of the Company.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
This forward-looking information and other forward-looking information is based on our opinions, estimates
and assumptions in light of our experience and perception of historical trends, current conditions and
expected future developments, as well as other factors that we currently believe are appropriate and
reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking
information, there can be no assurance that the underlying opinions, estimates and assumptions will prove
to be correct.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that,
while considered by the Company to be appropriate and reasonable as of the date of this MD&A, are subject
to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results,
level of activity, performance or achievements to be materially different from those expressed or implied by
such forward-looking information, including but not limited to:
•
the impact of the COVID-19 pandemic on our operations, business and financial results including
the Canadian supply of COVID-19 vaccines;
the impact of changing conditions in the healthcare logistics and transportation services market;
risks and liabilities associated with the transportation of dangerous goods;
•
•
• our ability to comply with U.S. foreign ownership, control or influence mitigation measures;
• our ability to execute our growth strategies;
•
increasing competition in the healthcare logistics and transportation services market in which we
operate;
changes in the attitudes, financial condition and demand of our target market;
• volatility in financial markets;
•
• developments and changes in applicable laws and regulations;
• our ability to source and complete acquisitions;
• our ability to successfully integrate businesses and assets that we acquire;
• our ability to retain existing clients and develop new clientele;
• our ability to retain members of our management team and key personnel;
•
• our ability to expand into additional markets; and
•
increases in driver compensation and the ability to attract and retain employees;
such other factors discussed in greater detail under “Risk Factors” in this MD&A and in our Annual
Information Form dated March 2, 2022 for Fiscal 2021 (the “AIF”) which is available on our profile
on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.
If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the
forward-looking information prove incorrect, actual results or future events might vary materially from those
anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above
and described in greater detail in “Risk Factors” should be considered carefully by prospective investors.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the
relevant subject. Forward-looking information is provided for the purpose of presenting information about
management’s current expectations and plans relating to the future and allowing investors and others to get a
better understanding of our anticipated financial position, results of operations and operating environment.
Readers are cautioned that such information may not be appropriate for other purposes.
Although we have attempted to identify important risk factors that could cause actual results to differ
materially from those contained in forward-looking information, there may be other risk factors not presently
known to us or that we presently believe are not material that could also cause actual results or future events
to differ materially from those expressed in such forward-looking information. There can be no assurance
that such information will prove to be accurate, as actual results and future events could differ materially from
those anticipated in such information. Accordingly, investors should not place undue reliance on forward-
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Andlauer Healthcare Group Inc. – 2021 Annual Report
looking information, which speaks only as of the date made. The forward-looking information contained in
this MD&A represents our expectations as of the date of this MD&A (or as of the date they are otherwise
stated to be made), and are subject to change after such date. However, we disclaim any intention or obligation
or undertaking to update or revise any forward-looking information whether as a result of new information,
future events or otherwise, except as required under applicable securities laws.
All of the forward-looking information contained in this MD&A is expressly qualified by the foregoing
cautionary statements.
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and are
presented in thousands of Canadian dollars unless otherwise indicated.
Non-IFRS Measures
This MD&A makes reference to certain non-IFRS measures. These measures are not recognized measures
under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other companies. Rather, these measures are provided as
additional information to complement those IFRS measures by providing further understanding of our results
of operations from management’s perspective. Accordingly, these measures should not be considered in
isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS
measures including “EBITDA” and “EBITDA Margin”. These non-IFRS measures are used to provide
investors with supplemental measures of our operating performance and thus highlight trends in our core
business that may not otherwise be apparent when relying solely on IFRS financial measures. We also
believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the
evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating
performance comparisons from period to period, to prepare annual operating budgets and to determine
components of management compensation.
For a description of how we define these non-IFRS Measures and an explanation of why the non-IFRS
measures provide useful information to investors, please see “How We Assess the Performance of Our
Business – Non-IFRS Measures” below.
For quantitative reconciliations of net income and comprehensive income to EBITDA for Q4 2021, Fiscal
2021, Q4 2020 and Fiscal 2020, please see “Reconciliation of Non-IFRS Measures” below.
Overview
AHG was incorporated under the Business Corporations Act (Ontario) on November 12, 2019 with its head
office located at 100 Vaughan Valley Blvd, Woodbridge, ON, L4H 3C5. The Company’s subordinate voting
shares (“Subordinate Voting Shares”) are listed on the Toronto Stock Exchange (the “TSX”) under the stock
symbol “AND”.
We are a leading and growing supply chain management company with a platform of customized third-party
logistics (“3PL”) and specialized transportation solutions for the healthcare sector. We offer services to
healthcare manufacturers, wholesalers, distributors and 3PL providers, among others, through a
comprehensive platform of high quality, technology-enabled supply chain solutions for a range of products,
including: pharmaceuticals, vaccines, biologics, narcotics, precursors, active pharmaceutical ingredients,
over-the-counter, natural health, animal health, consumer health, cosmetics, health and beauty aids, and
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
medical devices. We integrate our uniquely designed nation-wide network of facilities, vehicles, personnel
and technology systems into our clients’ businesses to offer holistic solutions that span all of our clients’
shipping needs and satisfy the requirements of the highly regulated Canadian healthcare sector. During
Fiscal 2021, we expanded our specialized transportation capabilities, through acquisitions, into truckload
services for the healthcare sector in the United States.
We differentiate our service offerings and deliver value to our clients through our competitive strengths in
temperature management, quality assurance and regulatory compliance, technology-enabled visibility
throughout the supply chain and security. We are committed to developing and expanding long-term
strategic relationships with our clients to provide improved operational efficiencies and access to value-
added services. We generate revenue across five principal product lines: logistics and distribution, packaging
solutions, air freight forwarding, ground transportation, and dedicated and last mile delivery.
We believe that we are Canada’s only national third-party service provider focused exclusively on delivering
customized, end-to-end logistics and specialized transportation solutions to the healthcare sector. Our 3PL
services are provided under our Accuristix brand, through which we provide customized logistics,
distribution and packaging solutions to various healthcare manufacturers. Our specialized transportation
solutions are offered under our ATS Healthcare, ATS Dedicated and Skelton brands, where we provide a
one-stop shop for our clients’ healthcare transportation needs through our specialized air freight forwarding,
ground transportation, dedicated delivery and last mile services. We believe we are a national leader in the
Canadian healthcare logistics and specialized transportation markets we serve.
We also provide specialized transportation services domestically in the United States under our Skelton USA
and Boyle Transportation brands (each as defined below). Skelton USA was launched in 2017 and has been
growing rapidly by successfully leveraging its Canadian reputation and brand for expertise in cold chain
services. Skelton USA currently serves customers across the United States. Boyle Transportation provides
specialized transportation services to clients in the life sciences (approximately 75% of revenue) and
government/defense sectors (approximately 25% of revenue). Boyle Transportation adheres to stringent
quality and security standards, employs highly trained and dedicated professionals, continually invests in
advanced technology and equipment, and has an expansive reach across the United States.
In our healthcare logistics segment, we serve as an extension of our manufacturing clients, leveraging our
infrastructure and expertise to manage their supply chain activities, allowing them to focus on other strategic
priorities such as sales, marketing, research and development. We focus on serving our logistics clients as
comprehensively as possible and incorporate multiple services from all of our related product lines into our
customized logistics solutions.
In our specialized transportation segment, we leverage our national infrastructure to offer coast-to-coast
delivery, including specialized facilities, multiple modes of transportation and flexible capacity to
accommodate the full range of our clients’ logistics and/or transportation needs on an integrated and efficient
basis. By combining multiple service offerings, we can effectively provide managed and monitored
movement of our clients’ temperature sensitive and valuable products through a closed-loop nation-wide
system.
Our competitive strengths in temperature management, quality assurance and regulatory compliance,
visibility throughout the supply chain and security are deployed across our Canada-wide network of 30
secure, temperature-controlled facilities, the six third-party owned cross-docks that we operate from and by
our team of highly-trained employees. Our security, information and monitoring systems, as well as our
temperature management expertise, allow us to meet and exceed Health Canada guidelines and regulations,
ensuring the integrity and quality of our clients’ temperature sensitive healthcare goods and data.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
We also have four facilities in the United States following our acquisitions of Skelton USA and Boyle
Transportation.
Additional information about AHG, including our AIF, can be found on our profile on SEDAR at
www.sedar.com or on our website at www.andlauerheathcare.com.
Summary of Factors Affecting Performance
We believe that our performance and future success depend on a number of factors that present significant
opportunities for us. These factors are also subject to a number of inherent risks and challenges, some of
which are discussed below and in the “Risk Factors” section of this MD&A and in our AIF.
Service Offering
We believe that offering a platform of services designed specifically for the healthcare sector puts us in a
unique position as a provider of supply chain solutions. Our competitive strengths in temperature
management, quality assurance and regulatory compliance, visibility throughout the supply chain and
security allow us to provide healthcare clients with specialized, integrated, end-to-end supply chain
solutions. Through our five principal, complementary service offerings: logistics and distribution, packaging
solutions, air freight forwarding, ground transportation, and dedicated and last mile delivery, we
accommodate our clients’ specialized supply chain needs on an integrated and efficient basis.
Relationships with Manufacturers and Distributors
We believe that our market position is strengthened by the desire of our clients to increasingly outsource
their supply-chain management to specialized service providers with the healthcare quality systems,
operational expertise and experience to efficiently optimize their product distribution. We are committed to
developing and expanding long-term strategic relationships with our clients to provide improved operational
efficiencies and access to value-added services. From manufacturers to distributors to retail locations to front
doors across Canada and the United States, we store, transport and monitor and manage the temperature
conditions of a range of healthcare products. Our trained personnel comply with healthcare industry
regulations and best practices.
New Development Projects
We secure client contract wins as a foundation for growth and then add incremental warehousing and
distribution square footage through capital efficient leases. Given the required lead-time to build and license
facilities, as we secure new major client contracts, we typically strategically invest in excess capacity in
anticipation of growing client needs, as well as new client opportunities, which enables capital efficient
growth.
Demographics and Healthcare Spending
We believe that we are strategically positioned to directly benefit from the strong growth expected in the
North American healthcare sector, which is driven by a number of favourable trends including an aging
population, increased life expectancy, increasing healthcare spending, and an increasing number of
healthcare products requiring unique logistics needs. Vaccines and biologics, for example, are generally
temperature sensitive and require varying degrees of temperature conditions for transportation and storage.
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Regulatory Environment
In order to maintain the safety, quality and efficacy of healthcare products, government regulations set out
rules relating to, among other things, the packaging, warehousing, distribution, transportation and
temperature monitoring of such products. The pace of introduction and complexity of such regulations has
increased in recent years, including through the introduction of, and revisions to, many Health Canada
guidelines, such as Health Canada’s GUI-0069 - Guidelines for Environmental Control of Drugs During
Storage and Transportation (“GUI-0069”), among others. Recognizing the ever-changing regulatory
demands on the healthcare sector, we take a proactive approach to stay aligned with regulatory protocols,
provide environments that are compliant with Good Manufacturing Practices and offer our clients’ real- time
monitoring and reporting. By outsourcing their logistics and transportation needs to AHG and our
specialized services platform, our clients can focus on their core business.
While we believe the United States does not have as rigorous standards as Canada or Europe regarding the
transportation of healthcare products, healthcare manufacturers are demanding high quality temperature
control and monitoring as well as security and visibility for their truckload shipments in the United States,
which aligns with our specialized transportation solutions. Both Skelton USA and Boyle Transportation
comply with United States Pharmacopeia (USP) chapter <1079> Good Storage & Distribution Practices for
Drug Products, to the extent applicable for transportation.
Boyle Transportation complies with U.S. Federal Motor Carrier Safety Administration regulations regarding
the transportation of hazardous materials. Additionally, the National Industrial Security Program Operating
Manual requires that Boyle Transportation be effectively insulated from any Foreign Ownership, Control, or
Influence to perform on certain U.S. Department of Defense contracts and operates pursuant to a pending
Special Security Agreement with the U.S. Defense Counterintelligence and Surveillance Agency.
Competition
We believe that we offer a unique set of services in the marketplace and stand apart from other outsourced
healthcare service providers and traditional logistics and transportation companies. In particular, we believe
our differentiated capabilities, including our temperature management expertise, together with our coast-to-
coast distribution network in Canada and multiple service offerings, uniquely positions us within our
industry and sets us apart from companies specializing in global integration and supply chain management,
national non-temperature managed solutions, regional temperature managed solutions as well as niche
service providers and insourced transportation services. Notwithstanding the foregoing, we do compete with
FedEx, Purolator, UPS Supply Chain Solutions, Kuehne + Nagel and Lynden Logistics in our delivery of
3PL services. We also compete with certain regional transportation providers in Canada, such as Williams
Pharmalogistics in Quebec and Rogue Transportation Services Inc. in Ontario.
In the United States, Boyle Transportation and Skelton USA compete with a large number of regional
carriers as well as national transportation providers, such as FedEx.
Acquisitions
We selectively evaluate strategically compelling acquisition opportunities that leverage or expand our
differentiated capabilities. In pursuing potential acquisition opportunities, we assess several criteria to
expand our domestic platform, including: (i) complementary tuck-ins; and (ii) entry or expansion into growth
verticals, new verticals and new service offerings. We will continue to assess opportunities for expansion in
the U.S. or into international markets through existing platforms that align with our core capabilities and
existing service offering.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
In Q4 2020, we completed two tuck-in acquisitions: TDS Logistics Ltd. (“TDS”), now branded as “ATS
Dedicated”, and McAllister Courier Inc. (“MCI”), our first acquisitions as a public company. These two
regionally focused temperature-controlled transportation businesses increase the reach of our services and
expand our market presence in Ontario.
On March 1, 2021, we acquired 100% of Skelton Canada Inc. (“Skelton”) and 49% of Skelton USA Inc.
(“Skelton USA” and together with Skelton, the “Skelton Companies”) which enhanced our platform with
expanded national 2-8°C specialized temperature-controlled capabilities and provided us with a strategic
entry into the U.S. market.
On November 1, 2021, we acquired 100% of T.F. Boyle Transportation, Inc. (“Boyle Transportation”),
which provides specialized transportation services to clients in the life sciences and government/defense
sectors, and the remaining 51% of Skelton USA, increasing our aggregate ownership of Skelton USA to
100%.
On March 1, 2022, we acquired 100% of Logistics Support Unit (LSU) Inc. (“LSU”). LSU is a third-party
logistics provider offering specialty pharmacy, warehousing, distribution, and order management services
throughout Canada to national and international companies as well as government clients in the
pharmaceutical, medical, and biotechnology sectors.
Management & Employees
Our employee culture is one of our fundamental strengths and a strategic priority. Our employees are
passionate about our business and are dedicated to creating and improving solutions for our clients. We
empower our employees through training and professional development programs and maintain open lines
of communication that encourage our employees to suggest ways in which we can improve our operations.
We recognize and celebrate employees who act as leaders within our team and promote movement within
our organization in an effort to retain and encourage our top talent. As a result of this collaborative employee
culture, we have fostered strong relationships with our employees across our operating segments, none of
which are subject to collective bargaining agreements.
Cost Management
In order to provide the services that we offer, we incur various operating costs. These costs include amongst
others, labour, rent, fuel, equipment, and insurance. We are susceptible to increases in the price of these
items, many of which can fluctuate, often due to factors beyond our control, such as regional and global
supply and demand dynamics, political events, global pandemics, terrorist activities, the strength of the
Canadian dollar relative to other currencies, and natural disasters.
To mitigate the risk of cost escalation, we focus on operational excellence, synergies between our product
lines and cost controls. We rely on, among other things, long-term planning, budgeting processes, and
internal benchmarking to achieve our profitability targets. Additionally, we mitigate the risk of inflation by
utilizing leases to finance our network of facilities, many of our vehicles and our logistics equipment, as
well as by using third-party service providers. We also mitigate our exposure to rising fuel costs through the
implementation of fuel surcharge programs, which pass the majority of cost increases to our clients. In
addition, we have implemented a number of policies that focus on asset efficiency, including fuel economy,
asset utilization, proper repairs and maintenance of equipment, and measured equipment lease renewals.
Many of our contracts include cost escalation indexes that provide for annual price adjustments which further
protect us from escalating costs.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Financial and Operational Highlights
We refer the reader to the section entitled “How We Assess the Performance of Our Business” of this MD&A
for the definition of the items discussed below and, when applicable, to the section entitled “Reconciliation
of Non-IFRS Measures” for quantitative reconciliations of net income and comprehensive income to
EBITDA.
Q4 2021 Compared to Q4 2020
Select highlights include the following:
• Revenue increased 53.6% to $133.0 million, compared to $86.6 million in Q4 2020;
• Operating income increased 50.2% to $21.5 million, compared to $14.3 million in Q4 2020;
• Net income, which includes a gain on the step acquisition of Skelton USA of $37.9 million, increased
by more than 200% to $53.1 million, compared to $13.9 million in Q4 2020;
• Total comprehensive income increased to $56.0 million, compared with $13.9 million in Q4 2020;
• EBITDA was $73.7 million in Q4 2021. EBITDA, excluding the impact of the gain on step
acquisition of Skelton USA, increased 62.9% to $35.8 million, compared to $22.0 million in Q4 2020;
• EBITDA Margin was 55.4% in Q4 2021. EBITDA Margin, excluding the impact of the gain on step
acquisition, was 26.9%, compared to 25.4% in Q4 2020;
• During Q4 2021, we continued to provide logistics and distribution, specialized transportation, and
packaging solutions to certain of our manufacturer, 3PL provider, wholesaler and government
clients that are involved in the Canadian supply of COVID-19 vaccines and ancillary products. In
Q4 2021, our COVID-19 vaccine-related revenue comprised approximately 5.0% of total revenue
(effectively nil in Q4 2020);
• On October 26, 2021, together with Andlauer Management Group Inc. (“AMG”), we completed a
bought deal offering of 3.5 million Subordinate Voting Shares at a price of $48.20 per Subordinate
Voting Share for aggregate gross proceeds of $168.7 million (the “Offering”). The Offering was
comprised of 2.0 million Subordinate Voting Shares issued from treasury and offered by AHG for
gross proceeds of $96.4 million to the Company, which we used to pay the cash portion of the
purchase price payable in connection with the acquisitions of Boyle Transportation and Skelton
USA, and 1.5 million Subordinate Voting Shares offered by AMG, for gross proceeds to AMG of
$72.3 million;
• On November 1, 2021, we acquired 100% of Boyle Transportation and 51% of Skelton USA,
increasing our aggregate ownership of Skelton USA to 100%. These acquisitions enhance our
platform with expanded U.S. domestic specialized temperature-controlled capabilities and broaden
our strategic entry into the U.S. market. Boyle Transportation and Skelton USA accounted for
approximately $19.0 million of consolidated revenue during Q4 2021; and
• We continued our business continuity incident response management in connection with the ongoing
COVID-19 pandemic and successfully maintained service levels while proactively implementing
measures across our operations to prioritize the health and safety of our personnel, clients, and
suppliers.
Fiscal 2021 Compared to Fiscal 2020
Select highlights include the following:
• Revenue increased 40.0% to $440.1 million, compared to $314.3 million in Fiscal 2020;
• Operating income increased 44.7% to $73.7 million, compared to $50.9 million in Fiscal 2020;
• Net income increased by more than 100% to $90.0 million, including the impact of a gain on the step
acquisition of the Company’s equity-accounted investee (Skelton USA), compared to $37.7 million
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Andlauer Healthcare Group Inc. – 2021 Annual Report
in Fiscal 2020. Net income excluding the gain on step acquisition was $52.0 million for Fiscal 2021;
• Total comprehensive income was $92.8 million, compared to $37.7 million in Fiscal 2020;
• EBITDA was $157.2 million in Fiscal 2021. EBITDA, excluding the gain on step acquisition,
increased 51.1% to $119.3 million, compared to $78.9 million in Fiscal 2020;
• EBITDA Margin was 35.7% in Fiscal 2021. EBITDA Margin, excluding the impact of the gain on
step acquisition, was 27.1%, compared to 25.1% in Fiscal 2020;
• During Fiscal 2021, we provided logistics and distribution, specialized transportation, and packaging
solutions to certain of our manufacturer, 3PL provider, wholesaler and government clients that are
involved in the Canadian supply of COVID-19 vaccines and ancillary products. In Fiscal 2021,
approximately 4.0% of total revenue was derived from our clients that are involved in the Canadian
supply of COVID-19 vaccines; and
• On March 1, 2021, we acquired 100% of Skelton and 49% of Skelton USA for total aggregate
consideration of approximately $114.7 million, before customary working capital adjustments.
Skelton added approximately $33.6 million of revenue during Fiscal 2021.
Subsequent to Q4 2021
• On March 1, 2022, the Company acquired 100% of the issued and outstanding shares of LSU for
consideration of approximately $30 million, before customary working capital adjustments. LSU is
a third-party logistics provider offering specialty pharmacy, warehousing, distribution and order
management services throughout Canada to national and international companies as well as
government clients in the pharmaceutical, medical and biotechnology sectors. AHG financed the
acquisition through the issuance of 154,639 subordinate voting shares and cash of approximately
$22.5 million. The Company financed the cash portion of the purchase price through a combination
of cash on hand and by drawing on its Credit Facilities (as defined below).
How We Assess the Performance of Our Business
We have historically operated and managed our healthcare logistics and specialized transportation segments
as separate businesses with separate management teams. Our healthcare logistics segment has operated
under the brand name Accuristix and our specialized transportation segment has operated under the brand
names ATS Healthcare, ATS Dedicated and Skelton. Following our initial public offering (“IPO”)
completed December 11, 2019, both Accuristix and ATS Healthcare have continued to operate
autonomously, each having its own management. Skelton, which we acquired on March 1, 2021 and Boyle
Transportation and Skelton USA, which we acquired on November 1, 2021, which are reported in the
specialized transportation segment and, also operate autonomously, as they did prior to their respective
acquisitions. Over time, as we grow, our operating segments may change. If this occurs, we will reflect the
change in our reporting practices.
Except for tractors and trailers purchased by Skelton and Boyle Transportation, our operating segments
conduct their businesses in a manner that limits capital investments, preferring to lease facilities and certain
equipment rather than allocating significant cash flows to capital expenditures. We believe our business
model provides us with greater flexibility, cost savings and lower risks, as compared to more capital
expenditure intensive models. Accordingly, lease costs comprise a significant component of our expenses.
Under IFRS 16 – Leases, leases have been capitalized, resulting in the costs associated with our leases being
recorded as depreciation and interest expense. We believe that the cash flows associated with our lease
payments are a relevant metric in evaluating the performance of our business.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Revenue
We generate revenue from the provision of supply chain solutions to the Canadian and United States
healthcare sectors. Across our logistics and transportation operating segments, we generate revenue across
five principal product lines: logistics and distribution, packaging solutions, air freight forwarding, ground
transportation, and dedicated and last mile delivery.
Our healthcare logistics segment, which offers services under our Accuristix brand, generates revenue from
the provision of logistics and distribution services and packaging solutions to our clients. Services are
typically provided under master service agreements with terms that range from three to five years in length.
Our logistics contracts typically include a single performance obligation that is satisfied over time as clients
simultaneously receive and consume the benefits of our services. For this performance obligation, we
recognize revenue at the invoiced amount since this amount corresponds directly to our performance and
the value to the client. In some cases, our agreements include other performance obligations related to
managing transportation and other client services which are included in the logistics and distribution product.
These services are typically priced at their stand-alone selling prices and are recognized over time as the client
simultaneously receives and consumes the benefits of our services. Intersegment revenue generated by
Credo Systems Canada Inc. from the sale of thermal packaging containers to ATS Healthcare, as well as
intra-segment revenue between Accuristix and Nova Pack Ltd. (“Nova Pack”) is eliminated on
consolidation.
Our specialized transportation segment, which offers services under our ATS Healthcare, ATS Dedicated
and Skelton brands, generates revenue from the provision of specialized temperature-controlled, as well as
non-temperature controlled, ground transportation, air freight forwarding and dedicated and last mile
transportation services to our clients. Certain additional services are provided to clients where requested as
part of their transportation contracts, such as chain of custody and other incidental services. Transportation
revenue is recognized proportionally as a shipment moves from origin to destination and the related costs
are recognized as incurred. Performance obligations are short-term, with transit typically taking less than
one week. Generally, clients are billed upon shipment of the freight, and remit payment according to
approved payment terms. Intersegment revenue generated by ATS Healthcare and Skelton from the
provision of transportation services to Accuristix, on behalf of its logistics clients, is eliminated on
consolidation.
On November 1, 2021 we acquired the remaining 51% interest in Skelton USA and a 100% interest in Boyle
Transportation, both of which provide specialized temperature-controlled services to healthcare companies
in the United States. These acquisitions align with our specialized transportation segment in all material
respects except that they focus on full truckload ground transportation services.
As is customary in our industry, most of our client contracts and transportation pricing terms include fuel-
surcharge revenue programs or cost recovery mechanisms to mitigate the effect of fuel price increases over
base amounts established in the contract. However, these fuel surcharge mechanisms may not capture the
entire amount of changes in fuel prices, and there is also a lag between the payment for fuel and collection
of surcharge revenue. Decreases in fuel prices reduce the cost of transportation and services, and will
accordingly reduce our revenues and may reduce margins for certain product lines.
Cost of Transportation and Services
Our cost of transportation and services expense includes the cost of providing or procuring freight
transportation to our clients. The cost of transportation and services for our specialized transportation
segment includes: linehaul costs to connect our national network; pick-up and delivery costs paid to brokers,
agents, and our drivers; fuel, toll fees and maintenance costs; and inbound and outbound handling costs
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Andlauer Healthcare Group Inc. – 2021 Annual Report
which are largely comprised of hourly paid dock labour. The cost of transportation and services for our
healthcare logistics segment includes purchased transportation services, including fuel surcharges, sourced
from carriers. ATS Healthcare is the largest provider of transportation services to Accuristix, followed by
Skelton. Intersegment purchased transportation expense is eliminated on consolidation.
Direct Operating Expenses
Direct operating expenses are both fixed and variable and consist of operating costs related to our facilities
(including our distribution centres, branches and the cross-docks that we operate from). Direct operating
expenses consist mainly of personnel costs and facility and equipment expenses such as property taxes,
utilities, equipment maintenance and repair, costs of materials and supplies, security and insurance expenses.
We note that under IFRS 16 the costs associated with our leases are not recognized in our direct operating
expenses.
Selling, General and Administrative Expenses
Selling, General and Administrative (“SG&A”) expenses primarily consist of the cost of salaries and benefits
for executive and certain administration functions, including information technology, sales and client
service, finance and accounting, professional fees, facility costs, legal costs and other expenses related to the
corporate infrastructure required to support our business.
Depreciation & Amortization
Depreciation and amortization charges comprise non-cash charges expensed on the statement of income and
comprehensive income to spread the purchase price of assets over their useful lives. Within both of our
operating segments, we lease facilities and certain equipment rather than allocating significant cash flows to
capital expenditures. We believe this approach provides us with greater flexibility and lower risks and results
in cost savings as compared to capital expenditure intensive models. Accordingly, lease costs comprise a
significant component of our expenses. Under IFRS 16, leases have been capitalized, resulting in
depreciation and interest expense rather than direct operating expense.
Operating Income
Operating Income measures the amount of profit derived from our operations after deducting operating
expenses such as cost of transportation and services, direct operating expense, SG&A, and depreciation and
amortization. We do not typically measure “cost of sales or gross profit” as we are a service business.
Gain on Step Acquisition of Equity-Accounted Investee
We completed our acquisition of Skelton USA in two separate transactions (49% on March 1, 2021 and the
remaining 51% on November 1, 2021). Accordingly, in accordance with IFRS 3 – Business Combinations,
we re-measured our previously held equity interest in Skelton USA at its estimated fair value on November
1, 2021 resulting in a gain being recognized from the step acquisition.
Share of Profit of Equity-Accounted Investee, Net of Tax
Following the acquisition of a 49% interest in Skelton USA on March 1, 2021, we determined that AHG did
not control Skelton USA until the remaining 51% of Skelton USA was acquired on November 1, 2021.
Accordingly, between March 1, 2021 and October 31, 2021, we have accounted for this investment in
Skelton USA using the equity method of accounting. Under the equity method of accounting, an equity
investment is initially recorded at cost and is subsequently adjusted to reflect the investor’s share of the net
profit or loss of the investee. From November 1, 2021 forward, Skelton USA is consolidated with AHG in
accordance with IFRS 10 – Consolidated Financial Statements.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Interest Expense
Interest expense comprises interest charged to the statement of income and comprehensive income primarily
in connection with leased facilities and equipment under IFRS 16, and for borrowings under our Credit
Facilities.
Interest Income
Interest income comprises interest earned on cash and cash equivalents. In Q4 2021, we sub-leased a facility
to a third party that had previously been classified as a right-of-use asset. We derecognized net book value
from right-of-use assets and established a net investment sub-lease in connection with this facility. Interest
income includes interest generated by this sub-lease.
Other Income/Expense
Other income (expense) comprises income or expenses that do not arise from our main business, such as
exchange gains (losses) and gains resulting from the sale of property, plant and equipment and certain other
insignificant sources.
Income Tax Expense/Recovery
Income tax expense (recovery) comprises the amount that we have recognized in the accounting period
related to our taxable income. Our effective tax rate is generally close to the statutory rate, but certain
differences between income for tax and accounting income are recognized in the deferred income tax
provision.
Foreign Currency Translation Adjustment
In preparing the Company’s consolidated financial statements, the financial statements of each entity are
translated into Canadian dollars. The assets and liabilities of foreign operations are translated to Canadian
dollars at exchange rates as at the balance sheet date. Revenues and expenses of foreign operations are
translated to Canadian dollars at exchange rates that approximate those on the date of the underlying
transaction. Foreign exchange differences are recognized in other comprehensive income and accumulated
in equity in accumulated other comprehensive income.
Non-IFRS Measures
EBITDA
We define EBITDA as net income and comprehensive income for the period before: (i) income tax expense
(recovery); (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization. Net income is
the most directly comparable IFRS financial measure disclosed in the financial statements of the Company
to which EBITDA relates, and a reconciliation with this measure is presented under “Reconciliation of Non-
IFRS Measures”.
We believe EBITDA is a useful measure to assess our financial performance because it provides a more
relevant picture of operating results by excluding the effects of expenses that are not reflective of our
underlying business performance.
In accordance with IFRS 3, when we obtained control of Skelton USA, we re-measured our previously held
equity interest in our equity-accounted investee at its estimated fair value on November 1, 2021 resulting in
a gain of $37.9 million being recognized from the step acquisition. For comparative purposes with other
periods, we have presented EBITDA and EBITDA Margin excluding the gain on step acquisition in this
MD&A.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
EBITDA Margin
We define EBITDA Margin as EBITDA divided by revenue. EBITDA Margin represents a measure of our
profitability expressed as a percentage of revenue.
We believe EBITDA Margin is a useful measure to assess our financial performance because it helps
quantify our ability to convert revenues generated from clients into EBITDA.
Selected Consolidated Financial Information
The following table summarizes our results of operations for the periods indicated. The selected consolidated
financial information for Q4 2021, Q4 2020, Fiscal 2021 and Fiscal 2020, has been derived from our
consolidated financial statements and the related notes thereto. See “Reconciliation of Non-IFRS Measures”
for quantitative reconciliations of net income and comprehensive income to EBITDA.
Consolidated Statements of Income and Comprehensive Income
($CAD 000s)
Revenue
Logistics & distribution
Packaging solutions
Healthcare Logistics segment
Ground transportation
Air freight forwarding
Dedicated and last mile delivery
Intersegment revenue
Specialized Transportation segment
Total revenue
Operating expenses
Cost of transportation and services
Direct operating expense
Selling, general and administrative
expenses
Depreciation & amortization
Operating income
Gain on step acquisition of equity-
accounted investee
Share of profit of equity-accounted
investee, net of tax
Interest expense
Interest income
Other income (expense)
Income tax expense (recovery)
Net income
29,521
4,351
33,872
85,268
10,024
14,282
(10,421)
99,153
133,025
65,708
21,279
10,903
13,683
111,573
21,452
37,921
371
Three Months Ended
December 31,
2021
2020
2021
Year Ended
December 31,
2020
26,067
3,924
29,991
48,391
6,091
10,979
115,255
20,072
135,327
261,870
29,214
52,260
96,976
19,380
116,356
177,170
22,482
29,795
(8,820)
(38,556)
(31,463)
(25,015)
2019
88,311
21,307
109,618
169,040
19,656
16,689
56,641
86,632
38,542
18,775
7,310
7,724
72,351
14,281
-
-
304,788
440,115
197,984
314,340
180,370
289,988
201,784
84,861
37,051
42,716
366,412
73,703
37,921
2,469
(6,219)
198
368
(18,486)
89,954
131,392
75,374
28,613
28,022
263,401
50,939
-
-
(4,595)
285
(49)
(8,866)
37,714
121,405
74,792
23,092
25,706
244,995
44,993
-
-
(3,503)
1,004
(145)
(12,004)
30,345
(1,565)
(1,030)
32
264
(5,371)
53,104
39
(41)
620
13,869
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
($CAD 000s)
Other comprehensive income
Net income
Other comprehensive income
Total comprehensive income
Three Months Ended
December 31,
2021
2020
2021
Year Ended
December 31,
2020
2019
53,104
2,889
55,993
13,869
-
13,869
89,954
2,889
92,843
37,714
30,345
-
-
37,714
30,345
Total comprehensive income attributable to
Shareholders of the Company
55,993
13,869
92,843
37,714
Non-controlling interests
Earnings per share – basic
Earnings per share – diluted
-
$1.29
$1.26
-
$0.37
$0.36
-
$2.30
$2.25
-
$1.00
$0.98
29,773
572
$0.79
$0.79
($CAD 000s)
Select financial metrics1
EBITDA
EBITDA Margin
EBITDA excluding gain on step
acquisition
EBITDA Margin excluding gain on step
acquisition
Three Months Ended
December 31,
Year Ended
December 31,
2021
2020
2021
2020
2019
73,691
55.4%
21,964
25.4%
157,177
35.7%
78,912
25.1%
70,554
24.3%
35,770
21,964
119,256
78,912
70,554
26.9%
25.4%
27.1%
25.1%
24.3%
1 These are non-IFRS financial measures. See “How We Assess the Performance of Our Business – Non-IFRS Measures” for further information
on these measures.
Consolidated Balance Sheets
($CAD 000s)
Select financial position data
Total assets
Total non-current liabilities
As at December 31,
2021
2020
2019
644,169
201,521
252,797
110,394
212,995
94,795
Consolidated Statements of Changes in Equity
($CAD 000s)
Select financial data
Distributions to related parties
Dividends
Three Months Ended
December 31,
Year Ended
December 31,
2021
2020
2021
2020
2019
-
1,924
-
1,880
-
7,854
-
112,016
7,929
-
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Reconciliation of Non-IFRS Measures
The following table provides a reconciliation of net income and comprehensive income to EBITDA for Q4
2021, Q4 2020, Fiscal 2021, Fiscal 2020 and Fiscal 2019:
Three Months Ended
December 31,
2021
2020
2021
Year Ended
December 31,
2020
($CAD 000s)
Net income
Income tax expense (recovery)
Interest expense
Interest income
Depreciation & amortization
EBITDA1
Gain on step acquisition of equity-
accounted investee
EBITDA1 excluding gain on step acquisition
53,104
5,371
1,565
(32)
13,683
73,691
(37,921)
35,770
13,869
(620)
1,030
(39)
7,724
21,964
89,954
18,486
6,219
(198)
42,716
157,177
37,714
8,866
4,595
(285)
28,022
78,912
2019
30,345
12,004
3,503
(1,004)
25,706
70,554
-
(37,921)
-
-
21,964
119,256
78,912
70,554
1 This is a non-IFRS financial measure. See “How We Assess the Performance of Our Business – Non-IFRS Measures” for further information on
this measure.
Results of Operations
Three months ended December 31, 2021 compared with 2020
The following section provides an overview of our financial performance for Q4 2021 compared to
Q4 2020.
Revenue
Revenue for Q4 2021 increased by 53.6% to $133.0 million, compared with $86.6 million in Q4 2020. Our
Skelton, Skelton USA and Boyle Transportation acquisitions accounted for approximately $30.9 million of the
$46.4 million increase with the remaining growth attributable to organic growth as described below.
Approximately 5.0% of our consolidated revenue for Q4 2021 was generated by working with
manufacturer, 3PL, distributor, and government clients involved in the supply of vaccines and related
products in connection with the COVID-19 pandemic.
Healthcare Logistics Segment
Revenue in our healthcare logistics segment for Q4 2021 was $33.9 million, an increase of 12.9%, or
approximately $3.9 million, compared with Q4 2020. The increase in revenue for this segment was
primarily driven by the factors set out below.
Logistics & Distribution
Logistics and distribution revenue for Q4 2021 was $29.5 million, an increase of 13.3%, or approximately
$3.5 million, compared with Q4 2020. The increase reflects greater outbound order handling activities.
Packaging Solutions
Packaging revenue for Q4 2021 was $4.4 million, an increase of 10.9%, or approximately $0.4 million,
compared with Q4 2020. However, packaging revenue for Q4 2021 remained approximately $0.5 million,
or 11.1%, below Q4 2019 revenue. We expect that revenue for this product may not fully recover all of its
reduced or deferred business until the consumption of consumer healthcare products returns to pre-pandemic
levels.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Specialized Transportation Segment
Revenue in our specialized transportation segment for Q4 2021 was $99.2 million, an increase of 75.1%, or
approximately $42.5 million, compared with Q4 2020. Revenue growth in this segment was primarily driven
by the factors set out below.
Ground Transportation
Ground transportation revenue for Q4 2021 was $85.3 million, an increase of 76.2%, or approximately $36.9
million, compared with Q4 2020. The increase reflects incremental revenue from our Skelton, Skelton USA,
and Boyle Transportation acquisitions of approximately $30.8 million, with the remainder attributable to
higher volume from our existing client base and higher fuel costs passed through to customers as a
component of our pricing.
Air Freight Forwarding
Air freight forwarding revenue for Q4 2021 was $10.0 million, an increase of 64.6%, or approximately $3.9
million, compared with Q4 2020. The significant increase was primarily attributable to increased volume in
Q4 2021 as our clients attempted to minimize service disruptions in British Columbia arising from the
“atmospheric river” weather events that occurred in November 2021, which severed regional road and rail
links to Vancouver due to flooding and landslides. We expect air freight volume to continue to be higher
than historical levels during the early part of Q1 2022, but we believe volume will to return to normal levels
within Q2 2022. In addition, we expect to experience increased linehaul costs for ground transportation in
Q1 2022, which will be passed on to our customers, as the damaged infrastructure is rebuilt in British
Columbia.
Dedicated and Last Mile Delivery
Dedicated and last mile delivery revenue for Q4 2021 was $14.3 million, an increase of 30.1%, or
approximately $3.3 million, compared with Q4 2020. Our TDS acquisition, which was completed on
October 1, 2020, has been reflected in our results for a full twelve months, accordingly the majority of the
growth is attributable to incremental revenue from route expansion in Western Canada and increases in fuel
costs passed on to customers.
Cost of Transportation and Services
Cost of transportation and services for Q4 2021 was $65.7 million, or 49.4% of revenue, compared with $38.5
million, or 44.5% of revenue, for Q4 2020. The higher cost of transportation and services is primarily
attributable to an approximate 4.1% increase in volume in our ATS Healthcare business as compared to Q4
2020, the acquisitions of Skelton, Skelton USA, and Boyle Transportation, and higher fuel costs in line with
the increases in revenue related to fuel prices. The increase in the operating ratio for Q4 2021 as compared to
Q4 2020 reflects our Skelton, Skelton USA, and Boyle Transportation acquisitions, which have increased the
relative proportion of our specialized transportation segment as a percentage of our total consolidated revenue
and cost profiles.
Direct Operating Expenses
Direct operating expenses for Q4 2021 were $21.3 million, or 16.0% of revenue, compared with $18.8
million, or 21.7% of revenue, for Q4 2020. The $2.5 million increase is primarily attributable to growth in
our Accuristix logistics and distribution operations, and investments made to expand our ATS Healthcare
network in Canada. Our acquisitions (Skelton, Skelton USA and Boyle Transportation), which are included
in our specialized transportation segment, have lower facility-related costs compared to our healthcare
logistics segment, which results in a lower direct operating expense operating ratio in Q4 2021 as compared
to Q4 2020.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
During Q4 2021, the Canada Emergency Wage Subsidy (“CEWS”) program concluded, and we recognized
approximately forty thousand dollars (0.0% of revenue) in connection with our packaging operations as a
reduction to payroll expense. In Q4 2020, we recognized $0.6 million, or 0.7% of revenue, as a reduction to
payroll expense for CEWS.
Selling, General and Administrative Expenses
SG&A expenses for Q4 2021 were $10.9 million, or 8.2% of revenue, compared with $7.3 million, or 8.4%
of revenue, for Q4 2020. The $3.6 million increase in Q4 2021 is primarily attributable to our acquisitions
(Skelton, Skelton USA, and Boyle Transportation) and approximately $0.8 million of professional fees
related to the Boyle Transportation acquisition, partially offset by a $0.3 million reduction in the costs
attributable to share-based compensation expenses related to our IPO. The decrease in SG&A expenses as a
percentage of revenue reflects operating leverage generated within SG&A functions compared to revenue
growth.
Depreciation and Amortization
Depreciation and amortization for Q4 2021 was $13.7 million, an increase of 77.1% compared with $7.7
million for Q4 2020. The increase is primarily attributable to depreciation and amortization related to our
Skelton, Skelton USA, and Boyle Transportation acquisitions.
Gain on Step Acquisition of Equity-Accounted Investee
We completed our acquisition of Skelton USA in two separate transactions (49% on March 1, 2021 and the
remaining 51% on November 1, 2021). In accordance with IFRS 3, we re-measured our previously held equity
interest in Skelton USA at its estimated fair value on November 1, 2021 resulting in a gain of $37.9 million
being recognized from the step acquisition.
Share of Profit of Equity-Accounted Investee, Net of Tax
For Q4 2021, our 49% share of total comprehensive income of Skelton USA, comprising results for the
month of October 2021, was $0.4 million compared with $nil for Q4 2020.
Interest Expense
Interest expense for Q4 2021 was $1.6 million compared with $1.0 million for Q4 2020. Interest expense
related to leased facilities and equipment comprises the majority of interest expense; however, $0.3 million
of interest expense was incurred in Q4 2021 in connection with the Credit Facilities. Borrowing under our
Credit Facilities was increased in connection with the acquisitions of Skelton and Skelton USA on March 1,
2021. Accordingly, interest expense in connection with debt incurred under our Credit Facilities increased
by approximately $0.2 million in Q4 2021 compared with Q4 2020.
We expect to continue to hold debt under the Term Facility (as defined below), which does not have any
repayment schedule except as a single repayment at the end of the four-year term and will incur interest
expense until maturity on March 1, 2025. We intend to reduce amounts drawn on our Revolving Credit
Facility (as defined below) with free cash flow from operations. During Q4 2021, we reduced our borrowing
under our Revolving Credit Facility by $9.0 million.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Interest Income
Interest income for Q4 2021 and Q4 2020 was negligible. Interest income is generated on our cash and cash
equivalents balances and is earned in connection with our sub-lease of a facility to a third party.
Other Income/Expense
Other income was approximately $0.3 million for Q4 2021, the largest components of which relate to gains on
the sale of fixed assets and foreign exchange gains, compared to a negligible expense amount in Q4 2020. These
amounts are immaterial to our overall performance for Q4 2021 and Q4 2020.
Income Tax Expense/Recovery
Income tax expense for Q4 2021 was $5.4 million. Our effective tax rate is close to the statutory rate of
26.5% for Q4 2021 after removing the effect of the gain on step acquisition of equity-accounted investee,
non-deductible share-based compensation expenses, and the inclusion of the share of profit of our equity-
accounted investee, net of tax.
Income tax recovery for Q4 2020 was ($0.6) million. Previously unrecognized deferred tax assets were
recognized in our Q4 2020 provision for income taxes. Management determined that AHG, on a standalone
basis, will have sufficient future taxable profit available for the Company to use the benefits therefrom. The
previously unrecognized deferred tax assets arose from deductible temporary differences from Fiscal 2019,
comprising costs incurred by the Company related to the acquisition of certain of our subsidiary entities,
which were charged directly to equity, and non-capital tax losses generated in Fiscal 2019.
Operating Income and Net Income
Operating income for Q4 2021 was $21.5 million, an increase of $7.2 million, or 50.2%, compared with $14.3
million for Q4 2020. Approximately $3.5 million of the increase is attributable to our acquisitions of Skelton,
Skelton USA, and Boyle Transportation, with the remainder attributable to organic growth.
Income before tax for the Specialized Transportation segment was $56.3 million for Q4 2021, compared
with $10.9 million for Q4 2020. The increase was significantly impacted by the gain on step acquisition of
$37.9 million in connection with Skelton USA. In addition, approximately $3.5 million of the increase is
attributable to our acquisitions of Skelton, Skelton USA, and Boyle Transportation, with the remainder
attributable to organic growth.
Income before tax for the Healthcare Logistics segment was $3.2 million for Q4 2021 compared with $2.6
million for Q4 2020. The increase reflects greater outbound order handling activities in line with our revenue
growth for the period.
Net income for Q4 2021 of $53.1 million was significantly impacted by the gain on step acquisition of our
equity-accounted investee of $37.9 million, while net income for Q4 2020 was impacted by the deferred
income tax recovery of approximately $4.3 million. However, higher segment net income before
eliminations for both our healthcare logistics and specialized transportation operating segments also
contributed to the increased profitability on a consolidated basis.
Foreign Currency Translation Adjustment
Foreign exchange differences of $2.9 million have been recognized in other comprehensive income for Q4
2021. This reflects assets and liabilities of Skelton USA and Boyle Transportation which have been
translated to Canadian dollars at the exchange rate as at the December 31, 2021 and revenues and expenses
which have been translated to Canadian dollars at exchange rates that approximate those on the date of the
underlying transaction.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Total Comprehensive Income
Total comprehensive income attributable to the owners of the Company was $56.0 million for Q4 2021
compared to $13.9 million for Q4 2020. Q4 2021 is the first quarter in which total comprehensive income
differs from net income due to the acquisition of foreign operations (Skelton USA and Boyle Transportation)
resulting in foreign currency translation adjustments as described above.
EBITDA
EBITDA for Q4 2021 increased by more than 200% to $73.7 million, from $22.0 million for Q4 2020.
EBITDA excluding the gain on step acquisition of our equity-accounted investee was $35.8 million, which
increased over Q4 2020 due to the factors discussed above and reflects the incremental contributions of our
acquisitions and organic growth in both of our operating segments.
EBITDA Margin
EBITDA Margin for Q4 2021 was 55.4%. EBITDA Margin excluding the gain on step acquisition was 26.9%
compared with 25.4% for Q4 2020. The performance of our two operating segments continues to result in
strong and stable EBITDA Margins at the higher end of our historical range. In addition, the Skelton business
in Canada has a margin profile at the high end of the specialized transportation segment margin range which
positively impacts our overall margin. Inter-segment eliminations have increased with the Skelton
Companies acquisitions, which have also contributed to our improved EBITDA Margin. The margin profiles
of Skelton USA and Boyle Transportation are in line with AHG’s consolidated EBITDA range, but on the
lower end of our historical specialized transportation margin range.
Year Ended December 31, 2021 compared with 2020
The following section provides an overview of our financial performance for Fiscal 2021 and Fiscal 2020.
Revenue
Revenue for Fiscal 2021 increased by 40.0% to $440.1 million, compared with $314.3 million in Fiscal
2020. From October 1, 2020 through November 1, 2021 we made five acquisitions (TDS, MCI, Skelton,
Skelton USA, and Boyle Transportation) that have impacted Fiscal 2021 results. Revenue increases
attributable to our acquisitions, in aggregate, accounted for $77.1 million of the $125.8 million increase from
Fiscal 2020, with the remaining increase attributable to organic growth in both of our specialized
transportation and healthcare logistics segments. In Fiscal 2021, approximately 4.0% of our consolidated
revenue was generated by working with manufacturer, 3PL, distributor, and government clients involved in
the supply of COVID-19 vaccines and related products (e.g., test kits and personal protective equipment).
Healthcare Logistics Segment
Revenue in our healthcare logistics segment for Fiscal 2021 was $135.3 million, an increase of 16.3%, or
approximately $19.0 million, compared with Fiscal 2020. Revenue growth in this segment was primarily
driven by the factors set out below.
Logistics & Distribution
Logistics and distribution revenue for Fiscal 2021 was $115.3 million, an increase of 18.8%, or
approximately $18.3 million, compared with Fiscal 2020. COVID-19 vaccine distribution comprised
approximately $11.4 million, or 11.7%, of new business growth in Fiscal 2021 and a large new logistics and
distribution client implementation commenced in July 2020 which also contributed to revenue growth. Our
existing client base contributed approximately $6.9 million, or 7.1%, to Fiscal 2021 revenue growth –
aligned with our mid-to-high single digit percentage growth expectations.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Packaging Solutions
Packaging revenue for Fiscal 2021 was $20.1 million, an increase of 3.6% compared with Fiscal 2020. Since
the COVID-19 outbreak was declared a pandemic by the World Health Organization in March 2020, we
limited the number of associates in our packaging operations to allow for physical distancing in accordance
with public health guidelines which reduced our operating capacity for more than a year. At various times
during Fiscal 2021, we were able to safely ease limitations on the number of associates in our operations
and gradually restore our operating capacity to near pre-pandemic levels. However, revenue in Fiscal 2021
remained below our pre-pandemic Fiscal 2019 revenue of $21.3 million.
Specialized Transportation Segment
Revenue in our specialized transportation segment for Fiscal 2021 was $304.8 million, an increase of 53.9%,
or approximately $106.8 million, compared with Fiscal 2020. Revenue growth in this segment was primarily
driven by the factors set out below.
Air Freight Forwarding
Air freight forwarding revenue for Fiscal 2021 was $29.2 million, an increase of 29.9%, or approximately
$6.7 million, compared with Fiscal 2020. The increase was primarily attributable to volume increases in
Fiscal 2021 as compared to Fiscal 2020, including the impact of the British Columbia weather events in Q4
2021 described above, while approximately 24.3% of the increase was related to increased revenue related
to fuel cost increases in Fiscal 2021.
Ground Transportation
Ground transportation revenue for Fiscal 2021 was $261.9 million, an increase of 47.8%, or approximately
$84.7 million, compared with Fiscal 2020. Approximately $37.3 million, or 44.1%, of the increase is
attributable to the Skelton acquisition; and approximately $19.0 million, or 22.5% of the increase is
attributable to the Skelton USA and Boyle Transportation acquisitions. The remaining increase is
attributable to increased volume in our ATS Healthcare business (approximately $15.9 million), rate
increases, and fuel-related revenue.
Dedicated and Last Mile Delivery
Dedicated and last mile delivery revenue for Fiscal 2021 was $52.3 million, an increase of 75.4%, or
approximately $22.5 million, compared with Fiscal 2020. Approximately 75% of the increase reflects the
acquisition of TDS, with the remaining increase attributable to expanded routes for existing clients.
Cost of Transportation and Services
Cost of transportation and services for Fiscal 2021 was $201.8 million, or 45.8% of revenue, compared with
$131.4 million, or 41.8% of revenue, for Fiscal 2020. The increased cost of transportation and services and
the operating ratio for Fiscal 2021 reflects the addition of our Fiscal 2020 and Fiscal 2021 acquisitions, which
have increased the relative proportion of our specialized transportation segment and related costs as a
percentage of our total consolidated revenue and cost profiles. The increase was partially offset by savings
achieved by effectively managing our variable costs with an approximate 9.0% volume increase in Fiscal
2021 as compared to Fiscal 2020. The increase in cost of transportation and services also reflects higher fuel
costs for Fiscal 2021 in line with the increase in ground transportation revenue related to fuel for Fiscal
2021.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Direct Operating Expenses
Direct operating expenses for Fiscal 2021 were $84.9 million, or 19.3% of revenue, compared with $75.4
million, or 24.0% of revenue, for Fiscal 2020. The $9.5 million increase is primarily attributable to growth
in our healthcare logistics operating segment, and increased investment in our nationwide ATS Healthcare
network to support growth in the specialized transportation segment. Our acquisitions (TDS, MCI, Skelton,
Skelton USA, and Boyle Transportation). which are included in our specialized transportation segment, have
lower facility-related costs compared to our healthcare logistics segment which results in a lower direct
operating expense operating ratio in Fiscal 2021 as compared to Fiscal 2020. We have incurred certain
incremental costs in connection with our COVID-19 response measures, including additional cleaning
activities for our facilities and equipment, expenses for personal protective equipment for our associates,
and other measures impacting productivity; however, these incremental costs were mitigated through
effective productivity management and other cost controls.
During Fiscal 2021, we continued to qualify for the CEWS program in connection with our packaging
operations. We recognize government assistance as a reduction to payroll expense. A total of $1.2 million,
or 0.3% of revenue, was recognized as a reduction of direct operating expenses for Fiscal 2021 for assistance
received from the CEWS program, compared to $2.4 million, or 0.8% of revenue in Fiscal 2020.
Government assistance under the existing CEWS program concluded on October 23, 2021.
Selling, General and Administrative Expenses
SG&A expenses for Fiscal 2021 were $37.1 million, or 8.4% of revenue, compared with $28.6 million, or
9.1% of revenue, for Fiscal 2020. The increase in SG&A expenses is primarily attributable to the acquisitions
of TDS, MCI, Skelton, Skelton USA, and Boyle Transportation. We have generated operating leverage by
not increasing our SG&A expenses commensurate with our revenue growth. SG&A expenses for Fiscal
2021 include share-based compensation arrangements of approximately $1.9 million, or 0.4% of revenue
compared with $3.1 million, or 1.0% of revenue for Fiscal 2020, which contributed to lower SG&A expenses
as a percentage of revenue for Fiscal 2021 as compared to Fiscal 2020. These share-based compensation
arrangements relate to the initial stock option grants to our directors and senior management team, and
deferred share unit grants to our directors, which are intended to provide further alignment with shareholders.
A further $2.1 million of cost, or 0.5% of revenue, is included in Fiscal 2021 SG&A expenses for incremental
costs associated with the acquisitions of Skelton, Skelton USA, and Boyle Transportation and the Offering.
Depreciation and Amortization
Depreciation and amortization for Fiscal 2021 was $42.7 million, an increase of 52.4%, or $14.7 million,
compared with $28.0 million for Fiscal 2020. The acquisitions of Skelton, Skelton USA, and Boyle
Transportation accounted for $11.5 million of the increase, with the remaining $3.2 million increase
attributable to leases for new right-of-use logistics and transportation equipment to support growth in our
specialized transportation segment and our Brampton, Ontario facility.
Other Income/Expense
Other income for Fiscal 2021 was approximately $0.4 million compared with other expense of effectively
$nil for Fiscal 2020. This amount is immaterial to our overall performance for Fiscal 2021.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Interest Income
Interest income was $0.2 million for Fiscal 2021 compared with $0.3 million in Fiscal 2020. Interest income
is generated on our cash and cash equivalents balances and is earned in connection with our sub-lease of a
facility to a third party.
Interest Expense
Interest expense for Fiscal 2021 was $6.2 million compared with $4.6 million for Fiscal 2020. Interest
expense related to leased facilities and equipment comprises the significant majority of interest expense;
however, $1.4 million of interest expense was incurred in Fiscal 2021 in connection with the Credit Facilities
which were entered into at the time of our IPO and increased in connection with the acquisition of Skelton.
We expect to continue to hold debt under the Term Facility, which does not have any repayment schedule
except as a single repayment at the end of the term and will incur interest expense until maturity on March
1, 2025.
During Fiscal 2021, we repaid $39.0 million of the $50.0 million initially drawn on our Credit Facilities in
connection with the acquisition of Skelton.
Income Tax Expense/Recovery
Income tax expense for Fiscal 2021 was $18.5 million. Our effective tax rate is close to the statutory rate of
26.5% for Fiscal 2021 after removing the effect of the gain on step acquisition of equity-accounted investee,
non-deductible share-based compensation expenses, and the inclusion of the share of profit of our equity-
accounted investee, net of tax.
Income tax expense for Fiscal 2020 was $8.9 million. Previously unrecognized deferred tax assets were
recognized in our Fiscal 2020 provision for income taxes. Management determined that AHG, on a
standalone basis, will have sufficient future taxable profit available for the Company to use the benefits
therefrom. The previously unrecognized deferred tax assets arose from deductible temporary differences
from Fiscal 2019 comprising costs incurred by the Company related to the acquisition of certain of our
subsidiary entities, which were charged directly to equity, and non-capital tax losses generated in Fiscal
2019.
Operating Income and Net Income
Operating income for Fiscal 2021 was $73.7 million, an increase of $22.8 million, or 44.7%, compared with
$50.9 million for Fiscal 2020.
Income before tax for the Specialized Transportation segment was $95.5 million for Fiscal 2021, compared
with $40.3 million for Fiscal 2020. The increase was significantly impacted by the gain on step acquisition
of $37.9 million in connection with Skelton USA. In addition, approximately $6.3 million of the increase is
attributable to our acquisitions of Skelton, Skelton USA, and Boyle Transportation, with the remainder
attributable to organic growth.
Income before tax for the Healthcare Logistics segment was $15.0 million for Fiscal 2021 compared with
$10.6 million for Q4 2020. The increase reflects the impact of the addition of our Brampton, Ontario facility
in the second half of Fiscal 2020, together with greater outbound order handling activities in line with our
revenue growth for the year.
Net income for Fiscal 2021 increased by 138.5%, or $52.2 million, to $90.0 million, from $37.7 million for
Fiscal 2020. Net income for Fiscal 2021 includes a gain on step acquisition of Skelton USA of $37.9 million, as
Skelton USA was acquired in two separate transactions during Fiscal 2021. Segment net income before
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Andlauer Healthcare Group Inc. – 2021 Annual Report
eliminations for both our specialized transportation and our healthcare logistics operating segments increased
in relation to segment revenue as margins increased in both segments compared with the same periods for
the prior year. Fiscal 2021 net income and comprehensive income includes $2.5 million comprising the share
of profit of our equity- accounted investee, net of tax, prior to the acquisition of control on November 1,
2021.
Foreign Currency Translation Adjustment
Foreign exchange differences of $2.9 million have been recognized in other comprehensive income for Q4
2021. This reflects assets and liabilities of Skelton USA and Boyle Transportation which have been
translated to Canadian dollars at the exchange rate as at December 31, 2021 and revenues and expenses
which have been translated to Canadian dollars at exchange rates that approximate those on the date of the
underlying transaction.
Total Comprehensive Income
Total comprehensive income for the year was $92.8 million for Fiscal 2021 compared to $37.7 million for
Fiscal 2020. Fiscal 2021 is the first year in which total comprehensive income differs from net income due
to the acquisition of foreign operations (Skelton USA and Boyle Transportation) resulting in foreign
currency translation adjustments as described above.
EBITDA
EBITDA for Fiscal 2021 increased by 99.2% to $157.2 million, from $78.9 million for Fiscal 2020. EBITDA
excluding the gain on step acquisition of our equity-accounted investee was $119.3 million which increased
over Fiscal 2020 due to the factors discussed above and reflects the incremental contributions of our
acquisitions and organic growth in both of our operating segments.
EBITDA Margin
EBITDA Margin for Fiscal 2021 was 35.7%. EBITDA Margin excluding the gain on step acquisition was
27.1% compared with 25.1% for Fiscal 2020. The performance of our two operating segments continues to
result in strong and stable EBITDA Margins at the higher end of our historical range. The Skelton business
in Canada has a margin profile at the high end of the specialized transportation segment margin range which
positively impacts our overall margin. Inter-segment eliminations have increased with the Skelton
Companies acquisitions, which have also contributed to our improved EBITDA Margin. The margin profiles
of Skelton USA and Boyle Transportation are in line with AHG’s consolidated EBITDA range, but on the
lower end of our historical specialized transportation margin range.
Summary of Quarterly Results
While there is no significant seasonality to our business, our results are impacted by our clients’ storage and
shipping activities throughout the year as well as the timing of new client implementations or exits.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
The table below sets out our results for each of the eight most recently completed quarters (unaudited):
($CAD 000s) except per share data
Q4-21
Q3-21
Q2-21
Q1-21
Q4-20
Q3-20
Q2-20
Q1-20
Total revenue
Operating income
Net income
133,025
104,199
107,125
95,766
86,632
75,805
70,253
81,650
21,452
16,796
18,792
16,663
14,281
13,165
11,089
12,404
53,104
12,188
13,051
11,611
13,869
8,596
8,596
7,067
7,067
8,182
8,182
Total comprehensive income
55,993
12,188
13,051
11,611
13,869
EBITDA
73,691
28,026
29,973
25,487
21,964
20,190
17,959
18,799
Earnings per share – basic
Earnings per share - diluted
$ 1.29
$ 1.26
$ 0.32
$ 0.31
$ 0.34
$ 0.31
$ 0.33
$ 0.30
$ 0.37
$ 0.36
$ 0.23
$ 0.22
$ 0.19
$ 0.18
$ 0.22
$ 0.22
Generally, revenue has trended upwards through the past eight quarters with Fiscal 2021 and Fiscal 2020
reflecting both increased shipping volumes from our clients as well as the impact of price increases which
are contractually implemented in both of our operating segments annually or as contracts are renegotiated.
Our acquisitions in Fiscal 2021 and Fiscal 2020 have driven step change increases in revenue as well.
Revenue in Q4 2021 includes the consolidation of Skelton USA and Boyle Transportation, resulting in
approximately $19.0 million of acquired revenue for the quarter. During Q4 2021 we continued to support
the distribution of COVID-19 vaccines and related products, such as test kits and personal protective
equipment. Revenue in Q3 2021 was slightly lower than Q2 2021 revenue as activity related to COVID-19
vaccines was higher in Q2 2021.
Revenue for Q4 2020, and Q1 2021 includes incremental revenue related to our acquisitions of TDS and MCI
in Q4 2020 and Skelton in Q1 2021.
We believe that Q1 2020 revenue was favourably impacted by accelerated buying behaviour of our clients’
customers in connection with the COVID-19 pandemic, which negatively impacted Q2 2020 revenue as our
clients’ customers reduced inventories to more normal levels. Further, shipping volumes were lower in April
and May 2020 as a result of the government-mandated lockdown and other COVID-19 related restrictions,
but increased in June 2020 as restrictions were lifted by provincial governments. Shipping volumes throughout
Q3 2020 and Q4 2020 returned to more normalized pre-pandemic levels with year-over-year increases
averaging in the mid-single digit percentages.
Operating income, net income and comprehensive income, and EBITDA have continued to perform
consistently with revenue growth over the past eight quarters and have effectively absorbed the IPO and
incremental costs associated with being a public company since December 11, 2019.
Liquidity & Capital Resources
Overview
Our principal uses of funds are for operating expenses, taxes, interest, capital expenditures, lease payments
and dividends. We believe that cash generated from our operations, together with amounts available under
our Credit Facilities will be sufficient to meet our future operating expenses, taxes, interest, capital
expenditures, lease payments and any dividends that may be declared by our board of directors. However,
our ability to fund operating expenses, taxes, interest, capital expenditures and future lease payments will
depend on, among other things, our future operating performance, which will be affected by general
economic, financial and other factors, including factors beyond our control. See “Accounting Classifications
and Fair Values”, “Summary of Factors Affecting Performance” and “Risk Factors” in this MD&A. We
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Andlauer Healthcare Group Inc. – 2021 Annual Report
review potential acquisitions and investment opportunities in the normal course of our business and may make
select acquisitions and investments to implement our growth strategy when suitable opportunities arise.
Our tuck-in acquisitions of TDS and MCI in October 2020 for a purchase price of approximately $15.9 million
in cash were funded from existing cash flow from operations. We financed the acquisitions of Skelton and the
initial 49% of Skelton USA in March 2021 through a combination of cash on hand and by drawing $50.0
million on our Revolving Credit Facility and $25.0 million on our Term Facility, and by issuing $25.0 million
of Subordinate Voting Shares to the shareholders of Skelton and Skelton USA. During Fiscal 2021, we repaid
$39.0 million of the $50.0 million initially drawn on our Revolving Credit Facility in connection with the
Skelton and Skelton USA acquisitions.
On November 1, 2021, we completed the acquisitions of 100% of Boyle Transportation and the remaining
51% of Skelton USA, increasing our aggregate ownership of Skelton USA to 100%. The aggregate purchase
price for the acquisition of Boyle Transportation was approximately US$83.0 million ($104.7 million), of
which approximately US$63.0 million was paid in cash and US$20.0 million was satisfied by issuing 522,116
Subordinate Voting Shares to the shareholders of Boyle. The aggregate purchase price for the acquisition of
the remaining 51% interest in Skelton USA was approximately $44.8 million, of which $19.8 million was paid
in cash and $25 million was satisfied by issuing 518,672 Subordinate Voting Shares to the shareholders of
Skelton USA. The cash portion of the purchase price for each acquisition was funded through the Offering,
pursuant to which AHG issued 2.0 million Subordinate Voting Shares from treasury for gross proceeds of
$96.4 million to the Company, with the remaining amounts funded from existing cash flow from operations.
Working Capital
The following table presents our working capital position as at December 31, 2021 and 2020:
($CAD 000s)
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid expenses and other
Due from related parties
Revolving credit facility
Accounts payable and accrued liabilities
Current portion of lease liabilities
Income taxes payable
Working Capital
As at December 31,
2021
2020
24,990
90,093
2,331
4,656
108
(11,000)
(39,404)
(26,446)
(13,679)
31,649
30,148
57,867
1,228
2,830
381
-
(25,365)
(21,197)
(1,514)
44,378
As at December 31, 2021, we had working capital of $31.6 million compared with $44.4 million as at
December 31, 2020. The $12.8 million decrease in working capital is primarily attributable to the acquisition
of Skelton and the initial acquisition of our 49% interest in Skelton USA. The Revolving Credit Facility has
additional capacity and does not have repayment terms. We expect to continue to reduce amounts drawn on
the Revolving Credit Facility during Fiscal 2022 with excess free cash flow generated from operations, thus
we have classified the Revolving Credit Facility in current liabilities. Other working capital amounts reflect
the consolidation of our acquisitions.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Credit Facilities
We entered into credit facilities upon closing of our IPO, comprised of a revolving credit facility (the
“Revolving Credit Facility”) in the aggregate principal amount of up to $75.0 million and a term facility (the
“Term Facility”, and together with the Revolving Credit Facility, the “Credit Facilities”) in the aggregate
principal amount of up to $25.0 million. On February 19, 2021, in connection with our acquisitions of Skelton
and 49% of Skelton USA, we amended our Credit Facilities to increase the amounts available to be drawn
under the Revolving Credit Facility and the Term Facility each by $25.0 million. The amended Credit
Facilities comprise a Revolving Credit Facility in the aggregate principal amount of up to $100.0 million and
a Term Facility in the aggregate principal amount of up to $50.0 million. The remaining terms and conditions
of the Credit Facilities remain unchanged, except that they will mature and be due and payable on March 1,
2025. Fees of $0.7 million have been capitalized in connection with the amendment to our Credit Facilities.
As at December 31, 2021, the aggregate amount outstanding before financing costs under the Credit Facilities
was $50.0 million under the Term Facility and $11.0 million under the Revolving Credit Facility.
The Revolving Credit Facility is available to be drawn in Canadian dollars by way of prime rate loans,
bankers’ acceptances and letters of credit, and in U.S. dollars by way of base rate loans, LIBOR based loans
and letters of credit, in each case, plus the applicable margin in effect from time to time. The Term Facility
was drawn in a single Canadian dollar advance of $25.0 million on closing of the IPO by way of prime rate
loans and was subsequently converted to bankers’ acceptances and increased by a single Canadian dollar
advance of $25.0 million by way of bankers’ acceptances in connection with the Skelton acquisitions on
March 1, 2021.
The Credit Facilities are subject to customary negative covenants and include financial covenants requiring us
to maintain at all times a maximum net leverage ratio and a minimum interest coverage ratio, tested on a
quarterly basis. At December 31, 2021, we were in compliance with all of the covenants under the Credit
Facilities.
In order to support future potential growth through acquisitions, the Credit Facilities also include an accordion
feature to allow us to increase the commitment under one or both of the Credit Facilities in an aggregate
principal amount of up to $100.0 million, such that any amounts drawn under the accordion feature would be
in addition to the amounts ordinarily available, subject to the agreement of participating lenders and provided
that we are not, or would not, be in default under the Credit Facilities, or in non-compliance with any financial
covenants and an event of default does not or would not exist, after giving effect thereto and provided that all
representations and warranties are true and correct immediately prior to, and after giving effect to, such
increase. As of the date of this MD&A, this accordion feature remains uncommitted.
Capital Expenditures
Capital expenditures for Q4 2021 and Fiscal 2021 were $2.9 million and $8.0 million respectively, compared
with $0.9 million and $5.0 million for Q4 2020 and Fiscal 2020 respectively. Capital expenditures have
historically been funded through cash flows from operations. We have traditionally divided our capital
expenditures into two subcategories, capital expenditures (maintenance) and capital expenditures (growth),
which are further detailed below.
Skelton and Boyle Transportation have traditionally purchased their fleets, whereas ATS Healthcare and
Skelton USA have historically leased their equipment. As our operating segments run autonomously, we
expect these entities to continue their past practices in the foreseeable future. Accordingly, management
expects that capital expenditures will increase in Fiscal 2022 as Skelton and Boyle Transportation invest to
support growth and to maintain their fleets. Otherwise, there are no known trends or expected fluctuations in
our capital resources, including expected changes in the mix and relative cost of these resources.
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Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Capital Expenditures (Maintenance)
Maintenance capital expenditures refers to capital expenditures necessary for us to sustain our assets in order
to continue operating in our current form. We generally seek to maintain our facilities and equipment at a
level consistent with the needs of the sector we operate within and ensure that preventative maintenance
programs are in place to achieve the performance expected from our facilities and equipment. Outlays for
maintenance capital expenditures for Q4 2021 and Fiscal 2021 were $2.1 million and $4.0 million
respectively, compared with $0.4 million and $1.4 million for Q4 2020 and Fiscal 2020 respectively. These
capital expenditures were funded through cash flows from operations.
Capital Expenditures (Growth)
Growth capital expenditures comprises expenditures on new assets that are intended to grow our productive
capacity. These capital expenditures are made to acquire or expand leasehold improvements, transportation
and logistics equipment (including pick-up and delivery equipment, warehouse racking, material handling
equipment, warehouse automation equipment and specialized logistics equipment such as coolers or vaults,
among others), furniture and fixtures, and computer equipment to support new contracts or additional volume
from new business. Outlays for growth capital expenditures for Q4 2021 and Fiscal 2021 were $0.8 million
and $4.0 million respectively, compared with $0.5 million and $3.6 million in Q4 2020 and Fiscal 2020
respectively. Growth capital expenditures can range from $1.0 million up to $10.0 million in any given fiscal
year, depending on the underlying expansion need. Growth capital expenditures have also historically been
funded through cash flows from operations. Growth capital expenditures for Q4 2021 relate primarily to the
purchase of tractors and trailers by Skelton. Growth capital expenditures for Fiscal 2021 primarily comprise
leasehold improvements, warehouse racking, material handling equipment, and furniture and fixtures related
to our 220,000 square-foot facility in Brampton, Ontario. This new facility was in operation effective July
2020 and was fully outfitted by the end of Q2 2021.
In December 2020, we signed an agreement to implement the Tecsys Itopia® platform, a best-in-class
healthcare logistics ‘software as a service’ platform, to replace our prior warehouse management system
(“WMS”). Tecsys Inc. is an industry-leading supply chain management software company, and its technology
stack will provide us with enhanced warehouse management and transportation management capabilities as
well as end-to-end analytics and business intelligence. Our first client is expected to be live on our new WMS
in Fiscal 2022. In Q4 2021 and Fiscal 2021, we capitalized $0.6 million and $1.6 million, respectively, to
intangible assets in connection with our new WMS.
Cash Flows
The following table presents cash flows for the three months and year ended December 31, 2021 and 2020:
($CAD 000s)
Cash flows
Cash from Operating Activities
Cash from (used in) Financing Activities
Cash (used in) from Investing Activities
Effect of foreign currency translation1
Net change in cash
Select cash flow data
Capital expenditures
Lease payments
Three Months Ended
December 31,
Year Ended
December 31,
2021
2020
2021
2020
28,347
75,089
5,516
(7,782)
84,089
93,889
(93,005)
(16,131)
(183,382)
246
-
246
51,003
(19,196)
(20,371)
-
10,677
(18,397)
(5,158)
11,436
(2,898)
(8,020)
(878)
(8,026)
(6,557)
(29,947)
(4,966)
(24,666)
1 Comprises the effect of differences in exchange rates for U.S. dollar opening balance sheet cash balances on November 1, 2021 and December 31,
2021 for Boyle Transportation and Skelton USA.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Cash Flow Generated From Operating Activities
Cash flow generated from operating activities for Q4 2021 and Fiscal 2021 totaled $28.3 million and $84.1
million respectively, compared with $5.5 million and $51.0 million for Q4 2020 and Fiscal 2020 respectively.
The increase in cash flows generated from operating activities relates principally to profitable business
growth, including profitable growth from acquisitions, reflected in the 62.9% increase in Fiscal 2021
EBITDA, excluding the gain on step acquisition, and normal fluctuations in trade accounts receivable and
trade accounts payable.
Cash Flow Generated From (Used In) Financing Activities
Cash flow generated from financing activities for Q4 2021 and Fiscal 2021 totaled $75.1 million and $93.9
million respectively, compared with cash flow used in financing activities of $7.8 million and $19.2 million
for Q4 2020 and Fiscal 2020 respectively. The increase in cash flows generated from financing activities in
Q4 2021 relates principally to proceeds from the issuance of share capital in connection with the Offering. In
Q1 2021, we made an aggregate draw of $75.0 million on our Credit Facilities in connection with the Skelton
and Skelton USA acquisitions, of which $39.0 million has been repaid during Fiscal 2021. In Fiscal 2021 we
paid dividends of $7.9 million and made principal repayments on lease liabilities of $25.1 million.
In Fiscal 2020 a loan to the AHG Employee Benefit Plan Trust issued in connection with our IPO was repaid
in full resulting in $13.9 million of cash received, offset by lease payments, dividends and a $3.9 million
repayment of the Revolving Credit Facility.
Cash Flow (Used In) From Investing Activities
Cash flow used in investing activities for Q4 2021 and Fiscal 2021 totaled $93.0 million and $183.4 million
respectively, compared with cash flow used in investing activities of $16.1 million and $20.4 million for Q4
2020 and Fiscal 2020 respectively. The Skelton, Skelton USA and Boyle Transportation acquisitions
comprised an aggregate cash outflow of $174.0 million, net of cash acquired, in Fiscal 2021, with the
remaining amounts comprising normal course expenditures on property, plant and equipment and intangible
assets.
Contractual Obligations
As at December 31, 2021, we had the following contractual commitments:
• Outstanding letters of guarantee in the amount of $0.4 million (December 31, 2020 – $0.2 million);
• Commitments relating to the leasing of fleet equipment, ranging from 72 to 84 months, beginning
upon delivery to us of the equipment in Fiscal 2022, for total lease commitments of $8.5 million
(December 31, 2020 – $9.2 million); and
• Commitments to purchase fleet equipment expected to be delivered during Fiscal 2022 totaling $7.8
million (December 31, 2020 – $nil).
Credit facilities
As at December 31, 2021, the aggregate amounts outstanding under the Credit Facilities were $50.0 million
under the Term Facility (December 31, 2020 – $25.0 million) and $11.0 million under the Revolving Credit
Facility (December 31, 2020 – $nil) before capitalized financing costs. The Credit Facilities will mature and
be due and payable on March 1, 2025.
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Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Leases
We lease buildings and equipment in the operation of our healthcare logistics and specialized transportation
businesses. Building lease terms range from five to 10 years, with many leases including optional extension
periods. For Q4 2021, facility lease liabilities are calculated using our incremental borrowing rate of 3.71%
(Q4 2020 – 2.99%). Equipment lease terms range from one to five years. For Q4 2021, equipment lease
liabilities are calculated using our incremental borrowing rate of 3.13% (Q4 2020 – 3.11%) for our specialized
transportation segment and 2.66% (Q4 2020 – 2.70%) for our healthcare logistics segment.
The following table summarizes our contractual obligations as at December 31, 2021 based on undiscounted
cash flows:
($CAD 000s)
Credit facilities
Lease liabilities
Equipment purchase and lease commitments
Other obligations
Total contractual obligations
Off-Balance Sheet Arrangements
Total
61,000
140,893
16,332
106,346
324,571
Less than 1
Year
1-5 Years
More than 5
years
-
30,839
9,130
53,083
93,052
61,000
86,694
7,202
53,263
-
23,360
-
-
208,159
23,360
We have no off-balance sheet arrangements that have, or are reasonably expected to have, a current or future
material impact on our financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
Seasonality
There is no significant seasonality to our business.
Financial Instruments
Financial assets
Accounts receivable are initially recognized when they are originated. All other financial assets and financial
liabilities are initially recognized when we become a party to the contractual provisions of the instrument.
A financial asset (unless it is an account receivable without a significant financing component) or financial
liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to its acquisition or issue. An account receivable without a
significant financing component is initially measured at the transaction price.
Our financial assets are comprised of cash and cash equivalents, accounts receivable, and long-term deposits.
On initial recognition, we classify these financial assets as measured at amortized cost, when both of the
following conditions are met:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows;
and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
These financial assets are subsequently measured at amortized cost using the effective interest method. The
amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and
impairment are recognized in profit or loss. Any gain or loss on de-recognition is recognized in profit or loss.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets
are considered to be impaired when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been decreased.
For accounts receivable, we apply a simplified approach in calculating expected credit losses (“ECLs”).
Therefore, we do not track changes in credit risk but instead recognize a loss allowance based on lifetime
ECLs at each reporting date. We have established a provision matrix that is based on our historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
When an account receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are offset against the allowance account. Changes in
the carrying amount of the allowance account are recognized in profit or loss.
Financial liabilities
Our financial liabilities are comprised of accounts payable and accrued liabilities, lease liabilities, income
taxes payable and amounts due from related parties. Our financial liabilities are measured at amortized cost
using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in
profit or loss. Any gain or loss on de-recognition is also recognized in profit or loss.
Foreign exchange contracts
The Company, from time to time, uses foreign exchange contracts to manage certain exposures to fluctuations
in foreign exchange rates as part of its overall risk management program. Earnings impacts from derivatives
used to manage a particular risk are reported as part of other comprehensive income.
On October 5, 2021, when we announced definitive agreements to acquire Boyle Transportation, we entered
into a foreign exchange forward contract to manage foreign exchange rate risk related to the Company’s net
investment in Boyle Transportation for which the U.S. dollar is the functional currency. The Company
recognized a loss from the hedge of $2,010 in other comprehensive income and as an adjustment to goodwill
on November 1, 2021 when the business combination occurred.
Related Party Transactions
Intercompany balances and transactions have been eliminated in our consolidated financial statements for the
years ended December 31, 2021 and 2020.
During Fiscal 2021 and Fiscal 2020, we entered into transactions with related parties that were incurred in
the normal course of business. Our policy is to conduct all transactions and settle all balances with related
parties at market terms and conditions. All outstanding balances with these related parties are measured at
amortized cost and are to be settled in cash within two months of the reporting date. None of the balances are
secured. No expense has been recognized in the current year or prior year for bad or doubtful debts in respect
of amounts owed by related parties.
Certain of our operating units provide services to other operating units outside of their reportable segment.
Billings for such services are based on negotiated rates, which approximate fair value, and are reflected as
revenues of the billing segment. These rates are adjusted from time to time based on market conditions. Such
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Andlauer Healthcare Group Inc. – 2021 Annual Report
intersegment revenues and expenses are eliminated in our consolidated results. Michael Andlauer, our Chief
Executive Officer (“CEO”), is also our Chief Operating Decision Maker (“CODM”). The CODM regularly
reviews financial information at the operating segment level in order to make decisions about resources to be
allocated to the segments and to assess their performance. Segment results that are reported to the CODM
include items directly attributable to a segment, as well as those that can be allocated on a reasonable basis.
We evaluate performance based on the various financial measures of our two operating segments.
The amounts below are expressed in thousands of Canadian dollars, unless otherwise specified.
Andlauer Management Group Inc.
As of the date hereof, AMG holds all of the Multiple Voting Shares of the Company (the “Multiple Voting
Shares” and, together with the Subordinate Voting Shares, the “Shares”) and 10,200 Subordinate Voting
Shares, representing approximately 56.5% of the issued and outstanding Shares and 83.8% of the voting
power attached to all of the Shares. AMG is owned and controlled by Michael Andlauer, our CEO and a
director of the Company.
We undertake a limited amount of administrative shared services for AMG. We expect to continue to incur
and recover such costs in connection with AMG. For Fiscal 2021, we charged AMG $66 (Fiscal 2020 –
$12) for recovery of shared services costs.
Effective October 1, 2020, we acquired all of the issued and outstanding shares of TDS Logistics Ltd. and
McAllister Courier Inc. from AMG. Accordingly, transactions with TDS and MCI have been eliminated for
Fiscal 2021 but were related party transactions in Fiscal 2020.
Andlauer Properties and Leasing Inc.
Andlauer Properties and Leasing Inc. (“APLI”) is a subsidiary of AMG and leases certain facilities and
logistics and transportation equipment to us. We also lease facilities and logistics and transportation
equipment from arm’s length providers. During Fiscal 2021, we expensed $2,261 (Fiscal 2020 - $1,875) for
leases of logistics and transportation equipment; and $1,771 (Fiscal 2020 - $1,447) for leases of facilities from
APLI. The specific facilities that we lease from APLI are located at: 881 Bell Blvd. W, Belleville, Ontario;
18 Sandbourne Dr., Pontypool, Ontario; 80 – 14th Avenue, Hanover, Ontario; 465 Ofield Road South,
Dundas, Ontario; 605 Max Brose Drive, London, Ontario; and 5480 61 Avenue SE, Calgary, Alberta. We
expect to continue leasing properties and equipment from APLI. For Fiscal 2021, we charged APLI $19 (Fiscal
2020 - $35) for recovery of shared services costs.
9143-5271 Québec Inc.
9143-5271 Québec Inc. is a subsidiary of AMG and leases a facility located at 655 Desserte E. Hwy 13, Laval,
Québec to AHG. We also lease facilities from arm’s length providers. During Fiscal 2021, we expensed
$1,532 (Fiscal 2020 - $1,468) for this building. We expect to continue leasing this property. For Fiscal 2021,
we charged 9143-5271 Québec Inc. $31 (Fiscal 2020 - $32) for recovery of shared services costs.
Ready Staffing Solutions Inc.
Ready Staffing Solutions Inc. (“RSS”), a company owned by Mr. Andlauer’s spouse, provides us with
temporary agency employee services – providing hourly dock labour for our handling operations, principally
in the Greater Toronto Area. We also purchase temporary agency employee services from arm’s length
providers. During Fiscal 2021, we expensed $4,918 (Fiscal 2020 - $4,166) for purchases of temporary agency
employee services from RSS. We expect to continue purchasing temporary agency services from RSS.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
1708998 Ontario Limited (Medical Courier Services)
Medical Courier Services (“MCS”) is a subsidiary owned 80% by AMG and provides transportation services
to us, providing extended reach for shipments where we do not have our own facilities or equipment. During
Fiscal 2021, we expensed $188 (Fiscal 2020 - $167) for deliveries subcontracted to MCS. We expect to
continue subcontracting deliveries to MCS. Similarly, in Fiscal 2021 we invoiced MCS for $360 (Fiscal 2020
- $27) for transportation services provided to MCS. For Fiscal 2021, we charged MCS $14 (Fiscal 2020 -
$12) for recovery of shared services costs.
McAllister Courier Inc.
MCI was a subsidiary owned 100% by AMG until October 1, 2020, at which time MCI became a wholly-
owned subsidiary of the Company. Prior to this time, MCI provided transportation services to us, extending
our reach for shipments where we did not have our own facilities or equipment. During Fiscal 2020, we
expensed $682 for deliveries subcontracted to MCI and recovered $21 for the use of certain of our equipment
by MCI.
TDS Logistics Ltd.
TDS was a subsidiary owned 100% by AMG until October 1, 2020, at which time TDS became a wholly-
owned subsidiary of the Company. Prior to this time, TDS subcontracted deliveries to us, to take advantage of
efficiencies gained through coincidence of delivery. During Fiscal 2020, we charged $534 for deliveries
subcontracted to us by TDS. During Fiscal 2020, we also charged TDS $189 for shared services and recovered
$273 in equipment rental charges.
In Fiscal 2020, TDS also provided transportation services to us, offering us additional capacity where we
could subcontract deliveries to take advantage of coincidences of delivery. During Fiscal 2020, TDS charged
us $469 for deliveries subcontracted to it by AHG.
During Fiscal 2020 we provided TDS with leased facility space, which is a cost recovery for which we
recovered $492 of facility lease costs from TDS.
AWA Transportation & Logistics Inc.
AWA Transportation & Logistics Inc. (“AWA”) is a subsidiary owned 100% by AMG. AWA provided
transportation services to AHG, providing extended reach for shipments where we did not have our own
facilities or equipment. We purchased $813 in services for Fiscal 2020. In Q1 2021, we discontinued
purchasing transportation services from AWA.
Med Express Ltd.
Med Express Ltd. (“MEL”) is a subsidiary owned 100% by AMG. MEL provides transportation services to
AHG, providing extended reach for shipments where we do not have our own facilities or equipment. We
purchased $12 in services during Fiscal 2021 (Fiscal 2020 - $25). We expect to continue to subcontract deliveries
to MEL from time to time.
D.C. Racking & Maintenance Inc. and Logiserv Inc.
D.C. Racking & Maintenance Inc. (“DCR”) and Logiserv Inc. (“Logiserv”) are owned by Cameron Joyce, an
AHG director. DCR provides warehouse racking installation, maintenance and repairs for our healthcare
logistics segment. Logiserv provides us with warehouse racking and racking components as well as
warehouse racking installation, maintenance and repairs. We also purchase warehouse racking installation,
maintenance and repairs, and warehouse racking and racking components from arm’s length providers.
During Fiscal 2021, we expensed $29 (Fiscal 2020 - $64) for warehouse racking installation, maintenance
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Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
and repair services provided by DCR and Logiserv; and capitalized $20 (Fiscal 2020 - $nil). We expect to
continue to purchase warehouse racking installation, maintenance and repair services from DCR and Logiserv.
C-GHBS Inc.
C-GHBS Inc. (“C-GHBS”) is a subsidiary of AMG and provides air travel services to us. We also purchase
air travel services from arm’s length providers. During Fiscal 2021, we purchased $67 (Fiscal 2020 - $174)
from C-GHBS. We expect to continue to purchase air travel services from C-GHBS.
Skelton Truck Lines Inc.
Skelton Truck Lines Inc. (“SKINC”) is a wholly-owned subsidiary of Skelton USA. SKINC provides
specialized 2-8°C transportation services to Skelton USA in the United States, and Skelton provides
specialized 2-8°C transportation services to SKINC in Canada. For the period from March 1, 2021 to October
31, 2021, AHG purchased $319 of transportation services from SKINC and invoiced $1,180 to SKINC.
Effective November 1, 2021, we acquired the remaining 51% interest in Skelton USA, at which time SKINC
became a wholly-owned subsidiary of the Company.
Key Management Personnel
Our key management personnel, and persons connected with them, are also considered to be related parties for
disclosure purposes. Key management personnel are defined as those individuals having authority and
responsibility for planning, directing and controlling the activities of the Company and include our CEO, the
other four named executive officers comprising key management and the board of directors.
During Fiscal 2021, we recorded $5,169 (Fiscal 2020 – $5,296) related to key management personnel salaries
and benefits, share-based compensation, and director fees.
Due from/to related parties
The charts below summarize amounts due to or from related parties.
($CAD 000s)
Accounts receivable
AWA Transportation Services
Andlauer Properties and Leasing Inc.
Med Express Ltd.
1708998 Ontario Limited (Medical Courier Services)
Trade receivables due from related parties
Due from related parties
Andlauer Management Group Inc.
Andlauer Properties and Leasing Inc.
Former T.F. Boyle Transportation, Inc. shareholders
Due from related parties
Total due from related parties
As at December 31,
2021
2020
-
74
2
32
108
16
-
92
108
216
1
20
-
3
24
10
371
-
381
405
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
($CAD 000s)
Accounts payable and accrued liabilities
Ready Staffing Solutions Inc.
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
Logiserv Inc.
Trade payables due to related parties
Due to related parties
Andlauer Properties and Leasing Inc.
Former Skelton Canada Inc. shareholders
Due to related parties
Total due to related parties
As at December 31,
2021
2020
343
302
-
7
652
254
1,032
1,286
1,938
23
18
24
21
86
-
-
-
86
Critical Accounting Judgements and Estimates
The preparation of our consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions about future events. These estimates and the underlying
assumptions affect the reported amounts of assets and liabilities, the disclosures about contingent assets and
liabilities, and the reported amounts of revenues and expenses and apply equally to both our healthcare
logistics segment and our specialized transportation segment. Such estimates include the expected credit
losses on accounts receivable, the useful life of long-lived assets, our incremental borrowing rate, valuation
of property, plant and equipment, valuation of goodwill and intangible assets, the measurement of identified
assets and liabilities acquired in business combinations, share-based compensation arrangements, the
provision for income taxes and other provisions and contingencies. These estimates and assumptions are based
on management’s best estimates and judgments. Management evaluates its estimates and assumptions on an
ongoing basis using historical experience and other factors, including the current economic environment,
which management believes to be reasonable under the circumstances. Management adjusts such estimates
and assumptions when facts and circumstances dictate. Actual results could differ from these estimates.
Changes in those estimates and assumptions resulting from changes in the economic environment will be
reflected in the consolidated financial statements of future periods. Information about critical judgments,
assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
within the next financial year have been described in our consolidated financial statements for the years ended
December 31, 2021 and 2020. Key estimates and assumptions remain consistent with those disclosed in our
consolidated financial statements.
The Company attributes value to the customer relationships maintained by Skelton, Skelton USA, and Boyle
Transportation as well as to the brands of each acquired entity. For the year ended December 31, 2021, the
Company recorded intangible assets of $115.2 million in connection with customer relationships and $37.3
million in connection with the brands of its acquired entities. The determination of the acquisition-date fair
value of the customer relationships required the Company to make significant estimates and assumptions
regarding future revenue growth from existing customers, future cost of sales and operating expenses, attrition
rates, contributory asset charges and discount rates. The determination of the acquisition-date fair value of
brands required the Company to make significant estimates and assumptions regarding future revenue growth
applicable to brands, royalty rates, long-term growth rates used to determine terminal value and discount rates.
The customer relationships and brands are definite life intangible assets each of which will be amortized over
ten years.
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Andlauer Healthcare Group Inc. – 2021 Annual Report
The goodwill is principally attributable to the premium of established business operations, each with a strong
reputation in healthcare transportation, and the synergies expected to be achieved from integrating Skelton,
Skelton USA, and Boyle Transportation into the Company’s existing business. Goodwill arising from the
Company’s business combinations has been allocated to the Specialized Transportation segment in Fiscal
2021.
Significant New Accounting Standards
Adopted During the Period
There were no new standards that became effective for periods beginning on or after January 1, 2021 that
have a material impact on our consolidated financial statements for Fiscal 2021. The following describes
accounting standards which first impacted the Company during Fiscal 2021.
On March 1, 2021, the Company acquired a 49% interest in Skelton USA. Following the acquisition,
management determined that it did not control Skelton USA; accordingly, we accounted for our investment
in Skelton USA using the equity method of accounting. Under the equity method of accounting, an equity
investment is initially recorded at cost and is subsequently adjusted to reflect the investor's share of the net
profit or loss of the associate. Our 49% share of total comprehensive income of Skelton USA for the period
from March 1, 2021 to October 31, 2021 was $2.5 million. The net book value of our 49% interest in Skelton
USA at November 1, 2021 was $10.1 million. Subsequent to November 1, 2021, Skelton USA has been
consolidated with AHG from the acquisition date forward in accordance with IFRS 10.
Since we achieved our acquisition of Skelton USA in two steps, we re-measured our previously held equity
interest in Skelton USA at its estimated fair value on November 1, 2021 resulting in a gain of $37.9 million
being recognized from the step acquisition.
Skelton USA, through its wholly-owned subsidiary, SKINC, and Boyle Transportation are foreign operations
operating in the United States. In preparing the Company’s consolidated financial statements, the financial
statements of each entity are translated into Canadian dollars. The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on business combinations, are translated to Canadian
dollars at exchange rates as at the balance sheet date. Revenues and expenses of foreign operations are
translated to Canadian dollars at exchange rates that approximate those on the date of the underlying
transaction. Foreign exchange differences are recognized in other comprehensive income and accumulated in
equity in the foreign currency translation reserve. In Fiscal 2021, the Company recognized a net foreign
currency translation adjustment gain of $4.9 million, which is included in other comprehensive income.
On October 5, 2021, when we announced a definitive agreement to acquire Boyle Transportation, we entered
into a foreign exchange forward contract to manage foreign exchange rate risk related to the Company’s net
investment in Boyle Transportation for which the U.S. dollar is the functional currency. The Company
recognized a loss from the hedge of $2.0 million in other comprehensive income and as an adjustment to
goodwill on November 1, 2021 when the business combination occurred.
To be Adopted in Future Periods
The following new standards and amendments to standards are not yet effective for the year ended December
31, 2021, and have not been applied in preparing the consolidated financial statements for Fiscal 2021:
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
On January 23, 2020, the IASB issued amendments to IAS 1 – Presentation of Financial Statements, to clarify
the classification of liabilities as current or non-current. The amendments are effective for annual periods
beginning on or after January 1, 2023. Early adoption is permitted. For the purposes of non-current
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
// Page 37
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Andlauer Healthcare Group Inc. – 2021 Annual Report
classification, the amendments removed the requirement for a right to defer settlement or roll over of a
liability for at least twelve months to be unconditional. Instead, such a right must have substance and exist at
the end of the reporting period. The extent of the impact of adoption of the amendments has not yet been
determined.
Accounting Classifications and Fair Values
Our financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts
payable and accrued liabilities. We believe that the carrying amount of each of these items is a reasonable
approximation of fair value.
Risk Factors
For a detailed description of risk factors associated with the Company, refer to the “Risk Factors” section of
our AIF, which is available on the Company’s profile on SEDAR at www.sedar.com.
Coronavirus (“COVID-19”)
On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization.
This has resulted in governments worldwide, including the Canadian Federal and Provincial governments,
enacting emergency measures to combat the spread of the virus. These measures, which include the
implementation of travel restrictions, self-imposed quarantine periods, temporary closures or restrictions of
non-essential businesses, limitations on public gatherings, and social distancing guidelines, have caused
material disruption to businesses globally and in Canada resulting in an economic slowdown. Governments
and central banks have reacted with significant monetary and fiscal interventions designed to stabilize
economic conditions, however the success of these interventions is not currently determinable. Further,
depending on the duration of the pandemic, or if the pandemic were to worsen, existing emergency measures
may be extended, or additional restrictive measures may be implemented, causing further economic impact
and uncertainty.
We are actively assessing and responding, where possible, to the effects of the COVID-19 pandemic on
employees, customers, suppliers and other stakeholders. We have successfully adopted a work-from-home
policy for our administrative personnel, and at our facilities that continue to operate, in accordance with
applicable laws, we are taking steps to safeguard employees through enhanced cleaning practices, employee
monitoring strategies, physical distancing and the availability of personal protective equipment in certain
circumstances. We are also taking measures to manage costs where possible.
Certain of our administrative personnel have been working remotely, which could disrupt our management,
business development, customer service, finance, and information technology teams. We may experience an
increase in absences related to the pandemic among our operational personnel, including warehouse
associates, drivers and owner operators, which could have a negative impact on our operations. Further, our
network or facility operations, particularly in areas with a concentrated outbreak of COVID-19, could be
disrupted resulting in an adverse impact on our operating results.
While our business has not been materially and adversely affected by the COVID-19 pandemic to date, the
extent to which COVID-19 (including variant strains and mutations) and its effect on the economy will impact
our business in the future remains highly uncertain and may lead to adverse changes in our cash flows, working
capital levels, debt balances, operating results and financial position in the future. The situation is dynamic
and the ultimate duration and magnitude of the impact on the economy and our business is not known at this
time. Our pandemic management response team will continue to meet regularly as needed to review
38
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
procedures, service levels, news, and Health Canada updates to address any challenges as they arise. At this
time, we do not believe there is any immediate risk of significant disruption to our services. In the event of a
future significant disruption to our service, we will work closely with our clients, suppliers and regulatory
authorities to prioritize the supply and delivery of essential medications and supplies. We continue to closely
monitor this situation and we will provide appropriate updates in a timely manner.
In addition to the other risks that we face, which are detailed in the AIF under the heading “Risk Factors”, we
have exposure, through our financial assets and liabilities, to the following risks from our use of financial
instruments: credit risk, liquidity risk, interest rate risk, and currency risk. Senior management monitors risk
levels and reviews risk management activities as they determine to be necessary.
Credit Risk
We are exposed to credit risk in the event of non-performance by counterparties in connection with our
financial assets, namely cash and cash equivalents, accounts receivable and long-term deposits. We do not
typically obtain collateral or other security to support the accounts receivable subject to credit risk but mitigate
this risk by performing credit check procedures for new clients and monitoring credit limits for existing
clients. Thereby, we deal only with what management believes to be financially sound counterparties and,
accordingly, do not anticipate significant loss for non-performance.
The maximum exposure to credit risk for cash and cash equivalents, accounts receivable and long-term
deposits approximate the amount recorded on the consolidated balance sheets.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our
financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing
liquidity is to ensure, as far as possible, that we will have sufficient liquidity to meet our liabilities when they
are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to our reputation.
Our exposure to liquidity risk is dependent on the collection of accounts receivable, or raising of funds to
meet commitments and sustain operations. We control liquidity risk by management of working capital, cash
flows and the availability of borrowing facilities.
We have entered into Credit Facilities with affiliates of RBC, CIBC, and Bank of Nova Scotia, comprised of
a Revolving Credit Facility in the aggregate principal amount of up to $100.0 million and a Term Facility in
the aggregate principal amount of up to $50.0 million. The Credit Facilities are available to be drawn in
Canadian dollars by way of prime rate loans, bankers’ acceptances and letters of credit, and in U.S. dollars
by way of base rate loans, LIBOR based loans and letters of credit, in each case, plus the applicable margin
in effect from time to time. In order to support future potential growth through acquisitions, the Credit
Facilities also include an accordion feature to allow us to increase the commitment under one or both of the
Credit Facilities in an aggregate principal amount of up to $100.0 million, such that any amounts drawn under
the accordion feature would be in addition to the amounts ordinarily available, subject to the agreement of
participating lenders and provided that we are not, or would not, be in default under the Credit Facilities or
in non-compliance with any financial covenants and an event of default does not or would not exist, after
giving effect thereto and provided that all representations and warranties are true and correct immediately
prior to, and after giving effect to, such increase. As at December 31, 2021, the aggregate amounts outstanding
under the Credit Facilities were $50.0 million under the Term Facility and $11.0 million under the Revolving
Credit Facility before capitalized financing costs. As of the date of this MD&A, this accordion feature remains
uncommitted.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
// Page 39
39
Andlauer Healthcare Group Inc. – 2021 Annual Report
Our accounts payable and accrued liabilities are due and payable in the short-term.
Interest Rate Risk
We have a Revolving Credit Facility and Term Facility that each bear interest at a floating rate subject to
fluctuations in interest rates. Changes in interest rates can cause fluctuations in interest payments and cash
flows. We do not use derivative financial instruments to mitigate the effect of this risk. The Credit Facilities are
available to be drawn in Canadian dollars by way of prime rate loans, bankers’ acceptances and letters of
credit, and in U.S. dollars by way of base rate loans, LIBOR based loans and letters of credit, in each case,
plus the applicable margin in effect from time to time. At December 31, 2021, the Credit Facilities comprise
bankers’ acceptances drawn at an interest rate of 1.9%. During Fiscal 2021 there has been no exposure to
significant interest rate fluctuations.
Currency Risk
We enter into foreign currency purchase and sale transactions and have assets and liabilities that are
denominated in foreign currencies and thus are exposed to the financial risk of earnings fluctuations arising
from changes in foreign exchange rates and the degree of volatility of these rates. We use derivative
instruments to reduce our exposure to foreign currency risk only where appropriate, such as in connection
with the Boyle Transportation acquisition.
Outstanding Share Data
Our authorized share capital consists of an unlimited number of Subordinate Voting Shares, an unlimited
number of Multiple Voting Shares and an unlimited number of preferred shares, issuable in series. As at
March 2, 2022, there were 18,223,429 Subordinate Voting Shares issued and outstanding, 23,600,000
Multiple Voting Shares issued and outstanding (each of which is convertible into Subordinate Voting Shares
on a one-for-one basis), and no preferred shares issued and outstanding. In addition, as at such date we had
1,202,250 options, each of which can be exercised or settled for one Subordinate Voting Share and 37,407
Deferred Share Units issued and outstanding under our omnibus incentive plan. As of the date hereof, AMG
holds all of the Multiple Voting Shares and 10,200 of the Subordinate Voting Shares, representing
approximately 56.5% of the issued and outstanding Shares and 83.8% of the voting power attached to all of
the Shares.
Subject to financial results, capital requirements, available cash flow, corporate law requirements and any
other factors that our board of directors may consider relevant, we expect to declare a quarterly dividend on
the Subordinate Voting Shares and Multiple Voting Shares equal to approximately $0.06 per share on an
ongoing basis. Our Q4 2021 dividend, in the amount of $0.05 per Share, was paid on January 17, 2022 for
the period beginning on October 1, 2021 and ending on December 31, 2021, to shareholders of record as at
December 31, 2021. Dividends are declared and paid in arrears. The amount and timing of the payment of any
dividends are not guaranteed and are subject to the discretion of our board of directors.
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting
In compliance with the provisions of National Instrument 52-109 – Certification of Disclosure in Issuers’
Annual and Interim Filings, we have filed certificates signed by our CEO and by our Chief Financial Officer
(“CFO”) that, among other things, report on:
•
•
their responsibility for establishing and maintaining disclosure controls and procedures (“DC&P”)
and internal control over financial reporting (“ICFR”) for the Company; and
the design and effectiveness of DC&P and the design and effectiveness of ICFR.
40
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
// Page 40
Andlauer Healthcare Group Inc. – 2021 Annual Report
Management, including our CEO and CFO, does not expect that the disclosure controls or internal controls
over financial reporting of the Company will prevent or detect all errors and all fraud or will be effective
under all potential future conditions. A control system is subject to inherent limitations and, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance that the control systems
objectives will be met.
Further, the design of a control system must reflect that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Inherent limitations include the realities that judgments in
decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls
can also be circumvented by individual acts of some persons, by collusion of two or more people or by
management override of the controls. Due to the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. The design of any control system is also
based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential conditions. Projections of any
evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Disclosure Controls and Procedures
The CEO and the CFO, have designed DC&P, or have caused them to be designed under their supervision, in
order to provide reasonable assurance that:
• material information relating to AHG is made known to the CEO and CFO by others, particularly during
the period in which the interim and annual filings are being prepared; and
•
information required to be disclosed by AHG in its annual filings, interim filings or other reports filed
or submitted by it under securities legislation is recorded, processed, summarized and reported within
the time periods specified in securities legislation.
Internal Controls Over Financial Reporting
The CEO and CFO have also designed ICFR, or have caused them to be designed under their supervision, in
order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS.
The control framework used to design our ICFR is based on the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework
(2013 framework).
Changes in Internal Controls Over Financial Reporting
No changes were made to our ICFR during Fiscal 2021 that have materially affected, or are reasonably likely
to materially affect, our ICFR.
Limitation on Scope of Design
The scope of design of DC&P and ICFR excludes controls, policies and procedures related to Skelton USA
and Boyle Transportation, businesses which we acquired on November 1, 2021. Skelton USA recorded
approximately $19.0 million of revenue and approximately $1.7 million of net income for Fiscal 2021.
Summary financial information about Skelton USA and Boyle Transportation has been consolidated in our
consolidated financial statements.
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
// Page 41
41
Andlauer Healthcare Group Inc. – 2021 Annual Report
We anticipate that the design of DC&P and ICFR related to Skelton USA and Boyle Transportation will be
completed prior to September 30, 2022, at which time Skelton USA and Boyle Transportation will be
integrated with our existing specialized transportation segment’s control environment.
Additional Information
Additional information about AHG, including our AIF, can be found on our profile on SEDAR at
www.sedar.com or on our website at www.andlauerhealthcare.com.
42
Andlauer Healthcare Group Inc. – Fiscal 2021 Management’s Discussion and Analysis
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Consolidated Financial Statements of
ANDLAUER HEALTHCARE
GROUP INC.
For the years ended December 31, 2021 and 2020
43
Andlauer Healthcare Group Inc. – 2021 Annual Report
KPMG LLP
Commerce Place
KPMG LLP
21 King Street West, Suite 700
Commerce Place
Hamilton ON L8P 4W7
21 King Street West, Suite 700
Canada
Hamilton ON L8P 4W7
Telephone (905) 523-8200
Canada
Fax (905) 523-2222
Telephone (905) 523-8200
Fax (905) 523-2222
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Andlauer Healthcare Group Inc.
To the Shareholders of Andlauer Healthcare Group Inc.
Opinion
Opinion
We have audited the consolidated financial statements of Andlauer Healthcare Group
Inc. (the “Entity”), which comprise:
We have audited the consolidated financial statements of Andlauer Healthcare Group
Inc. (the “Entity”), which comprise:
•
•
the consolidated balance sheets as at December 31, 2021 and December 31,
the consolidated balance sheets as at December 31, 2021 and December 31,
2020
2020
the consolidated statements of income and comprehensive income for the years
the consolidated statements of income and comprehensive income for the years
ended December 31, 2021 and December 31, 2020
ended December 31, 2021 and December 31, 2020
the consolidated statements of changes in equity for the years ended December
31, 2021 and December 31, 2020
the consolidated statements of changes in equity for the years ended December
31, 2021 and December 31, 2020
the consolidated statements of cash flow for the years ended December 31, 2021
and December 31, 2020
the consolidated statements of cash flow for the years ended December 31, 2021
and December 31, 2020
• and notes to the consolidated financial statements, including a summary of
• and notes to the consolidated financial statements, including a summary of
•
•
•
•
•
•
significant accounting policies
significant accounting policies
(hereinafter referred to as the “financial statements”).
(hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material
In our opinion, the accompanying financial statements present fairly, in all material
respects, the financial position of the Entity as at December 31, 2021 and December
31, 2020, and its financial performance and its cash flows for the years then ended in
respects, the financial position of the Entity as at December 31, 2021 and December
31, 2020, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (“IFRS”) as issued by the
accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (IASB).
International Accounting Standards Board (IASB).
Basis for Opinion
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
We conducted our audit in accordance with Canadian generally accepted auditing
“Auditors’ Responsibilities for the Audit of the Financial Statements” section of our
standards. Our responsibilities under those standards are further described in the
auditors’ report.
“Auditors’ Responsibilities for the Audit of the Financial Statements” section of our
auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada and we have fulfilled our
We are independent of the Entity in accordance with the ethical requirements that are
ethical responsibilities in accordance with these requirements.
relevant to our audit of the financial statements in Canada and we have fulfilled our
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
KPMG Canada provides services to KPMG LLP.
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
44
Andlauer Healthcare Group Inc. – 2021 Annual Report
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,
2021. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be
communicated in our auditors’ report.
Assessment of the fair value of acquired customer relationships and brands
Description of the matter
We draw attention to Note 5 to the consolidated financial statements. The Entity
acquired Skelton Canada Inc. (“Skelton”), Skelton USA Inc. (“Skelton USA”) and T.F.
Boyle Transportation, Inc. (“Boyle”). The Entity accounts for acquired businesses using
the acquisition method of accounting by recording assets acquired and liabilities
assumed at their respective fair values. As a result of the transactions, the Entity
acquired intangible assets consisting of customer relationships of $115,218 thousand
and brands of $37,297 thousand respectively. The determination of the acquisition-
date fair value of the customer relationships required the Entity to make significant
estimates and assumptions regarding (1) future revenue growth from existing
customers, (2) future cost of sales and operating expenses, (3) forecasted attrition rate,
(4) contributory asset charges, and (5) discount rate. The determination of the
acquisition-date fair value of brands required the Entity to make significant estimates
and assumptions regarding (1) future revenue growth applicable to brands, (2) royalty
rate, (3) long-term growth rate used to determine terminal value, and (4) discount rate.
Why the matter is a key audit matter
We identified the assessment of the fair value of acquired customer relationships and
brands as a key audit matter. This matter represented an area of significant risk of
material misstatement due to the magnitude of the balances and the high degree of
estimation uncertainty in determining the fair value of acquired customer relationships
and brands. Significant auditor judgment and the involvement of those with specialized
skills and knowledge were required in performing and evaluating the results of our
procedures. This was due to the sensitivity of the fair value of the customer
relationships and brands to minor changes in certain significant estimates.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the
following:
We evaluated the appropriateness of future revenue growth, future cost of sales and
operating expenses by comparing to actual historical revenue growth, cost of sales
and operating expenses generated by Skelton, Skelton USA and Boyle. We
considered changes in conditions and events to assess the adjustments or lack of
adjustments made in arriving at future revenue growth, future cost of sales and
operating expenses.
We involved valuation professionals with specialized skills and knowledge who
assisted in:
• evaluating the appropriateness of the forecasted attrition rate by comparing to
actual historical customer attrition rates,
45
Andlauer Healthcare Group Inc. – 2021 Annual Report
• evaluating the appropriateness of the contributory asset charges by comparing to
independently developed contributory asset charges using a weighted-average-
returns-analysis,
• evaluating the appropriateness of the discount rate by comparing against a
discount rate range that was independently developed using publicly available
market data for comparable entities based on its relative risk profile, leveragability,
and liquidity,
• assessing the appropriateness of the royalty rates by comparing to external
industry data, and
• evaluating the appropriateness of the long-term growth rate used to determine the
terminal value that was independently developed using industry specific long-term
growth rates.
Other Information
Management is responsible for the other information. Other information comprises:
• the information included in Management’s Discussion and Analysis filed with the
relevant Canadian Securities Commissions.
• the information, other than the financial statements and the auditors’ report thereon,
included in a document likely to be entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we
do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears
to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed
with the relevant Canadian Securities Commissions as at the date of this auditors’
report. If, based on the work that we have performed on this other information, we
conclude that there is a material misstatement of this other information, we are required
to report that fact in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon,
included in a document likely to be entitled “Annual Report” is expected to be made
available to us after the date of this auditors’ report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of
this other information, we are required to report that fact to those charged with
governance.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards (IFRS), and
for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
46
Andlauer Healthcare Group Inc. – 2021 Annual Report
In preparing the financial statements, management is responsible for assessing the
Entity’s ability to continue as a going concern, disclosing as applicable, matters related
to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Entity or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial
reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis
of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Entity's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditors’ report to the
related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors’ report. However, future events or
conditions may cause the Entity to cease to continue as a going concern.
47
Andlauer Healthcare Group Inc. – 2021 Annual Report
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our
audit.
• Provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate with
them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the consolidated entity to express an
opinion on the financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for
our audit opinion.
• Determine, from the matters communicated with those charged with governance,
those matters that were of most significance in the audit of the financial statements
of the current period and are therefore the key audit matters. We describe these
matters in our auditors’ report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our auditors’ report because the adverse
consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in this auditors’ report is John J. Pryke
Chartered Professional Accountants, Licensed Public Accountants
Hamilton, Canada
March 2, 2022
48
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Balance Sheets
As at December 31, 2021 and December 31, 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid expenses and other
Due from related parties
Non-current assets
Long-term deposits and other
Property, plant and equipment
Goodwill and intangible assets
Deferred income taxes
Total Assets
Liabilities and Equity
Current liabilities
Revolving credit facility
Accounts payable and accrued liabilities
Current portion of lease liabilities
Income taxes payable
Long-term liabilities
Lease liabilities
Deferred income taxes
Due to related parties
Term facility
Total Liabilities
Equity
Common share capital
Contributed surplus
Accumulated other comprehensive income
Merger reserve
Retained earnings
Commitments and contingencies
Subsequent event
Total Liabilities and Equity
Note
December 31,
2021
December 31,
2020
6
7
21
8
9
17
11
10
18
18
17
21
11
13
15
2
20
24
$
24,990
90,093
2,331
4,656
108
122,178
$
30,148
57,867
1,228
2,830
381
92,454
847
178,112
335,200
7,832
810
118,915
34,479
6,139
$ 644,169
$ 252,797
$
11,000
39,404
26,446
13,679
90,529
$
-
25,365
21,197
1,514
48,076
100,517
50,430
1,286
49,288
292,050
83,749
1,978
-
24,667
158,470
719,936
4,967
4,899
(488,916)
111,233
352,119
549,662
4,448
-
(488,916)
29,133
94,327
$ 644,169
$ 252,797
See accompanying notes to the consolidated financial statements.
On behalf of the Board:
“Peter Jelley”
Director
“Thomas G. Wellner”
Director
Page | 1
49
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Revenue
Operating Expenses
Cost of transportation and services
Direct operating expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating Income
Gain on step acquisition of equity-accounted investee
Share of profit of equity-accounted investee, net of tax
Interest expense
Interest income
Other income (expenses)
Income before income taxes
Current income tax expense
Deferred income tax recovery
Net income
Net earnings per share
Basic earnings per share
Diluted earnings per share
Other comprehensive income
Net income
Foreign currency translation adjustment
Loss on hedge related to business combination
Other comprehensive income for the year
Total comprehensive income for the year
See accompanying notes to the consolidated financial statements.
Note
16
December 31,
2021
December 31,
2020
$ 440,115
$ 314,340
201,784
84,861
37,051
42,716
366,412
131,392
75,374
28,613
28,022
263,401
73,703
50,939
37,921
2,469
(6,219)
198
368
-
-
(4,595)
285
(49)
108,440
46,580
21,381
(2,895)
18,486
15,137
(6,271)
8,866
$
89,954
$
37,714
$
$
2.30
2.25
$
$
1.00
0.98
$
89,954
$
37,714
4,899
(2,010)
2,889
92,843
$
-
-
-
37,714
$
5
5
19
17
17
14
14
5
50
Page | 2
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Number of
shares
(thousands)
(note 13)
Share capital
(note 13)
Accumulated
other
compre-
hensive
income
Merger
reserve
(note 2)
Contributed
surplus
(note 15)
Retained
earnings
Total equity
Balance at December 31, 2020
37,603
$ 549,662
$
-
$ (488,916) $
4,448
$
29,133
$
94,327
Net income and comprehensive
income for the year
-
-
2,889
Shares issued in connection with
business combinations (note 5)
1,799
75,166
Net shares issued in connection
with the new issue and
secondary offering (note 13)
Transaction costs, net of tax
(notes 5, 13, 17)
Share-based compensation
(note 15)
Dividends (note 13)
Transfer of loss on hedge related
to business combination
(note 5)
2,000
96,400
-
(3,285)
267
1,993
-
-
-
-
2,010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
519
89,954
92,843
-
75,166
-
-
-
96,400
(3,285)
2,512
-
(7,854)
(7,854)
-
-
2,010
Balance at December 31, 2021
41,669
$ 719,936
$
4,899
$ (488,916) $
4,967
$ 111,233
$ 352,119
Balance at December 31, 2019
37,600
$ 549,679
$
-
$ (488,916) $
1,394
$
(652) $
61,505
Net income and comprehensive
income for the year
Share-based compensation
(note 15)
Dividends (note 13)
-
3
-
-
(17)
-
-
-
-
-
-
-
-
37,714
37,714
3,054
-
3,037
-
(7,929)
(7,929)
Balance at December 31, 2020
37,603
$ 549,662
$
-
$ (488,916) $
4,448
$
29,133
$
94,327
See accompanying notes to the consolidated financial statements.
Page | 3
51
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Cash Flow
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Operating activities
Net income for the year
Changes not involving cash:
Gain on step-acquisition of equity-accounted investee
Depreciation and amortization
Amortization of capitalized financing costs
Share-based compensation
Share of profit of equity-accounted investee, net of tax
Deferred income tax recovery
(Gain) loss on disposal of property, plant and equipment
Net gain on derecognition of right-of-use assets
Changes in non-cash operating working capital:
Trade and other receivables
Inventories
Accounts payable and accrued liabilities
Income taxes payable
Net change in other operating working capital balances
Cash flows from operating activities
Financing activities
Dividends
Principal repayments on lease liabilities
Net change in related party balances
Loan to employee trust
Proceeds from revolving credit facility
Proceeds from term facility
Repayment of revolving credit facility
Net financing costs on credit facilities
Proceeds from issuance of share capital
Transaction costs recorded in share capital
Cash flows from (used in) financing activities
Investing activities
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchase of intangible assets
Acquisition of equity accounted investee
Business combinations, net of cash acquired
Cash flows used in investing activities
Net (decrease) increase in cash and cash equivalents
Effect of foreign currency translation on cash and cash equivalents
Note
December 31,
2021
December 31,
2020
$
89,954
$
37,714
5
11
15
5
17
18
13
18
11
11
11
11
13, 15
13
9
5
5
(37,921)
42,716
242
1,861
(2,469)
(3,795)
(103)
(142)
90,343
(14,184)
(472)
4,449
4,076
(121)
84,091
(7,854)
(25,109)
(2,293)
-
50,000
25,000
(39,000)
(621)
97,051
(3,285)
93,889
(8,026)
258
(1,642)
(7,648)
(166,324)
(183,382)
(5,402)
244
-
28,022
112
3,037
-
(6,271)
18
(34)
62,598
(3,040)
(157)
(948)
(7,181)
(269)
51,003
(7,929)
(20,736)
(477)
13,875
-
-
(3,929)
-
-
-
(19,196)
(4,966)
1
(473)
-
(14,933)
(20,371)
11,436
-
Cash and cash equivalents, beginning of year
30,148
18,712
Cash and cash equivalents, end of year
$
24,990
$
30,148
See accompanying notes to the consolidated financial statements.
Page | 4
52
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
1. Reporting entity
Andlauer Healthcare Group Inc. (“AHG”, or the “Company”) was incorporated under the Ontario Business
Corporations Act with its head office located at 100 Vaughan Valley Blvd. in Woodbridge, Ontario. AHG’s
subordinate voting shares are listed on the Toronto Stock Exchange under the stock symbol “AND”. AHG
specializes in third party logistics and transportation solutions for the healthcare sector in Canada and the
United States.
In addition to the shares issued to the public, Andlauer Management Group Inc. (“AMG”) holds 23.6 million
multiple voting shares and 10,200 subordinate voting shares of AHG, representing approximately 56.7% of the
issued and outstanding shares and 83.9% of the voting power attached to all of the shares. AMG is owned and
controlled by Michael Andlauer, Chief Executive Officer and a director of AHG.
2. Basis of presentation
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and using
the accounting policies described herein.
b) Basis of measurement
These consolidated financial statements were prepared on a going concern basis under the historical cost
method except for share based compensation and business combinations, which were recorded at fair
value. Significant accounting policies are presented in note 3 to these consolidated financial statements
and have been consistently applied in each of the periods presented. These consolidated financial
statements were authorized for issue by the Board of Directors effective March 2, 2022.
Common control transaction
These consolidated financial statements comprise the results of AHG and Associated Logistics Solutions
Inc., Credo Canada Systems Inc., 2186940 Ontario Inc., Skelton Canada Inc., and their respective
subsidiaries. Prior to the Company’s initial public offering (“IPO”) on December 11, 2019, certain of AHG’s
subsidiaries (Associated Logistics Solutions Inc., Credo Canada Systems Inc., 2186940 Ontario Inc. and their
respective subsidiaries at that time – collectively, the “AHG Entities”) were owned 100% by AMG. Pursuant
to a share purchase agreement between AHG and AMG, and in connection with a corporate reorganization
immediately prior to the IPO, AHG acquired a 100% ownership interest in the AHG Entities based on the
value of consideration of $577,625. Total net parent investment immediately prior to the IPO was $88,709.
A merger reserve of $488,916 is recorded to reflect the difference in carrying value of the net assets
acquired and the consideration paid since AHG and the AHG Entities were all related parties under
common control of AMG at the time of the acquisition. Business combinations involving entities under
common control are outside the scope of IFRS 3 Business Combinations. AHG accounted for this common
control transaction using book value accounting, based on the book values recognized in the financial
statements of the underlying entities.
Page | 5
53
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
2. Basis of presentation (continued)
c) Basis of consolidation
(i) Business combinations
The Company accounts for acquired businesses using the acquisition method of accounting by
recording assets acquired and liabilities assumed at their respective fair values. The Company
measures goodwill as the fair value of the consideration transferred including the fair value of
liabilities resulting from contingent consideration arrangements, less the net recognized amount of
the identifiable assets acquired and liabilities assumed, all measured at fair value as of the acquisition
date.
Transaction costs, other than those associated with the issue of debt or equity securities, that the
Company incurs in connection with a business combination are expensed as incurred.
(ii) Subsidiaries
The consolidated financial statements comprise the financial statements of the Company and its
subsidiaries. The Company controls an entity when it is exposed to, or has the right to, variable returns
from its involvement with the entity and has the ability to affect those through its power over the
entity. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases. The accounting policies of
subsidiaries are aligned with the policies adopted by the Company.
The Company’s wholly-owned subsidiaries include:
Entity
Incorporation Jurisdiction
2040637 Ontario Inc.
2186940 Ontario Inc.
2721275 Ontario Limited
Accuristix Healthcare Logistics Inc.
Accuristix Inc.
Accuristix
Associated Logistics Solutions Inc.
ATS Andlauer Transportation Services GP Inc.
ATS Andlauer Transportation Services LP
Boyle Acquireco, Inc.4
Boyle Holdco, Inc.4
Concord Supply Chain Solutions Inc.1
Credo Systems Canada Inc.
McAllister Courier Inc.2
MEDDS Canada – A Medical Delivery Service Corporation1
MEDDS Winnipeg – A Medical Delivery Service Corporation
Nova Pack Ltd.
Skelton Canada Inc.3
Skelton Truck Lines, Inc.4
Skelton U.S.A. Inc.4
T.F. Boyle Transportation, Inc.4
TDS Logistics Ltd.2
1
2
3
4
Entity has been dormant throughout the entire reporting period.
Acquired on October 1, 2020. Refer to note 5.
Acquired on March 1, 2021. Refer to note 5.
Acquired on November 1, 2021. Refer to note 5.
Ontario
Ontario
Ontario
Ontario
Canada
Ontario
Ontario
Canada
Manitoba
Delaware
Delaware
Delaware
Ontario
Ontario
Canada
Manitoba
Ontario
Ontario
Delaware
Ontario
Massachusetts
Ontario
Page | 6
54
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
2. Basis of presentation (continued)
c) Basis of consolidation (continued)
(iii) Transactions eliminated on consolidation
Intercompany balances and transactions, and any unrealized income and expenses arising from
intercompany transactions, are eliminated in preparing the consolidated financial statements.
d) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Company’s
functional currency. All financial information presented in Canadian dollars has been rounded to the
nearest thousand. The functional currency of Canadian operations is the Canadian dollar and the
functional currency of U.S. operations is the U.S. dollar.
e)
Judgments and estimates
Preparing the consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these estimates. In preparing these
consolidated financial statements, significant judgments made by management in applying the accounting
policies and the key sources of estimation uncertainty were the same as those applied to the consolidated
financial statements for the year ended December 31, 2020. Information about significant judgments,
assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment
within the next financial year are included in the following notes:
• Note 5 – Establishing the fair value of assets and liabilities, intangible assets and goodwill related to
business combinations;
• Note 6 – Determining the expected credit losses related to trade accounts receivable;
• Note 8 – Estimating the useful life of the Company’s property, plant and equipment and
determining estimates and assumptions related to impairment tests for long-lived assets;
• Note 9 – Estimating the useful life of the Company’s intangible assets and determining estimates
and assumptions related to impairment tests for intangibles and goodwill;
• Note 15 – Determining the valuation of share-based compensation arrangements;
• Note 17 – Determining estimates and assumptions in measuring deferred tax assets and liabilities;
• Note 18 – Estimating the Company’s incremental borrowing rate in connection with measuring lease
liabilities; and
• Note 20 – Recognition and measurement of provisions and contingencies.
3. Significant accounting policies
Foreign currency translation
Transactions in foreign currencies are translated to the respective functional currencies of each entity at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rate in effect at the reporting date. The
foreign currency gain or loss on monetary items is the difference between amortized cost in the functional
currency at the beginning of the period, adjusted for effective interest and payments during the period, and
the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-
monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
at the rate in effect on the transaction date. Income and expense items denominated in foreign currency are
translated at the date of the transactions. Gains and losses are included in income or loss.
Page | 7
55
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Foreign currency translation (continued)
In preparing the Company’s consolidated financial statements, the financial statements of each foreign entity
are translated into Canadian dollars. The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on business combinations, are translated to Canadian dollars at exchange rates as at
the balance sheet date. Revenues and expenses of foreign operations are translated to Canadian dollars at
exchange rates that approximate those on the date of the underlying transaction. Foreign exchange differences
are recognized
in accumulated other
comprehensive income .
income and accumulated
in other comprehensive
in equity
If the Company or any of its subsidiaries disposes of its entire interest in a foreign operation, or loses control,
joint control, or significant influence over a foreign operation, the accumulated foreign currency translation
gains or losses related to the foreign operation are recognized in net income.
Revenue
Revenue is recognized upon transfer of control of promised products or services to customers in an amount
that reflects the consideration the Company expects to be entitled to receive in exchange for those products
or services. A performance obligation is a promise in a contract to transfer a distinct good or service to the
customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue when, or as, the performance obligation is satisfied. The following is a description of the Company’s
performance obligations for the transportation and logistics reportable segments.
a) Specialized Transportation
The Company’s transportation segment generates revenue from providing specialized ground
transportation, air freight forwarding and dedicated and last mile transportation services for its customers.
Certain additional services may be provided to customers as part of their transportation contracts, such
as temperature control and other incidental services. The transaction price is based on the consideration
specified in the customer’s contract. A contract exists when a customer under a transportation contract
submits a shipment document for the transport of goods from origin to destination. The performance
obligations within each contract are satisfied as the shipments move from origin to destination.
Transportation revenue is recognized proportionally as a shipment moves from origin to destination and
the related costs are recognized as incurred. Performance obligations are short-term, with transit days less
than one week. Generally, customers are billed upon shipment of the freight, and remit payment according
to approved payment terms.
b) Healthcare Logistics
The Company’s healthcare logistics segment generates revenue from providing supply chain services for
its customers, including logistics and distribution services and packaging solutions. The Company’s
contracts typically include a single performance obligation that is satisfied over time as customers
simultaneously receive and consume the benefits of the Company’s services. For this performance
obligation, the Company recognizes revenue at the invoiced amount, which is billed on a fixed price per
unit of logistics activities provided in the month, since this amount corresponds directly to the Company’s
performance and the value to the customer. In some cases, the Company’s contracts include other
performance obligations related to managing transportation and other customer services which are
included in the logistics and distribution of products. These services are typically priced at their stand-
alone selling prices and are recognized over time as the customer simultaneously receives and consumes
the benefits of the Company’s services. Contracts with customers that contain multiple performance
obligations require the Company to allocate the contractual transaction price to the identified distinct
performance obligations. The allocation of the transaction price requires management to determine the
standalone selling price for each distinct performance obligation. These services are recognized as
revenue when they are provided to the customer.
56
Page | 8
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Revenue (continued)
b) Healthcare Logistics (continued)
Customers are typically billed on a weekly basis for transactional transportation services, and on a monthly
basis for logistics and distribution services, and remit payment according to approved payment terms.
Payment terms may range under certain contracts, but are typically 30 days. The Company recognizes
unbilled revenue for transportation service revenue that has been recognized, but is not yet billed. The
Company will also recognize deferred revenue when customers are billed in advance for transportation
and logistics and distribution services.
Property, plant and equipment
Property, plant and equipment is accounted for at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset, the costs of dismantling
and removing the assets and restoring the site on which they are located and borrowing costs on qualifying
assets.
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 in net
income or loss.
Depreciation is based on the cost of an asset less its residual value and is recognized in income or loss over the
estimated useful life of each component of an item of property, plant and equipment. Leased assets are
depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the
Company will obtain ownership by the end of the lease term.
Depreciation is computed on either a declining balance basis or a straight-line basis over the estimated useful
lives of the assets as follows:
Asset
Method
Facilities
Furniture and fixtures
Leasehold improvements
Logistics and transportation equipment
storage
Amortization
Straight-line over the term of the lease
20-30% declining balance
5-15 year straight-line subject to the shorter of remaining
lease term or useful life
Primarily 20-30% declining balance, except for
vaults – which are amortized straight line over
40 years and certain transportation equipment
– which is amortized straight line over periods
of 3-7 years
Property, plant and equipment acquired or constructed during the year but not placed into use during the year
are not amortized until put into use.
Page | 9
57
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Goodwill and intangible assets
Recognition and measurement
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
Intangible assets consist of customer relationships, brands, and internally generated software.
Customer relationships and brands that are acquired by the Company and have finite useful lives are measured
at cost less accumulated amortization and any accumulated impairment losses.
For internally generated software, expenditure on research activities is recognized in profit or loss as incurred.
Development expenditure is capitalized only if the expenditure can be measured reliably, the product or
process is technically and commercially feasible, future economic benefits are probable, and the Company
intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is
recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is
measured at cost less accumulated amortization and any accumulated impairment losses.
Amortization
Goodwill is not amortized.
Customer relationships and brands are amortized on a straight-line basis over their estimated useful lives of
between 5 and 10 years.
Internally generated software is amortized on a straight-line basis over 10 years. Internally generated software
acquired or constructed during the year but not placed into use during the year is not amortized until placed
into use.
Impairment
The carrying amounts of the Company’s non-financial assets other than inventoried supplies and deferred tax
assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated.
For goodwill, the recoverable amount is estimated on December 31 of each year as part of the annual
impairment test. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”).
For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to
the group of CGUs (usually an operating segment of the Company), that is expected to benefit from the
synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects the
lowest level at which that goodwill is monitored for internal reporting purposes. The recoverable amount of
an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or group of assets.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated
recoverable amount. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the units, if any, and then to reduce the carrying amounts of the other
assets in the unit (group of units) on a prorated basis.
58
Page | 10
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Impairment (continued)
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses
recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased
or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized. Impairment losses and impairment reversals are
recognized in income or loss.
Leases
At inception of a contract, the Company assesses whether a contract is, or contains a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified
asset, the Company assesses whether:
•
•
•
The contract involves the use of an identified asset – this may be specified explicitly or implicitly, and
should be physically distinct or represents substantially all the capacity of a physically distinct asset. If
the supplier has a substantive substitution right, then the asset is not identified;
The Company has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use; and
The Company has the right to direct the use of the asset. The Company has the right when it has the
decision-making rights that are most relevant to changing how and for what purpose the asset is used.
In rare cases where the decision about how and for what purpose the asset is used is predetermined,
the Company has the right to direct the use of the asset if either:
-
-
the Company has the right to operate the asset; or
the Company designed the asset in a way that predetermines how and for what purpose it will
be used.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices. For the
leases of land and buildings in which it is a lessee, the Company has elected to account for the lease and non-
lease components separately.
a) For arrangements in which the Company is a lessee
The Company recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement
date. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives received.
The ROU asset is subsequently depreciated using the straight-line method from the commencement date
to the earlier of the end of the useful life of the ROU asset or the end of the lease term. The estimated
useful lives of ROU assets are determined by the estimated lease term. In addition, the ROU asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease
liability.
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.
Page | 11
59
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Leases (continued)
a) For arrangements in which the Company is a lessee (continued)
Lease payments included in the measurement of the lease liability comprise the following:
•
•
•
•
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Company is reasonably certain to exercise,
lease payments in an optional renewal period if the Company is reasonably certain to exercise an
extension option, and penalties for early termination of a lease unless the Company is reasonably
certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest method. It is re-measured
when there is a change in future lease payments arising from a change in an index or rate, if there is a
change in
the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the
Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.
b) Short-term leases and leases of low-value assets
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of
machinery that have a lease term of 12 months or less and leases of low-value assets, including IT
equipment. The Company recognizes the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
c) For arrangements in which the Company is a lessor
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease
or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers
substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case,
then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the
Company considers certain indicators such as whether the lease is for the major part of the economic life
of the asset.
If an arrangement contains lease and non-lease components, the Company applies IFRS 15 to allocate the
consideration in the contract.
The Company recognizes lease payments received under operating leases as income on a straight-line
basis over the lease term as part of ‘other income’.
60
Page | 12
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in income
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 year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
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 income 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 at 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 income 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.
Financial instruments
Financial assets
Trade and other receivables are initially recognized when they are originated. All other financial assets and
financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of
the instrument.
A financial asset (unless it is an account receivable without a significant financing component) or financial
liability is initially measured at fair value plus, for an item not at fair value through profit and loss (“FVTPL”),
transaction costs that are directly attributable to its acquisition or issue. An account receivable without a
significant financing component is initially measured at the transaction price.
The Company’s financial assets are comprised of cash and cash equivalents, trade and other receivables, due
from related parties, and long-term deposits. On initial recognition, the Company classifies these financial
assets as measured at amortized cost, when both of the following conditions are met:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows;
and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Page | 13
61
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
These financial assets are subsequently measured at amortized cost using the effective interest method. The
amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and
impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets
are considered to be impaired when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been decreased.
For accounts receivables, the Company applies a simplified approach in calculating expected credit losses
(“ECLs”). Therefore, the Company does not track changes in credit risk but instead recognizes a loss allowance
based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based
on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
When an account receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are offset against the allowance account. Changes in
the carrying amount of the allowance account are recognized in profit or loss.
Financial liabilities are classified at amortized cost
The Company’s financial liabilities are measured at amortized cost using the effective interest method. Interest
expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on
derecognition is also recognized in profit or loss.
Transaction costs
Transaction costs that are incremental and directly attributable to the acquisition or issue of a financial asset
or financial liability are recorded as follows:
•
•
•
Financial assets or financial liabilities at fair value through profit and loss – expensed to net income as
incurred;
Financial assets or liabilities recorded at amortized cost – included in the carrying value of the financial
asset or financial liability and amortized over the expected life of the financial instrument using the
effective interest method; and
Equity instruments recorded at fair value through other comprehensive income – included in the
initial cost of the underlying asset.
Derivative contracts and hedge accounting
The Company, from time to time, uses foreign exchange contracts to manage certain exposures to fluctuations
in foreign exchange rates as part of its overall risk management program. Earnings impacts from derivatives
used to manage a particular risk are reported as part of other comprehensive income.
When the Company enters into a foreign exchange forward contract to manage foreign exchange rate risk in
connection with a business combination , the hedge is considered a hedge of a non-financial item and is
therefore recognized in other comprehensive income with a corresponding adjustment to goodwill when the
business combination occurs.
62
Page | 14
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Inventories
Inventories, which consist of repair parts, materials and supplies, are carried at the lower of cost and net
realizable value. Cost is determined on a first-in, first-out basis and includes all costs of purchase and any other
costs incurred in bringing the inventories to their present location and condition. Net realizable value is the
estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect of the time value of money is material, 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. Where discounting is used, the unwinding of the
discount is recognized as finance cost.
Segmented reporting
The Company is organized into two reportable segments: Specialized Transportation and Healthcare Logistics.
In the Specialized Transportation segment, the Company provides specialized temperature controlled services
to healthcare customers. The Company’s transportation products include: ground transportation (comprising
less-than-truckload and courier services), air freight forwarding, and dedicated and last mile delivery.
In the Healthcare Logistics segment, the Company provides contract logistics services for customers, including
logistics and distribution (comprising warehousing and inventory management, order fulfillment, reverse
logistics, and transportation management), and packaging (comprising reusable thermal packaging solutions
and trade customization services).
Certain of the Company’s operating units provide services to other Company operating units outside of their
reportable segment. Billings for such services are based on negotiated rates, which approximates fair value,
and are reflected as revenues of the billing segment. These rates are adjusted from time to time based on
market conditions. Such intersegment revenues and expenses are eliminated in the Company’s consolidated
results. The Company’s chief executive officer is the Chief Operating Decision Maker (“CODM”) for the
Company. The CODM regularly reviews financial information at the reporting segment level in order to make
decisions about resources to be allocated to the segments and to assess their performance. Segment results
that are reported
to the CODM include items directly attributable to a segment, as well as those that can be allocated on a
reasonable basis. The Company evaluates performance based on the various financial measures of its two
reporting segments.
Page | 15
63
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Significant accounting policies (continued)
Share-based compensation
The Company has an omnibus stock option plan and records all stock-based payments, including grants of
employee stock options, at their respective fair values. The fair value of stock options granted to employees
and directors is estimated at the date of grant using the Black Scholes option pricing model. The Company
recognizes share-based compensation expense over the vesting period, over the life of the tranche of shares
being considered. The Company also estimates forfeitures at the time of grant and revises its estimate, if
necessary, in subsequent periods if actual forfeitures differ from these estimates. Any consideration paid by
employees on exercising stock options and the corresponding portion previously credited to contributed
surplus are credited to share capital. If a cashless exercise is undertaken, the employee or director will
surrender a number of options in order to fund the cashless exercise and a further amount, representing the
difference between the market price and the exercise price of the shares may be adjusted to share capital
unless the Company chooses to sell the shares in the amount required to fund the cashless exercise. The
Company’s stock option plan is equity-settled.
The Black-Scholes option pricing model used by the Company to calculate option values was developed to
estimate the fair value. This model also requires assumptions, including expected option life, volatility, risk-
free interest rate and dividend yield, which greatly affect the calculated values.
Expected option life is determined using the time-to-vest-plus-historical-calculation-from-vest-date method
that derives the expected life based on a combination of each tranche’s time to vest plus the actual or expected
life of an award based on the past activity or remaining time to expiry on outstanding awards. Expected
forfeiture is derived from historical patterns. Expected volatility is determined using comparable companies
for which the information is publicly available, adjusted for factors such as industry, stage of life cycle, size and
financial leverage. The risk-free interest rate is determined based on the rate at the time of grant and
cancellation for zero-coupon Canadian government securities with a remaining term equal to the expected life
of the option. Dividend yield is based on the stock option’s exercise price and expected annual dividend rate
at the time of grant.
Government assistance
The Company recognizes government assistance when there is reasonable assurance that it will comply with
the conditions required to qualify for the assistance, and that the assistance will be received. The Company
recognizes government assistance as a reduction to the related expense that the assistance is intended to
offset.
64
Page | 16
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
4. Segment reporting
The Company is organized into operating segments, which aggregate into two reportable segments: Specialized
Transportation and Healthcare Logistics. The operating segments are managed independently as they require
different technology and capital resources. For each of the operating segments, the Company’s CODM reviews
internal management reports, evaluating the metrics as summarized in the tables that follow.
The Company evaluates performance based on the various financial measures of its operating segments.
Performance is measured based on segment income or loss before tax. This measure is included in the internal
management reports that are reviewed by the Company’s CEO and refers to “Income before income taxes” in
the consolidated statements of income and comprehensive income. Segment income or loss before tax 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 the same industries.
The following table identifies selected financial data as at December 31, 2021 and 2020 and for the years then
ended:
As at December 31, 2021 and
for the year then ended
Revenue
Segment income before tax
Interest income
Interest expense
Depreciation and amortization
Segment net income
Segment total assets
Additions of ROU assets
Additions of property, plant and
equipment through business
combinations1
Capital expenditures
Segment total liabilities
As at December 31, 2020 and
for the year then ended
Revenue
Segment income before tax
Interest income
Interest expense
Depreciation and amortization
Segment net income
Segment total assets
Additions of ROU assets
Additions of property, plant and
equipment through business
combinations1
Capital expenditures
Segment total liabilities
Specialized
Transportation
Healthcare
Logistics
Corporate
Eliminations
Total
$ 343,344
95,465
(3,233)
(3,581)
(30,700)
80,889
524,127
22,547
$ 135,327
14,994
122
(2,164)
(12,016)
11,031
131,754
11,028
$
3,780
(2,019)
3,309
(474)
-
(1,966)
737,350
-
$
(42,336)
-
-
-
-
-
(749,062)
-
$ 440,115
108,440
198
(6,219)
(42,716)
89,954
644,169
33,575
54,010
5,410
280,854
-
2,616
68,867
-
-
31,382
-
-
(89,053)
54,010
8,026
292,050
$ 229,447
40,275
(612)
(2,059)
(16,845)
29,716
129,614
15,911
$ 116,356
10,574
66
(1,871)
(11,177)
7,700
113,358
20,861
$
2,400
(4,269)
831
(665)
-
298
572,141
-
$
(33,863)
-
-
-
-
-
(562,316)
-
$ 314,340
46,580
285
(4,595)
(28,022)
37,714
252,797
36,772
1,396
843
119,512
-
4,123
61,502
-
-
28,076
-
-
(50,620)
1,396
4,966
158,470
1 Includes $17,798 of ROU assets acquired through business combinations
Page | 17
65
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
4. Segment reporting (continued)
The Company’s Healthcare Logistics segment purchases transportation services from its Specialized
Transportation segment. Fees for these services are based on negotiated rates, which approximate fair value,
and are reflected as revenues of the Specialized Transportation segment. Rates are adjusted from time to time
based on market conditions. The Company also charges fees for services and costs incurred from its corporate
office to subsidiaries. Intersegment revenues and expenses and related intersegment payables and receivables
are eliminated in the Company’s consolidated results.
The Company does not have any customers that individually represent more than 10% of revenue for the years
ending December 31, 2021 and 2020.
5. Business combinations
On March 1, 2021, the Company acquired all of the issued and outstanding shares of Skelton Canada Inc.
(“Skelton”), a leading transportation partner to the Canadian pharmaceutical and biologics industry for
$107,306, the estimated fair value of the business acquired. The acquisition was financed through a
combination of cash on hand, drawing $75,000 on its credit facilities and by issuing 757,576 subordinate voting
shares comprising $25,000 to the shareholders of Skelton. As part of the same transaction, the Company
acquired a 49% interest in Skelton USA Inc. (“Skelton USA”), whose wholly-owned subsidiary, Skelton Truck
Lines, Inc., operates domestically in the United States, for cash consideration of $7,648. Management
determined that it did not control Skelton USA until AHG acquired the remaining 51% of Skelton USA on
November 1, 2021. Accordingly, between March 1, 2021 and November 1, 2021, the Company accounted for
its investment in Skelton USA using the equity method of accounting.
Under the equity method of accounting, an equity investment is initially recorded at cost and is subsequently
adjusted to reflect the investor's share of the net profit or loss of the associate. The Company’s 49% share of
total comprehensive income of Skelton USA for the period from March 1, 2021 to October 31, 2021 was $2,469.
The net book value of the Company’s 49% interest in Skelton USA at November 1, 2021 was $10,117.
On November 1, 2021 the Company acquired 100% of T.F. Boyle Transportation, Inc. (“Boyle”) and 51% of
Skelton USA, increasing AHG’s aggregate ownership of Skelton USA to 100%. Boyle provides specialized
transportation services to clients in the life sciences and government and defense sectors and Skelton USA
specializes in the transportation of refrigerated healthcare products. The estimated fair value of Boyle was
$104,715 (US $83,041). The estimated fair value for the remaining 51% of Skelton USA was $50,000 before
purchase consideration was reduced by $5,237 for certain tax liabilities attributed to the selling shareholders
absorbed by the Company. The Company used the net proceeds of the sale of subordinate voting shares by it
under a new issue public offering (refer to note 13 and the Company’s short form prospectus dated October
19, 2021), together with cash on hand, to pay the aggregate cash purchase price of $99,312. The remaining
purchase price of $50,166 was settled by the issuance of 1,040,788 subordinate voting shares from treasury.
For the period from acquisition on March 1, 2021 to December 31, 2021, Skelton contributed revenue of
$33,562 and net income before amortization of intangible assets acquired of $5,596 ($2,336 net of intangible
amortization) to the Company’s financial results. For the period from acquisition on November 1, 2021 to
December 31, 2021, Skelton USA and Boyle together contributed revenue of $19,001 and net income before
amortization of intangible assets acquired of $3,283 ($1,726 net of intangible amortization). If the Company
had acquired Skelton, Skelton USA, and Boyle on January 1, 2021, management estimates that consolidated
revenue would have been approximately $525,300 and consolidated net income before amortization of
intangible assets acquired would have been approximately $109,000 ($93,400 net of intangible amortization).
In determining these amounts, management has assumed that the fair value adjustments that arose on the
date of acquisitions would have been the same had the acquisition occurred on January 1, 2021.
66
Page | 18
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
5. Business combination (continued)
AHG achieved its acquisition of Skelton USA in two steps (49% on March 1, 2021 and the remaining 51% on
November 1, 2021). Accordingly, the Company remeasured its previously held equity interest in Skelton USA
at its estimated fair value on November 1, 2021 resulting in a gain of $37,921 being recognized from the step
acquisition.
On October 5, 2021, when management announced definitive agreements to acquire Boyle, the Company
entered into a foreign exchange forward contract to manage foreign exchange rate risk related to the
Company’s net investment in Boyle for which the U.S. dollar is the functional currency. The Company
recognized a loss from the hedge of $2,010 in other comprehensive income and as an adjustment to goodwill
on
November 1, 2021 when the business combination occurred.
During the year ended December 31, 2021, transaction costs of $1,809 (2020 – $66) have been expensed in
selling, general and administrative expenses in the consolidated statements of income and comprehensive
income and $104 (2020 – nil), net of deferred taxes, has been charged to share capital in relation to these
acquisitions.
Effective October 1, 2020, the Company acquired all of the issued and outstanding shares of TDS Logistics Ltd.
(“TDS”) and McAllister Courier Inc. (“MCI”), two regionally focused temperature-controlled transportation
businesses, in a single transaction with AMG for cash consideration of $15,878, the estimated fair value of the
businesses acquired. This related party transaction was accounted for as a business combination under IFRS 3.
The following table summarizes the acquisition date fair value of identifiable net assets and goodwill acquired.
As of the reporting date, the Company has not completed the measurement of fair value attributable to the
identifiable net assets and goodwill of Skelton USA and Boyle. Accordingly, the fair values for these acquisitions
are measured on a provisional basis:
Identifiable assets acquired and liabilities
assumed
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid expenses and other
Property, plant and equipment, including ROU
assets
Intangible assets
Accounts payable and accrued liabilities
Income taxes payable
Due to related parties
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Goodwill
Net book value of equity-accounted investee
Gain on step acquisition of equity-accounted
investee
Total purchase consideration
Skelton USA
(November 1,
2021)
Boyle
(November 1,
2021)
Skelton
(March 1, 2021)
5,662
$
4,590
451
274
$
$
1,371
6,329
175
1,274
27,840
39,100
(1,384)
(1,005)
-
(7,121)
(13,990)
54,417
52,889
-
5,381
64,685
(971)
(6,634)
(3,758)
(3,277)
(18,007)
46,568
46,233
(10,117)
TDS and MCI
(October 1, 2020)
$
945
3,767
-
126
1,396
7,303
(1,371)
-
-
(599)
(1,835)
9,732
6,146
-
8,261
5,344
-
156
20,789
48,730
(7,032)
-
-
(2,994)
(17,941)
55,313
49,402
-
-
107,306
$
(37,921)
44,763
$
-
104,715
$
-
15,878
$
Trade and other receivables comprise gross amounts due of $16,263 (2020 - $3,767), all of which were
expected to be collectible at the acquisition dates.
Page | 19
67
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
5. Business combination (continued)
When measuring the fair value of property, plant and equipment, the Company considers market prices for
similar items when they are available, and depreciated replacement cost when appropriate. Depreciated
replacement cost reflects adjustments for physical deterioration as well as functional and economic
obsolescence.
The Company attributes value to the customer relationships maintained by Skelton, Skelton USA, and Boyle
and to the brands of each acquired entity. For the year ended December 31, 2021, the Company recorded
intangible assets of $115,218 (2020 - $7,303) in connection with customer relationships and $37,297 (2020 –
nil) in connection with the brands of its acquisitions. The determination of the acquisition-date fair value of
the customer relationships required the Company to make significant estimates and assumptions regarding
future revenue growth from existing customers, future cost of sales and operating expenses, forecasted
attrition rate, contributory asset charges and discount rate. The determination of the acquisition-date fair
value of brands required the Company to make significant estimates and assumptions regarding future revenue
growth applicable to brands, royalty rate, long-term growth rate used to determine terminal value and
discount rate. The customer relationships and brands are definite life intangible assets each of which will be
amortized over 10 years (2020 – 5 years).
The goodwill is principally attributable to the premium of established business operations, each with a strong
reputation in healthcare transportation, and the synergies expected to be achieved from integrating Skelton,
Skelton USA, and Boyle into the Company’s existing business. Goodwill arising from the Company’s business
combinations has been allocated to the Specialized Transportation segment.
Of the goodwill and intangible assets acquired through this business combinations, $nil (2020 – $nil) is
deductible for tax purposes.
6. Trade and other receivables
Trade receivables
Trade receivables due from related parties (note 21)
Impairment loss
Trade and other receivables
December 31,
2021
December 31,
2020
$
$
90,739
108
(754)
58,096
24
(253)
$
90,093
$
57,867
Estimates are used in determining the impairment loss related to trade receivables. These estimates are based
on management’s best assessment of the ECL of the related receivable balance, which involves estimates
around the cash flows that are expected to be received. There is no impairment loss recorded against trade
receivables due from related parties.
7. Inventories
Inventories consist of:
Packaging inventory
Thermal packaging products and parts
Transportation equipment parts and supplies
Inventories
December 31,
2021
December 31,
2020
$
$
936
546
849
703
525
-
$
2,331
$
1,228
In 2021, the Company purchased a total of $8,876 in inventory (2020 - $5,248) and $7,773 was recognized as
an expense (2020 - $5,091) during the year and included in direct operating expenses.
68
Page | 20
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
8. Property, plant and equipment
Reconciliation of the net carrying amounts for each class of property, plant and equipment is summarized below:
Facilities1
Furniture and
fixtures
Leasehold
improvements
Logistics and
transportation
equipment1
Total
Cost
Balance at December 31, 2019
$
96,816
$
7,807
$
16,405
$
85,082
$ 206,110
Additions
Additions through business
combinations (note 5)
Dispositions
28,724
-
(185)
Balance at December 31, 2020
125,355
Additions
Additions through business
combinations (note 5)
Dispositions
Foreign currency adjustments
26,144
8,449
(4,233)
140
256
29
-
8,092
331
236
-
5
1,550
11,208
41,738
398
-
18,353
866
969
(323)
96,936
14,260
1,396
(508)
248,736
41,601
2,184
43,141
-
30
(496)
473
54,010
(4,729)
648
Balance at December 31, 2021
$ 155,855
$
8,664
$
21,433
$ 154,314
$ 340,266
Accumulated depreciation
Balance at December 31, 2019
$
40,531
$
5,993
$
Depreciation for the year
Dispositions
Balance at December 31, 2020
Depreciation for the year
Dispositions
Foreign currency adjustments
13,340
-
53,871
15,527
(2,886)
-
370
-
6,363
406
-
-
7,277
1,932
-
9,209
2,148
-
-
$
48,983
$ 102,784
11,516
(121)
60,378
17,487
(341)
(8)
27,158
(121)
129,821
35,568
(3,227)
(8)
Balance at December 31, 2021
$
66,512
$
6,769
$
11,357
$
77,516
$ 162,154
Net carrying amounts
At December 31, 2020
At December 31, 2021
$
$
71,484
89,343
$
$
1,729
1,895
$
$
9,144
10,076
$
$
36,558
$ 118,915
76,798
$ 178,112
1 Facilities and certain logistics and transportation equipment assets are ROU assets, capitalized in accordance with IFRS
16. Refer to note 18.
The Company has applied judgement in estimating the useful life of property, plant and equipment and to determine
the lease terms for ROU lease contracts that include renewal options. The assessment of whether the Company is
reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease
liabilities and ROU assets recognized. In applying such judgement, management relies on historical experience and
other factors, including the current economic environment, which management believes is reasonable under the
circumstances.
Page | 21
69
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
9. Goodwill and intangible assets
Goodwill
Customer
relationships
Brand
Software
Total
Cost
Balance at December 31, 2019
$
19,720
$
22,545
$
Additions
Additions through business
combinations (note 5)
Balance at December 31, 2020
Additions
Additions through business
combinations (note 5)
-
-
6,146
25,866
-
7,303
29,848
-
148,524
115,218
Foreign currency adjustments
2,347
2,188
-
-
-
-
-
37,297
653
$
5,553
$
47,818
473
-
6,026
1,642
-
-
473
13,449
61,740
1,642
301,039
5,188
Balance at December 31, 2021
$ 176,737
$ 147,254
$
37,950
$
7,668
$ 369,609
Accumulated amortization
Balance at December 31, 2019
$
Amortization for the year
Balance at December 31, 2020
Amortization for the year
Foreign currency adjustments
Balance at December 31, 2021
$
Net carrying amounts
-
-
-
-
-
-
$
22,545
$
365
22,910
5,283
-
-
-
-
1,376
-
$
3,852
$
26,397
499
4,351
489
-
864
27,261
7,148
-
$
28,193
$
1,376
$
4,840
$
34,409
At December 31, 2020
$
25,866
$
6,938
At December 31, 2021
$ 176,737
$ 119,061
$
$
-
36,574
$
$
1,675
2,828
$
34,479
$ 335,200
The Company performs annual goodwill impairment testing. The Company assesses goodwill at the operating
segment level, which is the lowest level within the Company at which goodwill is monitored for internal
management purposes. The table below sets out goodwill allocated to operating segments:
Operating segment/reportable segment
Healthcare Logistics
Specialized Transportation
Total goodwill
December 31,
2021
December 31,
2020
$
19,720
157,017
$
$
176,737
$
19,720
6,146
25,866
70
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
9. Goodwill and intangible assets (continued)
The results of the annual impairment testing determined that the recoverable amounts of each of the
Healthcare Logistics operating segment and the Specialized Transportation segment exceeded their respective
carrying amounts. The recoverable amount of the Company’s operating segments was determined using the
value in use methodology, which involves discounting estimated future cash flows. Management believes that
discounting estimated future cash flows results in a reasonable valuation for each segment. In assessing value
in use, the estimated future cash flows have been discounted to their present values using pre-tax discount
rates of 12.1% (2020 – 12.0%) for the Healthcare Logistics segment and 13.1% (2020 – 13.0%) for the
Specialized Transportation segment, which approximate the Company’s weighted average cost of capital for
each segment; and expected growth rates for the healthcare sector of between 3.0% and 5.0%. Management
has determined that no impairment has arisen in connection with the CGUs that gave rise to goodwill through
the business combinations. Accordingly, no impairment loss has been recognized in each of the years ended
December 31, 2021 and 2020.
During the year ended December 31, 2021, the Company made acquisitions in which customer relationships
and the brands of the acquired companies comprised significant value to AHG. In aggregate, $115,218 was
attributed to the customer relationships and $37,297 was attributed to the brands of Skelton, Skelton USA,
and Boyle. Management considers these identifiable intangible assets to have finite useful lives which are
amortized on a straight-line basis over ten years (note 5).
The Company attributes value to an overlapping customer relationship among MCI, TDS and ATS; and certain
ongoing customer relationships with MCI customers which were acquired through business combinations
effective October 1, 2020. For the year ended December 31, 2020, customer relationships includes additions
of $7,303 in connection with identifiable intangible assets acquired during the year. These customer
relationships intangibles are amortized on a straight-line basis over five years (note 5).
The Company performs an assessment for indicators of impairment for customer relationships, brands and
software at each reporting period. If an indicator of impairment exists, the Company would perform an
impairment test to determine the recoverable amount. No such indicators of impairment were identified at
any of the reporting periods covered by these financial statements.
10. Accounts payable and accrued liabilities
Trade payables and accrued liabilities
Trade payables due to related parties (note 21)
Deferred revenue (note 16)
Accounts payable and accrued liabilities
December 31,
2021
December 31,
2020
$
$
36,935
652
1,817
$
39,404
$
24,238
86
1,041
25,365
Page | 23
71
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
11. Credit facilities
Revolving credit facility
Term facility
Less: capitalized financing costs
Credit facilities
Recorded in the consolidated balance sheets as follows:
Revolving credit facility
Term facility
Credit facilities
The movement in credit facilities is as follows:
Opening balance
Changes from financing cash flows
Issuance of borrowings – revolving credit facility
Issuance of borrowings – term facility
Less: capitalized financing costs
Repayment of revolving credit facility
Non-cash movements
Amortization of capitalized financing costs
Ending balance
December 31,
2021
December 31,
2020
$
$
11,000
50,000
61,000
(712)
-
25,000
25,000
(333)
$
60,288
$
24,667
December 31,
2021
December 31,
2020
$
$
11,000
49,288
60,288
$
$
-
24,667
24,667
December 31,
2021
$
24,667
December 31,
2020
28,484
$
50,000
25,000
99,667
(621)
99,046
(39,000)
60,046
-
-
28,484
-
28,484
(3,929)
24,555
242
60,288
$
112
$
24,667
The Company is party to credit facilities with a syndicate of lenders. On February 19, 2021, in connection with
the anticipated acquisitions of Skelton and Skelton USA, the credit facilities were amended to increase the
amounts available to be drawn under the revolving credit facility and the term facility each by $25,000. The
amended credit facilities comprise a revolving credit facility in the aggregate principal amount of up to
$100,000 and a term facility in the aggregate principal amount of up to $50,000. The remaining terms and
conditions of the credit facilities were unchanged, except that they will mature and be due and payable on
March 1, 2025. There is no repayment schedule for either the revolving credit facility or the term facility, except
at maturity; however, the Company classifies the revolving credit facility in current liabilities because of its
intention to reduce drawn amounts with cash flow from operations within twelve months. Financing costs of
$621, which apply to the credit facilities in aggregate, were capitalized in the term facility in connection with
the amendment.
72
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Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
11. Credit facilities (continued)
The credit facilities are available to be drawn in Canadian dollars by way of prime rate loans, bankers’
acceptances and letters of credit, and in U.S. dollars by way of base rate loans, LIBOR based loans and letters
of credit, in each case, plus the applicable margin in effect from time to time. At December 31, 2021, the credit
facilities comprise bankers’ acceptances drawn at an interest rate of 1.9% (December 31, 2020 – 1.9%).
The credit facilities are guaranteed by each of the Company’s material subsidiaries and are secured by (i) a first
priority lien over all personal property of the Company, subject to certain exclusions and permitted liens, (ii)
charges over certain material leased real property interests, and (iii) a first ranking pledge of 100% of the
securities of any subsidiary owned by the Company.
The credit facilities are subject to customary negative covenants and include financial covenants requiring the
Company to maintain at all times a maximum net leverage ratio and a minimum interest coverage ratio, tested
on a quarterly basis. At December 31, 2021 and 2020, the Company was in compliance with all of its covenants
under the credit facilities.
Amounts recognized in the consolidated statements of income and comprehensive income in connection with
interest expense on the credit facilities for the year ended December 31, 2021 was $1,381 (2020 – $665).
12. Financial instruments and financial risk management
Accounting classifications and fair values
The Company's financial instruments consist of cash and cash equivalents, trade and other receivables, long-
term deposits, accounts payable and accrued liabilities and its credit facilities (refer to note 11). The Company
believes that the carrying amount of each of these items, other than the credit facilities, is a reasonable
approximation of fair value given the short-term nature of the financial instruments.
As the credit facilities bear interest at a floating rate subject to fluctuations in the bank prime rate the carrying
value of the debt approximates fair value.
Financial risk factors
The Company, through its financial assets and liabilities, has exposure to the following risks from its use of
financial instruments: credit risk, liquidity risk, interest rate risk, and currency risk. Senior management
monitors risk levels and reviews risk management activities as they determine to be necessary.
Credit risk
The Company is exposed to credit risk in the event of non-performance by counterparties in connection with
its financial assets, namely cash and cash equivalents, trade and other receivables and long-term deposits.
The Company does not typically obtain collateral or other security to support the trade and other receivables
subject to credit risk but mitigates this risk by performing credit check procedures for new customers and
monitoring credit limits for existing customers. Thereby, the Company deals only with what management
believes to be financially sound counterparties and, accordingly, does not anticipate significant loss for non-
performance.
The maximum exposure to credit risk for cash and cash equivalents, trade and other receivables and long-
term deposits approximate the amount recorded on the consolidated balance sheets.
Page | 25
73
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
12. Financial instruments and financial risk management (continued)
Credit risk (continued)
Trade and other receivables aging is set out below:
Current (not past due)
0-30 days past due
31-60 days past due
More than 61 days past due
Gross
Unbilled revenue
Impairment loss (note 6)
December 31,
2021
$
59,742
21,213
4,476
2,232
87,663
3,184
(754)
$
December 31,
2020
36,924
12,394
3,975
2,192
55,485
2,635
(253)
Trade and other receivables, net
$
90,093
$
57,867
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach
to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities
when they are due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Company’s reputation.
The Company’s exposure to liquidity risk is dependent on the collection of trade and other receivables, or
raising of funds to meet commitments and sustain operations. The Company controls liquidity risk by
management of working capital, cash flows and the availability of borrowing facilities.
As of December 31, 2021, $11,000 (2020 - $nil) has been drawn on the $100,000 revolving credit facility, and
$50,000 (2020 - $25,000) has been drawn on the $50,000 term facility. There is no repayment schedule for the
term facility except at maturity. The credit facilities are repayable in full on March 1, 2025.
The Company’s accounts payable and accrued liabilities are due and payable in the short-term.
Interest rate risk
The Company has a revolving and term credit facilities that bear interest at a floating rate subject to
fluctuations in the bank prime rate. Changes in the bank prime lending rate can cause fluctuations in interest
payments and cash flows. The Company does not use derivative financial instruments to mitigate the effect
of this risk. The facilities under this agreement are available to be drawn in Canadian dollars by way of prime
rate loans, bankers’ acceptances and letters of credit, and in U.S. dollars by way of base rate loans, LIBOR
based loans and letters of credit, in each case, plus the applicable margin in effect from time to time. At
December 31, 2021, the credit facilities comprises bankers’ acceptances drawn at an interest rate of 1.9%
(2020 – 1.9%).
During the year, there has been no exposure to significant interest rate fluctuations.
74
Page | 26
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
12. Financial instruments and financial risk management (continued)
Currency risk
The Company enters into foreign currency purchase and sale transactions and has assets and liabilities that
are denominated in foreign currencies and thus are exposed to the financial risk of earnings fluctuations
arising from changes in foreign exchange rates and the degree of volatility of these rates. The Company uses
derivative instruments to reduce its exposure to foreign currency risk on an exceptional basis, such as in
connection with the Boyle Transportation acquisition detailed in note 5.
Excluding its foreign subsidiaries, the Company has the following US dollar foreign currency denominated
balances at December 31, 2021 and 2020:
Currency risk
Cash
Trade and other receivables
Accounts payable and accrued liabilities
13. Share capital
December 31,
2021
December 31,
2020
$
$
8,575
12,461
3,023
473
88
169
The Company is authorized to issue an unlimited number of subordinate voting common shares, an unlimited
number of multiple voting common shares, and an unlimited number of preferred shares, issuable in series.
The subordinate voting shares and multiple voting shares rank pari passu with respect to the payment of
dividends, return of capital and distribution of assets in the event of liquidation, dissolution, or wind-up.
Holders of multiple voting shares are entitled to four votes per multiple voting share, and holders of
subordinate voting shares are entitled to one vote per subordinate voting share on all matters upon which
holders of shares are entitled to vote.
On October 26, 2021 the Company, together with the Company’s parent, AMG, completed a new issue from
treasury of 2.0 million subordinate voting shares and secondary offering of 1.5 million multiple voting shares
(which converted to subordinate voting shares at the time of the sale by AMG), on a bought deal basis, at a
purchase price of $48.20 per subordinate voting share for aggregate gross proceeds of $96,400 to the Company
and $72,300 to AMG. The proceeds of the treasury offering were used to pay the cash portion of the purchase
price payable in connection with the acquisitions of Boyle and Skelton USA. Please refer to the Company’s short
form prospectus dated October 19, 2021.
Transaction costs of $3,181, net of deferred taxes, were incurred in connection with the new issue and have
been offset against the proceeds of the subordinate voting shares. Transaction costs of $104, net of deferred
taxes, have been offset against subordinate voting shares in connection with acquisitions made during the
year ended December 31, 2021 (note 5).
Page | 27
75
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
13. Share capital (continued)
As of December 31, 2021, all of the multiple voting shares and 10,200 subordinate voting shares are owned
by AMG. The following table summarizes the number of common shares issued (refer to note 24 for further
details on subsequent event):
Number of common shares (in thousands)
Share capital (in thousands of dollars)
Multiple
voting
common
shares
25,100
Subordinate
voting
common
shares
12,503
Total
common
shares
37,603
Multiple
voting
common
shares
$ 376,500
Subordinate
voting
common
shares
$ 173,162
Total share
capital
$ 549,662
-
-
1,799
1,799
2,000
2,000
-
-
75,166
75,166
96,400
96,400
(1,500)
-
1,500
-
-
-
(22,500)
-
22,500
(3,285)
-
(3,285)
-
267
267
-
1,993
1,993
Balance at December 31, 2020
Shares issued in connection with
business combination (note 5)
Shares issued in connection with
the secondary offering
Shares converted in connection
with the secondary offering
Transaction costs, net of tax
Shares issued in connection with
the exercise of options
(note 15)
Balance at December 31, 2021
23,600
18,069
41,669
$ 354,000
$365,936
$719,936
Balance at December 31, 2019
Shares issued in connection with
the exercise of options
Balance at December 31, 2020
25,100
12,500
37,600
$ 376,500
$ 173,179
$ 549,679
-
25,100
3
12,503
3
37,603
-
$ 376,500
(17)
$ 173,162
(17)
$ 549,662
Dividends to subordinate voting and multiple voting shareholders
During the year ended December 31, 2021, the Company declared total dividends of $7,854, or $0.20 per
common share (2020 – $7,929, or $0.21 per common share), on subordinate voting and multiple voting
shares. Included in accounts payable and accrued liabilities as at December 31, 2021 is $2,083, or $0.05 per
common share (December 31, 2020 – $1,880, or $0.05 per common share) for dividends payable on January
17, 2022 and January 15, 2021 respectively, to common shareholders of record on December 31, 2021 and
2020 respectively.
76
Page | 28
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
14. Earnings per share
Basic earnings per share
The basic earnings per share and the weighted average number of common shares outstanding have been
calculated as follows:
(in thousands of dollars and number of shares)
Net income
December 31,
2021
December 31,
2020
$
89,954
$
37,714
Weighted average number of common shares
39,036
37,600
Earnings per share – basic
Diluted earnings per share
$
2.30
$
1.00
The basic earnings per share and the weighted average number of common shares outstanding after
adjustment for the effects of all dilutive common shares have been calculated as follows:
(in thousands of dollars and number of shares)
Net income
Weighted average number of common shares
Dilutive effects:
Stock options
Deferred share units
Weighted average number of diluted common shares
December 31,
2021
December 31,
2020
$
89,954
$
37,714
39,036
37,600
928
29
39,993
853
23
38,476
Earnings per share – diluted
$
2.25
$
0.98
15. Share-based payment arrangements
Stock option plan (equity settled)
The Company offers a stock option plan for the benefit of certain of its employees. Each stock option entitles
its holder to receive one subordinate voting common share upon exercise. The exercise price payable for each
option is determined by the Board of Directors at the date of grant. The options vest in equal installments over
four years and the expense is recognized following the treasury method as each installment is fair valued
separately and recorded over the respective vesting periods.
On December 11, 2019 the Board of Directors approved a grant of 1.65 million options, of which 373 thousand
options were exercised during the year ended December 31, 2021 (December 31, 2020 – 6 thousand). Of the
options outstanding at December 31, 2021, a total of 667 thousand (December 31, 2020 - 700 thousand) are
held by non-executive directors; 225 thousand (December 31, 2020 – 400 thousand) are held by executive
officers; with the remaining 310 thousand (December 31, 2020 – 544 thousand) held by management
personnel. During the year ended December 31, 2021, 69 thousand (December 31, 2020 – nil) options were
forfeited due to employee retirements.
Page | 29
77
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
15. Share-based payment arrangements (continued)
Stock option plan (equity-settled) (continued)
Estimating fair value for share-based payment arrangements requires determining the most appropriate
valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant.
The Company is also required to determine the most appropriate inputs to the valuation model, including
estimates and assumptions with respect to expected life, risk-free interest rate, volatility, distribution yield,
and forfeiture rate.
The fair value of the stock options granted was estimated using the Black-Scholes option pricing model using
the following weighted average assumptions:
Exercise price
Average expected option life
Risk-free interest rate
Expected stock price volatility
Average dividend yield
Weighted average fair value per option of options granted
December 11,
2019
$
$
15.00
7 years
1.59%
24.77%
1.33%
3.60
The table below summarizes the changes in the outstanding stock options:
(in thousands of options and in dollars)
Opening balance
Exercised
Forfeited
Ending balance
December 31, 2021
December 31, 2020
Number of
options
1,644
(373)
(69)
1,202
Weighted
average
exercise price
15.00
$
15.00
15.00
15.00
$
Number of
options
1,650
(6)
-
1,644
Weighted
average
exercise price
15.00
$
15.00
$
-
15.00
$
Options exercisable
615
$
15.00
669
$
15.00
The Company recognized compensation expense of $1,232 for the year ended December 31, 2021 (2020 –
$2,371), with corresponding increases to contributed surplus in connection with the vesting of options issued
at the time of the initial public offering.
78
Page | 30
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
15. Share-based payment arrangements (continued)
Stock option plan (equity settled) (continued)
During the year ended December 31, 2021, 373 thousand options were exercised. A total of 334 thousand
options were exercised on a cashless basis and 39 thousand were exercised on a cash basis resulting in 267
thousand subordinate voting common shares being issued from treasury and in the surrender of 109 thousand
options used to fund the cashless option exercise. The cash-based exercise resulted in proceeds of $589 and a
corresponding increase in share capital. The volume weighted average price used to calculate the cashless
exercises in accordance with the Company’s Omnibus Equity Incentive Plan ranged between $40.95 and $54.53
per share at the time of exercises resulting in a $1,286 increase in share capital after the proceeds from the
sale of 28 thousand shares on behalf of employees were used to fund their withholding taxes. When options
are exercised, the option value that was originally recognized is transferred from contributed surplus to share
capital. The transfer of the option value of the options exercised resulted in a $1,342 reduction to contributed
surplus at $3.60 per share.
Director deferred share units (“DSUs”) program (equity settled)
Each non-executive director receives at least 50% of his or her annual director retainer in DSUs. DSUs vest
when granted but are not redeemable for settlement until the director ceases to be a member of the Board.
The number of DSUs issued is calculated for each director as the director’s quarterly retainer divided by the
volume weighted average trading price on the TSX for the five trading days prior to such issuance. For the year
ended December 31, 2021, the Company recognized a compensation expense of $629, with corresponding
increases to contributed surplus (December 31, 2020 – $707).
The table below summarizes the changes in the outstanding DSUs:
(thousands of DSUs)
Opening balance
Granted
Outstanding at December 31
December 31,
2021
December 31,
2020
23
14
37
-
23
23
Page | 31
79
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
16. Revenue
a) Revenue streams
The Company generates revenue primarily from the provision of supply chain transportation and logistics
services to its customers. The Company’s contracts are typically satisfied over a short period of time.
Consequently, the Company applies the practical expedient and does not disclose information related to
its remaining performance obligations.
b) Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by major products and
service lines. The table also includes a reconciliation of the disaggregated revenue with the Company’s
reportable segments (note 4), and revenue disaggregated by primary geographical markets. All of the
revenue generated in the United Sates comprises ground transportation revenue.
Major products/service lines
Logistics and distribution
Packaging solutions
Healthcare Logistics segment
Ground transportation
Air freight forwarding
Dedicated and last mile delivery
Intersegment revenue
Specialized Transportation segment
Total revenue
Primary geographical markets
Canada
United States
Total revenue
c) Deferred revenue
December 31,
2021
December 31,
2020
$ 115,255
$
96,976
20,072
19,380
135,327
116,356
261,870
177,170
29,214
52,260
(38,556)
304,788
22,482
29,795
(31,463)
197,984
$ 440,115
$ 314,340
December 31,
2021
December 31,
2020
$ 421,114
$ 314,340
19,001
-
$ 440,115
$ 314,340
One of the Company’s specialized transportation operating segments bills customers for transportation
services based on the pick-up date. When shipments remain in transit at the end of a period, the Company
defers revenue until the shipments are delivered. The Company does not regularly bill customers in
advance for logistics and distribution services. Consequently, fluctuations in deferred revenue will occur
year over year and will depend on specifically negotiated payment terms resulting from customer billing
requests or concerns related to credit risk. To date, the changes in deferred revenue have been largely
insignificant. As at December 31, 2021 there was $1,817 (2020 – $1,041) recorded in accounts payable and
accrued liabilities (note 10). Revenue recognized in 2021 of $914 (2020 – $836) was included in the opening
deferred revenue balance at the beginning of the period.
80
Page | 32
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
17. Income taxes
a) Amounts recognized in profit or loss
Current income tax expense:
Current taxes on income for the reporting period
Current taxes referring to previous periods and other
adjustments
Deferred income tax recovery:
Recognition of tax benefits related to loss for the period
Origination and reversal of temporary differences
Impact of change in tax rates of subsidiaries
Previously unrecognized deferred tax assets
Deferred taxes referring to previous periods and other
adjustments
Deductible (taxable) temporary differences not recognized
December 31,
2021
December 31,
2020
$
21,117
$
14,439
264
21,381
(850)
3,302
6
-
(153)
(5,200)
(2,895)
698
15,137
(1,063)
(409)
(12)
(4,066)
(721)
-
(6,271)
Income tax expense reported to the statements of income
and comprehensive income
$
18,486
$
8,866
Total cash outflow for actual taxes paid for the year ended December 31, 2021 was $16,583
(2020 –$22,927).
b) Amounts recognized directly in equity
Transaction costs, before tax
Tax
Transaction costs, net of tax
c) Reconciliation of effective tax rate
Income before income taxes
Consolidated Canadian federal and provincial income tax rate
Income tax expense based on statutory rate
(Decrease) increase in income taxes resulting from non-
deductible (non-taxable) items or other adjustments
Gain on step acquisition of equity-accounted investee
Share of profit of equity-accounted investee reported
Impact of varying statutory tax rates of subsidiaries
Deductible temporary differences not recognized
Recognized tax losses
Taxes relating to previous periods and other adjustments
Total income tax expense
December 31,
2021
December 31,
2020
$
4,469
(1,184)
$
$
3,285
$
-
-
-
December 31,
2021
$ 108,440
26.5%
28,737
December 31,
2020
$ 46,580
26.5%
12,344
379
(10,050)
(654)
(189)
152
-
111
695
-
-
(102)
-
(4,066)
(5)
$
18,486
$
8,866
Page | 33
81
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
17. Income taxes (continued)
d) Deferred taxes
Deferred tax assets
Deferred tax liabilities
Net deferred tax (liability) asset
e) Movement in deferred tax balances
December 31,
2021
December 31,
2020
$
7,832
$
6,139
(50,430)
$
(42,598)
$
(1,978)
4,161
December
31, 2021
Recognized
in equity
Recognized
in income or
loss
Acquired in
business
combina-
tions
(note 5)
Foreign
currency
adjustments
December
31, 2020
Plant and equipment
$ (12,392) $
- $
1,370 $ (12,534) $
(176) $
(1,052)
Accounts payable and accrued liabilities
Intangibles
Benefit of losses carried forward
Leases
Transaction costs
607
(40,986)
2,154
4,748
3,271
-
-
237
-
947
154
-
-
453
1,849
(40,984)
(766)
(1,085)
614
(358)
(734)
-
3,580
-
-
42
-
1,303
1,484
3,058
Net deferred tax (liability) asset
$ (42,598) $
1,184 $
2,895 $ (49,938) $
(900) $
4,161
Plant and equipment
Accounts payable and accrued liabilities
Intangibles
Benefit of losses carried forward
Leases
Finance costs
December
31, 2020
Recognized
in income or
loss
Acquired in
business
combina-
tions
December
31, 2019
$
(1,052) $
(474) $
(59) $
(519)
453
(1,085)
1,303
1,484
3,058
185
141
2,799
562
3,058
-
(1,935)
-
159
-
268
709
(1,496)
763
-
Net deferred tax asset (liability)
$
4,161 $
6,271 $
(1,835) $
(275)
f) Unrecognized deferred tax liabilities
As at 31 December 2021, temporary differences of $40,390 (2020 – $nil) exist in connection with wholly-
owned investments in subsidiaries; and the related potential deferred tax liability of $5,352 (2020 – $nil)
has not been recognized. The Company controls the dividend policies of its subsidiaries and controls the
timing of payment of such dividends. Accordingly, the Company controls the timing of reversal of the
related taxable temporary differences; and management is satisfied that they will not reverse in the
foreseeable future.
g) Non-capital loss carryforwards
The Company recognized deferred tax assets in connection with certain losses for the current period on
the basis that it will have sufficient future taxable profit.
The Company has non-capital tax loss carryforwards of $901, $4,012, and $3,209 which will expire in 2039,
2040, and 2041 respectively.
82
Page | 34
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
17. Income taxes (continued)
h) Uncertainty over income tax treatments
The calculation of current and deferred income taxes requires management to make certain judgements
regarding the tax rules in jurisdictions where the Company performs activities. The Company believes that
its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience.
18. Leases
The Company leases buildings and equipment in the operation of its Transportation and Logistics businesses.
The Company is required to estimate the incremental borrowing rates used to discount lease liabilities if the
interest rate implicit in the lease is not readily determined. The Company estimates its incremental borrowing
rates for portfolios of leases with similar characteristics, such as similar risk profiles, same or similar types of
security, and similar lease terms. Building lease terms range from 5 to 10 years. Facilities lease liabilities are
calculated using the Company’s incremental borrowing rate based on the specific lease commitments and term
for each facility. The average incremental borrowing rate for facilities for the year ended December 31, 2021
is 3.71% (2020 – 2.99%). Equipment lease terms range from 1 to 5 years. Equipment lease liabilities are
calculated using the operating segment’s average incremental borrowing rate on an equipment lease portfolio
basis for that period. The average incremental borrowing rate for equipment for the year ended December 31,
2021 is 3.13% for Specialized Transportation and 2.66% for Healthcare Logistics (2020 – 3.11% for Specialized
Transportation; 2.70% for Healthcare Logistics).
Right-of-use assets – Facilities
Opening balance
Add: additions
Add: additions through business combinations
Less: derecognition
Less: depreciation
Foreign currency adjustments
Ending balance
Right-of-use assets – Logistics and transportation equipment
Opening balance
Add: additions
Add: additions through business combinations
Less: derecognition
Less: depreciation
Foreign currency adjustments
Ending balance
As at and for
the year
ended
December 31,
2021
As at and for
the year
ended
December 31,
2020
$
$
71,484
26,144
8,449
(1,347)
(15,527)
140
56,285
28,724
-
(185)
(13,340)
-
$
89,343
$
71,484
As at and for
the year
ended
December 31,
2021
As at and for
the year
ended
December 31,
2020
$
$
27,256
7,431
9,349
-
(10,622)
29
28,018
8,048
588
(183)
(9,215)
-
$
33,443
$
27,256
Page | 35
83
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
18. Leases (continued)
Net carrying amounts of right-of-use assets included in property, plant and
equipment
Facilities
Logistics and transportation equipment
Balance
Lease liabilities – Facilities
Opening balance
Add: additions
Add: additions through business combinations
Add: interest expense
Less: derecognition
Less: principal repayments
Less: interest payments
Foreign currency adjustments
Ending balance
Lease liabilities – Logistics and transportation equipment
Opening balance
Add: additions
Add: additions through business combinations
Add: interest expense
Less: derecognition
Less: principal repayments
Less: interest payments
Foreign currency adjustments
Ending balance
Cash lease principal payments
Repayments of lease principal
Total lease payments
Lease liabilities
Facilities
Logistics and transportation equipment
Balance
December 31,
2021
December 31,
2020
$
89,343
33,443
$
122,786
$
$
71,484
27,256
98,740
As at and for
the year
ended
December 31,
2021
As at and for
the year
ended
December 31,
2020
$
$
77,676
26,144
8,475
3,700
-
(13,756)
(3,700)
142
60,948
28,724
-
2,813
(212)
(11,784)
(2,813)
-
$
98,681
$
77,676
As at and for
the year
ended
December 31,
2021
As at and for
the year
ended
December 31,
2020
$
$
27,270
7,431
4,918
1,138
-
(11,353)
(1,138)
16
27,765
8,048
599
1,117
(190)
(8,952)
(1,117)
-
28,282
$
27,270
Year ended
December 31,
2021
(25,109)
$
Year ended
December 31,
2020
(20,736)
$
$
(25,109)
$
(20,736)
December 31,
2021
(98,681)
(28,282)
$
December 31,
2020
(77,676)
(27,270)
$
$
(126,963)
$
(104,946)
84
Page | 36
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
18. Leases (continued)
Lease liabilities included in consolidated balance sheets
Current
Non-current
Balance
Maturity analysis for lease liabilities –
contractual undiscounted cash flows
Less than one year
One to 5 years
More than 5 years
Total undiscounted lease liabilities
December 31,
2021
(26,446)
(100,517)
$
December 31,
2020
(21,197)
(83,749)
$
$
(126,963)
$
(104,946)
December 31,
2021
December 31,
2020
$
$
30,839
86,694
23,360
24,720
71,506
21,678
$
140,893
$
117,904
Amounts recognized in the consolidated statements of income and comprehensive income in connection with
interest expense for lease liabilities for the year ended December 31, 2021 was $4,838 (2020 – $3,930). Total
cash outflow for leases for the year ended December 31, 2021 was $25,109 (2020 – $24,666).
Net investment lease
Opening balance
Add: additions
Add: interest received
Less: payments received
Less: interest income
Ending balance
As at and for
year ended
December 31,
2021
$
$
-
1,489
29
(705)
(29)
784
During the year ended December 31, 2021, the Company sub-leased a facility to a third party that had
previously been classified as a right-of-use asset. The Company derecognized net book value of $1,347 from
right-of-use assets and established a net investment lease of $1,489 resulting in a net gain of $142 included in
other income in connection with this facility. The current portion of $723 in connection with this net investment
lease is included in trade and other receivables. The long-term portion of $61 is recorded in long-term deposits
and other. The Company recognized $29 of interest income for year ended December 31, 2021.
The table below sets out the current and long-term portions of the net investment lease:
Maturity analysis for net investment lease receivable – contractual undiscounted
cash flows
Less than one year
One to 5 years
More than 5 years
Total undiscounted net investment lease receivable
December 31,
2021
December 31,
2020
$
$
734
61
-
795
$
$
-
-
-
-
Page | 37
85
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
19. Interest expense
Interest expense recognized in income and
comprehensive income
Leases
Credit facilities
Total interest expense
December 31,
2021
December 31,
2020
$
$
4,838
1,381
6,219
$
$
3,930
665
4,595
Interest expense recognized in the consolidated statements of income and comprehensive income equates to
total interest paid for the periods ended December 31, 2021 and 2020.
20. Commitments and contingencies
a) The Company is, from time to time, involved in claims, legal proceedings and complaints arising in the
normal course of business and provisions for such claims have been recorded where appropriate. The
Company does not believe the final determination of these claims will have an adverse material effect on
its consolidated financial statements.
b) As at December 31, 2021, the Company had outstanding letters of guarantee in the amount of $365
(2020 – $180).
c) The Company has made commitments to lease fleet equipment, with the terms to begin upon delivery of
the equipment in 2022. Commitments range from 72 to 84 months and total $8,512 (2020 – $9,211).
d) The Company has made commitments to purchase fleet equipment totalling $7,820 (2020 – $nil)
21. Related parties
During the year, the Company entered into transactions with related parties that were incurred in the normal
course of business. The Company’s policy is to conduct all transactions and settle all balances with related
parties on market terms and conditions. All outstanding balances with these related parties are to be settled
in cash within two months of the reporting date. None of the balances are secured. No expense has been
recognized in the current period or prior period for bad or doubtful debts in respect of amounts owed by
related parties.
The Company is indirectly controlled by Michael Andlauer, the Chief Executive Officer and CODM. Included in
these consolidated financial statements are the following transactions and balances with companies related
either directly or indirectly to Mr. Andlauer.
The Company recovers certain facilities lease costs from Andlauer Management Group Inc. (“AMG”). The
Company also provides certain shared services (primarily accounting services) to AMG.
Effective October 1, 2020, the Company acquired all of the issued and outstanding shares of TDS Logistics Ltd.
and McAllister Courier Inc. from AMG. Accordingly, revenue and expense transactions in connection with TDS
and MCI for the nine-month period ending September 30, 2020 comprise related party transactions.
Andlauer Properties and Leasing Inc. (“APLI”) is a subsidiary of AMG and leases certain facilities and logistics
and transportation equipment to the Company. The Company also leases facilities and logistics and
transportation equipment from arm’s length providers. The Company provides certain shared services
(primarily accounting services) to APLI.
86
Page | 38
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
21. Related parties (continued)
9143-5271 (“9143”) Quebec Inc. is a subsidiary of AMG and leases a facility in Quebec to the Company. The
Company provides certain shared services (primarily accounting services) to 9143.
Ready Staffing Solutions Inc., a company owned by Mr. Andlauer’s spouse, provides the Company with
temporary agency employee services – providing hourly dock labour for handling operations, principally in the
GTA. The Company also purchases temporary agency employee services from arm’s length providers.
1708998 Ontario Limited (Medical Courier Services) (“MCS”) is a subsidiary owned 80% by AMG and provides
transportation services to the Company, providing extended reach for shipments where the Company does not
have facilities or equipment. The Company also provides certain shared services (primarily accounting services)
to MCS.
McAllister Courier Inc. is a subsidiary of AMG (until October 1, 2020, at which time MCI became a wholly-owned
subsidiary of the Company – see disclosure under AMG above) and provides transportation services to the
Company, providing extended reach for shipments where the Company does not have facilities or equipment.
TDS Logistics Ltd. is a subsidiary of AMG (until October 1, 2020, at which time TDS became a wholly-owned
subsidiary of the Company – see disclosure under AMG above) and provides transportation services to the
Company, providing additional capacity where the Company can sub-contract deliveries to take advantage of
coincidences of delivery. Similarly, the Company provides transportation services to TDS. The Company also
provides certain shared services (primarily accounting services) to TDS and recovers certain lease costs from
TDS.
Med Express is a subsidiary owned 50% by AMG and provides transportation services to the Company,
providing extended reach for shipments where the Company does not have facilities or equipment.
AWA Transportation & Logistics Inc. is a subsidiary of AMG and provides transportation services to AHG,
providing extended reach for shipments where the Company does not have facilities or equipment.
D.C. Racking & Maintenance Inc. (“DCR”) and Logiserv Inc. (“Logiserv”) are owned by Cameron Joyce, a member
of AHG’s board of directors. DCR provides warehouse racking installation and maintenance and repair services
to the Company. Logiserv provides warehouse racking and racking components as well as warehouse racking
installation, maintenance and repair services. The Company also purchases warehouse racking installation,
maintenance and repairs, and warehouse racking and racking components from arm’s length providers.
C-GHBS Inc. is a subsidiary of AMG and provides air travel services to the Company.
Bulldog Hockey Inc. is a subsidiary of AMG and provides sports and entertainment services to the Company.
Page | 39
87
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
21. Related parties (continued)
AHG acquired a 49% interest in Skelton USA on March 1, 2021 (note 5) which wholly owns Skelton Truck Lines,
Inc. (“SKINC”). SKINC provides specialized 2-8°C transportation services to Skelton Canada Inc. in the United
States, and Skelton Canada Inc. provides specialized 2-8°C transportation services to SKINC in Canada. On
November 1, 2021, AHG acquired the remaining 51% of Skelton USA. Accordingly, transactions with SKINC have
been included in related party transactions in the tables below for the period from March 1, 2021 to October
31, 2021.
December 31,
2021
December 31,
2020
Revenue
Transportation services
TDS Logistics Ltd.
1708998 Ontario Limited (Medical Courier Services)
Skelton Truck Lines, Inc.
Facility rent recovery
TDS Logistics Ltd.
Shared service recovery
TDS Logistics Ltd.
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
9143-5271 Quebec Inc.
1708998 Ontario Limited (Medical Courier Services)
Equipment rental recovery
TDS Logistics Ltd.
McAllister Courier Inc.
Expenses
Transportation services
McAllister Courier Inc.
1708998 Ontario Limited (Medical Courier Services)
TDS Logistics Ltd.
AWA Transportation & Logistics Inc.
Med Express Ltd.
Skelton Truck Lines, Inc.
Contract labour services
Ready Staffing Solutions Inc.
Equipment rent
Andlauer Properties and Leasing Inc.
Facility rent
Andlauer Properties and Leasing Inc.
9143-5271 Quebec Inc.
Maintenance services
D.C. Racking and Maintenance Inc. and Logiserv Inc.
Travel services
C-GHBS Inc.
Capital Expenditures
Purchases of logistics and transportation equipment
Logiserv Inc.
-
360
1,180
-
-
19
66
31
14
-
-
-
188
-
-
12
319
4,918
2,261
1,771
1,532
29
67
20
534
27
-
492
189
35
12
32
12
273
21
682
167
469
813
25
-
4,166
1,875
1,447
1,468
64
174
-
88
Page | 40
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
21. Related parties (continued)
Trade receivables due from related parties
AWA Transportation Services & Logistics Inc.
Andlauer Properties and Leasing Inc.
Med Express Ltd.
1708998 Ontario Limited (Medical Courier Services)
Total trade receivables
Due from related parties
Andlauer Management Group Inc.
Andlauer Properties and Leasing Inc.
Former T.F. Boyle Transportation shareholders
Total due from related parties
Trade payables due to related parties
Ready Staffing Solutions Inc.
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
Logiserv Inc.
Due to related parties
Andlauer Properties and Leasing Inc.
Former Skelton Canada Inc. shareholders
Total due to related parties
Key management personnel
December 31,
2021
December 31,
2020
$
$
$
$
-
74
2
32
108
16
-
92
108
216
343
302
-
7
652
254
1,032
1,286
1,938
$
$
$
$
1
20
-
3
24
10
371
-
381
405
23
18
24
21
86
-
-
-
86
The Company’s key management personnel, and persons connected with them, are also considered to be
related parties for disclosure purposes. Key management personnel are defined as those individuals having
authority and responsibility for planning, directing and controlling the activities of the Company and include
the Company’s CEO, four named executive officers comprising key management and the Board of Directors.
Key management personnel compensation comprised the following:
Key management compensation
Salaries and benefits
Share-based payment arrangements
Director deferred share units
Total key management compensation
December 31,
2021
December 31,
2020
$
$
3,310
1,232
629
5,171
$
$
3,223
1,366
707
5,296
Page | 41
89
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
22. Capital management
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Management monitors the return on capital,
as well as the level of dividends and distributions to ordinary shareholders.
The Board of Directors seeks to maintain a balance between the higher returns that might be possible with
higher levels of borrowing and the advantages and security afforded by a sound capital position. The Company
monitors capital using a net leverage ratio, calculated as net debt divided by the last twelve months’ earnings
before interest, taxes, depreciation and amortization (“EBITDA”). The Company seeks to keep its net leverage
ratio below 3.0 in the ordinary course of business.
Revolving credit facility
Total lease liabilities
Term facility
Less: cash and cash equivalents
Net debt
Net income
Interest income
Interest expense
Income tax expense
Depreciation and amortization
EBITDA
Net leverage ratio
23. COVID-19 pandemic
December 31,
2021
December 31,
2020
$
$
11,000
126,963
49,288
(24,990)
162,261
89,954
(198)
6,219
18,486
42,716
157,177
-
104,946
24,667
(30,148)
99,465
37,714
(285)
4,595
8,866
28,022
78,912
1.03
1.26
On March 11, 2020 the outbreak of a novel coronavirus known as “COVID-19” was declared a global pandemic
by the World Health Organization. This has resulted in governments worldwide, including the Canadian federal
and provincial governments, enacting emergency measures to combat the spread of the virus. These measures,
which include the implementation of travel restrictions, self-imposed quarantine periods, temporary closures
or restrictions of non-essential businesses, limitations on public gatherings, and social distancing guidelines,
have caused material disruption to businesses globally and in Canada resulting in an economic slowdown.
Governments and central banks have reacted with significant monetary and fiscal interventions designed to
stabilize economic conditions; however, the success of these interventions is not currently determinable.
Depending on the duration of the pandemic, or if the pandemic were to worsen, existing emergency measures
may be extended, or additional restrictive measures may be implemented, causing further economic impact
and uncertainty. The current challenging economic climate may lead to adverse changes in cash flows, working
capital levels and/or debt balances, which may also have a direct impact on the Company’s operating results
and financial position in the future.
90
Page | 42
Andlauer Healthcare Group Inc. – 2021 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(In thousands of Canadian dollars, except shares, share price and earnings per share)
23. COVID-19 pandemic (continued)
The Company’s pandemic management response team meets regularly to review procedures, service levels,
news, and Health Canada updates to address any challenges as they arise. At this time, management does not
believe there is any immediate risk of significant disruption to the Company’s services. In the event of a future
significant disruption to service, the Company will work closely with clients, suppliers and regulatory authorities
to prioritize the supply and delivery of essential medications and supplies.
The Government of Canada introduced the Canada Emergency Wage Subsidy (“CEWS”) as part of its COVID-19
response. The program was effective from March, 2020 to October, 2021 and provided a wage subsidy for
entities that experienced revenue declines over the comparable period in the prior year. During the year ended
December 31, 2021, the Company recorded a $1,209 (2020 – $2,366) reduction to direct operating expenses
in connection with the CEWS for its Nova Pack Ltd. subsidiary.
24. Subsequent event
On March 1, 2022, the Company acquired 100% of the issued and outstanding shares of Logistics Support Unit
(LSU) Inc. (“LSU”) for consideration of approximately $30,000, before customary working capital adjustments.
LSU is a third-party logistics provider offering specialty pharmacy, warehousing, distribution and order
management services throughout Canada to national and international companies as well as government
clients in the pharmaceutical, medical and biotechnology sectors.
AHG financed the acquisition through the issuance of 154,639 subordinate voting shares and cash of
approximately $22.5 million. The Company financed the cash portion of the purchase price through a
combination of cash on hand and by drawing on its credit facilities.
Page | 43
91
Andlauer Healthcare Group Inc. – 2021 Annual Report
Notes
92
Andlauer Healthcare Group Inc. – 2021 Annual Report Notes
93
Andlauer Healthcare Group Inc. – 2021 Annual Report Shareholder Information
Shares Outstanding (As at March 2, 2022)
Total Subordinate Voting Shares (“SVS”): 18,223,429
Total Multiple Voting Shares: 23,600,000
Stock Exchange Listing
Andlauer Healthcare Group’s SVS are listed on the
Toronto Stock Exchange under the symbol “AND”
Investor Contacts
Peter Bromley
Chief Financial Officer
T: 416-744-4916
E: Investor.relations@andlauer.ca
Bruce Wigle
Investor Relations
T: 647-496-7856
E: Investor.relations@andlauer.ca
Registrar and Transfer Agent
TMX Trust Company
Auditor
KPMG LLP
Legal Counsel
Goodmans LLP
Virtual Annual General Meeting
Thursday, May 5, 2022, at 10 a.m. (ET)
www.andlauerhealthcare.com
94
Andlauer Healthcare Group Inc. – 2021 Annual Report Executive Team
Michael Andlauer
Chief Executive Officer
Peter Bromley, CPA, CA
Chief Financial Officer
Stephen Barr
President, Transportation
Bob Brogan
President, Specialty Solutions
Dean Berg
President, Logistics
Board of Directors
Peter Jelley
Chair
Rona Ambrose 1, 2, 3
Lead Director
Michael Andlauer
Director and Chief Executive Officer
Andrew Clark 1, 2
Director
Cameron Joyce
Director
Joseph Schlett, CPA, CA 1
Director
Evelyn Sutherland, FCPA, FCA 1, 2*, 3
Director
Thomas Wellner 1, 3*
Director
Independent director
1
2 Member of Compensation, Nominating & Governance Committee
3 Member of the Audit Committee
* Denotes Committee Chair
100 Vaughan Valley Blvd.
Vaughan, Ontario
L4H 3C5
www.andlauerhealthcare.com
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