ANNUAL
REPORT
2023
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 returned to a more normalized operating environment following the COVID-19 pandemic. During this time, we focused on
integrating businesses we have acquired since our initial public offering, realizing synergies across our operations;
/ We generated revenue of $648.0 million, consistent with Fiscal 2022, and an EBITDA margin of 25.3%, which is within our
historical range of 24% to 26%;
/ We initiated a 35,000 square-foot expansion at our Logistics Support Unit facility in Laval, Québec (completed in January 2024);
/ We increased our quarterly dividend twice in Fiscal 2023 and again subsequent to year end, bringing it from $0.07 per share at
the end of 2022 to the current level of $0.10 per share;
/ During 2023, we purchased and cancelled approximately 475,000 subordinate voting shares, for a total of approximately
$18.8 million, in support of future accretive earnings growth for shareholders; and
/ We repaid $25.0 million of debt and finished the year with a strong balance sheet, thereby enhancing our financial flexibility to
pursue further opportunities to expand our platform.
FINANCIAL PERFORMANCE
/ Revenue
($ millions)
/ Operating Income
($ millions)
/ EBITDA ($ millions)(1, 2)
and Margin (%)(2)
/ Net Income(2)
($ millions)
648.4
648.0
110.3
174.5
163.8
440.1
73.7
96.1
119.3
27.1%
26.9%
25.3%
52.0
76.3
66.1
2021
2022
2023
2021
2022
2023
2021
2022
2023
2021
2022
2023
(1)
(2)
EBITDA is defined as net income for the period before: (i) income tax expense; (ii) interest income; (iii) interest expense; and (iv) depreciation and amortization.
The EBITDA, EBITDA Margin and net income figures provided above exclude the gain of $37.9 million on the step acquisition of 51% of Skelton USA Inc. in Fiscal 2021. Including the gain, EBITDA for Fiscal 2021
was $157.2 million, EBITDA Margin was 35.7%, and net income was $90.0 million.
F E L LOW S H A R E H O L D E RS,
On behalf of our Board of Directors, senior
management, and our team of more than
2,300 personnel and owner/operators
across Canada and the United States,
I am pleased to present the Andlauer
Healthcare Group 2023 Annual Report.
Michael Andlauer
Chief Executive Officer
In Fiscal 2023, we experienced a return to a more normalized operating environment following the
COVID-19 pandemic. We benefitted from significant operating tailwinds in 2022, including temporarily
inflated U.S. truckload premiums, increased air freight forwarding volumes and significant COVID
vaccine related contributions. Despite the absence of these pandemic-related tailwinds in 2023,
as well as reduced fuel surcharge revenue, our consolidated revenue of $648 million for the year
was consistent with 2022. Our revenue total for 2023 also represents an increase of 47.2% from
$440.1 million in 2021, demonstrating the positive impact of our acquisitions. Our EBITDA margin for
2023 was 25.3%, comfortably within our historical range of 24% to 26%, but down from 26.9% in 2022.
Net income for 2023 totaled $66.1 million, or $1.55 per
share (diluted), compared to $76.3 million, or $1.79 per
share (diluted), in 2022. Lower segment net income
before eliminations for our specialized transportation
segment, primarily attributable to reduced U.S.-based
truckload rates and related margins, and lower air freight
forwarding revenue, as well as lower outbound volume in
Accuristix, contributed to the year-over-year decline on a
consolidated basis.
We believe that pricing in the U.S. ground transportation
market has now stabilized. Going forward, our strategy
in the U.S. will be more focused on leveraging our core,
specialized competencies in temperature, security, and
quality control with certain customers and / or high-value
products that are not as susceptible to fluctuations in U.S.
spot rates. We are determined to drive incremental margin
growth in the U.S. from where we are today, but we do not
expect to return to the premium levels we experienced
during the pandemic. We continue to generate solid
organic growth in our Canadian ground transportation
network, and we expect this to continue.
While we experienced lower outbound order handling
activities for Accuristix the past few quarters, we expect
the 35,000 square-foot expansion at our Logistics Support
Unit facility in Laval, Québec, just north of Montréal, which
was completed in January this year, to improve our logistics
and distribution product line performance in 2024.
Throughout 2023, we focused on further integrating
the businesses we acquired since our IPO and realizing
synergies across our operations. We also continued to
selectively evaluate strategically compelling acquisition
opportunities that leverage or expand our differentiated
capabilities. While we elected not to close on any of these
acquisition targets in 2023, we will continue with these
efforts throughout 2024, focusing on opportunities that
strengthen our existing service offering or broaden our
Letter to Shareholders (continued)
service offering to further enhance our clients’ connection
to our platform, while maintaining our disciplined
approach with respect to both financial valuation and
operating metrics.
We finished the year with a strong balance sheet.
Following the repayment of $25 million on our Term
Facility during the third quarter, we finished the year with
only $25 million outstanding under our Term Facility, and
nil under our Revolving Facility.
low debt
Our
levels, combined with the continued
strong cash generation of our business, provided us
with enhanced flexibility to be active with our normal
course issuer bid (“NCIB”). At year end, we had purchased
and cancelled approximately 475,000 subordinate
voting shares, for a total of approximately $18.8 million,
pursuant to the NCIB. We believe our activity in executing
the NCIB represented an attractive, accretive path for
capital allocation and supports the best interests of our
shareholders over the long term.
We also implemented two increases to our quarterly
dividend during 2023, increasing our payout from $0.07
per share in the fourth quarter of 2022 to $0.08 per share
in the first quarter of 2023, and to $0.09 per share in
the third quarter. Effective for the first quarter of 2024,
our Board approved a further increase to our quarterly
dividend to $0.10 per share.
Despite our debt repayment, NCIB expenditures, and
dividend increases, we had cash and cash equivalents of
$59.7 million and working capital of $105.6 million at 2023
year-end, further underlining the enduring strong cash
generation and profitability of our business.
Spending on healthcare logistics and transportation has
been outpacing GDP growth in both Canada and the United
States, and this trend is expected to continue, supported
by favourable demographics, 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 well positioned
to capitalize on growth opportunities in this large, stable,
and growing market to further enhance our customer
value proposition, strengthen our unique culture, and
build shareholder value.
Andlauer Healthcare Group is a vital link in Canadian
healthcare, and we will continue to pursue opportunities
to expand our unique position in supporting the Canadian
healthcare system.
In closing, I want to thank our dedicated team of people
that fortify our exceptional platform of companies, and
our Board of Directors for their strategic contributions
and governance oversight. And to our shareholders, 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, 2023
March 5, 2024
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Andlauer Healthcare Group Inc. – 2023 Annual Report
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Information .................................................................................. 3(cid:3)
Basis of Presentation ................................................................................................................................................ 5(cid:3)
Non-IFRS Measures ................................................................................................................................................. 5(cid:3)
Overview................................................................................................................................................................... 6(cid:3)
Summary of Factors Affecting Performance ........................................................................................................... 7(cid:3)
How We Assess the Performance of Our Business ................................................................................................ 11(cid:3)
Selected Consolidated Financial Information ........................................................................................................ 14(cid:3)
Reconciliation of Non-IFRS Measures ................................................................................................................... 16(cid:3)
Results of Operations ............................................................................................................................................. 16(cid:3)
Summary of Quarterly Results .............................................................................................................................. 23(cid:3)
Liquidity & Capital Resources............................................................................................................................... 24(cid:3)
Cash Flows ............................................................................................................................................................. 27(cid:3)
Contractual Obligations ......................................................................................................................................... 28(cid:3)
Off-Balance Sheet Arrangements .......................................................................................................................... 29(cid:3)
Seasonality .............................................................................................................................................................. 29(cid:3)
Financial Instruments ............................................................................................................................................ 29(cid:3)
Related Party Transactions .................................................................................................................................... 30(cid:3)
Critical Accounting Judgements and Estimates .................................................................................................... 33(cid:3)
Significant New Accounting Standards ................................................................................................................. 34(cid:3)
Accounting Classifications and Fair Values .......................................................................................................... 34(cid:3)
Risk Factors............................................................................................................................................................ 34(cid:3)
Outstanding Share Data ......................................................................................................................................... 35(cid:3)
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting ....................................... 36(cid:3)
Additional Information .......................................................................................................................................... 37(cid:3)
(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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, 2023 should be read in conjunction with Andlauer Healthcare
Group Inc.’s audited annual consolidated financial statements for the fiscal year ended December 31, 2023,
along with the related notes thereto. This MD&A is presented as of March 5, 2024 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 2023” are to the three
months ended December 31, 2023, “Q4 2022” are to the three months ended December 31, 2022; “Q4 2021”
are to the three months ended December 31, 2021, “Q3 2023” are to the three months ended September 30,
2023; “Q3 2022” are to the three months ended September 30, 2022; “Q2 2023” are to the three months
ended June 30, 2023; “Q2 2022” are to the three months ended June 30, 2022; “Q1 2023” are to the three
months ended March 31, 2023; “Q1 2022” are to the three months ended March 31, 2022; “Fiscal 2024” are
to the year ending December 31, 2024; “Fiscal 2023” are to the year ended December 31, 2023; “Fiscal
2022” are to the year ended December 31, 2022; and “Fiscal 2021” are to the year ended December 31,
2021.
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 expectations with respect to the coronavirus
disease (“COVID-19”). Particularly, information regarding 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, activity under the NCIB and
ASPP (each as defined below) and the markets in which we operate 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.
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Andlauer Healthcare Group Inc. – 2023 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 inflation and rising interest rates together with the threats of stagflation or recession;
the uncertainties in the global economy created by the war in Ukraine and the Israel-Hamas war;
the impact of variation in the value of the Canadian dollar in relation to the U.S. dollar;
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 markets;
• 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 and realize synergies;
• our ability to retain and grow revenue with 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;
the availability of equipment and drivers in the markets in which we operate;
the possibility of a cyber attack impacting our information systems;
such other factors discussed in greater detail under “Risk Factors” in this MD&A and in our Annual
Information Form dated March 5, 2024 for Fiscal 2023 (the “AIF”) which is available on our profile
on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at www.sedarplus.ca.
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.
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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-
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 refers 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 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 to EBITDA for Q4 2023, Fiscal 2023, Q4 2022, Fiscal 2022
and Fiscal 2021, please see “Reconciliation of Non-IFRS Measures” below.
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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, blood products, narcotics, precursors, active pharmaceutical
ingredients, over-the-counter, natural health, animal health, consumer health, cosmetics, health and beauty
aids, and medical devices. We integrate our uniquely designed Canada-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 and LSU brands, 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 in Canada, 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 Boyle
Transportation and Skelton USA brands (each as defined below). Boyle Transportation provides specialized
transportation services to clients in the life sciences (approximately 70-75% of revenue) and
government/defense sectors (approximately 25-30% 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. Skelton USA was
launched in 2017 and has grown by successfully leveraging its Canadian reputation and brand for expertise
in cold chain services. Skelton USA currently serves customers 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.
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Andlauer Healthcare Group Inc. – 2023 Annual Report
In our specialized transportation segment, we leverage our national infrastructure in Canada 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 31
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.
We also have four facilities in the United States.
Additional information about AHG, including our AIF, can be found on our profile on SEDAR+ at
www.sedarplus.ca 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.
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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.
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 Boyle Transportation and Skelton USA
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, under AHG’s
ownership, 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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1012)(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
UPS Supply Chain Solutions, Kuehne + Nagel and Lynden Logistics in our delivery of 3PL services, and
with UPS, FedEx, Purolator, and several regional players in the specialized transportation space in Canada.
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 and CRST.
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 offerings.
On October 5, 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 increased the reach of our services
and expanded 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.
During Fiscal 2023 we implemented a new long-term incentive plan under our Omnibus Equity Incentive
Plan dated December 11, 2019, for certain management members in order to further promote share
ownership among our employees, ensure that employees can participate in the Company’s growth through
its share price, and retain employees over the long-term.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1013)(cid:3)
9
Andlauer Healthcare Group Inc. – 2023 Annual Report
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.
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 to EBITDA.
Q4 2023 Compared to Q4 2022
Select highlights include the following:
• Revenue was $169.1 million in Q4 2023, compared to $165.8 million in Q4 2022;
• Operating income was $28.0 million in Q4 2023, compared to $28.2 million in Q4 2022;
• Net income was $18.6 million in Q4 2023, compared to $19.8 million in Q4 2022;
• Total comprehensive income for Q4 2023 was $13.5 million, compared to $17.1 million in Q4 2022;
• EBITDA was $44.8 million in Q4 2023, compared to $44.7 million in Q4 2022; and
• EBITDA Margin was 26.5% in Q4 2023, compared to 27.0% in Q4 2022.
Fiscal 2023 Compared to Fiscal 2022
Select highlights include the following:
• Revenue was $648.0 million in Fiscal 2023, compared to $648.4 million in Fiscal 2022;
• Operating income was $96.1 million in Fiscal 2023, compared to $110.3 million in Fiscal 2022;
• Net income was $66.1 million in Fiscal 2023, compared to $76.3 million in Fiscal 2022;
• Total comprehensive income was $60.7 million in Fiscal 2023, compared with $91.0 million in
Fiscal 2022;
• EBITDA was $163.8 million in Fiscal 2023, compared to $174.5 million in Fiscal 2022;
• EBITDA Margin was 25.3% in Fiscal 2023, compared to 26.9% in Fiscal 2022; and
• During Fiscal 2023, less than 1.0% of total revenue was derived from our clients that are involved in
the Canadian supply of COVID-19 vaccines, compared with approximately 3.0% in Fiscal 2022 and
approximately 4.0% in Fiscal 2021; and
• On March 1, 2022, we acquired 100% of the issued and outstanding shares of LSU for consideration
of approximately $26.7 million.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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 operates under
the brand names Accuristix and LSU; and our specialized transportation segment operates under the brand
names ATS Healthcare, ATS Dedicated, Boyle Transportation and Skelton Truck Lines. 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, also operate autonomously, as they did prior to their
respective acquisitions. Similarly, LSU, which we acquired on March 1, 2022, operates autonomously and
is included in our healthcare logistics segment. 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 (with respect to periods prior to Q3 2023) and trailers purchased by Skelton and Boyle
Transportation, our operating segments conduct their businesses in a manner that limits capital investments.
We prefer 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 (“IFRS 16”), 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.
Revenue
We generate revenue from the provision of supply chain solutions to the Canadian and United States
healthcare sectors. Across our healthcare logistics and specialized 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 and LSU brands, 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 our logistics and distribution product
line. 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,
Boyle Transportation and Skelton Truck Lines 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 as 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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
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 and LSU, on behalf of their logistics
clients, is eliminated on consolidation.
Our Boyle Transportation and Skelton USA subsidiaries provide specialized temperature-controlled services
to healthcare companies in the United States, and, in the case of Boyle Transportation, to certain defense
contractors and the U.S. Department of Defense. These companies, acquired in Fiscal 2021, align with our
specialized transportation segment in all material respects except that they focus on full truckload ground
transportation services, which traditionally realize lower margins than our ground transportation businesses
in Canada.
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. Increases or decreases in fuel prices increase or reduce the cost of transportation and
services, and will accordingly increase or reduce our revenues and may reduce or increase margins for
certain product lines. During Fiscal 2022 and Fiscal 2023, fluctuations in diesel fuel prices have impacted
both revenue and cost of transportation and services more significantly than in prior periods.
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
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 and LSU,
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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1006)(cid:3)
12
Andlauer Healthcare Group Inc. – 2023 Annual Report
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). In accordance with IFRS 3 – Business Combinations (“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 being recognized from the step acquisition in Fiscal 2021.
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 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 investee. From November 1, 2021 forward, Skelton USA is consolidated with AHG in accordance
with IFRS 10 – Consolidated Financial Statements.
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 Fiscal 2021, we sub-leased a
facility to a third party that had previously been classified as a right-of-use asset. We derecognized the 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 (losses) 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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1007)(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
provision.
Foreign Currency Translation Adjustment
In preparing our 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 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 our financial statements 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 $37.9 million being recognized from the step acquisition in Fiscal 2021. For comparative purposes
with other periods, we have presented EBITDA and EBITDA Margin excluding the gain on step acquisition
in this MD&A for Fiscal 2021.
EBITDA Margin
We define EBITDA Margin as EBITDA divided by revenue. EBITDA Margin represents a measure of our
profitability expressed as a percentage of revenue.
We believe EBITDA Margin is a useful measure to assess our financial performance because it helps
quantify our ability to convert revenues generated from clients into EBITDA.
Selected Consolidated Financial Information
The following table summarizes our results of operations for the periods indicated. The selected consolidated
financial information for Q4 2023, Q4 2022, Fiscal 2023, Fiscal 2022 and Fiscal 2021 has been derived from
our consolidated financial statements and the related notes thereto. See “Reconciliation of Non-IFRS
Measures” for quantitative reconciliations of net income to EBITDA.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
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Andlauer Healthcare Group Inc. – 2023 Annual Report
Consolidated Statements of Income and Comprehensive Income
($CAD 000s)
Revenue
Logistics & distribution
Packaging solutions
Healthcare Logistics segment
Ground transportation
Air freight forwarding
Dedicated and last mile delivery
Three Months Ended
December 31,
2023
2022
40,851
3,269
44,120
37,911
3,925
41,836
113,607
113,057
8,013
18,324
7,549
17,354
Year Ended
December 31,
2022
2021
155,575
115,255
21,290
176,865
422,236
34,383
66,896
20,072
135,327
261,870
29,214
52,260
2023
159,168
16,761
175,929
429,174
30,595
68,821
Intersegment revenue
(14,997)
(14,024)
(56,567)
(51,957)
(38,556)
124,947
169,067
123,936
165,772
472,023
647,952
471,558
648,423
304,788
440,115
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 (expense) income
Income tax expense
Net income
Other comprehensive income
Net income
Foreign currency translation adjustment
Total comprehensive income
Earnings per share
Earnings per share – basic
Earnings per share – diluted
Select financial metrics1
EBITDA1
EBITDA Margin1
EBITDA1 excluding gain on step
acquisition
EBITDA Margin1 excluding gain on step
acquisition
85,790
25,083
12,829
17,321
141,023
28,044
-
-
86,336
20,989
13,826
16,455
137,606
28,166
-
-
(2,476)
(1,867)
396
63
(6,934)
19,824
19,824
(2,772)
17,052
770
(592)
(7,185)
18,561
18,561
(5,021)
13,540
$ 0.45
$ 0.44
44,773
26.5%
328,493
103,829
51,428
68,149
551,899
96,053
-
-
(8,207)
3,170
(409)
322,844
102,280
48,502
64,452
538,078
110,345
-
-
(6,858)
599
(328)
201,784
84,861
37,051
42,716
366,412
73,703
37,921
2,469
(6,219)
198
368
(24,467)
(27,483)
(18,486)
66,140
76,275
89,954
66,140
(5,448)
60,692
76,275
14,743
91,018
89,954
2,889
92,843
$ 0.47
$ 0.46
$ 1.58
$ 1.55
$ 1.82
$ 1.79
$2.30
$2.25
44,684
27.0%
163,793
25.3%
174,469
26.9%
157,177
35.7%
44,773
44,684
163,793
174,469
119,256
26.5%
27.0%
25.3%
26.9%
27.1%
1 These are non-IFRS financial measures. See “How We Assess the Performance of Our Business – Non-IFRS Measures” for further information
on these measures.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1009)(cid:3)
15
Andlauer Healthcare Group Inc. – 2023 Annual Report
Consolidated Balance Sheets
($CAD 000s)
Select financial position data
Total assets
Total non-current liabilities
As At December 31,
2023
2022
2021
682,426
143,364
712,460
185,690
644,169
201,521
Consolidated Statements of Changes in Equity
($CAD 000s)
Select financial data
Dividends
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
2021
3,732
2,934
14,202
10,883
7,854
Reconciliation of Non-IFRS Measures
The following table provides a reconciliation of net income to EBITDA for the periods indicated:
($CAD 000s)
Net income
Income tax expense
Interest expense
Interest income
Depreciation and amortization
EBITDA1
Gain on step acquisition of equity-
accounted investee
Three Months Ended
December 31,
2023
18,561
7,185
2,476
(770)
17,321
44,773
2022
19,824
6,934
1,867
(396)
16,455
44,684
Year Ended
December 31,
2022
76,275
27,483
6,858
2021
89,954
18,486
6,219
(599)
(198)
64,452
174,469
42,716
157,177
2023
66,140
24,467
8,207
(3,170)
68,149
163,793
-
-
-
-
(37,921)
EBITDA1 excluding gain on step acquisition
44,773
44,684
163,793
174,469
119,256
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, 2023 compared with 2022
The following section provides an overview of our financial performance for Q4 2023 compared to Q4 2022.
Revenue
Revenue for Q4 2023 increased by 2.0% to $169.1 million, compared with $165.8 million in Q4 2022. The
increase is primarily attributable to organic growth in our Canadian transportation network, partially offset
by lower fuel surcharge revenue, a decline in our US-based truckload rates and reduced revenue related to
COVID-19 vaccines and ancillary products. Our COVID-19 related revenue declined to approximately
1.0% of consolidated revenue in Q4 2023, compared to approximately 2.3% in Q4 2022. The increase in
revenue was also impacted by the Q4 2022 reclassification of pass-through expenses in our logistics and
distribution product line as discussed below.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1010)(cid:3)
16
Andlauer Healthcare Group Inc. – 2023 Annual Report
Healthcare Logistics Segment
Revenue in our healthcare logistics segment for Q4 2023 was $44.1 million, an increase of 5.5%, or
approximately $2.3 million, compared with Q4 2022. The increase in revenue for this segment was primarily
driven by the factors set out below.
Logistics & Distribution
Logistics and distribution revenue for Q4 2023 was $40.9 million, an increase of 7.8%, or approximately
$2.9 million, compared with Q4 2022. The increase is primarily attributable to a reclassification of
approximately $5.1 million of certain pass-through expenses to logistics and distribution revenue for LSU
in accordance with IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”) during Q4 2022. This
net revenue treatment has been consistently applied during Fiscal 2023.The increase was partially offset by
lower outbound order handling and transportation activities for Accuristix and a decline in revenue related
to COVID-19 vaccines and ancillary products.
Packaging Solutions
Packaging revenue for Q4 2023 was $3.3 million, a decrease of 16.7%, or approximately $0.7 million,
compared with Q4 2022. The decline in packaging revenue primarily reflects the loss of one of our customers
in Q1 2023, and lower volume from our remaining base of customers compared to Q4 2022.
Specialized Transportation Segment
Revenue in our specialized transportation segment for Q4 2023 was $124.9 million, an increase of 0.8%, or
approximately $1.0 million, compared with Q4 2022. Revenue in this segment was primarily driven by the
factors set out below.
Ground Transportation
Ground transportation revenue for Q4 2023 was $113.6 million, an increase of 0.5%, or approximately $0.6
million, compared with Q4 2022. The increase is primarily attributable to organic growth in our Canadian
transportation network, partially offset by a decline in our US-based truckload rates, reduced revenue related
to COVID-19 vaccines and ancillary products, and lower fuel costs passed through to customers as a
component of our pricing compared to Q4 2022. Ground transportation revenue, excluding fuel, in our
Canadian network increased by approximately 6.3%. We continued to experience a year-over-year decline
in our US-based truckload rates as opportunities to obtain rate premiums in Fiscal 2022 due to pandemic-
related equipment and driver shortages have diminished. We believe that our US-based revenue and related
margins have returned to more normalized levels in Fiscal 2023 and we do not foresee a return to the
premiums we generated in Fiscal 2022, which may impact our comparative growth and margins in future
periods.
Air Freight Forwarding
Air freight forwarding revenue for Q4 2023 was $8.0 million, an increase of 6.1%, or approximately $0.5
million, compared to Q4 2022, as our clients shipped approximately 1.3% more weight in Q4 2023 compared
with Q4 2022. This increase was partially offset by a lower volume of shipments.
Dedicated and Last Mile Delivery
Dedicated and last mile delivery revenue for Q4 2023 was $18.3 million, an increase of 5.6%, or
approximately $1.0 million, compared with $17.4 million for Q4 2022. The increase reflects organic growth,
partially offset by a reduction in fuel surcharge revenue.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1011)(cid:3)
17
Andlauer Healthcare Group Inc. – 2023 Annual Report
Cost of Transportation and Services
Cost of transportation and services for Q4 2023 was $85.8 million, or 50.7% of revenue, compared with
$86.3 million, or 52.1% of revenue, for Q4 2022. Lower fuel costs in line with decreases in revenue related
to fuel prices were largely offset by increased costs of transportation and services attributable to organic
growth in our Canadian ground transportation network.
Direct Operating Expenses
Direct operating expenses were $25.1 million, or 14.8% of revenue, compared with $21.0 million, or 12.7%
of revenue, for Q4 2022. The increase is primarily attributable to the impact of the reclassification of certain
pass-through expenses in Q4 2022 to logistics and distribution revenue for LSU in accordance with IFRS
15, resulting in comparatively lower direct operating expenses for Q4 2022. This net revenue treatment has
been consistently applied during Fiscal 2023. The increase in direct operating expenses in Q4 2023 was
partially offset by a reduction in outbound order handling activities for Accuristix in line with lower revenue.
Selling, General and Administrative Expenses
SG&A expenses for Q4 2023 were $12.8 million, or 7.6% of revenue, compared with $13.8 million, or 8.3%
of revenue, for Q4 2022. Our SG&A expenses are in line with our expected operating ratio as a percentage
of revenue.
Depreciation and Amortization
Depreciation and amortization for Q4 2023 was $17.3 million, an increase of 5.3% compared with $16.5
million for Q4 2022. The increase was primarily attributable to investments in facilities and equipment to
support our growth and the total amount is consistent as a percentage of our revenue at approximately 10%
to 11%.
Interest Expense
Interest expense for Q4 2023 was $2.5 million compared with $1.9 million for Q4 2022. Interest expense
related to leased facilities and equipment comprises the majority of interest expense; however, $0.6 million
of interest expense for Q4 2023 was incurred in connection with our Credit Facilities, compared with $0.7
million in Q4 2022. The decrease was attributable to lower amounts drawn on our Credit Facilities, offset
by increased interest rates.
At this time, 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 either early repayment or maturity on March 1, 2025.
Interest Income
Interest income for Q4 2023 was $0.8 million compared with approximately $0.4 million in Q4 2022. Interest
income is generated on our cash and cash equivalents balances and has increased with higher interest rates.
Other Income/Expense
Other expense was $0.6 million for Q4 2023, compared with other income of approximately $0.1 million in
Q4 2022. These amounts vary from quarter to quarter are not material to our overall performance for Q4
2023 and Q4 2022.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1012)(cid:3)
18
Andlauer Healthcare Group Inc. – 2023 Annual Report
Income Tax Expense
Income tax expense for Q4 2023 was $7.2 million compared with $6.9 million in Q4 2022. Our effective
tax rate was close to the statutory rate of 26.5% for Q4 2023 and Q4 2022 after adjusting for non-deductible
items such as share-based compensation expenses, taxes relating to previous years, and other negligible
adjustments.
Operating Income and Net Income
Operating income for Q4 2023 was $28.0 million, a decrease of $0.2 million, or 0.4%, compared with $28.2
million for Q4 2022. The net decrease in operating income was primarily attributable to lower contributions
from our Boyle Transportation and Skelton USA operations.
Income before tax for the specialized transportation segment was $20.0 million for Q4 2023 compared with
$20.3 million for Q4 2022. The decrease was primarily attributable to lower contributions from Boyle
Transportation and Skelton USA, mostly offset by organic growth in our Canadian specialized transportation
businesses.
Income before tax for the healthcare logistics segment was $4.7 million for Q4 2023 compared with $6.0
million for Q4 2022. The decrease reflects reduced outbound order handling and transportation activities in
line with the decrease in revenue for the period.
Net income for Q4 2023 was $18.6 million compared with $19.8 million in Q4 2022. Lower segment net
income before eliminations for our specialized transportation segment was primarily attributable to lower
contributions from Boyle Transportation and Skelton USA; and lower segment net income from our
healthcare logistics operating segment reflects reduced outbound order handling and transportation activities
as discussed above.
Foreign Currency Translation Adjustment
Foreign exchange differences of $(5.0) million and $(2.8) million have been recognized in other
comprehensive income for Q4 2023 and Q4 2022, respectively. These differences reflect assets and
liabilities of Boyle Transportation and Skelton USA which have been translated to Canadian dollars at the
exchange rates as at December 31, 2023 and 2022, respectively, and revenues and expenses which have been
translated to Canadian dollars at exchange rates that approximate those on the date of the underlying
transactions. Foreign exchange rates averaged approximately $1.3619 during Q4 2023 and approximately
$1.3580 during Q4 2022.
Total Comprehensive Income
Total comprehensive income was $13.5 million for Q4 2023 compared to $17.1 million for Q4 2022. Total
comprehensive income differs from net income due to our foreign operations (Boyle Transportation and
Skelton USA) resulting in foreign currency translation adjustments as described above.
EBITDA
EBITDA for Q4 2023 was $44.8 million compared with $44.7 million for Q4 2022. The increase was due
to the factors discussed above and primarily reflects organic growth in our Canadian specialized
transportation network, partially offset by lower contributions from our US-based truckload businesses,
reduced outbound order handling and transportation activities for Accuristix and lower revenue related to
COVID-19 vaccines and ancillary products.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1005)(cid:1013)(cid:3)
19
Andlauer Healthcare Group Inc. – 2023 Annual Report
EBITDA Margin
EBITDA Margin for Q4 2023 was 26.5% compared with 27.0% for Q4 2022. The decrease was primarily
attributable to lower margins in our US-based truckload businesses, partially offset by new business growth in our
Canadian specialized transportation network. The performance of our two operating segments continues to
result in strong and industry-leading EBITDA Margins. The margin profiles of Boyle Transportation and
Skelton USA, which were in line with our consolidated EBITDA range throughout Fiscal 2022, have been
impacted in Fiscal 2023 by post-pandemic macroeconomic factors, such as increased equipment and driver
availability, resulting in fewer opportunities to obtain rate premiums. We believe that our US-based
truckload rates and related margins have returned to more normalized levels in Fiscal 2023, and we do not
foresee a return to the premium levels we generated in Fiscal 2022, which may impact our comparative
growth and margins in future periods.
Year ended December 31, 2023 compared with 2022
The following section provides an overview of our financial performance for Fiscal 2023 and Fiscal 2022.
Revenue
Revenue for Fiscal 2023 decreased by 0.1% to $648.0 million, compared with $648.4 million in Fiscal
2022. Revenue attributable to organic growth in our Canadian specialized transportation business accounted
for an increase of approximately $14.0 million from Fiscal 2022 to Fiscal 2023, which was offset by lower
fuel surcharge revenue, downward pressure on our US-based truckload rates, reduced revenue related to
COVID-19 vaccines and ancillary products, and a revenue decline in our packaging business.
Healthcare Logistics Segment
Revenue in our healthcare logistics segment for Fiscal 2023 was $175.9 million, a decrease of 0.5%, or
approximately $0.9 million, compared with Fiscal 2022. The decline in revenue in this segment was
primarily driven by the factors set out below.
Logistics & Distribution
Logistics and distribution revenue for Fiscal 2023 was $159.2 million, an increase of 2.3%, or
approximately $3.6 million, compared with $155.6 million in Fiscal 2022. Approximately $5.5 million of
the increase was attributable to a full year contribution from LSU (acquired on March 1, 2022), and
approximately $2.8 million was attributable to organic growth. These increases were partially offset by
approximately $4.7 million of reduced revenue related to COVID-19 vaccines and ancillary products.
Packaging Solutions
Packaging revenue for Fiscal 2023 was $16.8 million, a decrease of 21.3%, or approximately $4.5 million,
compared with Fiscal 2022. The decline in packaging revenue reflects the loss of a customer in Q1 2023 and
reduced volume from our remaining base of customers during Fiscal 2023.
Specialized Transportation Segment
Revenue in our specialized transportation segment for Fiscal 2023 was $472.0 million, an increase of 0.1%,
or approximately $0.5 million, compared with $471.6 million in Fiscal 2022. The increase in revenue in this
segment was primarily driven by the factors set out below.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1004)(cid:3)
20
Andlauer Healthcare Group Inc. – 2023 Annual Report
Ground Transportation
Ground transportation revenue for Fiscal 2023 was $429.2 million, an increase of 1.6%, or approximately
$6.9 million, compared with Fiscal 2022. The increase was attributable to organic growth for ATS
Healthcare and Skelton Canada, partially offset by lower truckload revenue from our US subsidiaries, Boyle
Transportation and Skelton USA, and reduced revenue related to COVID-19 vaccines and ancillary
products. Increases in fuel-related revenue driven by increased fuel surcharges in Q1 2023 were offset by
decreases in fuel related surcharges in the remainder of Fiscal 2023.
Air Freight Forwarding
Air freight forwarding revenue for Fiscal 2023 was $30.6 million, a decrease of 11.0%, or approximately
$3.8 million, compared with Fiscal 2022. The decrease was attributable to an approximate 16.5% volume
decline in Fiscal 2023 compared to Fiscal 2022, primarily reflecting unusually high air freight forwarding
shipment volume in Q2 2022. Air freight forwarding volume and revenue are in line with our expectations
for Fiscal 2023.
Dedicated and Last Mile Delivery
Dedicated and last mile delivery revenue for Fiscal 2023 was $68.8 million, an increase of 2.9%, or
approximately $1.9 million, compared with Fiscal 2022. The increase was attributable to expanded routes
for existing clients, partially offset by reduced fuel-related revenue passed on to clients reflecting decreased
fuel costs during Q2 2023 through Q4 2023 compared with the same periods in Fiscal 2022.
Cost of Transportation and Services
Cost of transportation and services for Fiscal 2023 was $328.5 million, or 50.7% of revenue, compared with
$322.8 million, or 49.8% of revenue, for Fiscal 2022. The increase reflects greater ground shipment volume
related to ATS Healthcare and Skelton, partially offset by lower fuel costs compared with Fiscal 2022. The
increase in operating ratio was primarily attributable to lower pricing in our US-based truckload businesses
(Boyle Transportation and Skelton USA) as opportunities to obtain rate premiums in Fiscal 2023 related to
COVID-19 tailwinds and equipment and driver shortages have diminished.
Direct Operating Expenses
Direct operating expenses for Fiscal 2023 were $103.8 million, or 16.0% of revenue, compared with $102.3
million, or 15.8% of revenue, for Fiscal 2022. The increase was primarily attributable to the full-year impact
of our acquisition of LSU on March 1, 2022.
Selling, General and Administrative Expenses
SG&A expenses for Fiscal 2023 were $51.4 million, or 7.9% of revenue, compared with $48.5 million, or
7.5% of revenue, for Fiscal 2022. The increase reflects investments in our business growth and the total
amount is in line with our expected SG&A expenses as a percentage of revenue.
Depreciation and Amortization
Depreciation and amortization for Fiscal 2023 was $68.1 million, an increase of 5.7%, or $3.7 million,
compared with $64.5 million for Fiscal 2022. The increase was primarily attributable to organic growth and
the total amount is consistent as a percentage of our revenue at approximately 10% to 11%.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1005)(cid:3)
21
Andlauer Healthcare Group Inc. – 2023 Annual Report
Other Income/Expense
Other expense for Fiscal 2023 was $0.4 million compared with $0.3 million for Fiscal 2022. These
amounts are immaterial to our overall performance for these periods.
Interest Income
Interest income for Fiscal 2023 was $3.2 million compared with $0.6 million for Fiscal 2022. Interest income
is generated on our cash and cash equivalents balances and reflects higher cash balances and interest rates
in Fiscal 2023.
Interest Expense
Interest expense for Fiscal 2023 was $8.2 million compared with $6.9 million for Fiscal 2022. Interest
expense related to leased facilities and equipment comprises the majority of interest expense; however, $3.0
million of interest expense was incurred in Fiscal 2023 in connection with the Credit Facilities, compared
to $2.0 million in Fiscal 2022. At this time, 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 on the Term Facility until either early repayment or maturity on March 1, 2025.
Income Tax Expense
Income tax expense for Fiscal 2023 was $24.5 million compared with $27.5 million for Fiscal 2022. Our
effective tax rate was close to the statutory rate of 26.5% for both Fiscal 2023 and Fiscal 2022 after removing
the effect of non-deductible share-based compensation expenses.
Operating Income and Net Income
Operating income for Fiscal 2023 was $96.1 million, a decrease of $14.3 million, or 13.0%, compared with
$110.3 million for Fiscal 2022. Approximately $10.9 million of the decrease was attributable to lower
margins in our US-based truckload businesses as described above. The remaining decrease in operating
income was attributable to lower revenue generated from COVID-19 related business, lower outbound
volume in Accuristix in Q3 2023 and Q4 2023, and lower air freight forwarding revenue in Q2 2023
compared to Q2 2022, partially offset by organic growth in our Canadian ground transportation network.
Net income for Fiscal 2023 decreased by 13.3%, or $10.1 million, to $66.1 million, from $76.3 million for
Fiscal 2022. Lower segment net income before eliminations for our specialized transportation operating
segment, primarily attributable to reduced US-based truckload rates and related margins and lower air freight
forwarding revenue in Q2 2023, contributed to our decreased profitability on a consolidated basis.
Foreign Currency Translation Adjustment
Foreign exchange adjustments of $(5.4) million and $14.7 million have been recognized in other
comprehensive income for Fiscal 2023 and Fiscal 2022, respectively. This reflects assets and liabilities of
Skelton USA and Boyle Transportation which have been translated to Canadian dollars at the exchange rates
as at December 31, 2023 and 2022, respectively, 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 attributable to the owners of the Company was $60.7 million for Fiscal 2023
compared to $91.0 million for Fiscal 2022. Total comprehensive income differs from net income due to our
foreign operations (Skelton USA and Boyle Transportation) resulting in foreign currency translation
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1006)(cid:3)
22
Andlauer Healthcare Group Inc. – 2023 Annual Report
adjustments as described above.
EBITDA
EBITDA for Fiscal 2023 decreased by 6.1% to $163.8 million, from $174.5 million for Fiscal 2022. The
decrease in EBITDA was due to the factors discussed above.
EBITDA Margin
EBITDA Margin for Fiscal 2023 was 25.3% compared with 26.9% for Fiscal 2022 and is in line with our
pre-pandemic historical range of EBITDA Margins.
Summary of Quarterly Results
While there is no significant seasonality to our business, our results are impacted by our clients’ storage and
shipping activities throughout the year as well as the timing of new client implementations or exits.
The table below sets out our results for each of the eight most recently completed quarters (unaudited):
($CAD 000s) except per share data
Q4-23
Q3-23
Q2-23
Q1-23
Q4-22
Q3-22
Q2-22
Q1-22
Total revenue
Operating income
Net income
169,067
156,754
157,357
164,774
165,772
164,898
169,402
148,351
28,044
21,724
22,595
23,690
28,166
27,860
30,157
24,162
18,561
15,335
15,716
16,528
19,824
18,995
20,985
16,471
Total comprehensive income
13,540
20,147
10,677
16,328
17,052
32,902
27,560
13,504
EBITDA1
Earnings per share – basic
Earnings per share - diluted
44,773
39,011
39,540
40,469
44,684
44,072
46,327
39,386
$0.45
$0.44
$0.37
$0.36
$0.37
$0.39
$0.47
$0.45
$ 0.50
$ 0.39
$0.37
$0.39
$0.46
$0.44
$ 0.49
$ 0.39
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.
Generally, changes in revenue generated through the past eight quarters reflect changes in shipping volumes
from our clients, variable fuel surcharge rates, premium U.S. ground transportation rates in Fiscal 2022, and
the impact of price increases which are contractually implemented in both of our operating segments annually
or as contracts are renegotiated. Our acquisitions of Boyle Transportation and the remaining 51% of Skelton
USA in Q4 2021, and LSU in Q1 2022 have driven step change increases in revenue as well.
Several factors, described above, impacted lower revenue in Q2 2023 and Q3 2023 compared to the previous
four quarters, including a decline in fuel surcharge revenues driven by lower diesel fuel prices, which are
passed on to customers as a component of our pricing. Average fuel prices increased by approximately 6%
in Q4 2023 from Q3 2023 but remained approximately 14% below levels experienced in Q4 2022. Average
fuel prices increased by approximately 10% in Q3 2023 from Q2 2023 but remained approximately 13%
below levels experienced in Q3 2022. Average diesel fuel prices declined from Q2 2022 to Q3 2022, then
increased from Q3 2022 to Q4 2022, remained relatively stable in Q4 2022 and then increased again in Q1
2023 before declining in Q2 2023.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1007)(cid:3)
23
Andlauer Healthcare Group Inc. – 2023 Annual Report
Since Fiscal 2021, we have supported the distribution of COVID-19 vaccines and related products, such as
test kits and personal protective equipment. Revenue related to COVID-19 declined as a percentage of our
total revenue throughout Fiscal 2022 from approximately 5.5% in Q2 2022 to approximately 2.3% in Q4
2022 and declined to less than 1% in Fiscal 2023. We do not expect any appreciable revenue related to
COVID-19 beyond Fiscal 2023.
Operating income, net income, comprehensive income, and EBITDA have continued to perform in line with
revenue over the past eight quarters. Fiscal 2023 EBITDA margins in our US-based truckload businesses
returned to more normalized, pre-pandemic levels and negatively impacted our consolidated margins in Fiscal
2023 relative to Fiscal 2022 by approximately 2.0%. Our EBITDA margin improved in Q4 2023 due to new
business growth in our ATS Healthcare business.
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, 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 in income from the step acquisition. Net income, total comprehensive
income, EBITDA and earnings per share figures for Q4 2021 reflect this gain.
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
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 Transportation. 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 completion of a bought deal equity offering on October 26, 2021, pursuant to which AHG issued 2.0
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1008)(cid:3)
24
Andlauer Healthcare Group Inc. – 2023 Annual Report
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.
On March 1, 2022, we acquired LSU for approximately $26.7 million. We satisfied the purchase price through
the issuance of 154,639 Subordinate Voting Shares to the shareholders of LSU and cash of approximately
$19.2 million comprising the cash portion of the purchase price net of provisional customary working capital
adjustments. We financed the cash portion of the purchase price through a combination of cash on hand and
by drawing on our Revolving Credit Facility. During Fiscal 2022, we repaid $23.0 million of the amounts
drawn on our Revolving Credit Facility in connection with the LSU and Skelton acquisitions. As at December
31, 2023, there was $nil drawn on our Revolving Credit Facility.
During Fiscal 2023, cash from operating activities continued to build our cash and cash equivalents balance.
On March 24, 2023, the Company announced a NCIB as described below. As of December 31, 2023, a total
of 474,740 Subordinate Voting Shares, for a total of approximately $18.8 million, have been purchased and
cancelled pursuant to the NCIB.
Working Capital
The following table presents our working capital position as at December 31, 2023 and 2022:
($CAD 000s)
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
Inventories
Prepaid expenses and other
Due from related parties
Accounts payable and accrued liabilities
Current portion of lease liabilities
Income taxes payable
Working Capital
As at December 31,
2023
59,740
102,206
1,230
5,329
6,605
1
(41,795)
(27,697)
-
105,619
2022
65,855
98,423
-
3,326
4,416
56
(42,918)
(26,547)
(16,313)
86,298
As at December 31, 2023, we had working capital of $105.6 million compared with working capital of $86.3
million as at December 31, 2022. The $19.3 million increase in working capital is primarily attributable to
the consistent profitability of our business, net of a $25.0 million repayment on our Term Facility as described
below.
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. On August 31, 2023, the Company repaid $25.0 million on its Term Facility. As at December 31, 2023,
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1009)(cid:3)
25
Andlauer Healthcare Group Inc. – 2023 Annual Report
the aggregate amount outstanding before financing costs under the Credit Facilities was $25.0 million under
the Term Facility and $nil 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 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. As at December 31, 2023, 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 2023 and Fiscal 2023 were $7.6 million and $23.5 million, respectively,
compared with $11.0 million and $25.7 million, for Q4 2022 and Fiscal 2022, 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 discussed further 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
expected these entities to continue their past practices, however the Company has evaluated different lease
versus purchase scenarios for its fleets in order to optimize its free cash flow and maintain operational
efficiency moving forward. Starting from Q3 2023, the Company will generally seek to lease trucks and
tractors and purchase trailers for the foreseeable future to ensure that its tractor fleet continues to run the most
fuel efficient and latest diesel engines; and will generally seek to purchase trailers to ensure that their
underlying useful lives are maximized. Beyond this evaluation, there are no known trends or expected
fluctuations in our capital resources, including expected changes in the mix and relative cost of these
resources.
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 2023 and Fiscal 2023 were $7.2 million and $12.2 million,
respectively, compared with $7.0 million and $13.3 million for Q4 2022 and Fiscal 2022, respectively. These
capital expenditures were funded through cash flows from operations.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1010)(cid:3)
26
Andlauer Healthcare Group Inc. – 2023 Annual Report
Capital Expenditures (Growth)
Growth capital expenditures comprise 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 2023 and Fiscal 2023 were $0.4 million
and $11.3 million, respectively, compared with $4.0 million and $12.5 million in Q4 2022 and Fiscal 2022,
respectively.
Growth capital expenditures can range from $5.0 million to over $15.0 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 Fiscal 2023 and Fiscal 2022 relate
primarily to the purchase of new tractors and trailers and include approximately $1.4 million in Fiscal 2023
related to warehouse equipment for a new LSU facility in Laval, Québec. Growth capital expenditures for Q4
2022 were primarily attributable to the purchase of trailers for Skelton and Boyle and warehouse equipment
for LSU.
We are implementing the Tecsys Itopia® platform, a healthcare logistics ‘software as a service’ platform, to
replace our prior warehouse management system (“WMS”). Tecsys Inc. is a supply chain management
software company, and its technology stack will provide us with updated warehouse management and
transportation management capabilities as well as end-to-end analytics and business intelligence. Our first
client went live on our new WMS in Q4 2022. Implementations continued throughout Fiscal 2023 and will
continue into Fiscal 2024. In Fiscal 2023, we capitalized $1.4 million to intangible assets in connection with
our new WMS.
Cash Flows
The following table presents cash flows for the three months and year ended December 31, 2023 and 2022:
($CAD 000s)
Cash flows
Cash from Operating Activities
Cash (used in) Financing Activities
Cash (used in) 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,
2023
2022
2023
2022
25,164
(25,263)
(7,941)
(505)
(8,545)
36,745
104,419
137,128
(10,110)
(10,928)
(535)
15,172
(86,182)
(23,848)
(504)
(6,115)
(51,587)
(45,557)
881
40,865
(7,630)
(8,182)
(11,023)
(8,506)
(23,523)
(32,358)
(25,748)
(33,822)
1 Comprises the effect of differences in exchange rates for U.S. dollar opening balance sheet cash balances on January 1, 2023 and 2022 versus
December 31, 2023 and 2022 for Boyle Transportation and Skelton USA.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1011)(cid:3)
27
Andlauer Healthcare Group Inc. – 2023 Annual Report
Cash Flow Generated From Operating Activities
Cash flow generated from operating activities for Q4 2023 and Fiscal 2023 totaled $25.2 million and $104.4
million, respectively, compared with $36.7 million and $137.1 million for Q4 2022 and Fiscal 2022,
respectively. The decrease in cash flows generated from operating activities relates principally to lower
EBITDA margins in Fiscal 2023 compared with Fiscal 2022 and normal fluctuations in trade accounts
receivable, trade accounts payable and other working capital balances. During Fiscal 2023 we made income
tax installments based on Fiscal 2022 income taxes, resulting in an over installment of income taxes for Fiscal
2023 due to reduced operating income from our US-based truckload businesses. Accordingly, the Company
has $1.2 million of income taxes receivable as at December 31, 2023.
Cash Flow Used In Financing Activities
Cash flow used in financing activities for Q4 2023 and Fiscal 2023 totaled $25.3 million and $86.2 million,
compared with $10.1 million and $51.6 million for Q4 2022 and Fiscal 2022, respectively. On March 1, 2022,
we made a $12.0 million draw on our Revolving Credit Facility in connection with the acquisition of LSU of
which we repaid $5.0 million by the end of Q3 2022. On August 31, 2023, we made a $25.0 million repayment
on our Term Facility. In Q3 2023 and Q4 2023 we purchased 107,740 and 367,000 Subordinate Voting
Shares, respectively, for $4.4 million and $14.4 million, respectively, pursuant to our NCIB as described
below. The remaining cash flows used in financing activities in Q4 2023 and Q4 2022 and Fiscal 2023 and
Fiscal 2022, respectively, relate principally to ordinary course repayments of lease liabilities and related party
balances. In Q3 2023 and Q1 2023, we increased our quarterly dividend to $0.09 (from $0.08) and to $0.08
(from $0.07) per Subordinate Voting Share and Multiple Voting Share, respectively.
Cash Flow Used In Investing Activities
Cash flow used in investing activities for Q4 2023 and Fiscal 2023 totaled $7.9 million and $23.8 million,
respectively, compared with $10.9 million and $45.6 million for Q4 2022 and Fiscal 2022, respectively. The
decrease in Fiscal 2023 compared to Fiscal 2022 was primarily attributable to our acquisition of LSU in Q1
2022 which comprised $21.8 million net of cash acquired. The remaining amounts, comprised normal course
expenditures on property, plant and equipment, and intangible assets.
Contractual Obligations
As at December 31, 2023, we had the following contractual commitments:
• Outstanding letters of guarantee in the amount of $0.4 million (December 31, 2022 – $0.4 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 2024, for total lease commitments of $12.9 million
(December 31, 2022 – $11.4 million); and
• Commitments to purchase fleet equipment expected to be delivered during Fiscal 2024 totaling $4.8
million (December 31, 2022 – $10.1 million).
Credit facilities
As at December 31, 2023, the aggregate amounts outstanding under the Credit Facilities were $25.0 million
under the Term Facility (December 31, 2022 – $50.0 million) and $nil under the Revolving Credit Facility
(December 31, 2022 – $nil) before capitalized financing costs. The Credit Facilities will mature and be due
and payable on March 1, 2025.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1012)(cid:3)
28
Andlauer Healthcare Group Inc. – 2023 Annual Report
Leases
We lease buildings and equipment in the operation of our healthcare logistics and specialized transportation
operating segments. Building lease terms range from five to 10 years, with many leases including optional
extension periods. For Fiscal 2023, facility lease liabilities are calculated using our average incremental
borrowing rate of 5.76% (Fiscal 2022 – 5.20%). Equipment lease terms range from one to seven years. For
Fiscal 2023, equipment lease liabilities are calculated using our average incremental borrowing rate of 5.94%
(Fiscal 2022 – 4.87%) for our specialized transportation segment and 5.74% (Fiscal 2022 – 5.49%) for our
healthcare logistics segment.
The following table summarizes our contractual obligations as at December 31, 2023 based on undiscounted
cash flows:
($CAD 000s)
Credit facilities
Lease liabilities
Equipment purchases and lease commitments
Other obligations
Total contractual obligations
Off-Balance Sheet Arrangements
Total
25,000
114,298
17,774
84,956
242,028
Less than 1
Year
1-5 Years
More than 5
years
-
32,285
6,836
41,795
80,916
25,000
76,377
10,938
43,161
155,476
-
5,636
-
-
5,636
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, 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.
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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1006)(cid:1013)(cid:3)
29
Andlauer Healthcare Group Inc. – 2023 Annual Report
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.
There were no foreign exchange contracts in place during Fiscal 2023 or as at December 31, 2023 or
throughout Fiscal 2022.
Related Party Transactions
Intercompany balances and transactions have been eliminated in our consolidated financial statements for the
periods ended December 31, 2023 and 2022.
During Fiscal 2023 and Fiscal 2022, 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
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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1004)(cid:3)
30
Andlauer Healthcare Group Inc. – 2023 Annual Report
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, Andlauer Management Group Inc. (“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 52.9% of the issued and outstanding
Shares and 81.8% 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 2023, we charged AMG $14 (Fiscal 2022 –
$13) for recovery of shared services costs.
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 2023, we paid $2,237 (Fiscal 2022 - $2,301) for leases
of logistics and transportation equipment; and $2,239 (Fiscal 2022 - $2,163) 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 2023, we charged APLI $19 (Fiscal 2022 -
$20) 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 2023, we paid $1,544
(Fiscal 2022 - $1,532) for this building. We expect to continue leasing this property. For Fiscal 2023, we
charged 9143-5271 Québec Inc. $32 (Fiscal 2022 - $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 2023, we expensed $6,503 (Fiscal 2022 - $6,517) for purchases of temporary agency
employee services from RSS. We expect to continue purchasing temporary agency services from RSS.
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 2023, we expensed $151 (Fiscal 2022 - $147) for deliveries subcontracted to MCS. We expect to
continue subcontracting deliveries to MCS. Similarly, in Fiscal 2023 we invoiced MCS for $215 (Fiscal 2022
- $173) for transportation services provided to MCS. For Fiscal 2023, we charged MCS $24 (Fiscal 2022 -
$13) for recovery of shared services costs.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1005)(cid:3)
31
Andlauer Healthcare Group Inc. – 2023 Annual Report
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 $20 in services during Fiscal 2023 (Fiscal 2022 - $40). 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 partially 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 2023, we expensed $nil (Fiscal 2023 - $54) for warehouse racking installation, maintenance
and repair services provided by DCR and Logiserv. We expect to continue to purchase warehouse racking
installation, maintenance and repair services from DCR and Logiserv. During Fiscal 2023, we purchased $nil
(Fiscal 2022 - $47) of warehouse racking and racking components 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 2023, we purchased $58 (Fiscal 2022 - $104)
from C-GHBS. We expect to continue to purchase air travel services from C-GHBS.
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 2023, we recorded $4,849 (Fiscal 2022 – $4,556) related to key management personnel salaries
and benefits, share-based compensation, and director fees.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1006)(cid:3)
32
Andlauer Healthcare Group Inc. – 2023 Annual Report
Due from/to related parties
The charts below summarize amounts due to or from related parties.
($CAD 000s)
Accounts receivable
Andlauer Properties and Leasing Inc.
1708998 Ontario Limited (Medical Courier Services)
Trade receivables due from related parties
Due from related parties
Andlauer Management Group Inc.
Due from related parties
Total due from related parties
Accounts payable and accrued liabilities
Ready Staffing Solutions Inc.
1708998 Ontario Limited (Medical Courier Services)
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
Logiserv Inc.
C-GHBS Inc.
As at December 31,
2023
2022
13
41
54
1
1
55
150
13
287
-
-
-
15
32
47
56
56
103
463
18
73
9
12
12
Trade payables due to related parties
450
587
Due to related parties
Andlauer Properties and Leasing Inc.
Due to related parties
Total due to related parties
206
206
656
342
342
929
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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1007)(cid:3)
33
Andlauer Healthcare Group Inc. – 2023 Annual Report
within the next financial year have been described in our consolidated financial statements for the years ended
December 31, 2023 and 2022. Key estimates and assumptions remain consistent with those disclosed in our
consolidated financial statements.
Significant New Accounting Standards
Adopted During the Period
The IASB has issued 'Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement
2)' with amendments that are intended to help preparers in deciding which accounting policies to disclose in
their financial statements. The amendments are effective for annual periods beginning on or after January 1,
2023.
We performed a review of our significant accounting policies with reference to materiality as contemplated
by IAS 1 and have listed our material accounting policies in Note 3 to our consolidated financial statements.
To be Adopted in Future Periods
There are no new or anticipated standards which will become effective in future periods that are expected to
have a material impact on our consolidated financial statements.
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.sedarplus.ca.
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
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1008)(cid:3)
34
Andlauer Healthcare Group Inc. – 2023 Annual Report
flows and the availability of borrowing facilities.
We have entered into Credit Facilities with affiliates of RBC, CIBC, and The 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 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, 2023, the aggregate amounts outstanding under the Credit
Facilities were $25.0 million under the Term Facility and $nil under the Revolving Credit Facility before
capitalized financing costs. As of the date of this MD&A, this accordion feature remains uncommitted.
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 and letters of credit, in each case, plus the applicable
margin in effect from time to time. At December 31, 2023, the Credit Facilities comprise bankers’ acceptances
drawn at an interest rate of 6.9%. Although interest rates have increased during Fiscal 2023 there has been no
significant impact on our financial condition or results of operations. There may be further increases in
interest rates in the near term as the Governing Council of the Bank of Canada continues to target 2-3%
inflation, however we expect that any such increases will not significantly impact our financial condition.
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. During Fiscal 2023 and
as at December 31, 2023 there were no derivative instruments in place.
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 5, 2024, there were 19,482,993 Subordinate Voting Shares issued and outstanding, 21,840,000
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
1,106,093 options, each of which can be exercised or settled for one Subordinate Voting Share and 56,536
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 52.9% of the issued and outstanding Shares and 81.8% of the voting power attached to all of
the Shares.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1009)(cid:3)
35
Andlauer Healthcare Group Inc. – 2023 Annual Report
On March 24, 2023, the Company announced that the TSX had approved its notice of intention to make a
normal course issuer bid (“NCIB”) for up to a maximum of 1,856,857 of its Subordinate Voting Shares, or
approximately 10% of its public float as of March 23, 2023, over the 12-month period commencing on March
29, 2023. The bid will terminate on March 28, 2024, or such earlier time as the Company completes its
purchases pursuant to the bid or provides notice of termination. In connection with the NCIB, the Company
established an automatic securities purchase plan (“ASPP”) with its designated broker that contains specified
parameters regarding how its Subordinate Voting Shares may be purchased under the NCIB during times
when the Company would ordinarily not be permitted to make such purchases due to regulatory restrictions
or self-imposed blackout periods. The Company has and may in the future, temporarily suspend the ASPP
and vary the specified purchase parameters included therein, in accordance with the terms and conditions set
forth in the ASPP. Any Subordinate Voting Shares purchased under the NCIB will be cancelled upon their
purchase. AHG intends to fund purchases out of its available cash. As of the date hereof, 618,785 Subordinate
Voting Shares have been purchased and cancelled pursuant to the NCIB.
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 $0.10 per share on an
ongoing basis. Our Q4 2023 dividend, in the amount of $0.09 per Share, was paid on January 15, 2024 to
shareholders of record as at December 29, 2023. 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.
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.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1010)(cid:3)
36
Andlauer Healthcare Group Inc. – 2023 Annual Report
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 2023 that have materially affected, or are reasonably likely
to materially affect, our ICFR.
Additional Information
Additional information about AHG, including our AIF, can be found on our profile on SEDAR+ at
www.sedarplus.ca or on our website at www.andlauerhealthcare.com.
(cid:4)(cid:374)(cid:282)(cid:367)(cid:258)(cid:437)(cid:286)(cid:396)(cid:3)(cid:44)(cid:286)(cid:258)(cid:367)(cid:410)(cid:346)(cid:272)(cid:258)(cid:396)(cid:286)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)–(cid:3)(cid:38)(cid:349)(cid:400)(cid:272)(cid:258)(cid:367)(cid:3)2023 Management’s Discussion and Analysis(cid:3)
(cid:876)(cid:876)(cid:3)(cid:87)(cid:258)(cid:336)(cid:286)(cid:3)(cid:1007)(cid:1011)(cid:3)
37
Andlauer Healthcare Group Inc. – 2023 Annual Report
Consolidated Financial Statements of
ANDLAUER HEALTHCARE
GROUP INC.
For the years ended December 31, 2023 and 2022
38
Andlauer Healthcare Group Inc. – 2023 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
To the Shareholders of Andlauer Healthcare Group Inc.
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
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, 2023 and December 31, 2022
•
•
•
•
•
•
the consolidated balance sheets as at December 31, 2023 and December 31, 2022
the consolidated statements of income and comprehensive income for the years ended
December 31, 2023 and December 31, 2022
the consolidated statements of income and comprehensive income for the years ended
December 31, 2023 and December 31, 2022
the consolidated statements of changes in equity for the years ended December 31, 2023 and
December 31, 2022
the consolidated statements of changes in equity for the years ended December 31, 2023 and
December 31, 2022
the consolidated statements of cash flow for the years ended December 31, 2023 and December
31, 2022
•
the consolidated statements of cash flow for the years ended December 31, 2023 and December
31, 2022
• and notes to the consolidated financial statements, including a summary of material accounting
policies
• and notes to the consolidated financial statements, including a summary of material accounting
(hereinafter referred to as the “financial statements”).
policies
(hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2023 and December 31, 2022, and its financial
In our opinion, the accompanying financial statements present fairly, in all material respects, the
performance and its cash flows for the years then ended in accordance with International Financial
financial position of the Entity as at December 31, 2023 and December 31, 2022, and its financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB).
performance and its cash flows for the years then ended in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the 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 “Auditors’ Responsibilities for
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
the Audit of the Financial Statements” section of our auditors’ report.
responsibilities under those standards are further described in the “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 ethical responsibilities in
We are independent of the Entity in accordance with the ethical requirements that are relevant to our
accordance with these requirements.
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 Canada provides services to KPMG LLP.
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 Canada provides services to KPMG LLP.
39
Andlauer Healthcare Group Inc. – 2023 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, 2023. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated
in our auditors’ report.
Evaluation of revenue recognition in the Healthcare Logistics Segment
Description of the matter
We draw attention to Notes 3(b) and 4 to the financial statements. The total revenues for the
Healthcare Logistics segment is $176 million. In some cases, the Entity’s contracts with customers
have multiple performance obligations that require the Entity to allocate the contractual transaction
price to the identified distinct performance obligations. The allocation of the transaction price requires
management to determine the stand-alone selling price (“SSP”) for each distinct performance
obligation.
Why the matter is a key audit matter
We identified the evaluation of revenue recognition for contracts that contain multiple performance
obligations in the Healthcare Logistics segment as a key audit matter. This matter represented an
area of higher risk of material misstatement due to the complexities of the various terms included in
each contract. Significant auditor judgment was required to identify the stand-alone selling price for
each distinct performance obligation and the timing of revenue recognition.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
• Examined a selection of revenue transactions and compared the amount of revenue recognized
to the source documentation, including invoice, proof of delivery (when applicable) and
subsequent cash receipt.
• For samples selected related to contracts that include more than one performance obligation, we
obtained the Entity’s master contract summary and tested the SSP used to invoice the customer
to evaluate the revenue recognized. We also performed testing over the master contract
summary by examining the customer contracts to assess the appropriateness of the SSP used
to bill customers for specific performance obligations.
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.
40
Andlauer Healthcare Group Inc. – 2023 Annual Report
•
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.
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.
41
Andlauer Healthcare Group Inc. – 2023 Annual Report
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
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion,
from error, as
fraud may
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditors’ report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors’ report. However, future events or conditions may cause the Entity
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the consolidated entity to express an opinion on the financial
42
Andlauer Healthcare Group Inc. – 2023 Annual Report
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 5, 2024
43
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Balance Sheets
As at December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
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
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
Total Liabilities and Equity
Note
December 31,
2023
December 31,
2022
$
6
7
21
8
9
17
$
10
18
18
17
21
11
13
15
2
20
59,740
102,206
1,230
5,329
6,605
1
175,111
911
166,200
334,919
5,285
$
65,855
98,423
‐
3,326
4,416
56
172,076
997
175,880
357,698
5,809
682,426
$ 712,460
$
41,795
27,697
‐
69,492
$
42,918
26,547
16,313
85,778
75,384
42,955
206
24,819
212,856
87,182
48,609
342
49,557
271,468
718,790
6,308
14,194
(488,916)
219,194
469,570
727,835
5,806
19,642
(488,916)
176,625
440,992
$ 682,426
$ 712,460
See accompanying notes to consolidated financial statements.
On behalf of the Board:
“Peter Jelley”
Director
“Thomas G. Wellner”
Director
44
// Page 1
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2023 and 2022
(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
Interest expense
Interest income
Other 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
Other comprehensive income (loss) for the year
Total comprehensive income for the year
See accompanying notes to consolidated financial statements.
Note
16
December 31,
2023
December 31,
2022
$ 647,952
$ 648,423
328,493
103,829
51,428
68,149
551,899
322,844
102,280
48,502
64,452
538,078
96,053
110,345
(8,207)
3,170
(409)
(6,858)
599
(328)
90,607
103,758
28,896
(4,429)
24,467
29,528
(2,045)
27,483
$
66,140
$
76,275
$
$
$
$
1.58
1.55
66,140
(5,448)
(5,448)
60,692
$
$
$
$
1.82
1.79
76,275
14,743
14,743
91,018
19
17
17
14
14
// Page 2
45
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2023 and 2022
(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, 2022
41,914
$ 727,835
$
19,642
$ (488,916) $
5,806
$ 176,625
$ 440,992
Net income and comprehensive
loss for the year
Share‐based compensation
(note 15)
Shares repurchased for
cancellation (note 13)
‐
(5,448)
‐
28
426
(475)
(9,471)
‐
‐
‐
‐
‐
‐
‐
‐
66,140
60,692
502
‐
928
‐
‐
(9,369)
(18,840)
(14,202)
(14,202)
Dividends (note 13)
‐
‐
Balance at December 31, 2023
41,467
$ 718,790
$
14,194
$ (488,916) $
6,308
$ 219,194
$ 469,570
Balance at December 31, 2021
41,669
$ 719,936
$
4,899
$ (488,916) $
4,967
$ 111,233
$ 352,119
Net income and comprehensive
income for the year
‐
‐
14,743
Shares issued in connection with
business combinations (note 5)
155
7,500
Transaction costs, net of tax
(note 5)
Share‐based compensation
(note 15)
Dividends (note 13)
‐
90
‐
(63)
462
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
839
76,275
91,018
‐
‐
‐
7,500
(63)
1,301
‐
(10,883)
(10,883)
Balance at December 31, 2022
41,914
$ 727,835
$
19,642
$ (488,916) $
5,806
$ 176,625
$ 440,992
See accompanying notes to consolidated financial statements.
46
// Page 3
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Consolidated Statements of Cash Flow
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
Operating activities
Net income for the year
Changes not involving cash:
Depreciation and amortization
Amortization of capitalized financing costs
Share‐based compensation
Deferred income tax recovery
Loss (gain) on disposal of property, plant and equipment
Changes in non‐cash operating working capital:
Trade and other receivables
Inventories
Accounts payable and accrued liabilities
Income taxes
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
Proceeds from revolving credit facility
Repayment of revolving credit facility
Repayment of term facility
Shares repurchased for cancellation
Transaction costs recorded in share capital
Cash flows used in financing activities
Investing activities
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchase of intangible assets
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,
2023
December 31,
2022
$
66,140
$
76,275
11
15
17
13
18
11
13
13
9
5
68,149
262
928
(4,429)
308
131,358
(4,109)
(2,011)
(1,011)
(17,662)
(2,146)
104,419
64,452
269
1,301
(2,045)
(48)
140,204
(2,855)
(317)
1,485
(1,716)
327
137,128
(14,202)
(27,952)
(188)
‐
‐
(25,000)
(18,840)
‐
(86,182)
(23,523)
1,744
(2,069)
‐
(23,848)
(5,611)
(504)
(10,883)
(29,034)
(607)
12,000
(23,000)
‐
‐
(63)
(51,587)
(25,748)
1,721
(2,212)
(19,318)
(45,557)
39,984
881
Cash and cash equivalents, beginning of year
65,855
24,990
Cash and cash equivalents, end of year
$
59,740
$
65,855
See accompanying notes to consolidated financial statements.
// Page 4
47
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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 21.84 million
multiple voting shares and 10,200 subordinate voting shares of AHG, representing approximately 52.7% of the
issued and outstanding shares and 81.7% of the voting power attached to all of the shares. AMG is owned and
controlled by Michael Andlauer, Chief Executive Officer, Chief Operating Decision Maker (“CODM”), 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. Material 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 5, 2024.
Common control transaction
These consolidated financial statements comprise the results of AHG and Associated Logistics Solutions
Inc., Credo Canada Systems Inc., Andlauer Specialized Transportation Inc. (formerly 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., Andlauer Specialized Transportation Inc. (formerly 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.
48
// Page 5
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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
2040637 Ontario Inc.
Accuristix Inc.
Accuristix
Andlauer Healthcare Group (USA), Inc.
Andlauer Healthcare Logistics Inc.
Andlauer Specialized Transportation Inc. (formerly 2186940 Ontario Inc.)
Associated Logistics Solutions Inc.
ATS Andlauer Transportation Services GP Inc.
ATS Andlauer Transportation Services LP
ATS Healthcare Inc. (formerly 2721275 Ontario Inc.)
Concord Supply Chain Solutions Inc.1
Credo Systems Canada Inc.
Logistics Support Unit (LSU) Inc.2
McAllister Courier Inc.
MEDDS Canada – A Medical Delivery Service Corporation1
MEDDS Winnipeg – A Medical Delivery Service Corporation
Nova Pack Ltd.
Skelton Canada Inc.
Skelton Truck Lines, Inc.
Skelton U.S.A. Inc.
T.F. Boyle Transportation, Inc.
TDS Logistics Ltd.
1
2
Entity has been dormant throughout the entire reporting period.
Acquired on March 1, 2022. Refer to note 5.
Incorporation Jurisdiction
Ontario
Canada
Ontario
Delaware
Ontario
Ontario
Ontario
Canada
Manitoba
Ontario
Delaware
Ontario
Canada
Ontario
Canada
Manitoba
Ontario
Ontario
Delaware
Ontario
Massachusetts
Ontario
// Page 6
49
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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, 2022. 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 (“ECLs”) 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. Material 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.
50
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Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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 other comprehensive income or loss and accumulated in equity in accumulated other
comprehensive income or loss.
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 or loss.
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. The Company acts as an agent on behalf of its customers for a
limited number of contracts in which certain products are purchased and sold on a pass‐through basis. In
such cases, net billings are included in revenue.
// Page 8
51
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material accounting policies (continued)
Revenue (continued)
b) Healthcare Logistics (continued)
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.
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
Facilities
Furniture and fixtures
Leasehold improvements
Logistics and transportation equipment
Depreciation Method
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 storage
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 depreciated until put into use.
52
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Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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 income 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 income 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
developed 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.
// Page 10
53
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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.
54
// Page 11
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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 income 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’, which is combined with, and nets against, other
expenses on the Company’s consolidated statements of income and comprehensive income.
// Page 12
55
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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 or loss.
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.
56
// Page 13
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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 income or loss. Any gain or loss on derecognition is recognized in income 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 trade receivables, the Company applies a simplified approach in calculating ECLs. Accordingly, 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 a trade 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 income 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 income or loss. Any gain or loss on
derecognition is also recognized in income 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 or
loss 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.
// Page 14
57
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material 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.
Vaccine inventory temporarily held for principals
The Company offers a consolidation service and acts as an agent on behalf of certain vaccine manufacturer
clients (“principals”) where end customers (primarily travel and vaccine clinics) place a single order for vaccines
sold by multiple manufacturers. The Company temporarily holds, but does not obtain control of, a limited
amount of vaccine inventory for resale at prices and other terms of sale specified by principals participating in
the consolidated vaccine distribution program. Gross billings in connection with the sale of vaccines are entirely
offset by the cost of purchases of vaccines resulting in nil net revenue for the Company related to the sale of
such vaccines.
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.
58
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Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
3. Material accounting policies (continued)
Share‐based compensation
The Company has an omnibus equity incentive plan and records all share‐based compensation, including grants
of restricted share units and 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.
// Page 16
59
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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, 2023 and 2022 and for the years then
ended:
As at December 31, 2023 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
Capital expenditures
Segment total liabilities
As at December 31, 2022 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
$ 528,590
67,061
1,343
(10,831)
(52,867)
48,993
526,282
17,224
19,012
164,617
$ 175,929
19,308
796
(1,915)
(15,282)
14,114
174,107
263
4,511
73,343
$
7,136
4,238
6,643
(1,071)
‐
3,033
680,970
‐
‐
6,320
$
(63,703)
‐
(5,612)
5,610
‐
‐
(698,933)
‐
‐
(31,424)
$ 647,952
90,607
3,170
(8,207)
(68,149)
66,140
682,426
17,487
23,523
212,856
$
523,515
81,352
(2,887)
(3,759)
(50,148)
60,102
554,903
11,810
‐
23,179
236,796
$
$ 176,865
22,247
(39)
(2,085)
(14,304)
16,265
175,528
228
5,159
2,569
88,868
5,225
159
3,525
(1,014)
‐
(92)
734,498
‐
‐
‐
30,766
$
(57,182)
‐
‐
‐
‐
‐
(752,469)
‐
$ 648,423
103,758
599
(6,858)
(64,452)
76,275
712,460
12,038
‐
‐
(84,962)
5,159
25,748
271,468
1 Includes $3,798 of ROU assets acquired through a business combination.
60
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Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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
ended December 31, 2023 and 2022.
5. Business combinations
On March 1, 2022, the Company acquired all of the issued and outstanding shares of Logistics Support Unit
(LSU) Inc. (“LSU”), a leading 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, for $26,747, the
estimated fair value of the business acquired. The acquisition was financed through a combination of cash on
hand, drawing $12,000 on the credit facilities and by issuing 154,639 subordinate voting shares totaling $7,500
to the shareholder of LSU.
For the period from acquisition on March 1, 2022 to December 31, 2022, LSU contributed revenue of $21,275
and net income before amortization of intangible assets acquired of $3,390 ($2,065 net of intangible
amortization) to the Company’s financial results. If the Company had acquired LSU on January 1, 2022,
management estimates that consolidated revenue would have been approximately $651,800, and
consolidated net income would have been approximately $78,600. In determining these amounts,
management has assumed that the fair value adjustments that arose on the dates of acquisition would have
been the same had the acquisition occurred on January 1, 2022.
During the year ended December 31, 2022, transaction costs of $345 were expensed in selling, general and
administrative expenses in the consolidated statements of income and comprehensive income and $63, net of
deferred taxes, was charged to share capital in relation to the acquisition.
The following table summarizes the final acquisition date fair value of identifiable net assets and goodwill
acquired:
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
Lease liabilities
Deferred tax liabilities
Total identifiable net assets
Goodwill
Final purchase consideration
LSU
(March 1, 2022)
(71)
$
4,636
663
140
5,159
15,900
(1,778)
(4,160)
(3,398)
(2,496)
14,595
12,152
$
26,747
// Page 18
61
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
5. Business combinations (continued)
Trade and other receivables comprise gross amounts due of $4,636, all of which were expected to be collectible
at the acquisition date.
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 LSU, and to its brand. For the year
ended December 31, 2022, the Company recorded intangible assets of $12,700 in connection with customer
relationships and $3,200 in connection with the brand of LSU. 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 brand are definite life intangible assets each of which will
be amortized over 10 years.
The goodwill is principally attributable to the premium of established business operations with a strong
reputation in healthcare logistics, and the synergies expected to be achieved from integrating LSU into the
Company’s existing business. Goodwill arising from the acquisition of LSU is allocated to the Healthcare
Logistics segment.
Of the goodwill acquired through the business combination, $4,850 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,
2023
102,799
54
(647)
December 31,
2022
$
99,232
47
(856)
$
102,206
$
98,423
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
Vaccines temporarily held for principals
Inventories
62
December 31,
2023
December 31,
2022
$
$
389
1,241
1,023
2,676
624
909
859
934
$
5,329
$
3,326
// Page 19
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
7. Inventories (continued)
During the year ended December 31, 2023, the Company purchased a total of $33,830 in inventory (2022 ‐
$22,660) and $31,821 was recognized as an expense (2022 ‐ $22,182) during the year and included in direct
operating expenses.
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, 2021
$ 155,855
$
8,664
$
21,433
$ 154,314
$ 340,266
Additions
Additions through business
combinations (note 5)
Dispositions
Foreign currency adjustments
2,744
2,756
‐
391
Balance at December 31, 2022
161,746
Additions
Dispositions
Foreign currency adjustments
2,477
‐
(144)
511
1,518
33,013
37,786
‐
(7)
18
9,186
344
‐
(8)
672
(29)
101
23,695
3,408
‐
(59)
1,731
(2,631)
1,695
5,159
(2,667)
2,205
188,122
382,749
34,781
(4,284)
(796)
41,010
(4,284)
(1,007)
Balance at December 31, 2023
$ 164,079
$
9,522
$
27,044
$ 217,823
$ 418,468
Accumulated depreciation
Balance at December 31, 2021
$
66,512
$
6,769
$
11,357
$
77,516
$ 162,154
Depreciation for the year
17,492
Dispositions
Foreign currency adjustments
Balance at December 31, 2022
Depreciation for the year
Dispositions
Foreign currency adjustments
‐
42
84,046
17,934
‐
(40)
411
(3)
1
2,437
25,013
45,353
‐
6
(991)
307
(994)
356
7,178
$
13,800
101,845
206,869
416
‐
(1)
2,625
‐
(8)
27,009
(2,232)
(304)
47,984
(2,232)
(353)
Balance at December 31, 2023
$ 101,940
$
7,593
$
16,417
$ 126,318
$ 252,268
Net carrying amounts
At December 31, 2022
At December 31, 2023
$
$
77,700
62,139
$
$
2,008
1,929
$
$
9,895
10,627
$
$
86,277
$ 175,880
91,505
$ 166,200
1 Facilities and certain logistics and transportation equipment assets are ROU assets, capitalized in accordance with IFRS
16. Refer to note 18.
// Page 20
63
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
8. Property, plant and equipment (continued)
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.
9. Goodwill and intangible assets
Goodwill
Customer
relationships
Brand
Software
Total
Cost
Balance at December 31, 2021
$ 176,737
$ 147,254
$
37,950
$
‐
‐
Additions
Additions through business
combinations (note 5)
Foreign currency adjustments
‐
9,836
6,335
12,700
6,115
Balance at December 31, 2022
192,908
166,069
Additions
‐
‐
Foreign currency adjustments
(2,348)
(2,245)
3,200
1,827
42,977
‐
(671)
7,668
2,212
‐
‐
9,880
2,069
(8)
$ 369,609
2,212
25,736
14,277
411,834
2,069
(5,272)
Balance at December 31, 2023
$ 190,560
$ 163,824
$
42,306
$
11,941
$ 408,631
Accumulated amortization
Balance at December 31, 2021
$
Amortization for the year
Foreign currency adjustments
Balance at December 31, 2022
Amortization for the year
Foreign currency adjustments
Balance at December 31, 2023
$
Net carrying amounts
‐
‐
‐
‐
‐
‐
‐
$
28,193
$
14,495
484
43,172
15,056
(453)
1,376
4,127
144
5,647
4,284
(136)
$
4,840
$
34,409
477
‐
5,317
825
‐
19,099
628
54,136
20,165
(589)
$
57,775
$
9,795
$
6,142
$
73,712
At December 31, 2022
$ 192,908
$ 122,897
At December 31, 2023
$ 190,560
$ 106,049
$
$
37,330
32,511
$
$
4,563
5,799
$ 357,698
$ 334,919
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
64
December 31,
2023
December 31,
2022
$
31,872
158,688
$
31,872
161,036
$
190,560
$
192,908
// Page 21
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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 9.3% (2022 – 8.6%) for the Healthcare Logistics segment and 10.5% (2022 – 10.3%) 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, 2023 and 2022.
During the year ended December 31, 2022, the Company acquired LSU in which its customer relationships and
its brand comprised significant value to AHG. In aggregate, $12,700 was attributed to the customer
relationships and $3,200 was attributed to the brand of LSU. 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 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
11. Credit facilities
Term facility
Less: capitalized financing costs
Credit facilities
December 31,
2023
December 31,
2022
$
$
40,379
450
966
41,194
587
1,137
$
41,795
$
42,918
December 31,
2023
December 31,
2022
25,000
25,000
(181)
50,000
50,000
(443)
$
24,819
$
49,557
// Page 22
65
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
11. Credit facilities (continued)
Recorded in the consolidated balance sheets as follows:
Revolving credit facility
Term facility
Credit facilities
The movement in credit facilities from December 31, 2023 is as follows:
Balance at December 31, 2022
Changes from financing cash flows
Repayment of term facility
Non‐cash movements
Amortization of capitalized financing costs
Balance at December 31, 2023
December 31,
2023
December 31,
2022
$
$
‐
24,819
24,819
$
$
‐
49,557
49,557
Credit
Facilities
49,557
$
(25,000)
24,557
262
$
24,819
The Company is party to credit facilities with a syndicate of lenders. The 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 credit facilities 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.
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, and letters of credit, in each
case, plus the applicable margin in effect from time to time. At December 31, 2023, the credit facilities comprise
bankers’ acceptances drawn at an interest rate of 6.9% (December 31, 2022 – 5.9%).
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, 2023 and December 31, 2022, 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, 2023 was $2,977 (2022 – $2,001).
66
// Page 23
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
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 and other, 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 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.
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,
2023
$
64,975
23,394
5,663
3,466
97,498
5,355
(647)
$
December 31,
2022
70,547
20,218
3,039
1,008
94,812
4,467
(856)
Trade and other receivables, net
$ 102,206
$
98,423
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.
// Page 24
67
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
12. Financial instruments and financial risk management (continued)
Liquidity risk (continued)
As of December 31, 2023, $nil (2022 ‐ $nil) has been drawn on the $100,000 revolving credit facility, and
$25,000 (2022 ‐ $50,000) 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 and letters
of credit, in each case, plus the applicable margin in effect from time to time. At December 31, 2023, the
credit facilities comprises bankers’ acceptances drawn at an interest rate of 6.9% (2022 – 5.9%).
During the year, interest rates have increased as the Governing Council of the Bank of Canada continues to
target 2‐3% inflation. However, there has been no significant impact on the Company’s financial condition or
results of operations as a result of such increases in interest rates. Increased interest rates have also increased
the Company’s interest income earned on cash balances during the year.
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. During the
years ended December 31, 2023 and 2022, no derivative instruments were used by the Company.
Excluding its foreign subsidiaries, the Company has the following US dollar foreign currency denominated
balances at December 31, 2023 and 2022:
Currency risk
Cash
Trade and other receivables
Accounts payable and accrued liabilities
December 31,
2023
$
12,595
14,625
4,679
December 31,
2022
16,409
15,489
$
4,542
68
// Page 25
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
13. Share capital
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 December 12, 2022 the Company’s parent, AMG, sold 1.76 million multiple voting shares (which converted
to subordinate voting shares at the time of the sale by AMG), representing approximately 9.64% of the issued
and outstanding subordinate voting shares, pursuant to a number of private agreements at a price of $49.25
per subordinate voting share for an aggregate purchase price of $86,680. There were no transaction costs
incurred in connection with these private agreements.
Transaction costs of $63, net of deferred taxes, have been offset against subordinate voting shares in
connection with the acquisition made during the year ended December 31, 2022 (note 5).
As of December 31, 2023, 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:
Number of common shares (in thousands)
Share capital (in thousands of dollars)
Multiple
voting
common
shares
21,840
Subordinate
voting
common
shares
20,074
Multiple
voting
common
shares
$ 327,600
Subordinate
voting
common
shares
$ 400,235
Total common
shares
41,914
Total share
capital
$ 727,835
‐
‐
8
20
8
20
‐
‐
314
314
112
112
‐
21,840
(475)
19,627
(475)
41,467
‐
$ 327,600
(9,471)
$ 391,190
(9,471)
$ 718,790
23,600
18,069
41,669
$ 354,000
$ 365,936
$ 719,936
‐
‐
‐
155
‐
90
(1,760)
1,760
155
‐
90
‐
‐
‐
‐
7,500
(63)
462
(26,400)
26,400
7,500
(63)
462
‐
Balance at December 31, 2022
Shares issued in connection with
the settlement of DSUs (note
15)
Shares issued in connection with
the exercise of options (note
15)
Shares repurchased for
cancellation in connection with
the Company’s normal course
issuer bid
Balance at December 31, 2023
Balance at December 31, 2021
Shares issued in connection with
business combination (note 5)
Transaction costs, net of tax
Shares issued in connection with
the exercise of options
Shares converted in connection
with secondary sale by AMG
Balance at December 31, 2022
21,840
20,074
41,914
$ 327,600
$ 400,235
$ 727,835
// Page 26
69
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
13. Share capital (continued)
Normal course issuer bid and automatic securities purchase plan
From time to time, the Company will announce a normal course issuer bid (“NCIB”) approved by the Board and
the TSX to repurchase and cancel a specified number of subordinate voting shares. All repurchases are made
through the facilities of the Toronto Stock Exchange at market prices. Amounts paid above the average book
value of the subordinate voting shares are charged to retained earnings. In connection with a NCIB, the
Company may enter into an automatic securities purchase plan (“ASPP”) with a designated broker for the
purpose of permitting the Company to purchase its subordinate voting shares under the NCIB during times
when the Company would ordinarily not be permitted to make such purchases due to regulatory restrictions
or self‐imposed blackout periods. The volume of purchases is determined by the broker in its sole discretion
based on purchase price and maximum volume parameters established by the Company in accordance with
the rules of the TSX, applicable securities laws and the terms of the ASPP. Any purchases made under an ASPP
will be included in computing the number of subordinate voting shares purchased under a NCIB.
On March 24, 2023, the Company announced that the TSX had approved its notice of intention to make a
NCIB for up to a maximum of 1,856,857 of its subordinate voting shares, or approximately 10% of its public
float as of March 23, 2023, over the 12‐month period commencing on March 29, 2023. The bid will terminate
on March 28, 2024, or such earlier time as the Company completes its purchases pursuant to the bid or
provides notice of termination. In connection with the NCIB, the Company established an ASPP with its
designated broker that contains specified parameters regarding how its subordinate voting shares may be
purchased under the NCIB during self‐imposed blackout periods. The Company paused its ASPP and issued
manual instructions to its designated broker for the period from August 9, 2023 to September 30, 2023 at
which time the ASPP was reinstated under amended terms and conditions. As of December 31, 2023, a total
of 474,740 subordinate voting shares, comprising approximately 2.4% of the number of subordinate voting
shares outstanding, have been purchased and cancelled pursuant to the NCIB at an average price of $39.67
per share, for a total purchase price of approximately $18,840. The excess of the purchase price paid over the
average carrying value of the subordinate voting shares purchased and cancelled, in the amount of $9,369,
was recognized as a share repurchase premium and a reduction to retained earnings.
Dividends to subordinate voting and multiple voting shareholders
During the year ended December 31, 2023, the Company declared total dividends of $14,202, or $0.34 per
common share (December 31, 2022 – $10,883, or $0.26 per common share), on subordinate voting and
multiple voting shares. Included in accounts payable and accrued liabilities as at December 31, 2023 is $3,732
(December 31, 2022 – $2,934) for dividends paid on January 15, 2024 and January 16, 2023, to common
shareholders of record on December 31, 2023 and 2022 respectively.
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,
2023
December 31,
2022
$
66,140
$
76,275
Weighted average number of common shares
41,833
41,813
Earnings per share – basic
$
1.58
$
1.82
70
// Page 27
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
14. Earnings per share (continued)
Diluted earnings per share
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
Restricted share units
Deferred share units
Weighted average number of diluted common
shares
December 31,
2023
December 31,
2022
$
66,140
$
76,275
41,833
41,813
656
2
52
812
‐
46
42,543
42,671
Earnings per share – diluted
$
1.55
$
1.79
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 which were granted to
non‐executive directors, executive officers and management personnel in connection with its initial public
offering. Of these options, 1,043 remain outstanding and are exercisable.
On December 11, 2023, the Board of Directors approved a grant of 63 thousand options which were granted
to executive officers and management personnel in connection with its long‐term incentive plan. 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,
2023
December 11,
2019
$
$
39.73
6.3 years
3.48%
33.66%
0.93%
$
14.37
$
15.00
7.0 years
1.59%
24.77%
1.33%
3.60
Of the options outstanding at December 31, 2023, a total of 635 thousand (December 31, 2022 – 635 thousand)
are held by non‐executive directors; 223 thousand (December 31, 2022 – 200 thousand) are held by executive
officers; with the remaining 248 thousand (December 31, 2022 – 239 thousand) held by management
personnel.
// Page 28
71
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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)
The table below summarizes the changes in the outstanding stock options:
(in thousands of options and in dollars)
Opening balance
Granted
Exercised
Ending balance
December 31, 2023
December 31, 2022
Number of
options
1,074
63
(31)
1,106
Weighted
average
exercise price
15.00
$
39.73
$
15.00
16.41
$
Number of
options
1,202
‐
(128)
1,074
Weighted
average
exercise price
15.00
$
‐
15.00
15.00
$
Options exercisable
1,043
$
15.00
780
$
15.00
The table below summarizes stock options outstanding and exercisable at December 31, 2023:
(in thousands of options and in dollars)
Options Outstanding
Exercise price
15.00
$
39.73
Number of
options
1,043
63
1,106
Weighted
average
remaining
contractual
life (in years)
5.95
9.95
Options
Exercisable
Number of
options
1,043
‐
6.18
1,043
The Company recognized compensation expense of $301 for the year ended December 31, 2023 (2022 – $669),
with corresponding increases to contributed surplus in connection with the vesting of options.
During the year ended December 31, 2023, 31 thousand options were exercised on a cashless basis resulting
in 20 thousand subordinate voting common shares being issued from treasury and in the surrender of 11
thousand options used to fund the cashless option exercise. The volume weighted average price used to
calculate the cashless exercises in accordance with the Company’s Omnibus Equity Incentive Plan was $39.73
per share at the time of exercise resulting in a $112 net increase in share capital. 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 $112 reduction to contributed surplus at
$3.60 per share.
Restricted share units (“RSUs”) program (equity settled)
On December 11, 2023, the Board of Directors approved a grant of 30 thousand RSUs which were granted to
executive officers and management personnel in connection with its long‐term incentive plan. The fair value
of the RSUs is determined to be the share price fair value at the date of the grant. The RSUs vest in equal
installments over four years and the expense is recognized as a share‐based compensation expense, through
contributed surplus over the vesting period. The fair value of the RSUs granted was $39.95 per unit. For the
year ended December 31, 2023 the Company recognized a compensation expense of $34, with a corresponding
increase to contributed surplus ($2022 – $nil).
72
// Page 29
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
15. Share‐based payment arrangements (continued)
Restricted share units (“RSUs”) program (equity settled) (continued)
The table below summarizes the changes in the outstanding RSUs:
December 31, 2023
(in thousands of RSUs and in dollars)
Opening balance
Granted
Ending balance
RSUs exercisable
Number of
RSUs
‐
30
30
‐
Weighted
average grant
date fair value
$
‐
39.95
39.95
39.95
$
$
Director deferred share units (“DSUs”) program (equity settled)
Each non‐executive director receives at least 50% of their 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, 2023, the Company recognized a compensation expense of $593, with corresponding increases
to contributed surplus (2022 – $632).
On June 5 and 12, 2023, an aggregate of 8 thousand DSUs were settled by the issuance of subordinate voting
shares of the Company from treasury in connection with the retirement of a director resulting in a reduction
of $314 to contributed surplus and a corresponding increase in share capital.
The table below summarizes the changes in the outstanding DSUs:
(thousands of DSUs)
Opening balance
Granted
Settled
Ending balance
December 31,
2023
December 31,
2022
51
14
(8)
57
37
14
‐
51
// Page 30
73
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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 States 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,
2023
December 31,
2022
$ 159,168
$ 155,575
16,761
21,290
175,929
176,865
429,174
422,236
30,595
68,821
34,383
66,896
(56,567)
(51,957)
472,023
471,558
647,952
$ 648,423
December 31,
2023
December 31,
2022
520,983
$ 516,845
126,969
131,578
647,952
$ 648,423
$
$
$
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, 2023 there was $966 (2022 – $1,137) recorded in accounts payable and
accrued liabilities (note 10). Revenue recognized in 2023 of $1,137 (2022 – $1,817) was included in the
opening deferred revenue balance at the beginning of the period.
74
// Page 31
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
17. Income taxes
a) Amounts recognized in income or loss
Current income tax expense:
Current taxes on income for the reporting year
Current taxes relating to previous years and other adjustments
Deferred income tax recovery:
Utilization (recognition) of tax benefits related to income (loss) for the year
Origination and reversal of temporary differences
Deferred taxes relating to previous years and other adjustments
Deductible temporary differences not recognized
December 31,
2023
December 31,
2022
$
29,022
(126)
28,896
252
(4,841)
160
‐
(4,429)
$
29,855
(327)
29,528
(629)
(1,797)
358
23
(2,045)
Income tax expense reported to the statements of income and
comprehensive income
$
24,467
$
27,483
Total cash outflow for actual taxes paid for the year ended December 31, 2023 was $46,124 (2022 –
$30,989).
b) Amounts recognized directly in equity
Transaction costs, before tax
Tax
Transaction costs, net of tax
c) Reconciliation of effective tax rate
December 31,
2023
December 31,
2022
$
‐
‐
$
$
86
(23)
63
$
‐
Income before income taxes
Consolidated Canadian federal and provincial income tax rate
Income tax expense based on statutory rate
Increase in income taxes resulting from non‐deductible items or other
adjustments
Impact of varying statutory tax rates of subsidiaries
Deductible temporary differences not recognized
Taxes relating to previous years and other adjustments
Total income tax expense
$
December 31,
2023
90,607
26.5%
24,011
December 31,
2022
$ 103,758
26.5%
27,496
609
(187)
‐
34
256
(322)
23
30
$
24,467
$ 27,483
// Page 32
75
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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
e) Movement in deferred tax balances
Plant and equipment
Accounts payable and accrued liabilities
Intangibles
Benefit of losses carried forward
Leases
Transaction costs
Net deferred tax liability
December 31,
2023
December 31,
2022
$
5,285
$
5,809
(42,955)
(48,609)
$
(37,670)
$
(42,800)
December
31, 2023
Recognized
in income or
loss
Foreign
currency
adjustments
December
31, 2022
$ (12,787) $
872 $
144 $ (13,803)
868
50
(1)
819
(33,580)
4,879
588
(39,047)
2,531
4,079
1,219
(252)
(85)
(1,035)
‐
(30)
‐
2,783
4,194
2,254
$ (37,670) $
4,429 $
701 $ (42,800)
December
31, 2022
Recognized
in equity
Recognized
in income or
loss
Acquired in
business
combina‐
tions
Foreign
currency
adjustments
December
31, 2021
Plant and equipment
$ (13,803) $
‐ $
(797) $
(116) $
(498) $ (12,392)
Accounts payable and accrued liabilities
Intangibles
Benefit of losses carried forward
Leases
Transaction costs
819
(39,047)
2,783
4,194
2,254
‐
‐
‐
‐
207
3,742
629
(696)
23
(1,040)
‐
5
607
(125)
(1,678)
(40,986)
‐
61
‐
‐
81
‐
2,154
4,748
3,271
Net deferred tax liability
$ (42,800) $
23 $
2,045 $
(180) $
(2,090) $ (42,598)
76
// Page 33
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
17. Income taxes (continued)
f) Unrecognized deferred tax liabilities
As at December 31, 2023, temporary differences of $40,390 (December 31, 2022 – $40,390) exist in
connection with wholly‐owned investments in subsidiaries; and the related potential deferred tax liability
of $5,352 (December 31, 2022 – $5,352) 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 year on the
basis that it will have sufficient future taxable profit.
The Company has total non‐capital tax loss carry forwards of $9,507 that begin to expire in 2040.
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, 2023
is 5.76% (2022 – 5.20%). Equipment lease terms range from 1 to 7 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 year ended December 31,
2023 is 5.94% for Specialized Transportation and 5.74% for Healthcare Logistics (2022 – 4.87% for Specialized
Transportation; 5.49% for Healthcare Logistics).
Right‐of‐use assets – Facilities
Opening balance
Add: additions
Add: additions through business combinations
Less: depreciation
Foreign currency adjustments
Ending balance
$
As at and for
the year ended
December 31,
2023
77,701
2,477
‐
(17,934)
(103)
$
As at and for
the year ended
December 31,
2022
89,343
2,744
2,756
(17,487)
345
$
62,141
$
77,701
// Page 34
77
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
18. Leases (continued)
Right‐of‐use assets – Logistics and transportation equipment
Opening balance
Add: additions
Add: additions through business combinations
Less: depreciation
Foreign currency adjustments
Ending balance
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: 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: principal repayments
Less: interest payments
Foreign currency adjustments
Ending balance
Cash lease principal payments
Repayments of lease principal
Total lease payments
78
$
As at and for
the year ended
December 31,
2023
32,333
15,010
‐
(11,691)
(23)
$
As at and for
the year ended
December 31,
2022
33,443
9,294
1,042
(11,519)
73
$
35,629
$
32,333
December 31,
2023
62,141
35,629
$
December 31,
2022
77,701
32,333
$
$
97,770
$
110,034
$
As at and for
the year ended
December 31,
2023
86,925
2,477
‐
3,085
(17,794)
(3,085)
(107)
$
As at and for
the year ended
December 31,
2022
98,681
2,744
2,006
3,623
(16,857)
(3,623)
351
$
71,501
$
86,925
$
As at and for
the year ended
December 31,
2023
26,804
15,010
‐
1,321
(10,158)
(1,321)
(76)
$
As at and for
the year ended
December 31,
2022
28,282
9,294
1,392
1,165
(12,177)
(1,165)
13
$
31,580
$
26,804
Year ended
December 31,
2023
(27,952)
$
Year ended
December 31,
2022
(29,034)
$
$
(27,952)
$
(29,034)
// Page 35
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
18. Leases (continued)
Lease liabilities
Facilities
Logistics and transportation equipment
Balance
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,
2023
(71,501)
(31,580)
$
December 31,
2022
(86,925)
(26,804)
$
$
(103,081)
$
(113,729)
December 31,
2023
(27,697)
(75,384)
$
December 31,
2022
(26,547)
(87,182)
$
$
(103,081)
$
(113,729)
$
December 31,
2023
32,285
76,377
5,636
$
December 31,
2022
30,523
81,317
12,886
$
114,298
$
124,726
Amounts recognized in the consolidated statements of income and comprehensive income in connection with
interest expense for lease liabilities for year ended December 31, 2023 was $4,406 (2022 – $4,788). Total cash
outflow for leases for the year ended December 31, 2023 was $32,358 (2022 – $33,822).
Net investment lease
Opening balance
Add: interest received
Less: payments received
Less: interest income
Ending balance
As at and for
the year ended
December 31,
2023
As at and for
year ended
December 31,
2022
$
$
$
61
‐
(61)
‐
‐
$
784
11
(723)
(11)
61
In January 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 the net book value of the right‐of‐use asset and established a net
investment lease at that time. As at December 31, 2023 the lease has been fully paid and terminated. The
Company recognized less than $1 of interest income for the year ended December 31, 2023 (2022 – $11).
// Page 36
79
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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
Other
Total interest expense
$
$
December 31,
2023
December 31,
2022
4,406
2,977
824
8,207
$
$
4,788
2,001
69
6,858
Interest expense recognized in the consolidated statements of income and comprehensive income equates to
total interest paid for the years ended December 31, 2023 and 2022.
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, 2023, the Company had outstanding letters of guarantee in the amount of $365
(December 31, 2022 – $365).
c) The Company has made commitments to lease fleet equipment, with the terms to begin upon delivery of
the equipment. Commitments range from 72 to 84 months and total $12,926 (December 31, 2022 –
$11,371).
d) The Company has made commitments to purchase fleet equipment totalling approximately $4,848
(December 31, 2022 – $10,126).
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 year or prior year 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.
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.
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.
80
// Page 37
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
21. Related parties (continued)
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.
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.
D.C. Racking & Maintenance Inc. (“DCR”) and Logiserv Inc. (“Logiserv”) are partially 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.
Revenue
Transportation services
1708998 Ontario Limited (Medical Courier Services)
$
215
$
173
December 31,
2023
December 31,
2022
Shared service recovery
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
9143‐5271 Quebec Inc.
1708998 Ontario Limited (Medical Courier Services)
Expenses
Transportation services
1708998 Ontario Limited (Medical Courier Services)
Med Express Ltd.
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.
19
14
32
24
151
20
6,503
2,237
2,239
1,544
‐
58
‐
20
13
32
13
147
40
6,517
2,301
2,163
1,532
54
104
47
// Page 38
81
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except shares, share price and earnings per share)
21. Related parties (continued)
Trade receivables due from related parties
Andlauer Properties and Leasing Inc.
1708998 Ontario Limited (Medical Courier Services)
Due from related parties
Andlauer Management Group Inc.
Total due from related parties
Trade payables due to related parties
Ready Staffing Solutions Inc.
1708998 Ontario Limited (Medical Courier Services)
Andlauer Properties and Leasing Inc.
Andlauer Management Group Inc.
C‐GHBS Inc.
Logiserv Inc.
Due to related parties
Andlauer Properties and Leasing Inc.
Total due to related parties
Key management personnel
December 31,
2023
December 31,
2022
$
$
$
$
13
41
54
1
1
55
150
13
287
‐
‐
‐
450
206
656
$
$
$
$
15
32
47
56
56
103
463
18
73
9
12
12
587
342
929
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,
2023
December 31,
2022
4,061
196
592
4,849
$
$
3,498
426
632
4,556
$
82
// Page 39
Andlauer Healthcare Group Inc. – 2023 Annual Report
Andlauer Healthcare Group Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
(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.
Total lease liabilities
Term facility
Less: cash and cash equivalents
Net debt
Last twelve months’ net income
Last twelve months’ interest income
Last twelve months’ interest expense
Last twelve months’ income tax expense
Last twelve months’ depreciation and amortization
EBITDA
Net leverage ratio
December 31,
2023
December 31,
2022
$
$
103,081
24,819
(59,740)
68,160
66,140
(3,170)
8,207
24,467
68,149
163,793
113,729
49,557
(65,855)
97,431
76,275
(599)
6,858
27,483
64,452
174,469
0.42
0.56
// Page 40
83
Andlauer Healthcare Group Inc. – 2023 Annual Report
NOTES
84
Andlauer Healthcare Group Inc. – 2023 Annual Report NOTES
85
Andlauer Healthcare Group Inc. – 2023 Annual Report SHAREHOLDER INFORMATION
Shares Outstanding (As at March 5, 2024)
Total Subordinate Voting Shares (“SVS”): 19,482,993
Registrar and Transfer Agent
TSX Trust Company
Total Multiple Voting Shares: 21,840,000
Auditor
KPMG LLP
Legal Counsel
Goodmans LLP
Virtual Annual General Meeting
Friday, May 3, 2024, at 10 a.m. (ET)
www.andlauerhealthcare.com
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
86
Andlauer Healthcare Group Inc. – 2023 Annual Report EXECUTIVE TEAM
Michael Andlauer
Chief Executive Officer
Peter Bromley, CPA, CA
Chief Financial Officer
Sandro Caccaro
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
Cameron Joyce 1
Director
Joseph Schlett, CPA, CA 1, 2, 3
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
PLATFORM OF COMPANIES
100 Vaughan Valley Blvd. • Vaughan, Ontario • L4H 3C5
www.andlauerhealthcare.com