ANNUAL REPORT
2018
(cid:86)(cid:87)(cid:17)(cid:3)(cid:77)(cid:82)(cid:75)(cid:81)(cid:183)(cid:86)(cid:3)(cid:571)(cid:3)(cid:75)(cid:68)(cid:79)(cid:76)(cid:73)(cid:68)(cid:91)(cid:3)(cid:571)(cid:3)(cid:86)(cid:68)(cid:76)(cid:81)(cid:87)(cid:3)(cid:77)(cid:82)(cid:75)(cid:81)(cid:3)(cid:571)(cid:3)(cid:90)(cid:68)(cid:69)(cid:88)(cid:86)(cid:75)(cid:3)(cid:571)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:85)(cid:72)(cid:68)(cid:79)(cid:3)(cid:571)(cid:3)(cid:82)(cid:87)(cid:87)(cid:68)(cid:90)(cid:68)(cid:3)(cid:571)(cid:3)(cid:87)(cid:82)(cid:85)(cid:82)(cid:81)(cid:87)(cid:82)(cid:3)(cid:571)(cid:3)(cid:90)(cid:76)(cid:81)(cid:81)(cid:76)(cid:83)(cid:72)(cid:74)(cid:3)(cid:571)(cid:3)(cid:70)(cid:68)(cid:79)(cid:74)(cid:68)(cid:85)(cid:92)(cid:3)(cid:571)(cid:3)(cid:72)(cid:71)(cid:80)(cid:82)(cid:81)(cid:87)(cid:82)(cid:81)(cid:3)(cid:571)(cid:3)(cid:89)(cid:68)(cid:81)(cid:70)(cid:82)(cid:88)(cid:89)(cid:72)(cid:85)
EIGHTY-EIGHTH
ANNUAL REPORT
for the year ended
December 31, 2018
CORPORATE OFFICE
5700 Explorer Drive, Suite 400
Mississauga, ON L4W 0C6 Canada
DIRECTORS
OFFICERS
J. Richard Bird, Ph.D., MBA (1)(2) ................................................. Calgary
Ian J. Boyd, P.Eng. ............................................................. Oakville
Karyn A. Brooks FCPA, FCA (1)(2) ................................................. Calgary
Paul A. Charette (Chair) (1)(2) .................................................. Oakville
D. Greg Doyle, FCPA, FCA (1)(2) .................................................. Victoria
Bonnie D. DuPont, BSW, MEd (1)(2) ............................................... Calgary
Luc J. Messier, P.Eng. (1)(2) ................................................. Texas, USA
Ron D. Munkley, BSc, Hon (Eng) (1)(2) ........................................ Mississauga
Paul R. Raboud, P.Eng., MSc, MBA ............................................. Toronto
Arni C. Thorsteinson, CFA (1)(2) ............................................... Winnipeg
(1)
(2)
Audit Committee Member
Human Resources, Safety and Governance Committee Member
Ian J. Boyd, P.Eng. ................................................... President & CEO
Teri L. McKibbon ...........................................Chief Operating Officer
Wayne R. Gingrich CPA, CMA ................. Chief Financial Officer & Treasurer
Charles J. Caza, BA, Sc.Eng., LL.B .................... General Counsel & Secretary
Gilles G. Royer, P.Eng. ...................... Executive Vice President - Industrial
Paul Bergman, CET ....................... Executive Vice President - Commercial
Nicole Washington-Lee, MBA, LL.B, CFA .... Senior Counsel & Assistant Secretary
AUDITORS
KPMG LLP
BANK
SURETY
Bank of Montreal
Travelers Guarantee Company of Canada
STOCK EXCHANGE LISTING
Toronto Stock Exchange (Symbol “BDT”)
TRANSFER AGENT AND REGISTRAR
Computershare Investor Services
WEBSITE
www.bird.ca
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Management’s Discussion and Analysis
The following Management’s Discussion and Analysis (“MD&A”) of Bird Construction Inc.’s (“the Company” or
“Bird”) financial condition and results of operations should be read in conjunction with the December 31, 2018
consolidated financial statements of Bird Construction Inc. This discussion contains forward-looking
information, which are subject to a variety of factors that could cause actual results to differ materially from
those contemplated by this information. See “Forward-Looking Information”. Some of the factors that could
cause results or events to differ from current expectations include, but are not limited to, the factors
described under “Risks Relating to the Business” included in the Company’s most current Annual Information
Form dated March 12, 2019. This MD&A has been prepared as of March 12, 2019. Additional information about
the Company is available through the System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com and includes the Company’s Annual Information Form and other filings.
TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................ 1
EXECUTIVE SUMMARY ........................................................................................... 2
2018 HIGHLIGHTS ................................................................................................ 2
NATURE OF THE BUSINESS ...................................................................................... 4
STRATEGY ........................................................................................................ 5
BUILD THE BUSINESS ............................................................................................ 5
BUILD THE TEAM ................................................................................................. 7
BUILD RELATIONSHIPS .......................................................................................... 8
KEY PERFORMANCE DRIVERS ................................................................................... 8
RESULTS OF OPERATIONS .................................................................................... 11
FUTURE OPERATING PERFORMANCE ........................................................................ 13
ACCOUNTING POLICIES ....................................................................................... 14
SUMMARY OF QUARTERLY RESULTS ......................................................................... 15
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY ........................................... 16
DIVIDENDS ...................................................................................................... 20
CAPABILITY TO DELIVER RESULTS ........................................................................... 20
CONTRACTUAL OBLIGATIONS ................................................................................ 21
OFF BALANCE SHEET ARRANGEMENTS ...................................................................... 21
CRITICAL ACCOUNTING ESTIMATES ......................................................................... 21
OUTSTANDING COMMON SHARE DATA AND STOCK EXCHANGE LISTING ................................ 22
CONTROLS AND PROCEDURES ................................................................................ 22
RISKS RELATING TO THE BUSINESS .......................................................................... 23
TERMINOLOGY ................................................................................................. 26
FORWARD-LOOKING INFORMATION.......................................................................... 27
Page 1
Management’s Discussion and Analysis
EXECUTIVE SUMMARY
(in thousands of Canadian dollars, except per share amounts)
2018
2017
(restated)(1)
2016
Income Statement Data
Revenue
Net income (loss)
Basic and diluted earnings (loss) per share
Adjusted Net Income (2)
Adjusted Net Income (Loss)
Adjusted Net Income (Loss) per share
Cash Flow Data
Net increase (decrease) in cash and cash
equivalents during the period
Cash flows from (used in) operations
Addtions to property and equipment (3)
Cash dividends paid
Cash dividends declared per share
Balance Sheet Data
Total assets
Working capital
Loans and borrowings (current and non-current)
Shareholders' equity
$
$
1,381,784
(1,013)
(0.02)
$
1,418,557
8,836
0.21
1,589,868
25,002
0.59
(1,013)
(0.02)
8,836
0.21
27,741
0.65
24,606
101,441
14,613
16,582
0.39
(127,615)
(91,121)
14,572
17,891
0.39
43,143
43,682
5,602
32,297
0.76
December 31,
2018
December 31,
2017
(restated)(1)
January 1,
2017
(restated)(1)
652,021
70,215
29,957
136,229
706,732
84,078
18,598
153,816
803,857
115,272
11,388
161,543
(1) 2017 reported figures have been restated applying IFRS 15. See "Accounting Policies - New Accounting Standards Adopted"
(2) Adjusted Net Income is a non-GAAP measure and does not have standardized meaning. See "Non-GAAP Measures"
(3) includes computer software purchases classified as intangible assets
2018 HIGHLIGHTS
(cid:120)
(cid:120)
During the fourth quarter of 2018, the Company recorded net income of $6.4 million on construction
revenue of $385.9 million, compared with net income of $2.0 million on $365.6 million of construction
revenue respectively in 2017. The year-over-year increase in fourth quarter net income is reflective of the
increase in revenue and earnings attributable to higher margin self-perform industrial work programs in
the fourth quarter of 2018 as well as a reduction in pursuit costs and a foreign exchange translation gain
on U.S. cash and equivalents held.
In 2018, the Company recorded a net loss of $1.0 million on construction revenue of $1,381.8 million
compared with net income of $8.8 million on $1,418.6 million of construction revenue in 2017. The
decrease in net income year-over-year is attributable to a confluence of events that the Company
experienced in 2018. Industrial operations, including mining in eastern Canada, were negatively impacted
by project delays, including a labour strike at one of the Company’s primary mining clients, in the first half
of 2018. Industrial project activity ramped up through the second half of the year as delays eased and
alternative work programs became available, although later than initially anticipated. One of the
Company’s offices experienced execution issues on several projects that were largely design related and
for which the Company has recorded provisions to account for the increase in costs, taken steps to mitigate
Page 2
Management’s Discussion and Analysis
further impacts and is seeking recovery accordingly. In the first quarter of 2018, the Company incurred
additional costs, including financing costs from lenders, on a PPP project that was late in achieving
substantial completion.
(cid:120)
In 2018, the Company secured $1,491.7 million of new contract awards and change orders and executed
$1,381.8 million of construction revenues. The new contract awards through the year contributed to a
Backlog of $1,295.9 million for the Company at December 31, 2018, an increase of $109.9 million, or 9.3%
from the $1,186.0 million of Backlog recorded at December 31, 2017. Key new contract awards in 2018
that demonstrate the Company’s success in diversifying its work program include:
o
o
o
o
In the fourth quarter, the contract for the engineering, procurement and construction of LNG
Canada’s Cedar Valley Lodge project (the “Cedar Valley Lodge”) was novated to LNG Canada’s EPC
contractor (“EPC Contractor”) and the EPC Contractor has issued a notice to proceed. Cedar Valley
Lodge will house workers for the construction of LNG Canada’s export terminal project in Kitimat,
B.C. Design and engineering of the Cedar Valley Lodge along with plans for construction execution
are ongoing, with construction commencing in spring 2019.
In the third quarter, the Company executed a contract for the Ontario Provincial Police (OPP)
Modernization Phase 2 project to design, build and finance OPP detachments in nine Ontario
communities. Bird will undertake the design and construction of the detachments and will also own
the concession responsible for financing the project through Bird Capital. In 2012, the Company
successfully completed Phase 1 of the modernization program.
In the first quarter, the Company announced that it has a 50% interest in a construction joint
venture that is part of the Hartland Resource Management Group consortium that will design and
build the residuals treatment facility for the Capital Regional District (“CRD”) in Victoria, BC. The
Company also has taken a minority equity interest in the concession responsible for the design,
construction, financing, operations and maintenance of the project through Bird Capital.
In 2018, the Company had other strategic awards that were contracted including a hotel and
conference centre in Iqaluit, Nunavut for the Qikiqtaaluk Corporation. The project will use Stack
Modular to supply modular units as part of the hotel.
(cid:120) The Company announced in the third quarter that it was selected as first negotiations proponent as part of
the CBS JV Corp to execute, under an Integrated Project Delivery (“IPD”) contract model, the construction
of the Advanced Nuclear Materials Research Centre (“ANMRC”) for Canadian Nuclear Laboratories (“CNL”)
located in Chalk River, Ontario. Bird is part of the joint venture that will lead the construction of the
project. The project has not yet been added to Backlog as CBS JV Corp is working through the validation
phase, which confirms the project’s financial viability and is expected to be complete by the third quarter
of 2019.
(cid:120) The Company achieved substantial completion on three Public Private Partnership and alternative finance
(“PPP”) projects in the year ended December 31, 2018:
o Stanton Territorial Hospital Renewal – At over 280,000 sq. ft., the new hospital located adjacent
to the current facility will offer outpatient and inpatient services including emergency, medical
imaging, dialysis, obstetrics, pediatric, cardio and mental health departments as well as day
procedure and surgery suites.
o Moncton Downtown Events Centre - The 8,800 seat, 250,000 sq. ft. facility is the largest project
the City of Moncton has procured and completed. The centre will serve as a catalyst for downtown
development in the City, will be the host for major sports and entertainment.
o East Rail Maintenance Facility – At more than 500,000 sq. ft. and built on 76 acres, construction
included progressive maintenance bays, coach maintenance shops, locomotive maintenance shops,
Page 3
Management’s Discussion and Analysis
paint booth, wheel shop, wash bays, fuel storage, a track maintenance building, track, and track
switches.
(cid:120)
(cid:120)
In 2018, cash and cash equivalents increased $25.8 million net of the effects of foreign exchange to $158.9
million, from the $133.1 million balance at the end of 2017. The majority of the increase in cash and
equivalents during the year relate to changes in the non-cash net current asset/liability position which can
fluctuate significantly in the normal course of business.
The Board has declared monthly eligible dividends of $0.0325 per common share for March 2019 and April
2019.
NON-GAAP MEASURES:
Adjusted Net Income:
Adjusted Net Income and Adjusted Net Income Per Share have no standardized meaning prescribed by GAAP
and are considered non-GAAP measures. Therefore, these measures may not be comparable with similar
measures presented by other companies. Management believes that the presentation of Adjusted Net Income
and Adjusted Net Income Per Share provides useful information for shareholders and potential investors as it
provides increased transparency and predictive value.
Adjusted Net Income (Non-GAAP Information)
(in thousands of Canadian dollars, except per share amounts)
Net income as reported in financial statements (GAAP)
Add: Impairment of equipment
Add: Associated tax effect
Adjusted Net Income (Non-GAAP Measure)
Adjusted Net Income Per Share (Non-GAAP Measure)
2018
2017 (2)
2016 (1)
$
$
$
(1,013)
-
-
(1,013)
(0.02)
$
$
$
8,836
-
-
8,836
0.21
$
$
$
25,002
3,855
(1,116)
27,741
0.65
Notes:
(1) Results provided for 2016 have not been restated in accordance with IFRS 15.
(2) 2017 reported figures have been restated applying IFRS 15. See "Accounting Policies - New Accounting Standards Adopted".
The Company’s net income in 2016 was negatively impacted by a non-cash charge to earnings of $3.9 million
($2.7 million after deferred tax reversal) for the impairment of equipment.
NATURE OF THE BUSINESS
The Company operates as a general contractor in the Canadian construction market with offices in: St. John’s,
Halifax, Saint John, Wabush, Montreal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver. The
Company and its predecessors have been in operation for 99 years. The Company focuses primarily on projects
in the industrial, commercial and institutional sectors of the general contracting industry. Within the industrial
sector, Bird constructs industrial buildings and performs civil construction operations including site preparation,
concrete foundations, metal & modular fabrication, mechanical process work, underground piping and
earthwork for clients primarily operating in the oil and gas, liquefied natural gas (LNG), mining and nuclear
sector. Within the institutional sector, Bird constructs hospitals, post-secondary education facilities, schools,
prisons, courthouses, government buildings, retirement and senior housing, as well as environmental facilities
that include water and wastewater treatment centres, composting facilities and biosolids treatment and
management facilities. Within the commercial sector, Bird's operations include the construction and renovation
of shopping malls, big box stores, office buildings, hotels and selected mixed-use high-rise condominiums and
Page 4
Management’s Discussion and Analysis
apartments. The Company has developed expertise in the construction of vertical elements and overall
management of transportation related projects and will continue to enhance our abilities in this market. Bird
also invests in equity in PPP projects as a means to support construction operations. In all sectors, Bird contracts
with its clients using a combination of fixed price, unit price, design-build, PPP, cost reimbursable (such as cost
plus, construction management and integrated project delivery methods).
While Bird self-performs some elements of its projects, particularly in the industrial market and in conjunction
with its civil construction and contract mining operations, a significant portion of the overall construction risk
rests with Bird’s subcontractors. The scope of work of each subcontractor is generally defined by the same
contract documents that form the basis of the Company’s agreements with its clients. The terms of the
agreements between the Company and its clients are generally replicated in the agreements between the
Company and its subcontractors. These “flow-down” provisions substantially mitigate the risk borne by the
Company. Depending on the value of the work, the Company may require bonds or other forms of contract
security including enrolling our subcontractors in Bird’s subcontractor default insurance program which will
mitigate exposure to possible additional costs should a subcontractor not be able to meet its contractual
obligations. Bird’s primary constraint on growth is the ability to secure new work at reasonable margins and
the availability of qualified professional staff who can be assigned to manage the projects.
STRATEGY
In 2016, the Company undertook a comprehensive strategic review to assess its market position and re-establish
medium and long-term goals. This process culminated in the Company’s Board of Directors endorsing the Build
Bird five-year strategic plan that has been developed to further enhance the Company’s position as a premier
Canadian contractor driven by the passion and dedication of a team of construction professionals. The Build
Bird five-year strategic plan is going into its third full year of implementation in 2019 and features three core
pillars: Build the Business, Build the Team and Build Relationships. Each pillar has been further expanded into
three primary initiatives detailed below with the express purpose of improving the Company’s margins and
overall profitability through 2021 and building a healthier company that can deliver more consistent earnings
through the various economic cycles.
Broadly, Bird’s strategic focus is to secure projects in markets with higher profit margins, which in the past
several years consisted of PPP and large design-build projects in the institutional sector as well as smaller
midstream oil & gas capital projects in western Canada. For Bird Heavy Civil, the focus will continue to be on
diversifying the customer base on select mining support and environmental projects on mine sites. In the fourth
quarter of 2018, the Company contracted the Cedar Valley Lodge, located at LNG Canada’s liquefaction and
export facility in Kitimat, British Columbia which is Canada’s largest ever infrastructure project. This project
will help the Company achieve a more balanced work program between industrial and commercial/institutional
sectors by increasing the contribution from industrial work on a project with significant size, scale and duration.
It will also provide the opportunity to secure additional scopes of work by executing well on the Cedar Valley
Lodge and leveraging our relationships. While the Company will position itself to maximize opportunities on
the LNG Canada project, Management remains fully committed to its diversification program.
BUILD THE BUSINESS
Diversification and Growth
The diversification of the Company’s work program and earnings base is intended to strengthen the Company
by making it healthier and more resilient during economic downturns. As part of the overall strategy, Bird will
continue to focus on larger and more complex construction projects, which limit competition and typically offer
the potential for enhanced profit margins. Diversification and Growth will be realized through geographic
expansion of existing services, introduction of new services and the development of new clients. The Company
sees opportunities in areas that were selected by the federal government to invest in such as indigenous
communities, environmental initiatives and transportation projects. The Company’s goal is to leverage its areas
of expertise to participate more fully in these markets on selective projects where it can develop a compelling
Page 5
Management’s Discussion and Analysis
win strategy. The Company will be very selective in its execution of the strategy to ensure it grows and
diversifies profitably.
Through its geographic expansion efforts, the Company will continue to express its preference for design-build
construction contracts where its proven experience provides Bird with a source of competitive advantage. In
doing so, the Company will also look to ensure there is a balanced risk profile in its work program so that there
is a mix of lower risk delivery methods such as construction management, cost-plus and integrated project
delivery (“IPD”) with higher risk methods such as stipulated sum, unit price, design-build and PPP. The
Company is also looking for opportunities to expand commercial and institutional expertise into additional
markets in Canada. The Edmonton Commercial office was established in 2017 and despite expectations for
challenging market conditions in Alberta in 2019, the business is positioning itself to develop the team and its
capabilities to service the region on a long-term basis. The Company has been successful already in expanding
its presence in northern Canada which is a key focus area for growth as evidenced by the recent completion of
the Stanton Territorial Hospital in Yellowknife and the ongoing construction of the Iqaluit Hotel which is being
built using steel frame modular units manufactured by Stack Modular (“Stack”), which the Company owns a 50%
stake. The Company is also focusing on the light rail transit (“LRT”) segment of the transportation market by
utilizing project teams from across the country in pursuit of the ‘vertical’ elements of these projects (i.e.
maintenance facilities, stations, platforms) in joint venture partnership arrangements with ‘horizontal’
contractors.
New service offerings will also contribute to Bird’s Diversification and Growth strategy. The Company will
pursue more opportunities in the nuclear market in Ontario building on successes achieved in 2018. The
Company will continue to leverage the mechanical and electrical experience it gained in its 2013 acquisition of
Nason Contracting Group Ltd. to pursue process related contracts in the industrial market sector. The Company
will build on its successful growth into the environmental market with projects active in four provinces and
shortlisted on projects in two additional provinces. By continuing to build our expertise, the Company will
further establish its position as a top tier environmental firm in the construction of bio-solid treatment
facilities, composting facilities and in water and wastewater treatment facilities across the country. We will
also selectively identify and pursue Maintenance, Repair and Operations (“MRO”) opportunities with our energy
clients in northern Alberta building a recurring revenue stream. The overall goal is to increase the contribution
from projects in the nuclear sector, turnkey process mechanical, environmental and MRO markets to be
balanced with our traditional full service civil, concrete formwork, earthmoving and building services. Any of
these services can be combined to meet a client’s needs.
As part of the Company’s growth strategy, the Company will use its existing relationships in established markets
to expand its work program. As one of only a few general contractors in Canada with a national footprint, Bird
looks to deepen its relationship with existing private clients that have a portfolio of properties and development
opportunities both regionally and across Canada while also seeking to foster new client relationships.
Historically, in western Canada the Company’s industrial work program has been focused on the oil sands where
it has secured a reputation as a safe, reliable and cost-effective general contractor. In the coming years, the
Company will leverage these proven capabilities to develop clients and work programs more broadly. As of
2018, the Company now has industrial related projects, including heavy civil, in regions across the country.
Bird Heavy Civil will widen its established activities in the Labrador Trough region to secure similar
opportunities in eastern Canada. This expanded geographical scope will also support the need to develop
additional clients, primarily in Ontario, Quebec and northern Canada to diversify from Bird Heavy Civil’s
historical focus on the iron ore market. These efforts to develop new clients will require a commitment to
business development and a recognition that program accomplishments will take time to mature, particularly
given the market conditions seen in the resource sector in recent years.
The focus on diversification has brought to light new market opportunities for the Company, some of which the
Company has been able to service through organic growth and others where the Company has identified the
need for an acquisition to spur the Company’s entry into a new sector. Most recently, the Company plans to
leverage its 2017 investment in Stack, a modular construction company with production operations in China, as
an alternative manner of delivering projects such as hotels, senior housing, residential apartments and
Page 6
Management’s Discussion and Analysis
condominiums and commercial office buildings for key clients. The Company and Stack have complementary
knowledge, resources and expertise that positions them well to serve the permanent modular construction
market in Canada and the United States. Recently, the Company has been more active in researching additional
acquisition targets. Generally, the Company is looking to add self-perform capabilities with niche service
offerings that will enhance overall profit margins and that will provide the Company with a platform for future
growth.
Build Efficiencies
As a primary initiative of the Build the Business pillar, Bird’s strategy for Build Efficiencies is to drive business
process improvements to gain efficiencies and generate savings from overheads. These savings will be
reinvested into the Company’s strategic initiatives. Through 2018, the Company successfully introduced new
software platforms to aid operations in safety management, human resource management and project delivery.
Increasing process efficiency, particularly for the operations team, will also lead to greater engagement
amongst the employee group and is anticipated to positively impact production as project teams will be able
to dedicate more energy to project execution and less to administrative tasks.
Safe Production
At Bird, the single most important value is Safety and the goal is zero harm. Building on a highly reputable and
proven safety program, this ongoing initiative will further the Company’s commitment to embedding a Safe
Production mindset throughout the project lifecycle, from estimating through to post-job assessment. It will
require driving greater involvement and commitment from subcontractors and suppliers, and will further extend
to fostering the safe planning and execution of Bird employee activities off the job. This holistic approach
reflects the Company’s fundamental belief that thinking and acting safely is not a switch that can, or should
be, activated when arriving at or leaving the job site or workplace. Rather, it is a mindset that must be
encouraged, nurtured and supported so that safe behaviours become a habit; repeatable, sustainable, and
embedded in everything Bird staff do.
BUILD THE TEAM
Drive Positive Engagement, Become the Employer of Choice & Grow Our Talent
The Build the Team pillar includes a wide range of human resource program initiatives intended to enhance
the employee experience, Drive Positive Engagement, and create a stronger and more productive workforce.
Bird’s success is highly dependent on the Company’s ability to Grow Our Talent and Become the Employer of
Choice. This involves attracting, developing and retaining a highly skilled workforce at all levels within the
organization. The Company is committed to providing employees and potential employees with interesting and
challenging work and opportunities to build a successful career in every aspect of the business. Through the
strategic planning process, several key priorities and challenges pertaining to the recruitment, onboarding,
development, performance management and retention of employees were identified. A key element of the
Company’s plan is the enhancement of a meaningful employee recognition program to go along with annual
service awards and the Company’s 25-year and 50-year clubs. New investment and implementation of a
software platform will help the Company employ more streamlined and proactive solutions for these priorities
in 2019 and beyond. It will also help elevate the employee experience and Drive Positive Engagement at Bird
by facilitating effective talent management and mobility across the organization. An updated employee
handbook, onboarding resources and the delivery of in-house leadership training programs that focus on people
and management skills rather than technical skills, will help facilitate the Company’s success. The training
programs include the Bird Leadership Academy (senior leaders), Bird Site Management Program (site supervisors
and project site-based staff) and Taking Flight (new managers and supervisors).
By continuously developing and refining policies and programs to engage employees at work and in their
communities, offering new and innovative training programs, driving ongoing leadership development, and
making a career at Bird more than just a job, the Company can recruit, develop and retain top talent while
ensuring compensation programs remain market competitive.
Page 7
Management’s Discussion and Analysis
BUILD RELATIONSHIPS
One Bird
Recognizing that the construction industry has evolved and projects are getting more complex, Bird has
deployed the One Bird initiative that considers a holistic, company-wide approach to work more efficiently and
effectively. One of the primary goals of this initiative is to identify and share the expertise across the Company
to enhance effective deployment of human resources on the best opportunities, regardless of employees’
geographic location. By promoting a more mobile workforce and increasing collaboration the Company will
leverage its talent for targeted opportunities to secure greater outcomes. This initiative is supported through
standardized technology and common software platforms and reinforced in the Company’s variable
compensation programs.
Creating a Customer 1st Attitude
A primary initiative of the Build Relationships pillar, the Creating a Customer 1st Attitude, targets the
development of stronger client relationships. The Company has traditionally focused on operational excellence
and execution of its work program to develop client relationships. While this has served the Company well in
terms of delivering consistent results and developing repeat clients, there is a need to invest more resources
in strengthening existing client relationships and developing new ones. This is consistent with Bird’s strategy
of targeting work with clients that welcome innovation and position the Company to add value. Bird will
continue to target complex work, a market the Company has successfully performed in and one where the
competition will be like-minded contractors with similar cost structures and approaches to risk and reward.
Clients that seek a longer term, collaborative relationship align well with the Build Bird five-year strategic
plan.
Corporate Social Responsibility
Bird believes in being a good corporate citizen and supporting the communities in which it works and its
employees live. In addition, employees increasingly wish to align themselves with a company that gives back
and is socially responsible. Bird’s Corporate Social Responsibility initiative includes Indigenous Cultural
Awareness training for all employees which builds upon the Company’s Indigenous Engagement Policy.
Furthermore, establishment of the Bird Foundation, a formal conduit for tabulating and communicating Bird
community donations and contributions, will provide greater direction to the Company’s community
engagement while driving increased employee participation and engagement.
KEY PERFORMANCE DRIVERS
Securing profitable construction contracts and then controlling the costs during the execution of that work are
the key drivers of success for the Company.
To achieve this, new work must be available, which is a function of the general state of the economy. In periods
of strong economic growth, capital spending will generally increase and there will be more opportunities
available in the construction industry. In economic downturns, fewer opportunities typically exist and
competition for those opportunities becomes even more intense, generally resulting in lower Gross Profit
Percentages. The Company must be successful in securing profitable work in various economic conditions. The
construction industry is highly fragmented and accordingly, the Company competes with a number of
international, national, regional and local construction firms. One of the Company’s competitive advantages
rests in its long-standing reputation for successfully delivering high quality projects that fully meet the needs
of the customer, which enables the Company to secure repeat business from existing clients and win work with
new clients.
The Company’s success in securing work is also reflected in the value of the Backlog. The following table shows
the Company’s Backlog at the end of the comparative reporting periods. The Company’s Backlog of $1,295.9
million at December 31, 2018 increased compared with $1,186.0 million at December 31, 2017. During 2018,
the Company announced that it was part of the consortium that has been contracted to design and build a
Page 8
Management’s Discussion and Analysis
biosolids facility for CRD in Victoria, BC, representing another strategic win and building on the Company’s
expanding portfolio of environmental projects. The Company also announced that it has executed a contract
for the OPP Modernization Phase 2 project. In the fourth quarter, the contract for the engineering,
procurement and construction of LNG Canada’s Cedar Valley Lodge was novated to LNG Canada’s EPC
Contractor and the EPC Contractor has issued a notice to proceed. Bird also announced it was selected as first
negotiations proponent as part of the CBS JV Corp to execute, under an IPD contract model, for the construction
of the Advanced Nuclear Materials Research Centre for CNL located in Chalk River, Ontario. Bird is part of the
joint venture that will lead the construction of the project. The Advanced Nuclear Research Centre is not yet
included in Backlog as the contract will be finalized following the validation phase.
(in thousands of Canadian dollars)
December 31,
2018
December 31,
2017
Backlog
$
1,295,940
$
1,186,000
Once the Company has secured a contract, the profitability of that contract, measured by the Gross Profit
Percentage, is primarily a function of management’s ability to control costs, achieve productivity objectives
associated with the contract and resolve outstanding commercial issues as they arise. The following table shows
the Gross Profit Percentage realized by the Company in the comparative periods.
Year ended
2018
(restated)
Year ended
2017
Gross Profit Percentage
4.2%
5.0%
During 2018 the Company realized a Gross Profit Percentage of 4.2% compared with 5.0% in 2017. The reduction
in both gross profit and Gross Profit Percentage in 2018 is a result of several factors. In the first quarter of
2018, the Company incurred additional costs, including financing costs from lenders, on a PPP project that was
late in achieving substantial completion. Further impacting gross profit and Gross Profit Percentage in 2018 was
lower volumes recognized in the Company’s higher margin self-perform operations in both the industrial
operations in western Canada and mining operations in eastern Canada, a result of project delays and a labour
strike at one of Company’s primary mining clients. In addition, late in the second quarter, it became apparent
one of the Company’s offices was experiencing difficulty in the execution of several projects primarily due to
design related issues. The Company has recorded provisions to account for the expected increase in construction
costs on these projects, has taken steps to mitigate further impacts on results, and is seeking recovery
accordingly. The Gross Profit Percentage in the fourth quarter of 2018 increased to 5.9%, moderately higher
year-over-year, and reflects the impact of a growing contribution from industrial projects and a more diversified
and balanced work program overall for the Company.
Financial Condition
The Company requires adequate working capital and equity retained in the business to support its ongoing
operations, including surety and contract security requirements. The Company continually monitors the
adequacy of its working capital and equity to satisfy contract security needs. The Company believes it has
sufficient working capital to support its current contract requirements. The Company has submitted proposals
and is waiting for the clients’ award decision on several large opportunities that if contracted to the Company
would significantly increase Backlog. If the Company is successful in securing some of these larger opportunities,
the Company has access to adequate financing from its lead banking partner.
Page 9
Management’s Discussion and Analysis
The following shows the working capital and shareholders’ equity of the Company in the comparative reporting
periods.
(in thousands of Canadian dollars)
Working capital
Shareholders' equity
December 31,
2018
(restated)
December 31,
2017
$
$
70,215
136,229
$
$
84,078
153,816
At December 31, 2018, the Company had working capital of $70.2 million compared with $84.1 million at
December 31, 2017, a decline of $13.9 million. In 2018, the Company paid dividends of $16.6 million, had net
additions of equipment and intangible assets of $4.9 million and net increase in deferred taxes of $3.3 million,
which served to reduce working capital. This was partially offset by $10.9 million net increase to non-current
loans and borrowings.
The $17.6 million decrease in the amount of the Company’s shareholders’ equity since December 31, 2017 is a
result of the $16.6 million dividends declared in 2018 combined with the net loss of $1.0 million generated in
2018.
Safety
At Bird, ensuring that all work on our sites is executed to exacting quality standards begins with our commitment
to creating and sustaining a culture in which the identification, assessment, and elimination or control of
hazards and risks is incorporated into every aspect of our operations. We call this Safe Production, and it is a
cornerstone of our operational philosophy and approach.
Ensuring that all workers leave our jobsites everyday just as healthy and safe as when they arrived is a shared
commitment and by working collaboratively with our employees and subcontractors to achieve this, we
minimize risk and create the appropriate conditions for the safe execution of construction activity - on time,
on budget, and to our client’s satisfaction. We believe this shared commitment is critical to our overall success.
It’s how we work.
Through our robust orientation and training programs and our ongoing communication and engagement
activities, we encourage all workers to actively contribute to our ongoing efforts to continuously improve not
only our safety program, but overall collaboration and effectiveness. In this way, we not only ensure they leave
work healthy and safe every day, but in doing so, help contribute to our overall operational excellence.
At Bird, Safe Production is not just a vision or a philosophy, it is a daily routine practiced with discipline and
rigor on all our job sites. As part of the Safe Production strategic initiative, the Company completed an
organization wide Safety Culture Assessment in the third quarter of 2017 which will form the basis for the
development of a long-term safety strategy for the organization.
In 2018, Bird executed 3,916,636 man-hours of work, incurring zero lost time incidents (LTI).
LTI frequency
0.00
0.16
Year ended
December 31, 2018
Year ended
December 31, 2017
Page 10
Management’s Discussion and Analysis
RESULTS OF OPERATIONS
FISCAL 2018 COMPARED WITH FISCAL 2017
In the fiscal year ended December 31, 2018, the Company recorded a net loss of $1.0 million on construction
revenue of $1,381.8 million compared with a net income of $8.8 million on $1,418.6 million of construction
revenue in 2017. Construction revenue of $1,381.8 million was $36.8 million or 2.6% lower than the $1,418.6
million recorded in 2017. While there was an increase in volume attributable to higher margin, self-perform
industrial work programs in the fourth quarter, revenue generated in the year was negatively impacted by
project delays in the industrial work program primarily experienced in the first half, including a strike at one
of the Company’s mining clients in eastern Canada. In addition, the extension of the procurement timelines of
several PPP projects in the Ontario region has resulted in lower volumes executed in our institutional work
program. These factors coupled with an industrial work program that had lower backlog entering the year from
a historical perspective contributed to lower volume in fiscal 2018.
The Company’s gross profit of $57.5 million in 2018 was $13.8 million or 19.4% lower than the $71.3 million
recorded in 2017. In 2018, the Gross Profit Percentage of 4.2% was 0.8% lower than the Gross Profit Percentage
of 5.0% recorded in 2017. The year-over-year reduction in both gross profit and Gross Profit Percentage in 2018
are a result of a confluence of events experienced during the course of the year. Industrial operations, including
mining in eastern Canada, were negatively impacted by project delays, including a labour strike at one of the
Company’s primary mining clients, in the first half of 2018. Industrial project activity ramped up through the
second half of the year as delays eased and alternative work programs became available, although later than
initially anticipated. One of the Company’s offices experienced execution issues on several projects that were
largely design related and for which the Company has recorded provisions to account for the increase in costs,
taken steps to mitigate further impacts and is seeking recovery accordingly.
Income from equity accounted investments in 2018 was $1.9 million, compared with $1.8 million in 2017. Early
in project lifecycles, equity investments in associates generally operate at a loss and typically generate positive
equity income later in the project lifecycle. Bird has a mix of equity investments in associates in varying stages
of project lifecycles in both fiscal 2017 and 2018.
In 2018, general and administrative expenses of $58.9 million (4.3% of revenue) was $0.4 million lower than
$59.3 million (4.2% of revenue) in 2017. During the year, the Company spent $3.0 million in third-party pursuit
costs which is $2.5 million lower than the amount recorded in 2017. In 2018, the Company also had a foreign
exchange gain compared to a foreign exchange loss in 2017 resulting in a $2.1 million improvement year-over-
year. Offsetting these positive variances was compensation expense at $4.4 million higher year-over-year
primarily due a combination of higher labour costs associated with a growing industrial work program as well
as a loss recorded in the total return swap program resulting from the decline in the Company’s share price in
2018.
Finance income in 2018 of $1.4 million is comparable to the $1.3 million recorded in 2017.
Finance and other costs of $4.5 million in 2018 was $2.5 million higher than the $2.0 million reported in 2017.
The increase is due to a $1.3 million change in the mark-to-market of interest rate swaps from a $0.3 million
gain in 2017 to a $1.0 million loss in 2018. In addition, interest costs were higher associated with increased
loans and borrowings and higher interest rates, as a well as other financing costs.
In 2018, income tax recovery was $1.7 million, compared to an income tax expense of $4.2 million recorded in
2017. The year-over-year decline in income taxes is primarily due to lower current income taxes associated
with the net loss before income taxes in the current year.
Page 11
Management’s Discussion and Analysis
THREE MONTHS ENDED DECEMBER 31, 2018 COMPARED WITH THREE MONTHS ENDED
DECEMBER 31, 2017
Selected Quarterly Financial Information
Consolidated Statements of Income
Fourth Quarter
(in thousands of Canadian dollars)
Construction revenue
Costs of Construction
Gross Profit
Income from equity accounted investments
General and administrative expenses
Income from operations
Finance income
Finance and other costs
Income before income taxes
Income tax expense
For the three months ended December 31,
2017
(restated)
(unaudited)
2018
(unaudited)
$
$
385,854
363,215
22,639
1,522
(15,180)
8,981
498
(1,910)
7,569
1,190
365,552
344,634
20,918
220
(17,163)
3,975
404
(728)
3,651
1,661
1,990
Net income for the period
$
6,379
$
During the fourth quarter of 2018, the Company recorded a net income of $6.4 million on construction revenue
of $385.9 million compared with a net income of $2.0 million on $365.5 million of construction revenue
respectively in 2017. The year-over-year increase in fourth quarter net income is reflective of the improvement
in earnings attributable to the higher margin self-perform industrial work programs in the fourth quarter of
2018.
The Company’s fourth quarter gross profit of $22.6 million was $1.7 million or 8.2% higher than the $20.9 million
recorded a year ago. The increase in the amount of fourth quarter 2018 gross profit is driven by the higher
quarterly construction revenues year-over-year. The Company’s fourth quarter 2018 Gross Profit Percentage of
5.9% was 0.2% higher than the Gross Profit Percentage of 5.7% recorded a year ago. On a year-over-year
comparative basis, Gross Profit Percentage in 2018 was positively impacted by higher volumes recognized in
the Company’s higher margin self-perform operations in its industrial work programs.
Income from equity accounted investments in the fourth quarter of 2018 was $1.5 million, compared with $0.2
million in same period of 2017. The income in fourth quarter of 2018 was primarily driven by the margin earned
from a project in eastern Canada.
In the fourth quarter of 2018, general and administrative expenses of $15.2 million (4.0% of revenue) were $2.0
million lower than $17.2 million (4.7% of revenue) in the comparable period a year ago. During the fourth
quarter, the Company had minimal third-party pursuit costs which were $1.3 million lower than the amount
recorded in 2017. In the fourth quarter of 2018 the Company also had a foreign exchange gain of $0.9 million
compared to a foreign exchange loss of $0.2 million recorded in 2017. Consulting and legal fees were
approximately $1.0 million lower year-over-year. Offsetting these positive variances was compensation expense
at $1.4 million higher than the amount recorded a year ago primarily due to a loss recorded in the total return
swap program resulting from the decline in the Company’s share price.
Page 12
Management’s Discussion and Analysis
Finance income of $0.5 million in the fourth quarter of 2018 is comparable to the $0.4 million recorded in the
same period of 2017.
Finance and other costs of $1.9 million were $1.2 million higher than the $0.7 million reported in the fourth
quarter of 2017. The increase is due a $0.6 million higher loss year-over-year on the mark-to-market of interest
rate swaps, which will balance out through the life of the derivative tied to project completion. In addition,
interest costs were higher associated with increased loans and borrowings and higher interest rates, as a well
as other financing costs.
In the fourth quarter of 2018, income tax expense was $1.2 million, compared to income tax expense of $1.7
million recorded in the fourth quarter of 2017.
FUTURE OPERATING PERFORMANCE
The Company will continue to make investments in both people and technology as it executes on the Build Bird
strategic plan, with diversification of our earnings base and margin improvement being key areas of focus. The
mix of revenue in 2018 differs from that of 2017 as evidenced by the increase in the industrial work program
relative to institutional and commercial with this trend expected to continue into 2019. The institutional market
sector contributed 53% of 2018 revenues (66% in 2017 restated). The industrial market sector contributed 30%
of 2018 revenues (21% in 2017 restated). The retail and commercial sector contributed 17% of 2018 revenues
(13% in 2017 restated).
At December 31, 2018, the Company was carrying a Backlog of $1,295.9 million, representing an increase from
the $1,186.0 million carried at the end of 2017. The increase in backlog in 2018 demonstrates the success in
the diversification efforts of the Company, with securements across a broad range of market sectors and a more
balanced risk profile than it has been for the last several years. This diversification includes growth of contracts
across Canada including environmental facilities, industrial contracts in LNG and nuclear, and in mining
contracts in gold and other minerals. However, mining operations in eastern Canada remain an annualized work
program with low but stable Backlog and increased seasonality as compared to the core industrial work program,
where the majority of the industrial Backlog resides.
In the fourth quarter, the Company was issued the Notice to Proceed with the construction of the Cedar Valley
Lodge for LNG Canada, a design build contract for the construction of a 4500-person workforce accommodations
facility in support of the new LNG liquefaction terminal in Kitimat, BC. The project has now been entered into
Backlog, providing the Company with a significant large-scale industrial project to execute through the course
of 2019 and 2020 and/while establishing early involvement in the project which is expected to be the largest
infrastructure investment in Canadian history. Other significant additions to Backlog in 2018 include a PPP
project for a residuals treatment facility for the Capital Region District in Victoria in which the Company has
taken a minority equity interest in the concession and the OPP Modernization Phase 2, an alternative finance
project for Ontario Infrastructure and Lands Corporation, in which the Company will design, build and finance
nine Ontario Provincial Police (OPP) detachments across Ontario.
The Company is anticipating additional growth in Backlog through 2019 with contributions from several different
markets. At December 31, 2018, the Company had approximately $300 million in projects that have been
awarded or in which the Company has been named as the primary negotiation proponent that are yet to be
contracted. The most significant is the Advanced Nuclear Materials Research Centre for Canadian Nuclear
Laboratories (CNL) located in Chalk River, Ontario, a project expected to be contracted in the third quarter of
2019 following the completion of the validation phase. Two institutional projects in Alberta and one for an
energy client in Ontario are expected to be contracted and entered into Backlog in the first half of 2019. In
addition, the Company is in the pre-construction phase for over $200 million in institutional projects in British
Columbia that are anticipated to proceed to construction by the third quarter of the year, although only a small
fraction of the revenue will be included in Backlog due to the agency nature of the construction management
contract delivery model.
With respect to the PPP market and larger scale design build opportunities, the pipeline of projects remains
strong. As of December 31, 2018, the Company has submitted two requests for proposals and was awaiting
Page 13
Management’s Discussion and Analysis
results. One as a preferred subcontractor to a consortium for an LRT project in Ottawa and the other proposal,
as part of a consortium, for the design, build, finance, maintenance and operations of a water treatment
facility. The Company, in a preferred subcontract arrangement to a consortium, was also in active pursuit of
an LRT project that is expected to be submitted in the second quarter of 2019 and was shortlisted for two
smaller environmental projects and is awaiting the request for proposals, although timing remains uncertain.
The Company also submitted responses for two requests for qualifications and was active in responding to one
other. The award of any of these project opportunities will primarily benefit the fourth quarter of 2019 and
beyond.
In fiscal 2019, the Company expects to have a work program that is more balanced and diversified than it has
been over the past several years, supporting progress towards returning to historical levels of profitability and
growth. Management expects to see the mobilization for the Cedar Valley Lodge ramp up through the second
quarter and as such, is not expected to contribute significantly to earnings in the first quarter. As a result,
seasonality will be a factor early in the year as the Company’s work program builds momentum through 2019.
The Company expects to see an improvement in earnings attributable to its higher margin self-perform
industrial work program and anticipates more broadly a double-digit year-over-year revenue growth. Due to
the combination of timing of bids and generally the smaller scale of the projects anticipated to be in active
pursuit in 2019, the Company expects third-party pursuit costs to return to more modest levels. Taking into
consideration the Company’s current Backlog and the pending booking of future contracts that have been
awarded, the Company expects earnings in 2019 to ramp up towards the $25.0 million of net income level
recorded in 2016.
Backlog
During year ended December 31, 2018, the Company secured a net $1,491.7 million in new construction
contracts (including change orders to existing contracts) and put in place $1,381.8 million of work resulting in
a Backlog at December 31, 2018 of $1,295.9 million. Backlog was negatively impacted by a cancellation of a
mixed-use residential project in Ontario, but overall remains strong. The following table outlines the changes
in the amount of the Company’s Backlog throughout the current and prior fiscal year.
Backlog
(in millions of Canadian dollars)
December 31, 2016
Securement and change orders in 2017
Realized in construction revenues in 2017
December 31, 2017
Securement and change orders in 2018
Realized in construction revenues in 2018
December 31, 2018
$
$
$
1,137.0
1,467.6
(1,418.6)
1,186.0
1,491.7
(1,381.8)
1,295.9
ACCOUNTING POLICIES
The Company’s significant accounting policies are outlined in the notes to the audited December 31, 2018 and
2017 Consolidated Financial Statements. The consolidated financial statements were prepared using the same
accounting policies as our 2017 consolidated financial statements except for new accounting standards adopted
January 1, 2018.
New Accounting Standards Adopted
Refer to the notes to the audited consolidated financial statements at December 31, 2018 for a summary of the
new accounting standards adopted.
Page 14
Management’s Discussion and Analysis
Future accounting changes
IFRS 16, Leases:
On January 13, 2016, the IASB issued IFRS 16 Leases. The new standard is effective for annual periods beginning
on or after January 1, 2019. This standard introduces a single lessee accounting model and requires a lessee to
recognize assets and liabilities for all leases with a term of more than twelve months unless the underlying
assets are of low value. A lessee is required to recognize a right-of-use (“ROU”) asset and a lease liability
representing its obligation to make lease payments.
The Company intends to adopt IFRS 16 in its financial statements for the annual period beginning on January
1, 2019. The standard may be applied retrospectively or using a modified retrospective approach. The Company
plans to use the modified retrospective approach which does not require restatement of prior period financial
information.
The Company continues to make progress in the evaluation of its contracts that may contain a ROU asset. The
Company anticipates that the most significant impact of adopting IFRS 16 will be the recognition of ROU assets
and corresponding lease liability related to leases with a term of 12 months or more on the Consolidated Balance
Sheet at January 1, 2019. The additional right-of-use asset and lease liability is expected to result in an increase
in depreciation and amortization expense and increase in interest costs on its lease liabilities, with a
corresponding decrease in operating lease expenses. The Company also expects an increase in operating
cashflows with a corresponding reduction in financing cashflows under IFRS 16.
On initial adoption, the Company intends to use the following practical expedients permitted under the
standard:
(cid:120) Apply a single discount rate to a portfolio of leases with similar characteristics;
(cid:120) Account for leases with a remaining term of less than 12 months as at January 1, 2019 as short-term
leases;
(cid:120) The use of hindsight in determining the lease term where the contract contains terms to extend or
terminate the lease; and
(cid:120) Use the Company’s previous assessment of impairment under IAS 37 for onerous contracts instead of
re-assessing the ROU asset for impairment on January 1, 2019.
The company is finalizing its overall analysis, assessing any potential impact to IT systems and internal controls
and reviewing additional disclosures required by the new standard.
The Company expects the adoption of the standard to result in an increase in assets of approximately $16.0
million and an increase in liabilities of $18.0 million, with a corresponding decrease to opening retained
earnings for the net difference of approximately $2.0 million as at January 1, 2019. The Company continues
to assess the impact of adopting IFRS 16 on deferred tax balances.
IFRIC 23, Uncertainty over Income Tax Treatments:
On June 7, 2017, the IASB issued IFRIC Interpretation 23 Uncertainty over Income Tax Treatments. The
Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over income tax treatments. The Interpretation is applicable for
annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Company intends to
adopt the Interpretation in its financial statements for the annual period beginning on January 1, 2019. The
Company does not expect the Interpretation to have a material impact on the financial statements.
SUMMARY OF QUARTERLY RESULTS
The table below summarizes the results for the eight most recent quarters. The Company experiences more
seasonality in its business in the first quarter and early second quarter as a result of a more annualized nature
of its mining work program and the timing of new project starts in its industrial work program. Contracts
Page 15
Management’s Discussion and Analysis
typically extend over several quarters and often over several years. For purposes of quarterly financial
reporting, the Company must estimate the cost required to complete each contract to assess the overall
profitability of the contract and the amount of gross profit to recognize for the quarter. Such estimating
includes contingencies to allow for certain known and unknown risks. The magnitude of the contingencies will
depend on the nature and complexity of the work to be performed. As the contract progresses and remaining
costs to be incurred and risk exposures become more certain, contingencies will typically decline or have been
utilized, although certain risks will remain until the contract has been completed, and even beyond. In some
cases, variations in earnings may occur where costs incurred to date may be recoverable from insurance policies
or claims to customers at a future date but cannot be recorded in the current quarter. In the case of insurance
claims, financial recovery is not recorded until certainty of the recovery is attained, in accordance with the
Company’s contingent asset accounting policy. Or in the case of claims to customers that are considered
constrained variable consideration, revenue is not recorded until it is highly probable that there will not be a
significant reversal of cumulative revenue to date, in accordance with the Company’s revenue recognition
accounting policy. As a result, earnings may fluctuate significantly from quarter-to-quarter, depending on
whether large and/or complex contracts are completed or nearing completion during the quarter, or have been
completed in a prior quarter, and may fluctuate based on timing of resolution of claims.
There are also several other factors that can affect the Company’s revenues and profit from quarter-to-quarter.
These include the timing of contract awards, the value of subcontractor billings and project scheduling.
Management does not believe that any individual factor is responsible for changes in revenue from quarter-to-
quarter, except for seasonality in the first quarter of each year.
(in thousands of Canadian dollars, except per share amounts)
2017(1)
2018
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Revenue
Net income/ (loss)
Earnings / (loss) per share
313,858
350,339
388,808
365,552
294,422
320,126
381,382
385,854
(2,216)
(0.05)
3,168
0.07
5,894
0.14
1,990
0.05
(6,408)
(0.15)
(5,344)
(0.13)
4,360
0.10
6,379
0.15
Notes:
(1) 2017 reported figures have been restated applying IFRS 15. See "Accounting Policies - New Accounting Standards Adopted".
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
The following table presents a summary of the Company’s financial condition for the periods indicated.
(in thousands of Canadian dollars)
Financial Position Data
Cash and cash equivalents
Non-cash working capital
Working capital
Non-current loans and borrowings
Shareholders' equity
$
$
2018
158,920
(88,705)
70,215
24,753
136,229
2017
(restated)
133,055
(48,977)
84,078
13,843
153,816
The Company has adequate amounts of both working capital and equity and expects to be able to maintain its
current dividend rate until earnings are rebuilt to pre-2017 levels, anticipated to result from progress executing
the Company’s diversification strategy. As a component of working capital, the Company maintains a balance
of cash and cash equivalents. At December 31, 2018, this balance amounted to $158.9 million. Included in cash
and cash equivalents is $43.2 million of cash in special purpose joint operation bank accounts ($46.2 million at
December 31, 2017).
Page 16
Management’s Discussion and Analysis
The non-cash net current asset/liability position was in a net liability position of $88.7 million at December 31,
2018, compared to a net liability position of $49.0 million at December 31, 2017. This increase in the net
liability position positively contributed $39.7 million of cash in the year as did an increase to non-current loans
and borrowings of $10.9 million. Partially offsetting this increase in cash was a use of cash through recording
a net loss of $1.0 million, payment of dividends of $16.6 million, an increase in equipment and intangible assets
of $4.9 million, and a $3.3 million increase in deferred taxes. The above changes are the primary drivers for
the net increase in cash and cash equivalents of $25.9 million in 2018.
The non-cash net current asset/liability position fluctuates significantly in the normal course of business from
period to period, primarily due to the timing of differences between the settlement of payables due to
subcontractors and suppliers, billings and collection of receivables from clients, and the timing in the
settlement of income taxes payable. The Company’s cash balances absorb these fluctuations with no net impact
to the Company’s net working capital position or ability to access contract surety support. The Company
believes it has sufficient working capital to support its current contract requirements. The Company has
submitted proposals and is waiting for the clients’ award decision on several large opportunities that if
contracted to the Company would significantly increase Backlog. If the Company is successful in securing some
of these larger opportunities, the Company has access to adequate financing from its lead banking partner.
Credit Facilities
The Company has a number of credit facilities available to access in order to support the issuance of letters of
credit, finance future capital expenditures and finance the day-to-day operations of the business.
Operating Lines of Credit
Committed revolving line of credit:
The Company has a committed revolving credit facility of up to $85.0 million, with a Canadian chartered bank.
The term of the facility matures December 31, 2021. This facility may be used in the normal course of business
for general working capital purposes, to issue non-collateralized letters of credit, and to fund future capital
expenditures and qualifying permitted acquisitions. At December 31, 2018, the Company has $24.3 million in
letters of credit outstanding (December 31, 2017 - $26.4 million) and has drawn $15.0 million on this facility
(December 31, 2017 - $5.0 million). The $15.0 million draw is presented as long-term loans and borrowings on
the Company’s statement of financial position as the facility matures in 2021. The Company is in compliance
with the working capital, minimum equity and debt-to-equity covenants of this facility.
Committed revolving term loan facility:
The Company has a committed revolving term loan facility totalling $35.0 million for the purpose of financing
acquisitions and for working capital advances in support of major projects. The facility matures on December
31, 2020. As of December 31, 2018, the Company has drawn $nil (December 31, 2017 - n/a) on the facility.
Borrowings under the facility bear interest at a rate per annum equal to the Canadian prime rate plus a spread.
A commitment fee that varies depending on certain consolidated financial ratios is due on the unutilized portion
of the facility.
Letters of Credit Facilities
The Company has available $80.0 million of demand facilities used to primarily support the issuance of letters
of credit. All letters of credit issued under these facilities are supported by the pledge of Company-owned
financial instruments, including cash. At December 31, 2018, the Company has $8.5 million in letters of credit
outstanding on this facility (December 31, 2017 - $25.1 million).
The Company has available a facility with Export Development Canada (EDC) to support the issuance of contract
performance security letters of credit issued by financial institutions on behalf of the Company. The Company
can use this facility only when letters of credit have been issued as contract security for projects that meet
the EDC mandate to provide financial support for Canadian exports abroad.
Page 17
Management’s Discussion and Analysis
Letters of credit are typically issued to support the Company’s performance obligations relating to PPP and
other major construction projects. The following table outlines the amount of the credit facilities, the amount
of issued letters of credit and the amount of collateral pledged in support of the outstanding letters of credit.
(in thousands of Canadian dollars)
December 31, 2018
December 31, 2017
Committed revolving operating credit facility
Letters of credit issued from Committed revolving operating credit facility
Committed revolving term loan facility
Letters of credit facilities
Letters of credit issued from Letters of credit facilities
Collateral pledged to support letters of credit
Guarantees provided by EDC
$
$
$
$
$
$
$
85,000
24,291
35,000
80,000
8,468
2,645
5,948
$
$
$
$
$
$
$
70,000
26,446
-
105,000
25,060
20,253
4,891
The decrease in the amount of outstanding letters of credit at the end of December 31, 2018 compared to the
end of 2017 is primarily the result of the cancellation of letters of credit that were issued in respect to the
Calgary Composting Facility project and reductions in the collateralized letters of credit issued related to the
East Rail Maintenance Facility and the Stanton Territorial Hospital Redevelopment Project.
Equipment Financing
The Company and its subsidiaries have term credit facilities of up to $45.0 million to be used to finance
equipment purchases. Borrowings under the facilities are secured with a first charge on the equipment being
financed. As of December 31, 2018, there is $6.7 million outstanding on the facilities (December 31, 2017 -
$5.8 million). Interest on the facilities can be charged at a fixed rate based on the Bank of Canada bond rate
plus a spread. Interest is paid monthly in arrears.
In addition, subsidiaries of the Company have equipment acquisition lines of credit for $32.5 million (December
31, 2017 - $42.5 million) with the financing arms of several major heavy equipment suppliers to finance the
purchase of equipment. Draws under this facility are typically recognized as finance leases or operating leases
for accounting purposes. At December 31, 2018, the Company has used $6.6 million under the facilities ($6.0
million at December 31, 2017). The Company’s total lease commitments are outlined under Contractual
Obligations.
At December 31, 2018, the Company was in compliance with all debt covenants relating to its operating and
equipment lines of credit.
Loans and Borrowings
In 2018, the Company entered into new fixed-rate term loans for $4.2 million, a variable loan borrowing of
$10.0 million and entered into finance leases for $3.9 million to finance equipment purchases. The Company
made $6.7 million in principal repayments (including finance lease repayments).
The following table provides details of outstanding debt as at December 31, 2018, and principal repayments
due over the next five years, excluding the amortization of debt financing costs and non-recourse project
financing.
(in thousands of Canadian dollars)
Amount
Year 1
Year 2
Year 3
Year 4
Year 5
Long-term debt
Finance leases
$
$
21,198
8,759
$
$
2,151
3,059
$
$
1,857
3,129
$
$
16,292
2,299
$
$
820
269
$
$
78
3
Page 18
Management’s Discussion and Analysis
Cash Flow Data
The following table provides an overview of cash flows during the periods indicated:
(in thousands of Canadian dollars)
Cash Flow Data
Cash flows from (used in) operations before changes in
non-cash working capital
Changes in contract assets - alternative finance
projects
Changes in non-cash working capital and other
Cash flows from (used in) operating activities
Investments in equity accounted entities
Capital distributions from equity accounted entities
Additions to property, equipment and intangible assets
Proceeds on sale of property and equipment
Purchase of short-term investments
Proceeds on maturity of short-term investments
Other long-term assets
Cash flows from (used in) investing activities
Dividends paid on shares
Proceeds from non-recourse project financing
Repayment of non-recourse project financing
Proceeds from loans and borrowings
Repayment of loans and borrowings
Cash flows from (used in) financing activities
(unaudited)
Quarter ended December 31,
2017
(restated)
2018
Year ended December 31,
2017
(restated)
2018
$
10,977
$
7,902
$
12,185
$
26,938
(2,384)
77,389
85,982
(2,270)
280
(2,065)
314
-
-
(652)
(4,393)
(4,145)
3,260
-
571
(1,414)
(1,728)
(6,956)
31,695
32,641
(1,608)
803
(2,106)
183
(179)
6,711
(1,972)
1,832
(4,145)
7,529
-
179
(1,486)
2,077
66,825
22,431
101,441
(7,508)
(110,551)
(91,121)
(4,020)
1,873
(14,613)
3,235
(4,742)
3,107
(861)
(16,021)
(16,582)
24,734
(76,474)
14,242
(6,734)
(60,814)
(12,144)
803
(14,572)
7,366
(6,943)
6,711
(2,312)
(21,091)
(17,891)
32,407
(27,662)
1,965
(4,222)
(15,403)
Increase (decrease) in cash and cash equivalents
$
79,861
$
36,550
$
24,606
$
(127,615)
Operating Activities
During 2018, cash flows from operating activities generated cash of $101.4 million compared with cash used of
$91.1 million in 2017. In 2018, operating activities generated $12.2 million of cash before changes in non-cash
working capital and generated $22.4 million of cash derived from changes in non-cash working capital relating
to operating activities, excluding changes in contract assets – alternative finance projects. In 2017, the
comparative amounts were $26.9 million of cash generated from operations before changes in non-cash working
capital and $110.6 million cash used from changes in non-cash working capital relating to operating activities
excluding changes in contract assets – alternative finance projects.
The year-over-year decrease in cash flows from operations before changes in non-cash working capital from
2017 is primarily the result of the $1.0 million net loss in 2018 compared to $8.8 million net income in 2017
and the change in income tax recovery of $1.7 million in 2018 from an income tax expense of $4.2 million in
2017.
In 2018, the $22.4 million increase in cash from changes in non-cash working capital and other is driven by a
$18.9 million decrease in accounts receivable and a $6.6 million decrease in contract assets partially offset by
a $2.4 million decrease in contract liabilities.
In 2017, the primary driver of the $110.6 million use of cash from the changes in non-cash working capital and
other is the $63.2 million decrease of accounts payable. The decrease is primarily the result of payments made
Page 19
Management’s Discussion and Analysis
to subcontractors in January of 2017 following the collection late in the fourth quarter of 2016 of a holdback
receivable. There was also $20.9 million of taxes paid, a $19.2 million decrease in contract liabilities and a
$20.3 million increase in other contract assets, only partially offset by a $17.3 million reduction to accounts
receivable.
Proceeds and repayments of the non-recourse debt relating to alternative finance projects are included in
financing activities.
Investing Activities
During 2018, the Company used $16.0 million of cash in investing activities compared to the $21.1 million use
of cash in 2017. The amount of cash used to purchase property, equipment and intangible assets in 2018 of
$14.6 million was the same as that used in 2017. The main difference is that year-over-year is that in 2018, the
Company used $2.1 million in cash from investments in equity accounted entities, net of capital distributions,
compared to a use of cash of $11.3 million in 2017 which was driven by a combination of investments in PPP
projects and investment in the Stack Modular companies in 2017.
Financing Activities
During 2018, the Company used $60.8 million of cash from financing activities compared with a use of cash of
$15.4 million in 2017. The increase in the use of cash in financing activities in the current year is primarily a
result of the $76.5 million repayment of non-recourse project financing related to the Moncton Downtown
Centre made in the third quarter of 2018 compared to a $27.7 million repayment in the second quarter of 2017
related to the Casey House project. The $76.5 million repayment in 2018 was partially offset by the $24.7
million in proceeds from non-recourse project financing. In addition, the amount of dividends paid were $1.3
million less than 2017 and net loans and borrowings generated additional cash of $9.8 million in 2018.
DIVIDENDS
The Company declared monthly eligible dividends on common shares payable on or about the 20th of the month
following the month in which the dividend was declared. The following table outlines the dividend history:
January 1, 2017 to March 31, 2017
April 1, 2017 to June 30, 2017
July 1, 2017 to September 30, 2017
October 1, 2017 to December 31, 2017
January 1, 2018 to March 31, 2018
April 1, 2018 to June 30, 2018
July 1, 2018 to September 30, 2018
October 1, 2018 to December 31, 2018
$
$
$
$
$
$
$
$
0.0975
0.0975
0.0975
0.0975
0.0975
0.0975
0.0975
0.0975
CAPABILITY TO DELIVER RESULTS
Productive capacity relates to the financial and non-financial resources available to the Company to execute
its strategy and achieve planned results. From a financial perspective, the Company believes it has sufficient
working capital and access to operating lines of credit to execute its current operational and growth forecast.
The belief is fully explained in sections of this MD&A dealing with financial condition and liquidity.
In addition to financial capacity, the success of the Company is dependent upon the management and leadership
skills of senior management. On an annual basis, high-performing candidates are identified for training and
progression into more senior positions within the Company. The Company’s performance management system
emphasizes the development of leadership skills. In addition, the Company sponsors internal and external
training programs, including the Bird Leadership Academy, the Bird Site Management program and the Taking
Flight management training program, to provide a forum for high-potential candidates to develop their
leadership skills.
Page 20
Management’s Discussion and Analysis
CONTRACTUAL OBLIGATIONS
At December 31, 2018, the Company has future contractual obligations of $459.5 million. Obligations for
accounts payable, finance and operating annual lease payments and for principal repayments, including
interest, under long-term debt over the next five years are:
(in thousands of Canadian dollars)
Accounts
Payable
Long-Term
Debt
Finance
Leases
Operating
Leases
Non-
recourse
Project
Financing
Deferred
payment
2019
2020
2021
2022
2023
Thereafter
$
$
371,283
11,518
807
-
-
-
383,608
2,310
16,942
1,341
835
78
-
21,506
3,247
3,242
2,338
274
3
-
9,104
5,115
4,774
4,055
3,679
3,232
10,780
31,635
347
12,553
-
-
-
-
12,900
786
-
-
-
-
-
786
Total
383,088
49,029
8,541
4,788
3,313
10,780
459,539
OFF BALANCE SHEET ARRANGEMENTS
The Company has operating lease obligations described under Contractual Obligations noted above and surety
lien bonds issued on behalf of the Company valued at $43.3 million at December 31, 2018.
Further details of commitments and contingencies are included in Note 24 of the December 31, 2018
consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of revenues, expenses, assets,
liabilities and the disclosure of contingent assets and liabilities at the reporting date. Uncertainty about these
assumptions and estimates could result in a material adjustment to the carrying amount of an asset or liability
and/or the reported amount of revenue and expense in future periods. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the
estimates are revised and any future periods affected.
Revenue and gross profit recognition
Construction revenue, construction costs, deferred revenue and contract assets are based on estimates and
judgements used in determining contract revenue and contract costs to determine the stage of completion for
a particular construction project, depending on the nature of the construction project, as more fully described
in the revenue recognition policy included in the notes to the Company’s annual financial statements. To
determine the estimated costs to complete construction projects, assumptions and estimates are required to
evaluate issues related to schedule, material and labour costs, labour productivity, changes in contract scope
and subcontractor costs. Due to the nature of construction, estimates can change significantly from one
accounting period to the next.
The value of many construction contracts increases over the duration of the construction period. Change orders
may be issued by our clients to modify the original contract scope of work or conditions. In addition, there may
be disputes or claims regarding additional amounts owing as a result of changes in contract scope, delays,
additional work or changed conditions. Construction work related to a change order or claim may proceed and
costs may be incurred in advance of final determination of the value of the change order. As many change
orders and claims may not be settled until the end of the construction project, significant increases or decreases
Page 21
Management’s Discussion and Analysis
in revenue and income may arise during any particular accounting period, applying the new revenue recognition
policy under IFRS 15.
Provisions
Provisions involve the use of estimates, as determined by management. Estimates and assumptions are required
to determine when to record and measure a provision in the financial statements for legal and warranty claims.
The outcomes can differ significantly from the estimates used in preparing the financial statements resulting
in required adjustments to expenses and liabilities.
Asset impairments
Impairment testing is performed annually or earlier, if a triggering event occurs, for indefinite-lived intangible
assets and goodwill resulting from business combinations, by comparing the recoverable amount of the cash
generating unit (“CGU”), or groups of CGUs to its carrying amount. The recoverable amount of the CGU is
determined based on a value in use calculation. There is significant amount of uncertainty with respect to the
estimates of recoverable amounts of the CGUs’ assets given the necessity of making key economic projections
which employ the following key assumptions: future cash flows, growth opportunities, including economic risk
assumptions, estimates of achieving key operating metrics and the discount rate.
OUTSTANDING COMMON SHARE DATA AND STOCK EXCHANGE LISTING
The Company is authorized to issue an unlimited number of common shares. The Company had a total of
42,516,853 common shares outstanding at December 31, 2018 and December 31, 2017.
At December 31, 2018, 490,000 stock options are outstanding with a weighted average exercise price of $13.55
per common share. With the approval of the Equity Incentive Plan (EIP) in May 2017, the Board of Directors has
resolved to suspend the stock option plan. All outstanding options will continue to vest in accordance with the
term of the option and the vesting periods.
The common shares are listed on the Toronto Stock Exchange (“TSX”) under the trading symbol BDT.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Based on their evaluations as of December 31, 2018, the President and Chief Executive Officer (“CEO”) and the
Chief Financial Officer (“CFO”) have concluded that the Company’s disclosure controls and procedures are
effective in providing reasonable assurance that information relating to the Company which is required to be
disclosed in reports filed under provincial and territorial securities legislation is accumulated, summarized and
communicated to the Company’s senior management, including the CEO and the CFO of the Company, as
appropriate, to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
The Company’s management is responsible for designing and maintaining adequate internal control over
financial reporting for the Company. All internal control systems, no matter how well designed, have inherent
limitations; therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation.
As of December 31, 2018, under the supervision of and with the participation of management, including the
CEO and CFO, internal controls over financial reporting have been designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the consolidated financial statements for
external purposes in accordance with IFRS.
Page 22
Management’s Discussion and Analysis
As of December 31, 2018, under the supervision of and with the participation of management, including the
CEO and CFO, the Company has evaluated the effectiveness of internal controls over financial reporting and
determined that the internal controls over financial reporting are operating as intended.
There have been no material changes in the Company’s internal control over financial reporting during the year
ended December 31, 2018 that materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
RISKS RELATING TO THE BUSINESS
The following discussion addresses the more significant risk factors relating to the business. For a detailed
discussion of all risk factors relating to the business, refer to the Company’s most recently filed Annual
Information Form dated March 12, 2019, which is available through the System for Electronic Document Analysis
and Retrieval (SEDAR) at www.sedar.com.
Ability to Hire and Retain Qualified and Capable Personnel
The success of Bird is highly influenced by the efforts of key management, technical, project and business
development personnel. The loss of the services of any of Bird’s key management personnel could negatively
impact Bird. The future success of Bird also depends heavily on its ability to attract, retain and develop high-
performing personnel in all areas of its operations.
Most firms throughout the construction industry face this challenge and, accordingly, competition for
professional staff is intense. If Bird ceases to be seen by current and prospective employees as an attractive
place to work, it could experience difficulty in hiring and retaining an adequate level of qualified staff. This
could have an adverse effect on current operations of Bird and would limit its prospects and impair its future
success.
Economy and Cyclicality
Activity within the construction industry is generally tied to the state of the economy. Thus, in periods of
strong economic growth, capital spending will generally increase and there will be more and better quality
opportunities available within the construction industry. Investment decisions by our clients are based on long-
term views of the economic viability of their current and future projects, sometimes based upon the clients’
view of the long-term prices of commodities which are influenced by many factors. If our clients’ outlook for
their current and future projects is not favourable, this may lead them to delay, reduce or cancel capital
project spending and may make them more sensitive to construction costs. A prolonged downturn in the
economy could impact Bird’s ability to generate new business or maintain a backlog of contracts with
acceptable margins to sustain Bird through such downturns.
As noted above, Bird attempts to insulate itself in various ways from the effects of negative economic conditions
through diversification of the sources of the Company’s earnings; however, there is no assurance that these
methods will be effective in insulating Bird from a downturn in the economy. Furthermore, as a result of
increased demand in certain regions or industry sectors, the Company has, in the past, earned above-average
margins on particular projects. There is also no assurance that above-average margins that may have been
generated on historical contracts can be generated in the future.
The Company has a 50% interest in Stack. which is based in China. There is uncertainty around how the recent
geopolitical tensions between China and Canada may affect the Company’s investment.
PPP Project Risk
Bird is active in the PPP market. Bird’s role in these projects is typically to provide design-build services to a
concession that is formed to provide design, construction, financing, and management and/or operations to a
public authority. Typical in the design-build contract format are performance guarantees and design-build
risks. Moreover, the performance guarantees on PPP projects often include responsibility for the energy
Page 23
Management’s Discussion and Analysis
performance of the facility and achievement of environmental standards. If Bird fails to meet the required
standards, it may be liable for substantial penalties and damages.
The PPP design-build contracts entered into by Bird also typically require Bird to pay significant liquidated
damages and/or other penalties and damages if the projects are not completed on schedule.
The PPP procurement model also typically results in the transfer of certain risks to the contractor beyond what
would be the case for a similar facility under a conventionally non-PPP procurement model. These include
responsibility and potential liability for matters such as changes in law and certain force majeure and delay
events. In addition, if Bird’s contract was terminated for cause, the Company would be exposed to substantial
liability for breakage costs to the concession and its lenders.
The security required to support the obligations that the Company undertakes on these projects typically
includes substantial letters of credit which may be drawn upon in the event the Company fails to meet its
obligations.
Design Risks
While many contracts entered into by Bird are for construction or construction services only, certain contracts
are undertaken on a design-build basis, under which Bird is responsible for both design and construction of the
project, which adds design risk assumed by Bird. While Bird subcontracts all of the design scope in such design-
build contracts to reputable designers, there is generally not a full transfer of design-related risks. These risks
include design development and potential resulting scope creep, delays in the design process that may adversely
affect the overall project schedule, and design errors and omissions.
To manage these risks, Bird manages and oversees the design process, coordinates the design deliverables with
the construction process and, for significant design-build projects, purchases errors and omissions insurance.
Ability to Secure Work
Bird generally secures new contracts either through a competitive bid process or through negotiation. Awards
in both the public and private sectors are generally based upon price, but are also influenced and sometimes
formally based on other factors, such as the level of services offered, safety record, construction schedule,
design (if applicable), project personnel, the consortium, joint venture and subcontractor team, prior
experience with the prospective client and/or the type of project, and financial strength including the ability
to provide bonds and other contract security.
In order to be afforded an opportunity to bid for large projects and in the PPP market, a strong balance sheet
measured in terms of an adequate level of working capital and equity is typically required. Bird operates in
markets that are highly competitive and there is constant pressure to find and maintain a competitive
advantage. In the current economic climate, competition is intense. This presents significant challenges for
the Company. If those competitive challenges are not met, Bird’s client base could be eroded or it could
experience an overall reduction in profits.
A decline in demand for Bird’s services from the private sector could have an adverse impact on the Company
if that business could not be replaced within the public sector. A portion of Bird’s construction activity relates
to government-funded institutional projects. Any reduction in demand for Bird’s services by the public sector,
whether as a result of funding constraints, changing political priorities or delays in projects caused by elections
or other factors, could have an adverse impact on the Company if that business could not be replaced within
the private sector.
Government-funded projects also typically have long and sometimes unpredictable lead times associated with
government review and approval. The time delays associated with this process can constitute a risk to general
contractors pursuing these projects. Certain government-funded projects, particularly PPP and alternative
finance projects, may also require significant bid costs which can only be recovered if Bird is the successful
bidder. A number of governments in Canada have procured a significant value of projects under a PPP and/or
alternative finance contract format, which is an attractive market for the Company. A reduction in the
Page 24
Management’s Discussion and Analysis
popularity of this procurement method or difficulties in obtaining financing for these projects would have
negative consequences for Bird.
Performance of Subcontractors
Successful completion of a contract by Bird depends, in large part, on the satisfactory performance of its
subcontractors who are engaged to complete the various components of the work. Subcontractor defaults tend
to increase during depressed market conditions. If subcontractors fail to satisfactorily perform their portion of
the work, Bird may be required to engage alternate subcontractors to complete the work and may incur
additional costs. This can result in reduced profits or, in some cases, significant losses on the contract and
possible damage to Bird’s reputation.
In addition, the ability of Bird to bid for and successfully complete projects is, in part, dependent on the
availability of qualified subcontractors and trades people. Depending on the value of a subcontractor’s work,
Bird may require some form of performance security and achieves this through the use of surety bonds,
subcontractor default insurance or other forms of security from the subcontractor to mitigate Bird’s exposure
to the risks associated with the subcontractor’s performance and completion. A significant shortage of qualified
subcontractors and trades people or the bankruptcy of a subcontractor could have a material impact on Bird’s
financial condition and results of operations.
Competitive Factors
Bird competes with many international, national, regional and local construction firms. Competitors often
enjoy advantages in a particular market that Bird does not have or they may have more experience or a better
relationship with a particular client. On any given contract bid or negotiation, Bird will attempt to assess the
level of competitive pressure it may face and it will attempt to neutralize or overcome any perceived advantage
that its competitors have. Depending on this assessment, Bird will decide whether or not to pursue a contract.
In addition, this assessment bears directly on decisions that Bird will make, including what level of profit can
be incorporated into its contract price and what personnel should be assigned to the contract. The accuracy
of this assessment and the ability of Bird to respond to competitive factors affect Bird’s success in securing
new contracts and its profitability on contracts that it does secure.
Estimating Costs and Schedules/Assessing Contract Risks
The price for most contracts performed by Bird is based, in part, on cost and schedule estimates that are
subject to a number of assumptions. Erroneous assumptions can result in an incorrect assessment of risks
associated with a contract or estimates of project costs and schedules that are in error, potentially resulting
in lower than anticipated profit or significant loss. All significant cost and schedule estimates are reviewed by
senior management prior to tender submission in an attempt to mitigate these risks.
Maintaining Safe Work Sites
Despite the Company’s efforts to minimize the risk of safety incidents, they can occur from time to time and,
if and when they do, the impact on Bird can be significant. Bird’s success as a general contractor is highly
dependent on its ability to keep its construction work sites and offices safe and any failure to do so can have
serious impact on the personal safety of its employees and others. In addition, it can expose Bird to contract
termination, fines, regulatory sanctions or even criminal prosecution.
Bird’s safety record and worksite safety practices also have a direct bearing on its ability to secure work,
particularly in the industrial sector. Certain clients will not engage particular contractors to perform work if
their safety practices do not conform to predetermined standards or if the general contractor has an
unacceptably high incidence of safety infractions or incidents.
Bird adheres to very rigorous safety policies and procedures which are continually reinforced on its work sites
and offices. Management is not aware of any pending health and safety legislation or prior incidents which
would be likely to have a material impact on any of Bird’s operations, capital expenditure requirements, or
Page 25
Management’s Discussion and Analysis
competitive position. Nevertheless, there can be no guarantee with respect to the impact of future legislation
or incidents.
Accuracy of Cost to Complete Estimates
As Bird performs each construction contract, costs are continuously monitored against the original cost
estimates. On at least a quarterly basis, a detailed estimate of the costs to complete a contract is compiled by
Bird. These estimates are an integral part of Bird’s process for determining construction revenues and profits
and depend on cost data collected over the duration of the project as well as the judgments of Bird’s field and
office personnel. To the extent that the costs to complete estimates are based on inaccurate or incomplete
information, or on faulty judgments, the accuracy of reported construction revenues and profits can be
compromised. Bird has adopted many internal control policies and procedures aimed at mitigating exposure to
this risk.
Work Stoppages, Strikes and Lockouts
Bird is signatory to a number of collective bargaining agreements. Future negotiation of these collective
bargaining agreements could increase Bird’s operating expenses and reduce profits as a result of increased
wages and benefits. Failure to come to an agreement in these collective bargaining negotiations or those of its
subcontractors and suppliers or government agencies could result in strikes, work stoppages, lockouts or other
work action, and increased costs resulting from delays on construction projects. A strike or other work stoppage
is disruptive to Bird’s operations and could adversely affect portions of its business, financial position, results
of operations and cash flows.
Adjustments and Cancellations of Backlog
The performance of the Company in a period depends significantly on the contribution from projects in its
backlog. There can be no assurance that the revenues or profits included in backlog at any point in time will
be realized. Contract suspensions, reductions and cancellations, which are beyond the control of Bird, do occur
from time-to-time in the construction industry. Customers may have the right to suspend, cancel or reduce the
scope of their contracts with Bird and, though Bird generally has a contractual right to be reimbursed for certain
costs, it typically has no contractual rights to the total revenue or profit that was expected to be derived from
such projects. These reductions could have a material adverse impact on future revenues and profitability.
TERMINOLOGY
Throughout this report, management uses the following terms not found in GAAP Standards and which do not
have a standardized meaning. Therefore, these terms may not be comparable with similar terms presented by
other companies and require definition:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
“Adjusted Net Income” is the net income for the Company adding back any impairment of property,
equipment and intangible, and the associated tax impact of the impairment.
“Adjusted Net Income Per Share” is the Adjusted Net Income divided by the number of outstanding
common shares.
"Gross Profit Percentage" is the percentage derived by dividing gross profit by construction revenue. Gross
profit is calculated by subtracting construction costs from construction revenue.
"Backlog" (also referred to in the construction industry as "work on hand") is the total value of all contracts
awarded to the Company, less the total value of work completed on these contracts as of the date of the
most recently completed quarter. This includes all contracts that have been awarded to the Company
whether the work has commenced or will commence in the normal course. It includes all of the Company’s
remaining performance obligations in its contracts with its clients. It does not include amounts for variable
consideration that are constrained, agency relationship construction management projects, and estimated
future work orders to be performed as part of master services agreements.
Page 26
Management’s Discussion and Analysis
(cid:120)
"Lost Time Incident Frequency" is the number of lost time incidents recorded per 200,000 manhours of
work by Bird employees.
FORWARD-LOOKING INFORMATION
Certain statements included herein which express management's expectations or estimates of future
performance may constitute "forward-looking information". The words "believe", "expect", "anticipate",
"contemplate", "target", "plan", "intends", and similar expressions identify forward-looking information.
Forward-looking information is necessarily based upon a number of estimates and assumptions that, while
considered reasonable by management, are inherently subject to significant business, economic and
competitive uncertainties and contingencies. In particular, this MD&A includes many such forward-looking
information and the Company cautions the reader that such forward-looking information involve known and
unknown risks, uncertainties and other factors that may cause the actual financial results, performance or
achievements of the Company to be materially different from the Company’s estimated future results,
performance or achievements expressed or implied by those forward-looking information and the forward-
looking information is not a guarantee of future performance. Risks that may impact the Company's future
results, performance or achievements include those described under "Risks Relating to the Business” in this
MD&A and in the Company's Annual Information Form dated March 12, 2019 filed and available on SEDAR. The
Company expressly disclaims any intention or obligation to update or revise any forward-looking information
whether as a result of new information, events or otherwise.
Page 27
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Report to Shareholders
Management’s Responsibility for Financial Reporting
The management of Bird Construction Inc. (“Company”) is responsible for the preparation and integrity of
the consolidated financial statements contained in the Annual Report. These consolidated financial statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and necessarily
include some amounts that are based on management’s best estimates and judgment. Financial information
contained throughout this Annual Report is consistent with the financial statements.
Management maintains appropriate systems of internal control. Policies and procedures are designed to
provide reasonable assurance that transactions are properly authorized, assets are safeguarded and financial
records are properly maintained to provide reliable information for the preparation of financial statements.
The Board of Directors has reviewed and approved the consolidated financial statements. The Board fulfills
its responsibility in this regard through its Audit Committee which meets regularly with management and the
Company’s external auditors.
Paul A. Charette
Wayne R. Gingrich
Chairman of the Board of Directors
Chief Financial Officer
Page 28
Independent Auditors’ Report
To the Shareholders of Bird Construction Inc.
Opinion
We have audited the consolidated financial statements of Bird Construction Inc. (the Entity), which comprise
the consolidated statements of financial position as at December 31, 2018, December 31, 2017 and January 1,
2017, the consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash
flows for the years ended December 31, 2018 and December 31, 2017, and notes to the financial statements,
including a summary of significant accounting policies (hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated
financial position of the Entity as at December 31, 2018, December 31, 2017 and January 1, 2017, and its
consolidated financial performance and its consolidated cash flows for the years ended December 31, 2018 and
December 31, 2017 in accordance with International Financial Reporting Standards (IFRS).
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 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 other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Emphasis of Matter - Comparative Information
We draw attention to Note 4 to the financial statements (“Note 4”) which explains that certain comparative
information presented:
(cid:120)
(cid:120)
for the year ended December 31, 2017 has been restated.
as at January 1, 2017 has been derived from the financial statements for the year ended December 31,
2016 which have been restated (not presented herein).
Note 4 explains the reason for the restatement and also explains the adjustments that were applied to restate
certain comparative information.
Our opinion is not modified in respect of this matter.
Other Information
Management is responsible for the other information. Other information comprises:
(cid:120) Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.
(cid:120)
information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled “2018 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.
Page 29
Independent Auditors’ Report
We obtained the Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions
as at the date of this auditors’ report. If, based on the work we have performed on this other information, we
conclude that there is a material misstatement of this other information, we are required to report that fact
in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a document
likely to be entitled “2018 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 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.
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:
(cid:120)
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
(cid:120) 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.
Page 30
Independent Auditors’ Report
(cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
(cid:120) 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.
(cid:120) 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.
(cid:120) 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.
(cid:120) 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.
(cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group Entity to express an opinion on the financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
Signed “KPMG LLP”
Chartered Professional Accountants
The engagement partner on the audit resulting in this auditors’ report is Austin Abas.
Winnipeg, Canada
March 12, 2019
Page 31
Consolidated Statements of Financial Position
As at December 31, 2018, December 31, 2017 and January 1, 2017
(in thousands of Canadian dollars)
ASSETS
Current assets:
Cash
Bankers' acceptances and short-term deposits
Short-term investments
Accounts receivable
Contract assets
Contract assets - alternative finance projects
Inventory
Prepaid expenses
Income taxes recoverable
Investments held for sale
Other assets
Total current assets
Non-current assets:
Other assets
Property and equipment
Investments in equity accounted entities
Deferred income tax asset
Intangible assets
Goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities:
Accounts payable
Contract liabilities
Dividends payable to shareholders
Income taxes payable
Non-recourse project financing
Current portion of loans and borrowings
Provisions
Other liabilities
Total current liabilities
Non-current liabilities:
Loans and borrowings
Deferred income tax liability
Investments in equity accounted entities
Other liabilities
Total non-current liabilities
SHAREHOLDERS' EQUITY
Shareholders' capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total shareholders' equity
Note
December 31,
2018
December 31,
2017
(restated)
January 1,
2017
(restated)
26
26
8
6
7
10
9
9
11
10
14
12
12
6
7
13
19
15
13
14
10
15
17
$
$
157,151
1,769
1,705
337,663
28,412
7,126
840
2,566
5,559
3,762
-
546,553
6,852
56,226
12,517
10,909
2,575
16,389
105,468
$
114,092
18,963
-
356,528
34,962
73,951
514
2,519
6,041
-
409
607,979
7,577
52,397
12,237
8,615
1,538
16,389
98,753
246,519
15,357
-
373,708
14,617
66,443
567
2,688
9,900
-
-
729,799
3,680
45,517
-
6,737
1,735
16,389
74,058
$
652,021
$
706,732
$
803,857
$
$
383,608
60,003
1,382
3,444
11,824
5,204
8,593
2,280
476,338
24,753
7,355
-
7,346
39,454
42,527
1,956
91,743
3
136,229
$
373,081
62,376
1,382
5,539
63,685
4,755
10,703
2,380
523,901
13,843
8,374
-
6,798
29,015
42,527
1,949
109,338
2
153,816
436,336
81,554
2,691
18,557
59,222
2,765
11,833
1,569
614,527
8,623
13,978
881
4,305
27,787
42,527
1,932
117,084
-
161,543
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
652,021
$
706,732
$
803,857
The accompanying notes are an integral part of these consolidated financial statements.
Page 32
Consolidated Statements of Income (Loss)
For the years ended December 31,
(in thousands of Canadian dollars, except per share amounts)
Note
2018
Construction revenue
Costs of construction
Gross profit
Income from equity accounted investments
10
General and administrative expenses
Income from operations
Finance income
Finance and other costs
Income (loss) before income taxes
Income tax expense (recovery)
Net income (loss) for the year
20
21
14
Basic and diluted earnings (loss) per share
18
$
$
$
$
1,381,784
1,324,329
57,455
1,894
(58,933)
416
1,386
(4,476)
(2,674)
(1,661)
(1,013)
$
2017
(restated)
1,418,557
1,347,250
71,307
1,775
(59,307)
13,775
1,298
(1,995)
13,078
4,242
8,836
(0.02)
$
0.21
The accompanying notes are an integral part of these consolidated financial statements.
Page 33
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31,
(in thousands of Canadian dollars)
Note
2018
2017
(restated)
Net income (loss) for the year
Other comprehensive income (loss) for the year:
Exchange differences on translating equity accounted investments
10
Total of items that may be reclassified to net income in subsequent years
Total other comprehensive income (loss) for the year
$
(1,013)
$
8,836
1
1
1
2
2
2
Total comprehensive income (loss) for the year
$
(1,012)
$
8,838
The accompanying notes are an integral part of these consolidated financial statements.
Page 34
Consolidated Statements of Changes in Equity
For the years ended December 31,
(in thousands of Canadian dollars, except per share amounts)
Note
Shareholders'
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Balance at January 1, 2017 (restated)
$
42,527
$
1,932
$
117,084
$
Net income (loss) for the year (restated)
Other comprehensive income for the year
Total comprehensive income for the year
Contributions by and dividends to owners
Stock-based compensation expense
Dividends declared to shareholders
10
16
-
-
-
-
-
-
-
-
17
-
8,836
-
8,836
-
(16,582)
-
-
-
-
2
2
Total equity
$
161,543
8,836
2
8,838
17
(16,582)
Balance at December 31, 2017 (restated)
$
42,527
$
1,949
$
109,338
$
$
2
153,816
Dividends per share declared during the year ended December 31, 2017
$
0.39
Balance at December 31, 2017 (restated)
$
42,527
$
1,949
$
109,338
$
$
2
153,816
Net income (loss) for the year
Other comprehensive income (loss) for the year
Total comprehensive income for the year
Contributions by and dividends to owners
Stock-based compensation expense
Dividends declared to shareholders
10
16
-
-
-
-
-
-
-
-
-
7
(1,013)
-
(1,013)
-
(16,582)
1
1
-
-
-
(1,013)
1
(1,012)
7
(16,582)
Balance at December 31, 2018
$
42,527
$
1,956
$
91,743
$
$
3
136,229
Dividends per share declared during the year ended December 31, 2018
$
0.39
The accompanying notes are an integral part of these consolidated financial statements.
Page 35
Consolidated Statements of Cash Flows
For the years ended December 31,
(in thousands of Canadian dollars)
Cash flows from (used in) operating activities:
Net income (loss) for the year
Items not involving cash:
Amortization
Depreciation
(Gain) loss on sale of property and equipment
(Income) loss from equity accounted investments
Finance income
Finance and other costs
Deferred compensation plan expense and other
Unrealized (gain) loss on investments and other
Income tax expense (recovery)
Stock-based compensation expense
Cash flows from operations before changes in non-cash working capital
Changes in non-cash working capital relating to operating activities
Interest received
Interest paid
Income taxes paid
Cash flows from (used in) operating activities
Cash flows from (used in) investing activities:
Investments in equity accounted entities
Capital distributions from equity accounted entities
Additions to property and equipment
Proceeds on sale of property and equipment
Additions to intangible assets
Purchase of short-term investments
Proceeds from maturity of short-term investments
Other long-term assets
Cash flows used in investing activities
Cash flows from (used in) financing activities:
Dividends paid on shares
Proceeds from non-recourse project financing
Repayment of non-recourse project financing
Proceeds from loans and borrowings
Repayment of loans and borrowings
Cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents during the year
Effects of foreign exchange on cash balances
Cash and cash equivalents, beginning of the year
Note
2018
$
(1,013)
$
12
11
10
20
21
14
16
26
10
10
11
11
12
7
7
13
13
473
10,763
(873)
(1,894)
(1,386)
4,476
4,622
(1,329)
(1,661)
7
12,185
95,532
1,349
(4,360)
(3,265)
101,441
(4,020)
1,873
(13,103)
3,235
(1,510)
(4,742)
3,107
(861)
(16,021)
(16,582)
24,734
(76,474)
14,242
(6,734)
(60,814)
24,606
1,259
133,055
2017
(restated)
8,836
458
11,531
(88)
(1,775)
(1,298)
1,995
1,582
1,438
4,242
17
26,938
(96,188)
1,224
(2,212)
(20,883)
(91,121)
(12,144)
803
(14,311)
7,366
(261)
(6,943)
6,711
(2,312)
(21,091)
(17,891)
32,407
(27,662)
1,965
(4,222)
(15,403)
(127,615)
(1,206)
261,876
Cash and cash equivalents, end of the year
26
$
158,920
$
133,055
The accompanying notes are an integral part of these consolidated financial statements.
Page 36
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
1. Structure of the Company
Bird Construction Inc. (the “Company”) is a corporation incorporated in the province of Ontario, Canada.
The address of the Company’s registered office is 5700 Explorer Drive, Suite 400, Mississauga, Ontario,
Canada.
The Company, through its subsidiaries and interests in joint arrangements carries on business as a general
contractor with offices across Canada. The Company serves customers in the industrial, mining,
institutional, retail, commercial, multi-tenant residential, light industrial, and renovation and restoration
sectors using fixed priced, design-build, unit price, cost reimbursable, guaranteed upset price and
construction management contract delivery methods.
Segment results are reviewed by the Company’s Chief Executive Officer to assess performance and allocate
resources within the Company. Management applies judgement in the aggregation of the Company’s
operating segments and has determined that the Company operates in one reportable segment being the
general contracting sector of the construction industry. The Company’s operating segments have similar
economic characteristics in that each of the Company’s operating districts provides comparable
construction services, use similar contracting methods, have similar long term economic prospects, share
similar cost structures and operate in similar regulatory environments.
2. Basis of preparation
Authorization of financial statements:
These consolidated financial statements were authorized for issue on March 12, 2019 by the Company’s
Board of Directors.
Statement of compliance:
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”).
Basis of measurement:
These consolidated financial statements have been prepared using the historical cost convention, except
for certain financial assets, derivative financial instruments and liabilities for cash settled share-based
payment arrangements which are measured at fair value.
Use of estimates and judgements:
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of revenues,
expenses, assets, liabilities and the disclosure of contingent assets and liabilities at the reporting date.
Uncertainty about these assumptions and estimates could result in a material adjustment to the carrying
amount of an asset or liability and/or the reported amount of revenue and expense in future periods.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
Revenue and gross profit recognition
Construction revenue, construction costs, contract liabilities, and contract assets are based on estimates
and judgements used in determining contract revenue and contract costs to determine the stage of
completion for a particular construction project, depending upon the nature of the construction
contract, as more fully described in the revenue recognition policy (see note 3). To determine the
estimated costs to complete construction contracts, assumptions and estimates are required to evaluate
matters related to schedule, material and labour costs, labour productivity, changes in contract scope
Page 37
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
and subcontractor costs. Due to the nature of construction activities, estimates can change significantly
from one accounting period to the next.
The value of many construction contracts increases over the duration of the construction period. Change
orders may be issued by customers to modify the original contract scope of work or conditions. In
addition, there may be disputes or claims regarding additional amounts owing as a result of changes in
contract scope, delays, additional work or changed conditions. Construction work related to a change
order or claim may proceed, and costs may be incurred, in advance of final determination of the value
of the change order. Many change orders and claims may not be settled until the construction project is
completed or subsequent to completion and the nature of the relationship with the other party to the
claim and the history of success of these claims may impact the associated revenue or cost recovery.
Claims against customers for variable consideration due to delays, changes, etc. are assessed under the
Company’s revenue policy as described in note 3, which requires significant judgement. The amount of
variable consideration that is constrained is the difference between the total claim value and the best
estimate of recovery. This constrained value is reviewed each reporting period.
Provisions
Provisions for legal and warranty and other provisions involve the use of estimates, as determined by
management. Estimates and assumptions are required to determine when to record and how to measure
a provision in the financial statements. The outcomes may differ significantly from the estimates used
in preparing the financial statements resulting in adjustments to previously reported financial results.
Asset impairments
Impairment testing is performed annually or earlier, if a triggering event occurs, for indefinite-lived
intangible assets and goodwill resulting from business combinations, by comparing the recoverable
amount of the cash generating unit ("CGU"), or groups of CGUs to its carrying amount. The recoverable
amounts of the CGU have been determined based on a value in use calculation. There is a significant
amount of uncertainty with respect to the estimates of recoverable amounts of the CGUs' assets given
the necessity of making key economic projections which employ the following key assumptions: future
cash flows, growth opportunities, including economic risk assumptions and estimates of achieving key
operating metrics and drivers; and the discount rate.
Information about significant judgements in applying accounting policies that have the most significant
effect on the amounts recognized in the consolidated financial statements is included in the significant
accounting policies note 3.
3. Summary of significant accounting policies
The significant accounting principles used in these consolidated financial statements are as follows:
Consolidation:
The consolidated financial statements include the accounts of the Company, its subsidiaries and
partnerships, as well as its pro-rata share of assets, liabilities, revenues, expenses and cash flows from
joint operations. Subsidiaries are entities controlled by the Company. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. All inter-company balances, transactions, revenues and expenses
have been eliminated on consolidation. The consolidated financial statements include the accounts of
the following significant subsidiaries:
Page 38
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Company:
Fully consolidated subsidiaries
Bird Construction Inc.
Bird Construction Company Limited
Bird Construction Company (Limited Partnership)
Bird Management Ltd.
Bird Design - Build Limited
Bird Capital Limited
Bird Capital Limited Partnership
Bird Industrial Group Limited
Bird Design-Build Construction Inc.
Westrac Resources Ltd.
Westrac Resources Limited Partnership
Bird Construction Group (Limited Partnership)
Bird Construction Group Limited
Bird General Contractors Ltd. (Formerly H.J. O'Connell, Limited)
Bird Civil et mines Ltée (Formerly Les Enterprises de Construction de Québec Ltée)
Bird Heavy Civil Ltd. (Formerly H.J. O'Connell Construction Ltd.)
Nason Contracting Group Ltd.
Bird Casey House Limited Partnership
Bird Capital MDC Project Co. Inc.
Bird Construction Industrial Services Ltd.
Bird Construction Group Ltd.
NCGL Industrial Ltd.
NCGL Construction Ltd.
BFL Fabricators Ltd.
Canadian Consulting Group Limited
Innovative Trenching Solutions Ltd.
Innovative Trenching Solutions Field Services Ltd.
Bird Capital OMP Project Co. Inc.
Proportionately consolidated joint arrangements
Restigouche Hospital Centre Joint Venture
HJOC-VPDL Placentia Bridge Joint Venture
Arctic-Bird Construction Joint Venture
Maple Reinders-Nason Joint Venture
Bird Kiewit Joint Venture
Bird/Wright Schools Joint Venture
Bird/Wright Schools 2 Joint Venture
Bird - Clark Stanton JV
Bird-Civeo Joint Venture
Pomerleau/O'Connell JV
Bird - Maple Reinders JV
Maple Reinders - Bird JV
Bird - ATCO Joint Venture
CBS Joint Venture
* Joint venture was dissolved on November 16, 2018.
2018
2017
Ownership/Voting Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
30%
50%
50%
50%
60%
70%
70%
50%
60%*
50%
50%
50%
60%
42.5%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
30%
50%
50%
50%
60%
70%
70%
50%
60%
50%
50%
n/a
n/a
n/a
The Company has invested in a number of Public Private Partnerships (“PPP”) concession ventures
usually holding a minority interest position in the venture. The Company has also invested in Stack
Modular group of companies. In these instances, the Company can either exercise significant influence
or joint control over the financial and operational policies of the venture (or investee). The Company
uses the equity method of accounting to account for these investments. The investment is recorded as
the amount of the initial investment adjusted for the pro-rata share of the investee’s earnings less any
distributions received from the investment.
Page 39
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Company:
Equity accounted investment in associates/joint ventures
Chinook Resources Management General Partnership
Plenary Infrastructure ERMF GP
Joint Use Mutual Partnership #1
Joint Use Mutual Partnership #2
Boreal Health Partnership
Timmiak Construction Limited Partnership (Formerly Nillik Construction Limited Partnership)
Harbour City Solutions General Partnership
Niagara Falls Entertainment Partners
Stack Modular Structures Ltd.
Stack Modular Structures Hong Kong Limited
Hartland Resource Management General Partnership
*Classified as investments held for sale in 2018.
2018
2017
Ownership/Voting Interest
50%
10%
20%*
20%*
25%
69.99%/33.33%
20%
20%/16.2%
50%
50%
20%
50%
10%
20%
20%
25%
69.99%/33.33%
20%
20%/16.2%
50%
50%
n/a
All of the above subsidiaries, joint arrangements, joint ventures and associates are incorporated or
registered in Canada except Stack Modular Structure Hong Kong Limited which is incorporated and
registered in Hong Kong.
Revenue recognition:
Contract revenue is recognized in profit or loss in accordance with the pattern of satisfying the
Company’s performance obligations under a contract. This satisfaction occurs when control of a good or
service transfers to the customer. In the majority of the Company’s contracts, the customer controls
the work in process as evidenced by the right to payment for work performed to date plus a reasonable
profit to deliver products or services that do not have an alternative use to the Company, and the work
is performed on the customer’s property. Based on the nature of these contractual arrangements,
control is transferred over time and revenue is recognized over time.
For each performance obligation satisfied over time, the Company will recognize revenue by measuring
progress toward complete satisfaction of that performance obligation. Using output or input methods
based on the type of contract, the Company recognizes revenue in a pattern that reflects the transfer
of control of the promised goods or services to the customer. Revenue from fixed price and cost
reimbursable contracts is recognized using the input method with reference to costs incurred. Revenue
from unit price contracts in the heavy construction, civil construction and contract surface mining
construction sectors is recognized based on the amount of billable work completed, established by
surveys of work performed, an output method. For agency relationships, such as construction
management contracts, where the Company acts as an agent for its customers, fee revenue only is
recognized, generally in accordance with the contract terms. If the outcome of a construction contract
cannot be estimated reliably for management to estimate the ultimate profitability of the contract with
a reasonable degree of certainty, no profit is recognized. When further clarity is gained throughout the
progression of the contract, the constrained margin and associated revenue will be reassessed.
Revenue from contract modifications, commonly referred to as change orders and claims, is recognized
to the extent that the contract modifications have been approved by the customer and the amount can
be measured reliably. In cases where the contract modification is approved, but the price has not been
finalized, the Company will account for the contract modification using variable consideration guidance
described below. A claim or dispute is considered variable consideration as it is in addition to the agreed
upon performance obligations outlined in the original contract but due to unforeseen circumstances is
claimed against the customer because of additional work and costs incurred due to delays and scope
Page 40
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
changes. The subsequent outcome and settlement of this claim through negotiation results in uncertainty
as to the likelihood and amount that will be ultimately collected.
The amount of variable consideration included in the transaction price may be constrained due to the
uncertain nature of the recovery of the associated revenue. The Company will make an estimate of the
amount to be constrained by using either the most likely amount or the expected value method,
depending which method is considered to best predict the amount of consideration by contract to which
the Company will be entitled. The amount of variable consideration to be included in the transaction
price is only that to which it is highly probable that a significant reversal of cumulative revenue
recognized to date will not occur. Management considers the following factors in their assessment of
the probability of reversal:
(i) Susceptibility of consideration to factors outside the Company’s influence.
(ii) Length of time before resolution of the uncertainty associated with the amount of
consideration is expected.
(iii) The Company’s experience with similar types of contracts is limited or the experience is not
relevant or has limited predictive value.
(iv) The Company has a practice of offering a broad range of pricing concessions or changing the
payment terms and conditions of similar contracts in similar situations.
(v) The contract has a larger number and broad range of possible consideration amounts.
Where the above factors indicate uncertainty associated with the outcome of the transaction price, the
Company reviews the historical performance under similar contracts in order to determine the
appropriate proportion of the variable consideration to be included in the transaction price.
For most customer arrangements, the customer contracts with the Company to provide a significant
service of integrating a complex set of tasks and components into a single project or capability (even if
that single project results in the delivery of multiple units). The Company therefore considers that the
entire contract results in the delivery of a single performance obligation. Less commonly, the Company
may promise to provide distinct goods or services within a contract in which case the contract is
separated into the associated performance obligations as assessed from the customer’s perspective. If
a contract contains multiple performance obligations, the Company allocates the total transaction price
to each performance obligation in an amount based on the estimated relative standalone selling prices
of the promised goods or services underlying each performance obligation. When the Company is
contracted to construct customer specific projects, the budgets and overall transaction prices are built
up using the Company’s best estimate of costs associated to complete the customized project using the
appropriate overhead and subcontractor rates for a given project and location. This approach to
estimate the overall costs and associated revenues is considered the most appropriate assessment of the
standalone selling price for the associated performance obligations.
Where costs are determined to be greater than total revenues, losses from any construction contracts
are recognized in full in the period the loss becomes apparent. Losses are recorded within provisions on
the statement of financial position.
Construction costs:
Construction costs are expensed as incurred unless they result in an asset related to future contract
activity and meet the criteria to be capitalized as contract assets. Construction costs include all
expenses that relate directly to execution of the specific contract, including site labour and site
supervision, direct materials, subcontractor costs, equipment rentals and depreciation, design and
technical assistance, and warranty claims. Construction costs also include overheads that can be
Page 41
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
attributed to the project in a systematic and consistent manner and include general insurance and
bonding costs, and staff costs relating to project management.
Contract assets and liabilities:
Any excess of costs and estimated earnings over progress billings on construction contracts is carried as
a contract asset in the financial statements. Contract assets also arise when the Company capitalizes
incremental costs of obtaining contracts with customers and the costs incurred in fulfilling those
contracts, such as mobilization costs. Costs to fulfill a contract are required to be capitalized where
they are determined to relate directly to a contract or an anticipated contract that the entity can
specifically identify, they generate or enhance resources of the Company that will be used in satisfying
performance obligations in the future, and they are expected to be recovered under that specific
contract.
In all cases, the specific contract asset is amortized into the project with reference to the same pattern
of recognition as the revenue recognized on the associated project.
Any excess of progress billings over earned revenue on construction contracts is carried as a contract
liability in the financial statements.
Contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end
of each reporting period. All contract assets and liabilities are classified as current in the financial
statements as they are expected to be settled within the Company’s normal operating cycle.
Inventory:
Inventory, which consists of certain equipment parts and aggregate materials, is carried at the lower of
cost and net realizable value. The cost of inventories of equipment parts and aggregate materials is
determined at the weighted average cost to acquire the inventory. Net realizable value is the estimated
selling price in the ordinary course of business less applicable disposal costs.
Property and equipment:
Property and equipment is measured at cost less accumulated depreciation and accumulated impairment
losses, if any. The cost of property and equipment includes the purchase price and the directly
attributable costs required to bring the asset to the condition necessary for the asset to be capable of
operating in the manner intended by management. The cost of replacing or repairing a component of
an item of property and equipment is recognized in the carrying amount of the item if it is probable that
future economic benefits will occur and the cost can be measured reliably. The costs of routine
maintenance of property and equipment are recognized in the statement of income as incurred.
Depreciation of property and equipment over the estimated useful lives of the assets is as follows:
i.
Diminishing balance method:
Buildings
Equipment, trucks and automotive
Heavy equipment
Furniture, fixtures and office equipment
5% and 10%
20% - 40%
hours of use
20% - 55%
ii.
Straight-line method:
Leasehold improvements
over the lease term
When parts of an item of property and equipment have different useful lives, they are accounted for as
separate components of property and equipment and depreciated accordingly. The carrying amount of
a replaced component is derecognized. The Company reviews the residual value, useful lives and
Page 42
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
depreciation methods used on an annual basis and, where revisions are required, the Company applies
such changes in estimates on a prospective basis.
Gains and losses on disposals of property and equipment are determined by comparing the proceeds
with the carrying amount of the asset and are included as part of general and administrative expenses
in the statement of income.
Foreign currency translation:
Foreign currency transactions
Foreign currency transactions and balances are recorded in the accounts as follows:
i.
ii.
iii.
iv.
Monetary assets and liabilities at the exchange rate in effect at the financial statement date;
Non-monetary assets and liabilities at exchange rates prevailing at the time of the transaction;
Depreciation expense at the exchange rate in effect at the time the related assets are acquired;
and
Expenses at the average exchange rate prevailing on the date of the transaction.
Translation of equity accounted foreign entities
Assets and liabilities of equity accounted foreign entities are translated from the functional currency to
the Company’s presentation currency at the closing rate at the end of the reporting period. The
consolidated statements of income are translated at exchange rates at the dates of the transactions or
at the average rate if it approximates the actual rates. All resulting exchange differences are recognized
in other comprehensive income.
Income taxes:
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized
in profit and loss except to the extent that it relates to a business combination, or items recognized
directly in equity or in other comprehensive income.
Current income taxes are recognized for the estimated income taxes payable based on applying enacted
income tax rates to the taxable income realized in the current year. Current tax includes adjustments
to taxes payable or recoverable in respect of previous years.
Deferred income tax assets and liabilities are recognized for temporary differences between the tax
basis of assets and liabilities and their carrying amounts for financial reporting purposes, as well as for
the benefit of tax losses available to be carried forward to future years provided they are likely to be
realized. Deferred taxes are recognized using enacted or substantively enacted rates expected to apply
in the periods in which the asset is realized or the liability is settled. Deferred taxes are measured on
an undiscounted basis. Deferred taxes are presented as non-current. Current and deferred tax assets
and liabilities are offset only when a legally enforceable right exists to offset current tax assets against
current tax liabilities relating to the same taxable entity and the same tax authority.
Basic and diluted earnings per share:
The Company’s basic earnings per share calculation is based on the net income available to common
shareholders for the period divided by the weighted average number of common shares outstanding for
the period. Diluted earnings per share is calculated by dividing the net income available to common
shareholders for the period by the weighted average number of common shares outstanding for the
period, adjusted for the effects of all dilutive potential common shares, which comprise stock options
granted to employees.
Page 43
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Medium term incentive plan:
The Company’s Medium Term Incentive Plan (“MTIP”) is a cash-settled share-based payment plan which
provides for the granting of phantom shares. The phantom shares provide the holder with the
opportunity to earn a cash benefit in relation to the value of a specified number of underlying notional
shares. MTIP awards vest on November 30 of the third year following the year to which the award
relates, if the employee has maintained continuous employment with the Company, except upon
retirement or death. Annually, the Board of Directors determines the amount of the initial award, which
is then used to determine the number of shares allocated to the employee. The total liabilities for this
plan are computed based on the estimated number of phantom shares expected to vest at the end of
the vesting period. The liability is measured at each reporting date at fair value with changes in fair
value recognized in income. The fair value of the phantom shares outstanding at the end of a reporting
period is measured based on the quoted market price of the Company’s shares. The phantom shares
earn notional dividends, equivalent to actual dividends declared on the Company’s shares.
Compensation expense relating to the initial award, notional dividends and changes in the market price
of the phantom shares is recognized on a straight-line basis over the vesting period.
Equity incentive plan:
The Company implemented an Equity Incentive Plan (“EIP”) as part of the Company’s executive
compensation plan. The purpose of the EIP is to provide certain officers and employees of the Company
with the opportunity to be granted performance share units (“PSUs”) or time-based restricted share
units (“RSUs”, and together with PSUs, the “Units”). The EIP is a full-value share unit plan using the
value of the Company’s shares as the basis for the Units. In the case of the PSUs, the amount of award
payable at the end of the vesting period will be determined by a performance multiplier. Under the EIP,
the Company is entitled, in its sole discretion, to settle the Units in either cash or the Company’s Shares
purchased on the TSX or issued from treasury, or a combination thereof. The Company intends to settle
the EIP in cash.
As a cash-settled compensation arrangement, the fair value of the amount payable is recognized as an
expense with a corresponding increase in liabilities over the vesting period. The Units will vest and be
settled on their issue date, which will be no later than December 31 in the third year following the date
of grant, or in accordance with the EIP, participant’s award agreement, or the Company’s discretion.
The liabilities for this plan are computed based on the estimated number of Units expected to vest at
the end of the vesting period. The Units earn notional dividends, equivalent to actual dividends declared
on the Company’s shares. The liability is remeasured at each reporting date at fair value with changes
in fair value recognized in income. The fair value of the Units outstanding at the end of a reporting
period is measured based on the quoted market price of the Company’s shares, with PSU’s also adjusted
by a performance multiplier. Compensation expense relating to the initial award, notional dividends
and changes in the market price of the Units is recognized on a straight-line basis over the vesting
period.
Stock option plan:
The Company's Stock Option Plan, as described in note 16(a), is a share-based payment plan which
provides for the granting of stock options. The fair value of share-based payment awards is recognized
as an employee expense, with a corresponding increase in contributed surplus, on a straight-line basis
over the vesting period. The amount recognized as an expense is adjusted to reflect the number of
awards for which the related service conditions are expected to be met, such that the amount ultimately
recognized as an expense is based on the number of awards that do meet the related service conditions
at the vesting date.
Page 44
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Deferred share unit plan:
The Company has a Deferred Share Unit Plan ("DSU Plan"), which is a cash-settled share-based payment
plan providing for the granting of phantom shares. The fair value of the amount payable to eligible
Directors in respect of Deferred Share Units ("DSUs") is equivalent to the cash value of the common
shares at the reporting date. The phantom shares earn notional dividends, equivalent to actual
dividends declared on the Company's shares. DSUs are cash-settled when the eligible Director ceases to
hold any position within the Company. The liability associated with the DSU Plan is recalculated at each
reporting date and at settlement. Any change in the fair value of the liability is recognized as an expense
in general and administrative expenses.
Financial instruments:
Financial assets and liabilities are recognized on the consolidated statement of financial position when
the Company becomes a party to the contractual provisions of the financial instrument or derivative
contract. Financial instruments are initially measured at fair value and are subsequently accounted for
based on their classification as described below. The Company derecognizes a financial asset when the
contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets
that is created or retained by the Company is recognized as a separate asset or liability. Financial
liabilities are derecognized when their contractual obligations are discharged, cancelled or have
expired.
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss if they are
classified as held-for-trading or are designated as such upon initial recognition. Financial assets are
designated at fair value through profit or loss if the Company manages such investments and makes
purchase and sale decisions based on their fair value in accordance with the Company’s documented
investment policy. Financial assets classified as fair value through profit or loss instruments are
measured at fair value at each reporting period with any changes in fair value during the reporting
period being included in income. Transaction costs are expensed as incurred.
Loans and receivables
Loans and receivables are non-derivative assets with fixed or determinable payments that are not
quoted on an active market. Financial assets classified as loans and receivables are initially
measured at fair value adjusted for directly attributable transaction costs, and subsequently, are
measured at amortized cost, using the effective interest rate method, which approximates fair
value. The Company will recognize changes in the fair value of loans and receivables only if realized,
or when an impairment in the value of the asset occurs. Loans and receivables are generally
comprised of cash and cash equivalents, accounts receivable and other non-current assets.
Cash and cash equivalents
The Company considers cash, bank indebtedness, if any, bankers’ acceptances and short-term
deposits with original maturities of three months or less, as cash and cash equivalents.
Financial liabilities
Financial liabilities are initially recognized at fair value adjusted for transaction costs directly
attributable to the liability, except for financial liabilities classified as fair value through profit or
loss. Financial liabilities classified as other liabilities are subsequently measured at amortized cost
using the effective interest method. The Company's other financial liabilities include accounts
payable, dividends payable, non-recourse project financing, deferred payment and loans and
borrowings.
Page 45
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
The Company has not classified any financial assets or liabilities as held-to-maturity or available-for-
sale (see note 27).
Financial assets and liabilities are offset and the net amount presented on the consolidated statement
of financial position when, and only when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Derivative financial instruments
The Company uses interest rate swaps to manage its interest rate risk on the non-recourse project
financing and the Total Return Swap (“TRS”). Such derivative financial instruments are initially
recognized at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value
is positive and as financial liabilities when the fair value is negative.
The Company uses TRS derivative contracts for the purpose of managing its exposure to changes in
the fair value of its MTIP, EIP and DSU share-based compensation plans due to changes in the fair
value of the Company’s common shares. Derivatives are initially recognized at fair value when a
derivative contract is entered into and are subsequently remeasured at their fair value. The TRS
derivative contracts are not designated as a hedge, and changes in the fair market value are
recorded as compensation expense in the statements of income.
Goodwill:
Goodwill that arises on the acquisition of subsidiaries is presented separately on the statement of
financial position. For the measurement of goodwill at initial recognition refer to note 3. Subsequently,
goodwill is measured at cost less any accumulated impairment losses.
Intangible assets:
Intangible assets with finite lives are measured at cost less accumulated amortization and accumulated
impairment losses. Amortization is recognized in profit or loss over the estimated useful lives as noted
below. The estimated useful lives for the current and comparative periods are as follows:
i.
Straight-line method:
Software
2 – 5 years
The Company reviews the residual value, useful lives and amortization methods used on an annual
basis. Amortization of intangible assets is included in general and administrative expenses in the
statements of income.
Provisions and contingent assets:
Provisions
Provisions are recognized when, at the financial statement date, the Company has a present obligation
as a result of a past event, and it is more likely than not that the Company will be required to settle
that obligation and the cash outflow can be estimated reliably. The amount recognized for provisions is
the best estimate of the expenditure to be incurred. Where the Company expects some or all of the
provision to be reimbursed, for example through insurance, the reimbursement is recognized as an asset
only when it is virtually certain of realization. The recoverable amount will not exceed the amount of
the provision.
Provisions include:
i.
Provisions for potential legal claims relating to the Company’s performance and completion of
construction contracts. The Company attempts to settle claims within the construction period
Page 46
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
ii.
iii.
of the contracts, but a legal claim may take years to settle. A provision is recognized when it
is more likely than not that a claim will require settlement. The amount recognized is the best
estimate of the settlement amount.
Provisions for potential warranty claims relating to construction projects. These claims are
usually settled during the project’s warranty period. A provision is recognized when it is more
likely than not that a warranty claim will arise. The amount recognized is the best estimate of
the amount required to settle the warranty issue.
Provisions for loss contracts are recorded when costs are determined to be greater than total
revenues for the contract. Losses from any construction contracts are recognized in full in the
period the loss becomes apparent. The loss provision will be net of management’s estimate of
probable expected recoveries, which differs from the criterion used for revenue recognition.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity. Cost recovery claims associated with claims against subcontractors and parties
other than customers are considered contingent assets until it is virtually certain that the claims will be
settled.
Contingent assets are not recorded or disclosed in the financial statements until such time as recovery
of a portion or all of the claim is considered probable, at which time disclosure in the notes to the
financial statements is required. For disclosed contingent assets, where the claim is accepted by the
other party and realization of income is considered virtually certain, full disclosure in the financial
statements as to the nature of the asset recorded is required, along with the recognition of the amount
to be received in current assets.
Impairment:
Property and equipment
The carrying amounts of items included in property and equipment are reviewed for impairment at the
end of each reporting period to determine whether there are indicators of impairment. If there is an
indicator of impairment and the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded in profit and loss to reflect the asset at the lower amount. For property
and equipment, the recoverable amount is usually determined by the selling price of the asset less the
costs of disposal. 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.
Intangible assets and goodwill
Intangible assets and goodwill resulting from business combinations are reviewed at each reporting date
to determine whether there is an indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. Goodwill and indefinite lived intangible assets are tested at least
annually for impairment. The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs of disposal. The value in use is determined by the cash flows expected to
arise from the CGU discounted using a pre-tax discount rate, which reflects the current market
assessments of the time value of money and asset-specific risk. Intangible assets and goodwill are
assigned to the CGUs associated with the related acquisition. An impairment loss is recognized if the
carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses
are recognized in profit and loss. Impairment losses recognized in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the CGUs, and then to reduce the carrying
amount of the other assets in the CGUs.
Page 47
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Joint arrangements:
A joint arrangement is an arrangement in which the Company has joint control, established by
contractual agreements requiring unanimous consent for decisions about activities that significantly
affect the arrangement's returns. Joint arrangements are classified as either a joint operation or a joint
venture. A joint operation is an arrangement where the joint controlling parties have direct rights to
the assets and direct obligations for the liabilities of the arrangement in the normal course of business.
Interests in a joint operation are accounted for by recognizing the Company's share of assets, liabilities,
revenues and expenses. A joint venture is an arrangement where the joint controlling parties have
rights to the net assets of the arrangement. Interests in a joint venture are recognized as an investment
and accounted for using the equity method. The determination as to whether a joint arrangement is a
joint venture or a joint operation requires significant judgment based on the structure of the
arrangement, the legal form of any separate vehicle, the contractual terms of the arrangement and
other facts and circumstances. The joint arrangements in which Bird participates are typically formed
to undertake a specific construction project, are jointly controlled by the parties, and are dissolved
upon completion of the project.
Finance income and finance costs:
Finance income is comprised of interest earned on cash and cash equivalents, gains/losses on disposal
of investments and changes in the fair value of financial assets classified as fair value through profit and
loss. Interest income is recognized as it accrues in the income statement.
Finance costs are comprised of interest on loans and borrowings including non-recourse project financing
using the effective interest rate method, interest expense related to the net gain or loss on interest
rate swaps, interest associated with total return swaps, fees associated with credit facilities, bank
charges and other interest expenses.
Business combinations:
The Company uses the acquisition method of accounting for business combinations. The consideration
transferred includes the fair value of the assets transferred to acquire a subsidiary, the liabilities
assumed and the fair value of any equity interest issued by the Company. Acquisition related costs are
expensed as incurred. Any excess of the fair value of the consideration transferred over the Company’s
share of the fair value of net identifiable assets acquired, all measured as of the acquisition date, is
recorded as goodwill. If the fair value of the consideration transferred is less than the fair value of the
net identifiable assets acquired, such as in the case of a bargain purchase, the difference is recognized
directly in profit or loss.
Leases:
Leases which transfer substantially all the benefits and risks of ownership of the asset are recognized as
finance leases. The asset is capitalized at the commencement of the lease at an amount equal to the
lower of its fair value and the present value of the minimum lease payments. The asset is depreciated
on a basis consistent with similar owned assets. The related lease obligation is recorded on the
statement of financial position. The interest element of the lease payments is charged to finance costs
over the term of the lease.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments required under operating leases are charged to income on a
straight line basis over the life of the lease. Lease incentives received are recognized as an integral
part of the total lease expense, over the term of the lease.
Subcontractor/Supplier Performance Default Insurance:
The Company maintains an insurance policy which provides the Company with comprehensive coverage
in respect of subcontractor or supplier default on certain projects where the subcontractor or supplier
Page 48
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
is enrolled in the program. The total insurance premium paid by the Company to the insurer is comprised
of a non-refundable premium and a deposit premium. The deposit premium paid by the Company is
included in other non-current assets on the consolidated statements of financial position. The liabilities
included in provisions on the consolidated statements of financial position relate to management’s best
estimate of exposures and costs associated with prior or existing subcontractor or supplier performance
defaults. Management conducts a thorough review of the liability every reporting period and takes into
consideration the Company’s experience to date with those subcontractors or suppliers that are enrolled
in the program.
4. New Accounting Standards and Amendments Adopted
The Company has adopted the following new accounting amendments effective January 1, 2018. These
changes did not have a material impact on the Company’s financial results:
a) Amendments to IFRS 2, Classification and Measurement of Share-based Payment Transactions
b)
IFRIC 22, Foreign Currency Transactions and Advance Consideration
The Company has adopted the following new accounting standards effective January 1, 2018:
I.
II.
IFRS 15, Revenue from Contracts with Customers
IFRS 9, Financial Instruments
IFRS 15, Revenue from Contracts with Customers:
The Company has adopted IFRS 15 effective January 1, 2018 using a fully retrospective approach. IFRS 15
supersedes previous accounting standards for revenue, including IAS 18 Revenue, and IAS 11 Construction
Contracts. IFRS 15 introduced a single comprehensive model for recognizing revenue from contracts with
customers. The standard requires revenue to be recognized in a manner that depicts the transfer of
promised goods or services to a customer and at an amount that reflects the consideration expected to be
received in exchange for transferring those goods or services. Specifically, IFRS 15 introduces a five-step
approach to revenue recognition:
Identify the contract(s) with a customer;
Identify the performance obligations in the contract;
1.
2.
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenue when (or as) the entity satisfies a performance obligation.
On adoption of the new revenue standard the Company has employed the fully retrospective model
therefore restating the impact on the comparative statements. The Company elected to utilize the
following practical expedients on adoption:
a) For completed contracts, an entity need not restate contracts that begin and end within the same
annual reporting periods.
b) For all reporting periods presented before the date of initial application, January 1, 2018, an entity
is not required to disclose the amount of transaction price allocated to the remaining performance
obligations and an explanation of when the entity expects to recognize that amount of revenue.
The revenue recognition policy is described in note 3. In addition, changes to the portion of payments
retained by the customer is explained below:
The portion of the payments retained by the customer until substantial completion, as defined in each
contract has historically been discounted to reflect the time value of money. Under IFRS 15, these
holdbacks from customers are no longer considered significant financing components due to the intent of
Page 49
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
the arrangement. These customer holdbacks are in place to protect the customer and ensure the Company
performs as specified under the contract. All invoices are issued by the Company in line with the billing
schedule included in each contract and payments of all elements (not inclusive of the holdback) is received
within an appropriate period of time. Due to this change, where historically there was a portion of interest
accretion on holdback receivables, this has ceased due to the understanding of the arrangement in
accordance with IFRS 15. Therefore, finance income has been restated to remove the effect of the interest
accretion.
Impact on Net Income
The impact to the Company’s statements of income for the IFRS 15 adjustments are as follows:
Construction revenue
Costs of construction
Gross profit
Income from equity accounted investments
General and administrative expenses
Year ended December 31, 2017
As previously
reported (1)
Adjustments
Restated
1,418,439
1,343,992
74,447
1,775
(59,307)
118
3,258
(3,140)
1,418,557
1,347,250
71,307
-
-
1,775
(59,307)
Income (loss) from operations
16,915
(3,140)
13,775
Finance income
Finance and other costs
4,111
(4,137)
(2,813)
2,142
1,298
(1,995)
Income (loss) before income taxes
16,889
(3,811)
13,078
Income tax expense (recovery)
5,271
(1,029)
Net income (loss) and comprehensive income (loss) for the year
11,618
(2,782)
4,242
8,836
Basic and diluted earnings (loss) per share
0.27
(0.06)
0.21
(1) Certain comparative figures for the prior year have been reclassified to conform to the presentation adopted in the current year (note 30)
Page 50
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Impact on assets, liabilities and shareholders’ equity at January 1, 2017 and December 31, 2017
$
$
$
(in thousands of Canadian dollars)
ASSETS
Current assets:
Cash
Bankers' acceptances and short-term deposits
Accounts receivable
Contract assets (2)
Contract assets - alternative finance projects (3)
Inventory
Prepaid expenses
Income taxes recoverable
Other assets
Total current assets
Non-current assets:
Other assets
Property and equipment
Investments in equity accounted entities
Deferred income tax asset
Intangible assets
Goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities:
Accounts payable
Contract liabilities (4)
Dividends payable to shareholders
Income taxes payable
Non-recourse project financing
Current portion of loans and borrowings
Provisions
Other liabilities
Total current liabilities
Non-current liabilities:
Loans and borrowings
Deferred income tax liability
Investments in equity accounted entities
Other liabilities
Total non-current liabilities
SHAREHOLDERS' EQUITY
Shareholders' capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total shareholders' equity
As at January 1, 2017
As at December 31, 2017
As previously
reported (1)
Adjustments
Restated
As previously
reported (1)
Adjustments
Restated
246,519
15,357
386,469
10,047
66,443
567
2,688
9,900
-
737,990
3,680
45,517
-
6,737
1,735
16,389
74,058
-
-
(12,761)
4,570
-
-
-
-
-
(8,191)
-
-
-
-
-
-
-
$
246,519
15,357
373,708
14,617
66,443
567
2,688
9,900
-
729,799
3,680
45,517
-
6,737
1,735
16,389
74,058
114,092
18,963
367,791
29,600
73,951
514
2,519
6,041
409
613,880
7,577
52,397
12,237
8,615
1,538
16,389
98,753
-
-
(11,263)
5,362
-
-
-
-
-
(5,901)
-
-
-
-
-
-
-
114,092
18,963
356,528
34,962
73,951
514
2,519
6,041
409
607,979
7,577
52,397
12,237
8,615
1,538
16,389
98,753
812,048
(8,191)
803,857
$
712,633
(5,901)
706,732
453,338
76,518
2,691
18,557
59,222
2,765
5,287
1,569
619,947
8,623
14,726
881
4,305
28,535
42,527
1,932
119,107
-
163,566
(17,002)
5,036
-
-
-
-
6,546
-
(5,420)
-
(748)
-
-
(748)
-
-
(2,023)
-
(2,023)
$
436,336
81,554
2,691
18,557
59,222
2,765
11,833
1,569
614,527
8,623
13,978
881
4,305
27,787
42,527
1,932
117,084
-
161,543
381,385
57,628
1,382
5,539
63,685
4,755
6,466
2,380
523,220
13,843
10,151
-
6,798
30,792
42,527
1,949
114,143
2
158,621
(8,304)
4,748
-
-
-
-
4,237
-
681
-
(1,777)
-
-
(1,777)
-
-
(4,805)
-
(4,805)
373,081
62,376
1,382
5,539
63,685
4,755
10,703
2,380
523,901
13,843
8,374
-
6,798
29,015
42,527
1,949
109,338
2
153,816
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
812,048
(8,191)
803,857
$
712,633
(5,901)
706,732
(1) Certain comparative figures for the prior year have been reclassified to conform to the presentation adopted in the current year (note 30)
(2) Previously reported as Costs and estimated earnings in excess of billings
(3) Previously reported as Costs and estimated earnings in excess of billings - alternative finance projects
(4) Previously reported as Deferred contract revenue
The application of IFRS 15 did not affect our cash flow totals from operating, investing, or financing
activities.
Page 51
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
IFRS 9, Financial Instruments:
The Company has adopted IFRS 9 effective January 1, 2018 with no restatement. The restatement of prior
periods is not required and is only permitted if information is available without the use of hindsight. The
Company has completed its analysis of the impact of IFRS 9 with the following results:
a)
IFRS 9 introduces new requirements for the classification and measurement of financial assets. Under
IFRS 9, financial assets are classified and measured based on the business model in which they are held
and the characteristics of their contractual cash flows. The financial assets are subsequently measured
at amortized cost, fair value through profit and loss or fair value through other comprehensive income.
There was no impact to the classification and measurement of the Company’s financial assets.
There are no changes to the classification and measurement of the Company’s financial instruments as
at January 1, 2018 as a result of adopting IFRS 9 except that the grouping for loans and receivables
described in note 3 in the annual financial statements is now referred to as financial assets.
Financial instruments at fair value through profit or loss (FVTPL)
IAS 39
IFRS 9
Non-recourse project financing - interest rate swaps
FVTPL
FVTPL
FVTPL
FVTPL
FVTPL
FVTPL
Interest rate swaps
Total return swap derivatives
Financial assets
Cash and cash equivalents
Accounts receivable
Other non-current assets
Financial liabilities
Accounts payable
Loans and receivables (amortized cost)
Financial assets (amortized cost)
Loans and receivables (amortized cost)
Financial assets (amortized cost)
Loans and receivables (amortized cost)
Financial assets (amortized cost)
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
Dividends payable to shareholders
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
Non-recourse project financing - loan facilities
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
Loans and borrowings
Deferred payment
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
Financial liabilities (amortized cost)
b)
IFRS 9 replaces the incurred loss model from IAS 39 by introducing a new ‘expected credit loss’ model
for calculating impairment of financial assets. IFRS 9 specifies different approaches for measuring and
recognizing expected credit losses, by considering only defaults in the next 12 months and/or the full
remaining life of the financial asset. The expected credit loss model requires a credit loss to be reflected
in profit and loss immediately after an asset or receivable is acquired, with subsequent changes in
expected credit losses at each reporting date recorded to reflect any change in credit risk. IFRS 9
provides a simplified approach for certain trade receivables and IFRS 15 contract assets. As a result of
adopting the new standard, the Company has determined that the impact of applying the ‘expected
credit loss model’ for calculating impairment of financial assets was not material, and therefore no
amounts were recorded on the financial statements on transition date.
c)
IFRS 9 includes a new general hedge accounting standard which aligns hedge accounting more closely
with risk management. This new standard does not fundamentally change the types of hedging
relationships or the requirement to measure and recognize ineffectiveness; however, it will provide
more hedging strategies that are used for risk management to qualify for hedge accounting and introduce
more judgement to assess the effectiveness of a hedging relationship. The Company does not currently
elect hedge accounting and is not intending to apply hedge accounting under IFRS 9 and therefore there
is no adjustment on transition date.
Page 52
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
5. Future accounting changes
Several new standards and amendments to standards and interpretations are not yet effective for the year
ended December 31, 2018 and have not been applied in preparing these consolidated financial statements.
IFRS 16, Leases:
On January 13, 2016, the IASB issued IFRS 16 Leases. The new standard is effective for annual periods
beginning on or after January 1, 2019. This standard introduces a single lessee accounting model and
requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months
unless the underlying assets are of low value. A lessee is required to recognize a right-of-use (“ROU”) asset
and a lease liability representing its obligation to make lease payments.
The Company intends to adopt IFRS 16 in its financial statements for the annual period beginning on
January 1, 2019. The standard may be applied retrospectively or using a modified retrospective approach.
The Company plans to use the modified retrospective approach which does not require restatement of
prior period financial information.
The Company continues to make progress in the evaluation of its contracts that may contain a ROU asset.
The Company anticipates that the most significant impact of adopting IFRS 16 will be the recognition of
ROU assets and corresponding lease liability related to leases with a term of 12 months or more on the
Consolidated Balance Sheet at January 1, 2019. The additional right-of-use asset and lease liability is
expected to result in an increase in depreciation and amortization expense and increase in interest costs
on its lease liabilities, with a corresponding decrease in operating lease expenses. The Company also
expects an increase in operating cashflows with a corresponding reduction in financing cashflows under
IFRS 16.
On initial adoption, the Company intends to use the following practical expedients permitted under the
standard:
(cid:120) Apply a single discount rate to a portfolio of leases with similar characteristics;
(cid:120) Account for leases with a remaining term of less than 12 months as at January 1, 2019 as short-
term leases;
(cid:120) The use of hindsight in determining the lease term where the contract contains terms to extend
or terminate the lease; and
(cid:120) Use the Company’s previous assessment of impairment under IAS 37 for onerous contracts instead
of re-assessing the ROU asset for impairment on January 1, 2019.
The company is finalizing its overall analysis, assessing any potential impact to IT systems and internal
controls and reviewing additional disclosures required by the new standard.
The Company expects the adoption of the standard to result in an increase in assets of approximately
$16.0 million and an increase in liabilities of $18.0 million, with a corresponding reduction to opening
retained earnings for the net difference of approximately $2.0 million as at January 1, 2019. The Company
continues to assess the impact of adopting IFRS 16 on deferred tax balances.
IFRIC 23, Uncertainty over Income Tax Treatments:
On June 7, 2017, the IASB issued IFRIC Interpretation 23 Uncertainty over Income Tax Treatments. The
Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over income tax treatments. The Interpretation is applicable
for annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Company
intends to adopt the Interpretation in its financial statements for the annual period beginning on January
Page 53
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
1, 2019. The Company does not expect the Interpretation to have a material impact on the financial
statements.
6. Revenue
Disaggregation of revenue:
The Company disaggregates revenue from contracts with customers by contract type, as this best depicts
how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic
factors.
The following tables provides details of total construction revenue by contract type for the year ended
December 31, 2018:
Fixed price / Unit price
Design-Build and PPP
Cost reimbursable / Cost plus
$
2018
725,798
394,693
261,293
$
2017
(restated)
708,751
467,759
242,047
$
1,381,784
$
1,418,557
Remaining performance obligations:
The total value of all contracts awarded to the Company, less the total value of work completed on these
contracts as of the date of the most recently completed quarter is referred to as remaining performance
obligations. This includes all contracts that have been awarded to the Company whether the work has
commenced or will commence in the normal course.
As at December 31, 2018 the aggregate amount of the transaction price allocated to total remaining
performance obligations from construction contracts is $1,295,940. The value of remaining performance
obligations does not include amounts for variable consideration that are constrained, agency relationship
construction management projects, and estimated future work orders to be performed as part of master
services agreements.
The Company expects to recognize 80% of the remaining performance obligations over the next 12 months
with the remaining balance being recognized beyond 12 months. This expectation is based on
management’s best estimate but contains uncertainty as it is subject to factors outside of management’s
control.
Summary of contract balances
The following table provides information about receivables, contract assets and contract liabilities from
contracts with customers.
Progress billings and holdbacks receivable (note 8)
Contract assets
Contract assets - alternative finance projects (note 7)
Contract liabilities
December 31,
2018
December 31,
2017
(restated)
January 1,
2017
(restated)
$
$
$
329,891
28,412
7,126
(60,003)
$
348,672
34,962
73,951
(62,376)
367,814
14,617
66,443
(81,554)
305,426
$
395,209
$
367,320
Page 54
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Progress billings and holdbacks receivable:
The Company issues invoices in accordance with the billing schedule or contract terms as agreed. These
invoices trigger recognition of an accounts receivable.
Contract assets including alternative finance projects:
The Company receives payments from customers based on a billing schedule, as established in the
contracts. A contract asset relates to the conditional right to consideration for the completed performance
under the contract. Accounts receivable are recognized when the right to consideration becomes
unconditional. Contract assets related to construction contracts are typically recognized to accounts
receivable within a year, while alternative finance projects follow a contractually agreed billing schedule
that is recognized to accounts receivable upon substantial performance.
Balance January 1, 2017
Reduction of contract assets as a result of
progress billings in year
Additions to contract assets
Balance December 31, 2017
Reduction of contract assets as a result of
progress billings in year
Additions to contract assets
Balance December 31, 2018
$
$
$
Contract assets
Construction
contracts
14,617
$
Alternative
finance projects
66,443
(9,031)
29,376
34,962
(24,831)
18,281
28,412
$
$
(24,437)
31,945
73,951
(73,951)
7,126
7,126
Total
81,060
(33,468)
61,321
108,913
(98,782)
25,407
35,538
$
$
$
Contract liabilities:
Contract liabilities relate to payments received in advance of performance under the contract. Contract
liabilities are recognized as revenue as (or when) the Company performs under the contract. Typically,
contract liabilities are recognized within a year as performance is achieved per contractual terms.
During the year, $62,376 of revenue (2017 - $81,554) was recognized that was included in the contract
liability balance at the beginning year.
For the year ended December 31, 2018, $11,450 of revenue was recognized from the satisfaction of
performance obligations relating to previous periods. This amount relates to changes in the transaction
price due to contract modifications and various other cumulative catch up adjustments.
7. Alternative finance projects
The following table provides details of contract assets – alternative finance projects as at December 31,
2018:
Balance December 31, 2017
Changes in non-cash working capital relating to
alternative finance projects
Balance December 31, 2018
$
$
Page 55
Moncton
Downtown
Centre
73,951
$
OPP
Modernization
Phase 2
-
(73,951)
-
$
7,126
7,126
Total
73,951
(66,825)
7,126
$
$
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
The following table provides details of the changes in the Company’s Non-Recourse Project Financing
during the year.
Loan
Facility
Moncton Downtown Centre
Interest
rate swap
(290)
-
-
-
63,975
12,499
(76,474)
-
$
OPP Modernization Phase 2
Loan
Facility
Interest
rate swap
$
$
-
12,235
-
(1,024)
$
-
-
-
-
Total
63,685
24,734
(76,474)
(1,024)
-
-
$
290
-
$
-
11,211
$
613
613
$
903
11,824
Balance December 31, 2017
Proceeds
Repayment of debt
Transaction costs net of amortization
Change in fair value of interest rate
swap
Balance December 31, 2018
$
$
(a) Moncton Downtown Centre
i. Background information:
During 2015, the Company was awarded a fixed-price build-finance contract to construct the Moncton
Downtown Centre. The project obtained substantial completion during the second quarter of 2018.
ii. Restricted cash:
The terms of the debt financing agreement require that scheduled loan advances be deposited into a
bank account, that cannot be accessed directly by the Company. Upon recommendation by the lender’s
technical advisor, cash is released monthly based on the progress of the work (note 26).
iii. Contract assets:
There are no contract assets as at December 31, 2018 related to the Moncton Downtown Centre project
(December 31, 2017 - $73,951). The project obtained substantial completion during the second quarter
of 2018 and had billed according to contract.
iv. Loan payable:
The Company had a $77,478 loan facility related to the project, of which $nil is outstanding at December
31, 2018 (December 31, 2017 - $63,975). The project obtained substantial completion during the second
quarter of 2018 and the loan was repaid in full.
Interest was paid monthly in arrears. Borrowings under the facility bear interest at a rate per equal to
the bankers’ acceptance rate per annum plus a spread. As part of the loan facility, the Company entered
into an interest rate swap agreement that effectively fixes the interest rate at 1.89%. The interest rate
swap was executed on December 31, 2015 and expired on July 31, 2018. The notional amounts of the
interest rate swap agreement matched the estimated draws under the loan facility. The interest rate
swap agreement is not designated as a hedge, and changes in the fair market value are recorded in the
statement of income. At December 31, 2018, the interest rate swap asset is $nil (December 31, 2017 –
interest rate swap asset $290). Interest expense on the loan in year ended December 31, 2018 of $731
(December 31, 2017 - $951) is included in finance costs.
Page 56
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
(b) OPP Modernization Phase 2
i. Background information:
During 2018, the Company was awarded a fixed-price design build-finance contract to construct the
Ontario Provincial Police (“OPP”) Modernization Phase 2 project.
ii. Restricted cash:
The terms of the debt financing agreement require that scheduled loan advances be deposited into a
bank account, that cannot be accessed directly by the Company. Upon recommendation by the lender’s
technical advisor, cash is released monthly based on the progress of the work (note 26).
iii. Contract assets:
Contract assets as at December 31, 2018 related to the OPP Modernization Phase 2 project and amounted
to $7,126. (December 31, 2017 – n/a). Contract assets will continue to increase throughout the project
until a contract payment is made to the Company following substantial completion of the project.
iv. Loan payable:
The Company has arranged a $138,475 loan facility related to the project, of which $12,235 has been
drawn at December 31, 2018 (December 31, 2017 – n/a). The loan is repayable in full, upon substantial
completion of the project, from the proceeds of the fixed price build-finance contract payment. The
scheduled substantial completion date is in 2020. In the event of a default in payment for the construction
work upon substantial completion, including interim interest costs, the lender has recourse only against
assets related to this project, which have been segregated in a wholly-owned subsidiary of the Company.
Interest is paid monthly in arrears. Borrowings under the facility bear interest at a rate per annum equal
to the bankers’ acceptance rate plus a spread. As part of the loan facility, the Company entered into an
interest rate swap agreement that effectively fixes the interest rate at 3.29%. The interest rate swap
was executed on August 17, 2018 and expires on January 4, 2021. The notional amounts of the interest
rate swap agreement matched the estimated draws under the loan facility. The interest rate swap
agreement is not designated as a hedge, and changes in the fair market value are recorded in the
statement of income. At December 31, 2018, the interest rate swap liability is $613 (December 31, 2017
– n/a). Interest expense on the loan during the year ended December 31, 2018 of $249 (December 31,
2017 – n/a) is included in finance costs.
8. Accounts receivable
Progress billings on construction contracts
Holdbacks receivable (due within one operating cycle)
Other
2018
221,259
108,632
7,772
337,663
$
$
2017
(restated)
216,623
132,049
7,856
356,528
$
$
Accounts receivable are reported net of an allowance for doubtful accounts of $1,271 as at December
31, 2018 ($1,672 – December 31, 2017).
Holdbacks receivable represent amounts billed on construction contracts which are not due until the
contract work is substantially completed and the applicable lien period has expired.
Page 57
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
9. Other assets
Subcontractor/Supplier insurance deposits
Notes receivable
Total return swap derivatives
Other assets
Less: current portion - total return swap derivatives
Non-current portion
$
$
$
2018
2017
5,727
1,125
-
6,852
-
6,852
$
$
$
4,846
1,145
1,995
7,986
409
7,577
Subcontractor/Supplier insurance deposits relate to the Company's insurance policies which provide Bird
with comprehensive coverage, subject to a deductible, in respect of subcontractor or supplier default on
certain projects where the subcontractor or supplier is enrolled in the program. As at December 31, 2018,
the funds held by the Company’s subcontractor insurance providers amounted to $5,727 (December 31,
2017 - $4,846).
The Company entered into Total Return Swap (“TRS”) derivative contracts for the purpose of managing its
exposure to changes in the fair value of its MTIP, EIP and DSU share-based compensation plans (note 16(b)),
due to changes in the fair value of the Company’s common shares. Derivatives are initially recognized at
fair value when a derivative contract is entered into and are subsequently remeasured at their fair value.
The TRS derivative contracts are not designated as a hedge, and changes in the fair market value are
recorded as compensation expense in the statement of income (note 16(b)). As at December 31, 2018, the
Company recorded a derivative liability of $2,218 (note 15) (December 31, 2017 – asset of $1,995).
10. Projects and entities accounted for using the equity method
The Company performs some construction and concession related projects through non-consolidated
entities. The Company’s participation in these entities is conducted through joint ventures and associates
and is accounted for using the equity method. The Company also has a joint venture interest in Stack
Modular group of companies and accounts for these investments using the equity method. The Company’s
joint ventures and associates are private entities and there is no quoted market value available for their
shares.
Page 58
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
December 31, 2018
Joint
Ventures
Associates
100,695 $
538,118
638,813
47,410 $
174,038
221,448
56,071
545,431
601,502
20,766
175,211
195,977
Total
148,105
712,156
860,261
76,837
720,642
797,479
37,311 $
25,471 $
62,782
14,018 $
2,547 $
16,565
142,203 $
33,283 $
175,486
3,263 $
5,812 $
9,075
1,313 $
581 $
1,894
December 31, 2017
Joint
Ventures
Associates
168,370 $
307,951
476,321
347,456 $
169,401
516,857
30,888
426,102
456,990
305,129
178,650
483,779
Total
515,826
477,352
993,178
336,017
604,752
940,769
19,331 $
33,078 $
52,409
8,929 $
3,308 $
12,237
192,150 $
118,418 $
310,568
3,711 $
8,741 $
12,452
901 $
874 $
1,775
$
$
$
$
$
$
$
$
$
$
$
$
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets (liabilities) - 100%
Attributable to the Company
Revenue - 100%
Total comprehensive income (loss) - 100%
Attributable to the Company
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets (liabilities) - 100%
Attributable to the Company
Revenue - 100%
Total comprehensive income (loss) - 100%
Attributable to the Company
Page 59
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
The movement in the investment in projects and entities accounted for using the equity method is as
follows:
Projects and entities accounted for using the equity method - December 31, 2016
Share of net income for the year
Share of other comprehensive income (loss) for the year
Distributions from projects and entities accounted for using the equity method
Investments in equity accounted entities
$
Projects and entities accounted for using the equity method - December 31, 2017
Share of net income for the year
Share of other comprehensive income (loss) for the year
Distributions from projects and entities accounted for using the equity method
Investments in equity accounted entities
Investments in equity accounted entities reclassified as held for sale
(881)
1,775
2
(803)
12,144
12,237
1,894
1
(1,873)
4,020
(3,762)
Projects and entities accounted for using the equity method - December 31, 2018
$
12,517
The Company has recognized the income and losses related to its investments in associates and joint
ventures, as the Company has an obligation to fund its proportionate share of the net liabilities of these
entities.
The carrying amount of investments in equity accounted entities may not always equal the Company’s
share of the net assets or net liabilities of these joint ventures and associates, due to fair value
adjustments including goodwill, and the timing of capital contributions or distributions in accordance with
contract terms.
Transactions with these related parties are described in note 25 in the financial statements. Amounts
committed for future capital injections to concession entities are described in note 24 (a) in the financial
statements.
Investments in equity accounted entities classified as held for sale:
During the year ended December 31, 2018, the Company initiated an active plan to sell its investments in
two entities accounted for using the equity method. These investments have been classified as investments
held for sale on the Consolidated Statements of Financial Position.
Page 60
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
11. Property and equipment
Cost
Balance January 1, 2018
Additions
Additions under finance leases
Disposals
Balance December 31, 2018
Accumulated depreciation
Balance January 1, 2018
Disposals
Depreciation expense
Balance December 31, 2018
Net book value
Cost
Balance January 1, 2017
Additions
Additions under finance leases
Disposals
Balance December 31, 2017
Accumulated depreciation
Balance January 1, 2017
Disposals
Depreciation expense
Balance December 31, 2017
Net book value
2018
Leasehold
improvements
Equipment,
trucks and
automotive
Furniture and
office
equipment
7,355
686
-
-
8,041
3,325
-
519
3,844
95,651
11,660
3,851
(5,984)
105,178
57,905
(4,805)
9,390
62,490
2,294
314
-
-
2,608
1,728
-
157
1,885
Land
Buildings
1,774
-
-
(5)
1,769
-
-
-
-
13,446
443
-
(1,457)
12,432
5,165
(279)
697
5,583
1,769
6,849
4,197
42,688
723
2017
Leasehold
improvements
Equipment,
trucks and
automotive
Furniture and
office
equipment
Land
Buildings
1,681
40
53
-
1,774
-
-
-
-
12,396
1,050
-
-
13,446
4,349
-
816
5,165
7,765
921
-
(1,331)
7,355
4,220
(1,331)
436
3,325
85,672
14,088
9,414
(13,523)
95,651
54,023
(6,247)
10,129
57,905
2,182
123
-
(11)
2,294
1,587
(9)
150
1,728
1,774
8,281
4,030
37,746
566
Total
120,520
13,103
3,851
(7,446)
130,028
68,123
(5,084)
10,763
73,802
56,226
Total
109,696
16,222
9,467
(14,865)
120,520
64,179
(7,587)
11,531
68,123
52,397
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The statement of cash flows for year December 31, 2018 excludes additions of equipment totalling $3,851
(December 31, 2017 - $9,467), leasehold improvements of $nil (December 31, 2017 - $861) and buildings
$nil (December 31, 2017 - $1,050) acquired by financed leases and lessor inducements.
During the year ended December 31, 2018, the Company purchased, sold, and finance leased back
equipment totalling $nil (December 31, 2017 - $6,337).
The carrying value of equipment, trucks and automotive held under finance leases at December 31, 2018
is $13,075 (December 31, 2017 - $10,747).
Page 61
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
12. Intangible assets and goodwill
Cost
Balance January 1, 2018
Additions
Disposals
Balance December 31, 2018
Accumulated amortization
Balance January 1, 2018
Disposals
Amortization expense
Balance December 31, 2018
Net book value
Cost
Balance January 1, 2017
Additions
Disposals
Balance December 31, 2017
Accumulated amortization
Balance January 1, 2017
Disposals
Amortization expense
Balance December 31, 2017
Net book value
Goodwill
Rideau districts
Nason district
2018
Computer
Software
Goodwill
6,250
1,510
-
7,760
4,712
-
473
5,185
2,575
2017
Computer
Software
5,989
261
-
6,250
4,254
-
458
4,712
1,538
$
$
$
$
$
$
$
$
$
$
30,540
-
-
30,540
14,151
-
-
14,151
16,389
Goodwill
30,540
-
-
30,540
14,151
-
-
14,151
16,389
2018
9,294
7,095
16,389
2017
9,294
7,095
16,389
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The recoverable amounts for the Rideau and Nason cash generating units (“CGU”) were determined based
on a value in use calculation using cash flow projections from financial forecasts approved by senior
management covering a three-year period. Significant assumptions used in the calculation of value in use
were the level of new awards, the construction gross margin percentage, the level of operating and capital
costs, the discount rate and the terminal value growth rate. Budgeted net income was based on
expectation of future outcomes taking into account past experience, the Company’s annual business plan
and the Company’s strategic plan adjusted for a number of weighted probabilities based on current
Page 62
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
economic conditions. Cash flows for the remaining periods were extrapolated using nominal growth rates.
An after-tax discount rate of 10.4%, which is based on a market-based cost of capital, was applied in
determining the recoverable amounts.
13. Loans and Borrowings and Operating and Equipment Lines of Credit
Maturity
Interest Rate
December 31,
2018
December 31,
2017
Revolving credit facility December 31, 2021
Equipment financing
Term loans
Term loans
Term loan
2018-2023
2018
fully repaid
Finance lease liabilities
Less: current portion of long-term debt
Less: current portion of finance lease liabilities
Current portion of loans and borrowings
Variable 3.87%
$
15,000
$
5,000
2.40% to 3.65%
Fixed
Variable 2.65%
2.12%
Fixed
6,198
-
-
21,198
8,759
29,957
2,151
3,053
5,204
4,381
419
377
10,177
8,421
18,598
2,479
2,276
4,755
Non-current portion of loans and borrowings
$
24,753
$
13,843
Committed revolving operating credit facilities:
The Company has a committed revolving credit facility up to $85,000. The term of the facility matures
December 31, 2021. As part of the agreement, the Company continues to provide a general secured
interest in the assets of the Company. At December 31, 2018, the Company has $24,291 letters of credit
outstanding on the facility (December 31, 2017 – $26,446) and has drawn $15,000 on the facility (December
31, 2017 - $5,000). The full amount is recorded as non-current, as the facility is due and payable December
31, 2021. Borrowings under the facility bear interest at a rate per annum equal to the Canadian prime
rate plus a spread. A commitment fee that varies depending on certain consolidated financial ratios is due
on the unutilized portion of the facility. The Company is in compliance with the working capital, minimum
equity and debt-to-equity covenants of this facility.
Expiry date
2019
2020 to
2022
2023 and
greater
December 31,
2018
December 31,
2017
Letters of credit
$
9,216
15,075
-
$
24,291
$
26,446
Committed revolving term loan facility:
The Company has a committed revolving term loan facility totalling $35,000 for the purpose of financing
acquisitions and for working capital advances in support of major projects. The facility matures on
December 31, 2020. As of December 31, 2018, the Company has drawn $nil (December 31, 2017 -n/a) on
the facility. Borrowings under the facility bear interest at a rate per annum equal to the Canadian prime
rate plus a spread. A commitment fee that varies depending on certain consolidated financial ratios is due
Page 63
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
on the unutilized portion of the facility. The Company is in compliance with the working capital, minimum
equity and debt-to-equity covenants of this facility.
Equipment financing:
The Company and its subsidiaries have committed term credit facilities of up to $45,000 to be used to
finance equipment purchases. Borrowings under the facilities are secured by a first charge against the
equipment financed using the facilities. As of December 31, 2018, the Company has $6,656 outstanding
on the facilities (December 31, 2017 - $5,823). Interest on the facilities can be charged at a fixed rate
based on the Bank of Canada bond rate plus a spread. Interest is paid monthly in arrears.
The Company and its subsidiaries obtained multiple fixed interest rate term loans which have been used
to finance equipment purchases. The maturity dates of term loans outstanding at December 31, 2018
range from 2019 to 2023. These term loans bear interest at a range of fixed rates from 2.40% to 3.65%.
Principal repayments and interest are payable monthly, and these term loans are secured by specific
equipment of the Company and its subsidiaries.
The Company and its subsidiaries obtained a variable interest rate term loan which has been used to
finance equipment purchases. The term loan outstanding at December 31, 2018 had an initial principal
amount of $2,645 and matured in 2018.
Subsidiaries of the Company have established operating lease lines of credit of $32,500 with the financing
arms of major heavy equipment suppliers to finance operating equipment leases. Draws under these
facilities are generally recognized as finance leases or operating leases, with the lease obligations being
secured by the specific leased equipment (see note 24). At December 31, 2018, the subsidiaries had used
$6,630 under these facilities.
Term loan facility:
A subsidiary of the Company had a fixed rate term loan used to finance a building. Principal repayments
in the amount of $2 were payable monthly based upon a 25-year amortization period with interest at a
fixed rate of 2.12%. The term loan facility was repaid in full in the third quarter of 2018.
Finance lease liabilities:
Finance leases relate to construction and automotive equipment and mature between October 2018 and
September 2022, and bear interest at the 30-day bankers’ acceptance rate plus a spread. The Corporation
has the option to purchase the construction and automotive equipment under lease at the conclusion of
the lease agreements. As of December 31, 2018, the Company has $4,461 (December 31, 2017 - $2,598)
outstanding as finance leases.
Letters of credit facilities:
The Company has authorized operating lines of credit totalling $80,000, at December 31, 2018, the lines
were drawn for outstanding letters of credit of $8,468 (December 31, 2017 - $25,060).
The Company has an agreement with Export Development Canada (EDC) to provide performance security
guarantees for letters of credit issued by financial institutions on behalf of the Company. The Company
can only use this facility when letters of credit have been issued as contract security for projects that
meet the EDC criteria. EDC has issued performance security guarantees totalling $5,948 (December 31,
2017 - $4,891).
The letters of credit represent performance guarantees primarily issued in connection with design-build
construction contracts related to Public Private Partnership projects and other major construction
Page 64
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
projects. These letters of credit are supported through the hypothecation of certain financial instruments
having a market value at December 31, 2018 of $2,645 (December 31, 2017 - $20,253).
Expiry date
2020 to
2022
2023 and
greater
December 31,
2018
December 31,
2017
2019
Letters of credit
$
5,992
2,476
-
$
8,468
$
25,060
The following table provides details of the changes in the Company’s Loans and Borrowings during the
year ended December 31, 2018.
Balance December 31, 2017
Proceeds
Repayment
Balance December 31, 2018
Equipment
financing
5,177
4,242
(3,221)
6,198
$
$
$
$
Revolving
Credit
Facility
5,000
10,000
-
15,000
$
$
Finance
Leases
8,421
3,851
(3,513)
8,759
$
$
Total
18,598
18,093
(6,734)
29,957
The aggregate amount of principal repayments and future minimum lease payments under finance leases
for all loans and borrowings is as follows:
Equipment
Financing
Revolving
Credit
Facility
Finance
Leases
Within 1 year
Year 2
Year 3
Year 4
Year 5
More than 5 years
Balance December 31, 2018
Less interest
$
$
$
2,151
1,857
1,292
820
78
-
6,198
-
-
-
15,000
-
-
-
15,000
-
3,242
3,247
2,339
272
4
-
9,104
$
$
Total
5,393
5,104
18,631
1,092
82
-
30,302
(345)
(345)
6,198
15,000
8,759
$
29,957
Page 65
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
14. Income taxes
Provision for income taxes
Income tax expense (recovery) is comprised of:
Current income taxes
Deferred income taxes
Income tax rate reconciliation
Combined federal and provincial income tax rate
Increases (reductions) applicable to:
Capital gains on sale of investments
Non-taxable items
Other
Effective rate
2018
2017
(restated)
$
$
1,652
(3,313)
(1,661)
$
$
11,724
(7,482)
4,242
27.3%
36.8%
(10.5%)
8.5%
62.1%
28.7%
-
2.5%
1.2%
32.4%
The Company's statutory tax rate is the combined federal and provincial tax rates in the jurisdictions in
which the Company operates.
Composition of deferred income tax assets and liabilities
Provisions and accruals
Timing of recognition of construction profits
Property and equipment
Intangible assets
Investments in equity accounted entities
Other
Tax loss carry forward
Balance sheet presentation
Deferred income tax asset
Deferred income tax liability
2018
4,254
(9,028)
(1,819)
(321)
(3,293)
(72)
13,833
3,554
$
$
10,909
(7,355)
3,554
$
2017
(restated)
3,173
(12,066)
(1,517)
(498)
(3,309)
(50)
14,508
241
8,615
(8,374)
241
$
$
$
The Company has deferred tax assets in the amount of $945 that have not been recognized in these
consolidated financial statements in respect of capital losses realized on the disposal of bonds and
preferred share investments in 2011, 2013 and 2015. A deferred tax asset has not been recognized because
it is not probable the Company will generate future taxable capital gains.
Page 66
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Movement in temporary differences for the year ended December 31, 2018
Provisions and accruals
Timing of recognition of construction profits
Property and equipment
Intangible assets
Investments in equity accounted entities
Other
Tax loss carry forward
Balance
December 31,
2017
(restated)
Recognized in
profit or loss
Balance
December 31,
2018
$
$
3,173
(12,066)
(1,517)
(498)
(3,309)
(50)
14,508
$
1,081
3,038
(302)
177
16
(22)
(675)
$
241
$
3,313
$
4,254
(9,028)
(1,819)
(321)
(3,293)
(72)
13,833
3,554
Movement in temporary differences for the year ended December 31, 2017
Provisions and accruals
Timing of recognition of construction profits
Property and equipment
Intangible assets
Investments in equity accounted entities
Other
Tax loss carry forward
$
Balance
January 1,
2017
(restated)
$
2,577
(11,191)
(1,739)
(671)
(899)
(264)
4,946
Recognized in
profit or loss
Balance
December 31,
2017
(restated)
$
596
(875)
222
173
(2,410)
214
9,562
3,173
(12,066)
(1,517)
(498)
(3,309)
(50)
14,508
$
(7,241)
$
7,482
$
241
Page 67
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
15. Other liabilities
Liabilities for cash-settled share-based compensation plans (note 16(b))
Leasehold inducement
Deferred payment
Total return swap derivatives
Interest rate swaps
Less: current portion - cash-settled share-based compensation plans
(note 16(b))
Less: current portion - leasehold inducement
Less: current portion - deferred payment
Less: current portion - total return swap derivatives
Less: current portion - interest rate swaps
Non-current portion
16. Share-based compensation plans
(a) Stock option plan:
December 31,
2018
December 31,
2017
$
$
$
$
4,374
2,224
756
2,218
54
9,626
917
218
756
389
-
2,280
7,346
$
$
$
$
5,558
2,484
1,136
-
-
9,178
1,726
218
436
-
-
2,380
6,798
The Company has a Stock Option Plan that provides all option holders the right to receive common shares
in exchange for the options exercised. The Board of Directors selects eligible employees to be granted
options, the number of options granted, the exercise price, the term of the option and the vesting periods.
The number of common shares issuable under the Stock Option Plan shall not exceed 10% of the number
of common shares outstanding. With the approval of the Equity Incentive Plan in May 2017, the Board of
Directors has resolved to suspend the stock option plan. All outstanding options will continue to vest in
accordance with the term of the option and the vesting periods.
Details of changes in the balance of stock options outstanding are as follows:
Number of share
options
outstanding
Weighted average
exercise price
Outstanding at December 31, 2016
565,000
$
Forfeited during the year
Outstanding at December 31, 2017
Forfeited during the year
(30,000)
535,000
(45,000)
Outstanding at December 31, 2018
490,000
$
13.61
13.98
13.59
13.98
13.55
Page 68
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
The following table summarizes information about stock options outstanding and exercisable as at
December 31, 2018:
Number of stock
Number of stock
Weighted
average fair
options issued and
options
Exercise
value of the
Remaining
Contractual life
outstanding
exercisable
price
option
Expiry Date
(years)
March 15, 2012 Grant
January 1, 2015 Grant
390,000
100,000
390,000
75,000
$ 13.98 $ 3.25 March 15, 2019
$ 11.87 $ 1.16 January 1, 2022
0.2
3.0
The stock-based compensation expense recognized during 2018 is $7 compared to an expense of $17
during 2017.
(b) Medium term incentive plan (“MTIP”), Equity incentive plan (“EIP”) and Deferred share unit plan (“DSU
Plan”):
MTIP liability
EIP liability
DSU liability
Liabilities for cash-settled share-based compensation plans
Less: current portion - MTIP liability
Non-current portion
December 31,
2018
December 31,
2017
$
$
$
$
1,226
1,336
1,812
4,374
917
917
3,457
$
$
$
$
2,975
861
1,722
5,558
1,726
1,726
3,832
The Company has recognized a derivative loss of $4,213 on its Total Return Swap contracts (note 9) and
(note 15) for the year ended December 31, 2018 (December 31, 2017 - $1,995 gain).
Balance January 1,
Annual award of phantom shares
Cash payments of vested shares
Shares awarded - notional dividends
Change in fair value of phantom shares
Balance December 31,
Less: current portion
Non-current portion
MTIP & EIP
2018
2017
$
$
$
3,836
$
2,207
(1,854)
162
(1,789)
2,562
917
1,645
$
$
3,004
2,403
(2,270)
167
532
3,836
1,726
2,110
As at December 31, 2018, a total of 920,489 unvested phantom units of the MTIP and EIP (December 31,
2017 – 751,733) are outstanding and valued at $4,603, of which $2,562 has been recognized to date in the
accounts of the Company.
As at December 31, 2018, a total of 296,536 deferred share units (DSU) (December 31, 2017 – 169,830)
were issued and valued at $1,812.
Page 69
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
17. Shareholders’ capital
The Company is authorized to issue an unlimited number of common shares and has issued and outstanding
42,516,853 common shares as at December 31, 2018. The Company is authorized to issue preference shares
in series with rights set by the Board of Directors, up to a balance not to exceed 35% of the outstanding
common shares.
Balance, December 31, 2018 and December 31, 2017
42,516,853
$
42,527
Number of shares
Amount
18. Earnings per share
Details of the calculation of earnings per share are as follows:
Profit (loss) attributable to shareholders (basic
and diluted)
Average number of common shares outstanding
Effect of stock options on issue
Weighted average number of common shares
(diluted)
Basic earnings (loss) per share
Diluted earnings (loss) per share
2018
2017
(restated)
$
(1,013)
$
8,836
42,516,853
42,516,853
-
-
42,516,853
42,516,853
$
$
(0.02)
(0.02)
$
$
0.21
0.21
At December 31, 2018, 490,000 options (December 31, 2017 - 535,000 options) were excluded from the
diluted weighted average number of common share calculation as their effect would have been anti-
dilutive.
19. Provisions
Balance December 31, 2017
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Balance December 31, 2018
Warranty claims
and other
Legal
Total
$
$
8,777
$
1,926
$
10,703
25,142
(23,732)
(3,521)
1,634
(1,362)
(271)
26,776
(25,094)
(3,792)
6,666
$
1,927
$
8,593
Page 70
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Balance January 1, 2017 (restated)
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Balance December 31, 2017 (restated)
Warranty claims
and other
Legal
Total
$
$
10,164
$
1,669
$
11,833
13,874
(13,139)
(2,122)
1,455
(674)
(524)
15,329
(13,813)
(2,646)
8,777
$
1,926
$
10,703
Various claims and litigation arise in the normal course of the construction business. It is management’s
opinion that adequate provision has been made for any potential settlements relating to such matters and
that they will not materially affect the financial position or future operations of the Company.
20. Finance income
Interest income
21. Finance and other costs
Interest on loans and borrowings
Loss (gain) on interest rate swaps (note 7 and note 15)
Interest on non-recourse project financing
Other
2018
1,386
1,386
2018
1,504
957
980
1,035
4,476
$
$
$
$
2017
(restated)
1,298
1,298
2017
(restated)
666
(282)
1,152
459
1,995
$
$
$
$
For the prior year certain borrowing costs included in general and administrative expenses were
reclassified to finance and other costs to conform to the presentation adopted in the current year.
22. Personnel costs
Salary and benefits expense of the Company included in costs of construction and general and
administrative expense is:
Wages, salaries and profit sharing
Benefits
Deferred compensation
Stock-based compensation
2018
174,818
28,807
670
7
204,302
$
$
2017
172,460
28,140
3,795
17
204,412
$
$
Page 71
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
23. Leases
Future minimum annual lease payments relating to lease commitments on buildings, equipment and
vehicles over the next five years are:
Maturities
From 2020 to
2023
2019
Beyond 2023
Total
Operating leases
$
5,115
15,740
10,780
$
31,635
The Company leases numerous pieces of heavy equipment under operating leases. The leases typically
run for a period of three to four years with an option to purchase the equipment at the end of the lease.
Expenses under lease commitments on buildings and equipment are $6,029 (December 31, 2017 -
$6,561).
24. Commitments and contingencies
(a) Commitments:
Outstanding surety lien bonds issued on behalf of the Company in connection with liens by
subcontractors and suppliers at December 31, 2018 totalled $43,301 (December 31, 2017 - $24,109).
The Company has acquired minority equity interests in a number of PPP concession entities (note 10),
which requires the Company to make $5,859 in future capital injections. These commitments have been
secured by letters of credit totalling $5,859 (December 31, 2017 - $8,131).
(b) Contingencies:
The Company is contingently liable for the usual contractor’s obligations relating to performance and
completion of construction contracts. These include the Company’s contingent liability for the
performance obligations of its subcontractors. Where possible and appropriate, the Company obtains
performance bonds, subcontract/supplier insurance or alternative security from subcontractors.
However, where this is not possible, the Company is exposed to the risk that subcontractors will fail to
meet their performance obligations. In that eventuality, the Company would be obliged to complete
the subcontractor’s contract, generally by engaging another subcontractor, and the cost of completing
the work could exceed the original subcontract price. The Company makes appropriate provisions in
the financial statements for all known liabilities relating to subcontractor defaults.
Page 72
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
25. Related party transactions
Compensation of key management personnel represents the aggregate amounts paid and accrued to
members of the Company’s Executive and the Company’s Board of Directors.
2018
Base Salary
LTIP/MTIP/
DSU
Stock-based
compensation
Short Term
Incentive Plan
Other Taxable
Benefits
Total
Executive & Directors
$
3,857
479
7
717
311
$
5,371
2017
Base Salary
LTIP/MTIP/
DSU
Stock-based
compensation
Short Term
Incentive Plan
Other Taxable
Benefits
Total
Executive & Directors
$
3,845
2,469
17
461
323
$
7,115
The Executive comprises the following positions:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
President & Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Executive Vice President Buildings
Executive Vice President Industrial
Senior Vice President Risk Management, General Counsel & Secretary
Senior Vice President Buildings
Senior Vice President Organizational Excellence & Community Engagement
Vice President Financial Planning & Analysis
Vice President Strategic Development
At December 31, 2018, Directors and Executive of the Company controlled 4.2% (December 31, 2017 – 4.0%)
of the voting shares of the Company.
In 2014, the Company issued a non-interest bearing five-year loan of $550 (due December 12, 2019) to one
of its executives to assist with expenses relating to the relocation of the employee. As at December 31,
2018, $550 remained outstanding on the loan (December 31, 2017 - $550).
In 2016, the Company issued a non-interest bearing five-year loan of $500 (due August 14, 2021) to one of
its executives to assist with expenses relating to the relocation of the employee. As at December 31, 2018,
$500 remained outstanding on the loan (December 31, 2017 - $500).
A Director or related parties hold positions in other entities that result in them having control over the
financial reporting or operating policies of these entities. All transactions with the Director and entities
over which they have control are provided for in the normal course of business based on terms similar to
those that prevail in arm's length transactions. The aggregate value of transactions during the year with
entities over which directors have control was $7,386 (December 31, 2017 - $1,632) and the outstanding
balance receivable at December 31, 2018 was $4,442 (December 31, 2017 - $nil).
Transactions with proportionally consolidated joint arrangements:
The Company provides services of its employees, management services, cost reimbursements, parental
guarantees and letters of credit to the joint arrangements. These services were transferred at the exchange
Page 73
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
amount, agreed to between the parties. The amounts recognized for services provided by the Company for
the year ended December 31, 2018 totalled $11,831 (December 31, 2017 - $18,024).
The Company has accounts receivable from the joint arrangements at December 31, 2018 totalling $857
(December 31, 2017 - $1,443).
Transactions with equity accounted joint arrangements:
The Company and its proportionately consolidated joint arrangements (notes 3 and 8), provides
development and construction services to its concession investments in associates and joint ventures which
are in the normal course of business and on commercial terms. The Company’s proportionate share of the
amounts billed for construction services provided by these joint arrangements for the year ended December
31, 2018 totalled $147,008 (December 31, 2017 – $192,506), of which $136,620 has been recognized in
revenue in 2018 (December 31, 2017 - $234,290). These amounts are not eliminated as they are deemed
to be realized by the Company.
The Company and its proportionately consolidated joint arrangements have accounts receivable from these
concession investment entities. The Company’s proportionate share of accounts receivable at December
31, 2018 totalled $35,509 (December 31, 2017 - $42,944). The Company also has a note receivable from an
equity accounted joint arrangement at December 31, 2018 totalling $1,125 (December 31, 2017 - $1,145).
Page 74
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
26. Other cash flow information
Changes in non-cash working capital relating to operating activities
Accounts receivable
Contract assets
Contract assets - alternative finance projects
Prepaid expenses
Inventory
Accounts payable
Contract liabilities
Provisions
Medium term incentive plan and other
$
$
2018
2017
(restated)
18,902
6,550
66,825
(47)
(326)
10,346
(2,373)
(2,110)
(2,235)
95,532
$
$
17,254
(20,345)
(7,508)
169
53
(63,233)
(19,178)
(1,130)
(2,270)
(96,188)
Contract assets - alternative finance project changes are driven by design build finance projects. Refer to note
7 for loan proceeds to fund contract assets - alternative finance projects.
Cash and cash equivalents
Cash
Cash held for joint operations
Bankers' acceptances and short-term deposits
2018
2017
$
$
113,993
43,158
1,769
158,920
$
$
67,852
46,240
18,963
133,055
Cash, bankers' acceptances and short-term deposits include restricted cash and cash equivalents that were
deposited as collateral for letters of credit issued by the Company. As such, these amounts are not available for
general operating purposes.
Restricted cash and cash equivalents
Cash and cash equivalents held to support letters of credit (note 13)
Cash deposited in restricted accounts for special projects
2018
2017
$
$
2,645
1,870
4,515
$
$
20,253
4,043
24,296
Support for Letters of Credit:
In the normal course of business, the Company issues letters of credit on certain projects to guarantee its
performance. These projects are typically design-build contracts relating to Public Private Partnership
arrangements and other major construction projects. In certain instances, the letters of credit are
supported by the hypothecation of cash and cash equivalents that are not available for general corporate
purposes (note 13).
Blocked Accounts:
The terms of non-recourse project financing require scheduled loan advances to be deposited in a blocked
bank account which cannot be accessed directly by the Company for general corporate purposes. Upon
recommendation by the lender’s technical advisor, cash is released monthly from the blocked account and
paid to the Company based on the progress made on the related construction project. Once Public Private
Partnership projects that only involve short term financing reach final completion and the debt is repaid,
Page 75
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
any remaining amounts in the project accounts become unrestricted and available for general corporate
purposes.
27. Financial instruments
The Company's investments and derivative financial instruments, including interest rate swaps and TRS
derivatives have been classified as fair value through profit and loss. The Company’s cash, bankers’
acceptances, short-term deposits, short-term investments, accounts receivable and other long-term assets
are classified as financial assets. The Company’s bank overdraft, if any, accounts payable, dividends
payable to shareholders, non-recourse project financing, deferred payment and long-term debt have been
classified as financial liabilities. The basis of the determination of the fair value of the Company’s financial
instruments is more fully described in note 3.
A. Classification and fair value of financial instruments:
Financial instruments at fair value through profit or loss
Non-recourse project financing - interest rate swaps
Interest rate swaps
Total return swap derivatives
Financial assets and financial liabilities
Financial assets
Cash and cash equivalents (note 26)
Accounts receivable
Other non-current assets
Short-term investments
Financial liabilities
Accounts payable
Dividends payable to shareholders
Non-recourse project financing - loan facilities (note 7)
Loans and borrowings
Deferred payment
Total financial instruments
2018
(613)
(54)
(2,218)
(2,885)
158,920
337,663
6,852
1,705
505,140
(383,608)
(1,382)
(11,211)
(29,957)
(756)
(426,914)
75,341
2017
(restated)
290
-
1,995
2,285
133,055
356,528
5,991
-
495,574
(373,081)
(1,382)
(63,975)
(18,598)
(1,136)
(458,172)
39,687
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The following table presents information about the Company’s financial instruments measured at fair value
as at December 31, 2018 and December 31, 2017, and indicates the fair value hierarchy of inputs utilized
by the Company to determine such fair value. The hierarchy of inputs is summarized below:
(cid:120)
(cid:120)
(cid:120)
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset or
liability, either directly or indirectly; and
Level 3 - inputs used in a valuation technique are not based on observable market data in determining
fair values of the instruments.
Page 76
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Determination of fair value and the resulting hierarchy requires the use of observable market data
whenever available. The classification of a financial instrument in the hierarchy is based upon the lowest
level of input that is significant to the measurement of fair value.
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
-
-
-
-
-
-
-
-
$
$
$
$
2018
(613)
$
(54)
(2,218)
(2,885)
$
2017
290
$
-
1,995
2,285
$
-
-
-
-
-
-
-
-
$
$
$
$
Total
$
(613)
(54)
(2,218)
$
(2,885)
$
$
290
-
1,995
2,285
Non-recourse project financing - interest rate swaps
Interest rate swaps
Total return swap derivatives
Total Financial Instruments through profit and loss
Non-recourse project financing - interest rate swaps
Interest rate swaps
Total return swap derivatives
Total Financial Instruments through profit and loss
There were no transfers between levels during both years.
The fair value of the loans and borrowings approximate their carrying values on a discounted cash flow
basis as the majority of these obligations bear interest at market rates. The fair values of the remaining
financial instruments approximate their carrying value due to their relatively short periods to maturity.
B. Risk Management:
In the normal course of business, the Company is exposed to several risks related to financial instruments
that can affect its operating performance. These risks and the actions taken to manage them are as follows:
i. Credit Risk:
Credit risk relates to the risk of financial loss to the Company if a customer or counterparty to a
financial instrument fails to meet their contractual obligation.
With respect to accounts receivable, concentration of credit risk is limited due to the geographic
dispersion of revenues and a diversified customer base. Before entering into any construction contract
and during the course of the construction project, the Company goes to considerable lengths to satisfy
itself that the customer has adequate resources to fulfil its contractual payment obligations as
construction work is completed. If a customer was unable or unwilling to pay the amount owing, the
Company will generally have a right to register a lien against the project that will normally provide
some security that the amount owed would be realized.
Bankers’ acceptances, short-term deposits and short-term investments are subject to minimal credit
risk as they are placed with only major Canadian financial institutions. As is reasonably practical,
these investments are placed with several different Canadian financial institutions, thereby reducing
the Company’s exposure to a default by any one financial institution.
Page 77
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Accounts receivable outstanding for greater than 90 days and considered past due by the Company’s
management, represent 13.0% (December 31, 2017 – 17.0% restated) of the balance of progress
billings on construction contracts receivable at December 31, 2018. Management has recorded an
allowance of $1,271 (December 31, 2017 - $1,672) against these past due receivables, net of amounts
recoverable from others.
Trade receivables
Impairment
Total Trade receivables
$
$
Amounts past due
Up to 12
months
17,510
(37)
17,473
$
$
Over 12
months
December 31,
2018
December 31,
2017
11,337
(1,234)
10,103
$
$
28,847
(1,271)
27,576
$
$
37,122
(1,672)
35,450
The movement in the allowance for impairment in respect of loans and receivables during the period
was as follows:
Balance, beginning of period
Impairment loss recognized
Amounts written off
Impairment loss reversed
December 31,
2018
December 31,
2017
$
$
1,672
140
(396)
(145)
1,271
$
$
1,524
383
(96)
(139)
1,672
ii.
Liquidity risk:
Liquidity risk relates to the risk that the Company will not be able to meet its financial obligations as
they fall due.
The Company has working capital of $70,215 which is available to support surety requirements related
to construction projects. As a component of working capital, the Company maintains significant
balances of cash and cash equivalents and investments in liquid securities. These investments, less
$2,645 hypothecated to support outstanding letters of credit and $1,870 held in blocked accounts,
are available to meet the financial obligations of the Company as they come due (note 26).
The Company has a committed line of credit of $85,000 available to finance operations and issue
letters of credit. As at December 31, 2018, the Company has drawn $15,000 on the facility and has
$24,291 letters of credit outstanding on the facility. The Company has a committed revolving term
loan facility totalling $35,000 for the purpose of financing acquisitions and for working capital
advances in support of major projects. The facility matures on December 31, 2020. As of December
31,2018, the Company has drawn $nil on the facility. Also, the Company and its subsidiaries have
$45,000 in equipment facilities, of which $6,656 is outstanding at December 31, 2018. Subsidiaries of
the Company have established operating lease lines of credit for $32,500 with the financing arms of
major heavy equipment suppliers to finance operating equipment leases. At December 31, 2018, the
subsidiaries have used $6,630 under these facilities. In addition, the Company has lines of credit
totalling $80,000 available for issuing letters of credit for which $8,468 was drawn at December 31,
2018. Additional draws on this line require hypothecation of additional securities or cash deposits.
Cash collateralization may not be required for certain letters of credit with an export component as
the Company has entered into an agreement with EDC to provide performance security guarantees
for letters of credit issued that meet their criteria. The Company believes it has access to sufficient
funding through the use of these facilities to meet foreseeable operating requirements.
Page 78
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
Principal repayments due on the loans and borrowings and non-recourse project financing are
disclosed in notes 13 and 7, respectively. As disclosed in notes 15 and 16, payments required pursuant
to the Company’s MTIP granted in 2016, 2017 and 2018 are due on the vesting dates of November
2019, November 2020 and November 2021, respectively, or upon retirement, if earlier. Payments
pursuant to the Company's EIP granted in 2017 and 2018 are due by December 2020 and December
2021 respectively. Payments pursuant to the Company's DSU Plan are cash settled when the eligible
Director ceases to hold any position within the Company.
The following are the contractual maturities of financial liabilities, including estimated interest
payments as at December 31, 2018:
Carrying
amount
Contractual
cash flows
Up to 12
months
2-3
years
4-5
years
Trade payables
Dividends payable
Finance lease liabilities
Non-recourse project financing
Long-term debt
Deferred payment
$
$
383,608
1,382
8,759
11,824
21,198
756
$
383,608
1,382
9,104
12,900
21,506
786
$
371,283
1,382
3,247
347
2,310
786
$
12,325
-
5,580
12,553
18,283
-
-
-
277
-
913
-
$
427,527
$
429,286
$
379,355
$
48,741
$ 1,190
iii. Market risk:
Market risk is the risk that changes in market prices, such as interest rates and equity prices, will
affect the Company’s income or the value of its holdings in liquid securities.
At December 31, 2018, the interest rate profile of the Company's long-term debt and non-recourse
project financing was as follows:
Fixed-rate facilities
Variable-rate facilities
Non-recourse project financing facilities
Total long-term debt and non-recourse project financing
December 31,
2018
6,198
15,000
12,235
33,433
$
$
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk
to the extent that its credit facilities and TRS derivatives are based on variable rates of interest. The
Company has the option to convert all variable-rate term facilities to fixed-rate term facilities.
Interest rate risk on the non-recourse project financing is managed with the objective of reducing
the cash flow interest rate risk through the use of interest rate swaps.
As at December 31, 2018, a one percent change in the interest rate applied to the Company's variable
rate long-term debt will change annual income before income taxes by approximately $150.
The Company has certain share-based compensation plans, whereby the values are based on the
common share price of the Company. The Company has fixed a portion of the settlement costs of
these plans by entering into various TRS derivatives maturing between 2019 and 2021. The TRS
Page 79
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
derivatives are not designated as a hedge. The TRS derivatives are recorded each quarter based on
the difference between the fixed price and the market price of the Company’s common shares at the
end of each quarter. The TRS derivatives are classified as derivative financial instruments.
As at December 31, 2018, a 10 percent change in the share price applied to the Company's TRS
derivatives will change income before income taxes by approximately $792. The intent of these
derivatives is to offset the impact associated with changes to the Company’s common share price for
its cash-settled share-based plans (note 16(b)).
iv. Currency risk:
Currency risk is the risk that fluctuations in currency exchange rates will affect the Company’s net
income.
A 10% movement in the Canadian and U.S. dollar exchange rate would have changed annual income
by approximately $1,155.
28. Capital disclosures
The Company’s capital management objectives are to:
(cid:120) Ensure that the Company has the financial capacity to support its current and anticipated volume and
mix of business and to manage unforeseen operational and industry developments.
(cid:120) Ensure that the Company has sufficient financial capacity to support the execution of its longer-term
growth strategies.
(cid:120) Provide its investors with the maximum long-term returns on equity and to generate sufficient cash
flow to sustain shareholder dividends and payments on long-term debt.
In the management of capital, the Company defines capital as shareholders’ equity and loans and
borrowings. Loans and borrowings include the current and non-current portions of long-term debt and
finance leases.
The Company manages its capital within the investment policy approved by the Board of Directors. The
Company makes changes to capital based on changes in business conditions and the mix of construction
contracts. In order to maintain or adjust the capital structure, the Company may adjust the amount of
dividends paid to Company shareholders, issue new debt or repay existing debt, issue new Company shares,
and to a lesser degree, may adjust capital expenditures.
As a component of working capital, the Company maintains significant balances of cash and cash
equivalents. These cash and cash equivalents are intended to cover net current liabilities, fund current
dividends payable to shareholders and provide capital to support surety and contract security requirements,
including issuing letters of credit relating to the current and near-term backlog of construction projects.
Backlog is not a term found in the CPA Canada Handbook. Backlog (also referred to in the construction
industry as “work on hand”) is the total value of all contracts awarded to the Company, less the total value
of work completed on these contracts as of the date of the most recently completed quarter. This includes
all contracts that have been awarded to the Company whether the work has commenced or will commence
in the normal course.
Page 80
Notes to the Consolidated Financial Statements
December 31, 2018
(in thousands of Canadian dollars, except per share amounts)
The amounts of shareholders’ equity, working capital and loans and borrowings at December 31, 2018 and
December 31, 2017 are as follows:
Shareholders' equity
Working capital
Loans and borrowings
$
2018
136,229
70,215
29,957
2017
(restated)
$
153,816
84,078
18,598
29. Eligible dividends declared with a record date subsequent to the financial statement date
As of the date of the approval of these financial statements, the Board of Directors has declared eligible
dividends for the following months:
i.
The January dividend of $0.0325 per share will be paid on February 20, 2019 to the Shareholders of
record as of the close of business on January 31, 2019.
ii. The February dividend of $0.0325 per share will be paid on March 20, 2019 to the Shareholders of
record as of the close of business on February 28, 2019.
iii. The March dividend of $0.0325 per share will be paid on April 18, 2019 to the Shareholders of
record as of the close of business on March 29, 2019.
iv. The April dividend of $0.0325 per share will be paid on May 17, 2019 to the Shareholders of record
as of the close of business on April 30, 2019.
30. Comparative figures
Certain comparative figures for the prior year have been reclassified to conform to the presentation
adopted in the current year.
Page 81
Five Year Summary
December 31, 2018
(in thousands of Canadian dollars, except Other Information)
2018
2017
(restated)(1)
2016
2015
2014
OPERATING RESULTS:
Revenue
Income before income taxes
Income taxes
Net income
Dividends
Cash flows from operations before changes
in non-cash working capital
$
$
$
$
$
1,381,784
1,418,557
1,589,868
1,444,806
1,364,456
(2,674)
(1,661)
(1,013)
16,582
13,078
4,242
8,836
16,582
34,327
9,325
25,002(2)
32,297
35,347
13,865
21,482(3)
32,297
48,617
12,380
36,237
32,297
12,185
26,938
48,449
75,291
64,899
Notes: (1) 2017 reported figures have been restated applying IFRS 15.
(2) Adjusting 2016 net income for the non-cash impairment charge, the Company's adjusted net income was $27,741 (a non-GAAP measure).
(3) Adjusting 2015 net income for the non-cash impairment charge, the Company's adjusted net income was $41,802 (a non-GAAP measure).
FINANCIAL POSITION:
Current assets
Current liabilities
Working capital
Property and equipment
Shareholders’ equity
BACKLOG:
Firm price
Construction management
OTHER INFORMATION:
$
$
$
$
$
$
2018
2017
(restated)(1)
January 1, 2017
(restated)(1)
2015
2014
546,553
476,338
70,215
56,226
136,229
607,979
523,901
84,078
52,397
153,816
729,799
614,527
115,272
45,517
161,543
652,864
525,506
127,358
54,281
170,891
530,479
426,452
104,027
58,440
181,587
1,295,940
82,155
1,186,000
128,509
1,137,000
1,662,800
1,149,700
35,351
17,108
3,012
Number of shares outstanding
42,516,853
42,516,853
42,516,853
42,516,853
42,516,853
Return on revenue
% (0.07)
0.62
1.57
1.49
2.66
Return on prior year shareholders’ equity
%
(0.66)
5.47
14.63
11.83
20.44
Net income per share
Book value per share
$ (0.02)
0.21
0.59
0.51
0.85
$ 3.20
3.62
3.80
4.02
4.27
Eligible Dividends
Bird Construction Inc. designates any and all dividends paid or deemed for Canadian federal, provincial or territorial income
tax purposes to be paid on or after January 1, 2007 to be “eligible dividends”, unless indicated otherwise in respect of
dividends paid subsequent to this notification, and thereby notifies all recipients of such dividends of this designation.
Page 82
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:92)
CORPORATE OFFICE
TORONTO
Ian Boyd, P.Eng.(cid:3)(cid:178)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:9)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
(cid:55)(cid:72)(cid:85)(cid:76)(cid:3)(cid:48)(cid:70)(cid:46)(cid:76)(cid:69)(cid:69)(cid:82)(cid:81)(cid:3)(cid:16)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
Wayne Gingrich, CPA, CMA(cid:3)(cid:178)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:3)(cid:9)(cid:3)(cid:55)(cid:85)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:85)
Paul Bergman, CET - Executive Vice President - Commercial
Gilles Royer, P.Eng. – Executive Vice President - Industrial ((cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:40)(cid:71)(cid:80)(cid:82)(cid:81)(cid:87)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:192)(cid:70)(cid:72))
Charles Caza, BA Sc. Eng., LL.B. – General Counsel & Secretary
Durck deWinter, P.Eng. – Senior Vice President ((cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:54)(cid:68)(cid:76)(cid:81)(cid:87)(cid:3)(cid:45)(cid:82)(cid:75)(cid:81)(cid:3)(cid:82)(cid:73)(cid:192)(cid:70)(cid:72))
Mark Dreschel - Senior Vice President Organizational Excellence & Community Engagement
Jason Leong, MAcc, CPA, CA - Vice President - Financial Planning & Analysis
5700 Explorer Drive, Suite 400
Mississauga, ON L4W 0C6
Tel: 905-602-4122 Fax: 905-602-1516
Email: investor.relations@bird.ca
1151 Sherwin Road
Winnipeg, MB R3H 0V1
Tel: 204-775-7141 Fax: 204-775-9508
ACCOUNTING OFFICE
WINNIPEG
CONSTRUCTION OFFICES
Institutional, Commercial, Light Industrial
ST. JOHN’S
Rene Cox, P.Eng. – VP & District Manager, Atlantic
90 O’ Leary Avenue, Suite 202
St. John’s, NL A1B 3P2
Tel: 709-579-4747 Fax: 709-579-4745
HALIFAX
John Duggan – Manager of Operations NS
20 Duke Street, Suite 201
Bedford, NS B4A 2Z5
Tel: 902-835-8205 Fax: 902-835-8245
SAINT JOHN
Derek Martell – Manager of Operations, NB
120 Millennium Drive
Quispamsis, NB E2E 0C6
Tel: 506-849-2473 Fax: 506-847-0270
OTTAWA
Roger Rowsell – VP & Director of Operations
150 Isabella Street, Suite 1200
Ottawa, ON K1S 1V7
T: 902-441-9842
TORONTO
Jon Thompson – VP & District Manager
5700 Explorer Drive, Suite 400
Mississauga, ON L4W 0C6
Tel: 905-602-4122 Fax: 905-602-6319
WINNIPEG
Dom Costantini - VP & District Manager
Travis Paul - Manager of Operations
1055 Erin Street
Winnipeg, MB R3G 2X1
Tel: 204-775-7141 Fax: 204-783-8119
CALGARY
Ian Reid – VP & District Manager, Alberta
1200, 59th Avenue SE, Unit 350
Calgary, AB T2H 2M4
Tel: 403-319-0470 Fax: 403-319-0476
EDMONTON
Ian Reid – VP & District Manager, Alberta
102, 17007 – 107 Avenue NW
Edmonton, AB T5S 1G3
Tel: 780-470-7100 Fax: 780-459-1208
VANCOUVER
Ken Nakagawa – VP & District Manager
6900 Graybar Road, Unit 2370-Building 2000
Richmond, BC V6W 0A5
Tel: 604-271-4600 Fax: 604-271-1850
Heavy Civil, Mining, Industrial
ST. JOHN’S
Nolan Jenkins, P.Eng.- Senior VP
90 O’Leary Avenue, Suite 101
St. John’s, NL A1B 2C7
Tel: 709-726-9095 Fax: 709-726-9106
WABUSH
Justin Fillier – Project Director & Operations
2 Old Airport Road
Wabush, NL A0R 1B0
Tel: 709-282-5633 Fax: 709-282-3500
MONTREAL
Anoop Singh, P.Eng. - VP Strategic Development
1868 boul. Des Sources, Suite 200
Pointe-Claire, QC H9R 5R2
Tel: 514-426-1333 Fax: 514-426-1339
EDMONTON (Industrial Process & Fabrication)
Tannis Proulx, P.Eng. - VP
102,17007 – 107 Avenue NW
Edmonton, AB T5S 1G3
Tel: 780-509-8600 Fax: 780-509-8601
EDMONTON (Industrial Civil, Buildings & Environmental)
Arthur Krehut - Senior VP
Greg Madziong - VP Buildings
Adham Kaddoura, CET - VP Civil
Lynnell Crone, P.Eng, PMP, MBA - VP Environmental
17007 – 107 Avenue NW
Edmonton, AB T5S 1G3
Tel: 780-452-8770 Fax: 780-455-2807
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Bird Construction Inc.
5700 Explorer Drive
Mississauga, ON L4W 0C6
www.bird.ca