EIGHTY-NINTH
ANNUAL REPORT
for the year ended
December 31, 2019
CORPORATE OFFICE
5700 Explorer Drive, Suite 400
Mississauga, ON L4W 0C6 Canada
DIRECTORS
OFFICERS
J. Richard Bird, Ph.D., MBA (1)(2) ................................................................................Calgary
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
Teri L. McKibbon .............................................................................................. Canmore
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
Teri L. McKibbon .................................................... President & Chief Executive Officer
Wayne R. Gingrich, CPA, CMA ........................................................ Chief Financial Officer
Brian C. Henry ................................................................................ Chief People Officer
Charles J. Caza, BA, Sc.Eng., LL.B ........................................... General Counsel & Secretary
Ian J. Boyd, P.Eng. .......................................... Executive Vice President – Major Projects
Gilles G. Royer, P.Eng. ............................................ Executive Vice President – Industrial
Paul Bergman, CET ............................................ Executive Vice President – Commercial
Paul Pastirik, CPA, MBA, B.Comm.............. Senior Vice President – Strategic Development
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
Management’s Discussion and Analysis
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. Diversification and Growth can 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 win strategy. The Company intends to
be very selective in its execution of the strategy to ensure it grows and diversifies profitably.
Through its geographic expansion efforts, the Company continues 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
also looks 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, alternative finance projects 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 continued expectations for challenging market conditions in Alberta, 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. The Company participates in 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) generally as a preferred subcontractor to ‘horizontal’
contractors where risk can be appropriately managed.
New service offerings also contribute to Bird’s Diversification and Growth strategy. The Company intends to pursue more
opportunities in the nuclear market in Ontario building on successes achieved in 2018 and 2019. The Company continues
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 intends to build on its successful growth
into the environmental market with projects active in four provinces. By continuing to build our expertise, the Company
hopes to 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 also selectively identify and
pursue Maintenance, Repair and Operations (“MRO”) opportunities with our energy clients in northern Alberta to further
build 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 uses 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 intends to 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 should widen its established activities in the Labrador Trough region to
secure similar opportunities in eastern Canada. This expanded geographical scope should 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 requires a commitment to business development and a
recognition that program accomplishments 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. Mass timber projects is an example where the Company has built an
Page 23
Management’s Discussion and Analysis
impressive resume. The Company is also working to leverage its 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 select 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. The Company remains active in researching potential acquisition targets and is
generally looking to add self-perform capabilities with niche service offerings that should enhance overall profit margins
and that should 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 are intended to be reinvested into
the Company’s strategic initiatives. Through 2019, the Company successfully introduced new software platforms to aid
operations in safety management, human resource management, project delivery and business intelligence. Increasing
process efficiency, particularly for the operations team, should also lead to greater engagement amongst the employee
group and is anticipated to positively impact production as project teams should 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 should further the Company’s commitment to embedding a Safe Production mindset
throughout the project lifecycle, from estimating through to post-job assessment. It requires driving greater involvement
and commitment from subcontractors and suppliers and should 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 and 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 the
implementation of a software platform in 2019 helps the Company employ more streamlined and proactive solutions for
these priorities in 2020 and beyond. It should 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, should 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 24
Management’s Discussion and Analysis
offset total CO2 emissions. Bird has built one of the strongest resumes in the country in mass timber projects, and the
company aims to continue being a leader in this sector.
Social Responsibility
As befitting of a Company that started out as a family business, critical to Bird’s successful growth is our continued
commitment to the health and safety of the employees and other stakeholders who work on our sites and in our offices
every day. This is a critical component of our operational strategy, a core company value, and a key corporate social
responsibility.
At Bird, we understand that a corporate commitment to health and safety yields tremendous dividends in both business
and human capital. In addition to reducing related health and safety costs and reducing the frequency and severity of work-
related personal injuries and property damage, a robust health and safety program leads to greater engagement of our
employees and other stakeholders. This, in turn, produces a stronger commitment to product and service quality, improved
productivity and client satisfaction.
From project planning to execution, through ongoing communication, documentation, orientation, training, and review and
analysis, we seek to ensure continuous improvement in all facets of our operations. This approach better prepares and
supports all our workers and managers to act as safety leaders in the construction industry.
In a highly competitive business environment, resourcing remains one of the greatest challenges facing the construction
industry. Bird’s commitment to the health and safety of our employees and partners enhances both employee recruitment
and retention and serves to provide a strategic competitive advantage, allowing us to continue to successfully pursue and
execute challenging work.
Community engagement and social responsibility is also a key focus area for Bird and our employees. We direct our efforts
towards youth and education initiatives, community sponsorship, health and wellness in the community, and Indigenous
engagement.
The Company’s approach to Indigenous relations is closely aligned with the core values of the company to operate with
integrity, provide stewardship, and invest in people. Bird is committed to building capacity within Indigenous business
communities and investing in community programs that support Indigenous skills development, including offering a variety
of post-secondary scholarships and bursaries. The Company adopted a National Indigenous Engagement Policy to ensure
a consistent and culturally appropriate approach across all operations and has instituted a mandatory Indigenous Cultural
Awareness Training Program for all employees, which is also available to subtrades.
Bird is proud to be part of the Canadian Council for Aboriginal Business’ Progressive Aboriginal Relations (PAR) certification
process, which confirms corporate performance in Indigenous relations and indicates to communities that participating
companies are good business partners, a great place to work, and committed to prosperity in Indigenous communities.
Bird’s membership in the Aboriginal Procurement Champions Group provides assurance that procurement opportunities
are made available to businesses that are independently pre-certified as at least 51 per cent Indigenous owned and
controlled.
Governance
The Board of Directors and the Management of the Company are committed to a strong corporate governance framework.
As a public company whose securities are traded on the Toronto Stock Exchange, the company’s Board of Directors has
adopted, as its approach to corporate governance, the guidelines set out in National Instrument 58-101 - Disclosure of
Corporate Governance Practices, National Instrument 52-110 – Audit Committees, and National Policy 58-201 - Corporate
Governance Guidelines.
A strong culture of ethical conduct is central to good governance at Bird. The Company and its Board are committed to
conducting their activities in accordance with the highest standards of business ethics. These standards are intended to
provide guidance regarding ethical issues, to assist in recognizing and dealing with ethical issues, to provide mechanisms to
report unethical conduct, and to help foster a culture of honesty and accountability.
Page 26
Management’s Discussion and Analysis
The Director Code of Ethics requires that the company’s Directors disclose any potential or actual conflict of interest to
ensure independent judgment regarding Board discussions and decision making. In the event of any potential or actual
conflict of interest by a Director in relation to a Board matter, the Director will withdraw from the deliberations and not
vote upon such matter. The Board has also approved the following written codes and policies applicable to all employees:
Employee Code of Ethics, Anti-Bribery and Corruption Policy, Insider Trading and Blackout Policy and Whistleblower Policy.
The Board and its committees have adopted governance best practices including:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Recognition of the benefits of promoting Board diversity. Diverse perspectives contribute to innovation and growth
opportunities, and the Board believes that diversity may be achieved through a range of factors including gender
diversity, diverse skills and experiences, regional diversity and industry diversity.
The Whistleblower Policy gives employees and others the opportunity to report any potential violations of regulatory
matters including accounting, financial reporting, securities laws, and financial audit matters, as well as matters
relating to business practices including conflicts, business, professional and personal ethics and other matters set out
in the company’s Ethics Policies. The Board has discretion to hire independent advisors (including outside legal
counsel, independent auditors and others) to help investigate any matter.
Regular in-camera meetings, without officers and management present. These sessions enable the Board and
committees to discuss issues in a candid and independent manner without the influence of senior management. To
make sure the Board functions independently of management, the Board has the flexibility to retain and to meet
with external consultants without the presence of management whenever the Board sees fit.
Conducting performance evaluations of the Board, the Audit Committee, the Human Resource, Safety and
Governance Committee (“HRS&G”), each of their chairs and individual Directors on a regular basis. In 2019, each of
the Directors completed confidential questionnaires to evaluate the effectiveness of the Board, its committees and
the Directors, and made recommendations for improving performance. The chair of the Board and the chair of the
HRS&G Committee also conducted informal discussions with each individual Director.
Now more than ever, companies are being called upon to be leaders in environmental, social, and governance initiatives.
Bird endeavors to be at the forefront of industry efforts to be responsible, responsive, and innovative corporate citizens.
More information can be found in our Management Information Circular.
Page 27
Management’s Discussion and Analysis
Gross Profit Percentage
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:
Gross Profit Percentage
December 31,
2019
December 31,
2018
5.2%
4.2%
During 2019 the Company realized a Gross Profit Percentage of 5.2% compared with 4.2% in 2018. The year-over-year
improvement is driven by the revenue mix, with a larger portion of revenue recognized from the Company’s higher margin
industrial operations.
Financial Condition
The Company must have 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 following table 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,
2019
December 31,
2018
$
$
80,503
127,720
$
$
70,215
136,229
At December 31, 2019, the Company had working capital of $80.5 million compared with $70.2 million at December 31,
2018, an increase of $10.3 million. In 2019, the majority of the increase in working capital was driven by the Company’s net
income of $9.5 million, a $15.7 million net increase in non-current loans and borrowings and classifying $3.8 million of
investments in equity accounted equities as held for sale. Partially offsetting these increases to working capital were the
$16.6 million in dividends paid and the net additions of equipment and intangible assets of $2.9 million.
The $8.5 million decrease in the amount of the Company’s shareholders’ equity since December 31, 2018 was primarily the
result of the $16.6 million dividends declared in 2019 offset by the net income of $9.5 million generated in 2019. In addition,
opening retained earnings decreased $1.4 million on the adoption of IFRS 16 on January 1, 2019.
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 is 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.
Page 29
Management’s Discussion and Analysis
THREE MONTHS ENDED DECEMBER 31, 2019 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 2018
Selected Fourth Quarter Financial Information
Consolidated Statement of Income
(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
Net income for the period
For the three months ended December
2018
(unaudited)
2019
(unaudited)
$
$
420,612
394,228
26,384
739
(16,302)
10,821
769
(1,553)
10,037
1,870
$
8,167
$
385,854
363,147
22,707
1,522
(15,180)
9,049
498
(1,978)
7,569
1,190
6,379
During the fourth quarter of 2019, the Company recorded net income of $8.2 million on construction revenue of $420.6
million compared with net income of $6.4 million on $385.9 million of construction revenue respectively in 2018. The year-
over-year increase of revenue in the fourth quarter of 9.0% was driven by growth in the industrial work program more than
offsetting a decline in the institutional work programs. The year-over-year increase in fourth quarter net income is reflective
of the improvement in earnings attributable to the mix of higher margin industrial work program in the fourth quarter of
2019.
The Company’s fourth quarter gross profit of $26.4 million was $3.8 million or 16.2% higher than the $22.7 million recorded
a year ago. The increase in the amount of fourth quarter 2019 gross profit is driven by the higher quarterly construction
revenues year-over-year. In addition, the increase in gross profit is due to a higher-margin work program as revenue
contribution shifted from predominantly institutional and commercial projects to a more balanced work program in 2019.
Gross Profit Percentage in the fourth quarter of 2019 was 6.3% and 0.4% higher than the Gross Profit Percentage of 5.9%
recorded a year ago. Gross Profit Percentage in 2019 improved due to a larger volume mix of revenue recognized from the
Company’s higher margin self-perform operations in its industrial work programs.
Income from equity accounted investments in the fourth quarter of 2019 was $0.7 million, compared with $1.5 million in
same period of 2018. The income in fourth quarter of 2019 and 2018 was primarily driven by the margin earned from a
project in eastern Canada. The income in fourth quarter of 2019 was lower year-over-year due to losses from some PPP
equity accounted entities which were anticipated at their stage of the project lifecycle.
In the fourth quarter of 2019, general and administrative expenses of $16.3 million (3.9% of revenue) were $1.1 million
higher than $15.2 million (3.9% of revenue) in the comparable period a year ago. The Company had additional third-party
pursuit costs which were $1.2 million higher than the amount recorded in 2018. In the fourth quarter of 2019 the Company
also had a lower foreign exchange gain compared to a foreign exchange gain of $0.9 million recorded in 2018. Offsetting
these negative variances, compensation expense was $1.3 million lower than the amount recorded a year ago primarily due
to the gain recorded on the total return swap program in 2019.
Finance income of $0.8 million in the fourth quarter of 2019 is comparable to the $0.5 million recorded in the same period
of 2018 due to higher cash balances.
Page 31
Management’s Discussion and Analysis
Credit Facilities
The Company has several 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 Credit Facilities
(cid:120)
Committed revolving operating credit facilities
The Company has a committed revolving credit facility of up to $85.0 million, with a Canadian chartered bank. The
facility matures December 31, 2022. 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, 2019, the Company has $28.5 million in letters of credit outstanding
(December 31, 2018 - $24.3 million) and has drawn $15.0 million on this facility (December 31, 2018 - $15.0 million).
The $15.0 million draw is presented as long-term loans and borrowings on the Company’s statement of financial
position. At December 31, 2019, the Company was in compliance with the working capital, minimum equity and debt-
to-equity covenants of this facility.
(cid:120)
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, 2021.
As of December 31, 2019, the Company has drawn $10.0 million (December 31, 2018 - $nil) 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. At
December 31, 2019, the Company was in compliance with the working capital, minimum equity and debt-to-equity
covenants of this facility.
Letters of Credit Facilities
The Company has available $80.0 million of demand facilities used primarily to 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, 2019, the Company has $6.6 million in letters of credit outstanding on this facility
(December 31, 2018 - $8.5 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.
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:
Page 35
Management’s Discussion and Analysis
(in thousands of Canadian dollars)
Committed revolving operating credit facility
Letters of credit issued from committed revolving operating credit facility
Drawn from committed revolving operating credit facility
Available committed revolving operating credit facility
Committed revolving term loan facility
Drawn from committed revolving term loan facility
Available committed revolving term loan facility
Letters of credit facilities
Letters of credit issued from letters of credit facilities
Available letters of credit facilities
Collateral pledged to support letters of credit
Guarantees provided by EDC
Equipment Financing
December 31,
2019
December 31,
2018
$
$
$
$
$
85,000
28,504
15,000
41,496
35,000
10,000
25,000
80,000
6,559
73,441
139
6,421
$
$
$
$
$
85,000
24,291
15,000
45,709
35,000
-
35,000
80,000
8,468
71,532
2,645
5,948
The Company and its subsidiaries have term credit facilities of up to $35.0 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, 2019, there is $12.4 million outstanding on the facilities (December 31, 2018 - $6.7 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 operating lease lines of credit for $31.8 million
(December 31, 2018 - $32.5 million) with the financing arms of several major heavy equipment suppliers to finance the
purchase of equipment. At December 31, 2019, the Company has used $11.7 million under these facilities (December 31,
2018 - $6.6 million). The Company’s total lease commitments are outlined under Contractual Obligations.
At December 31, 2019, the Company was in compliance with all debt covenants relating to its operating and equipment
operating lease lines of credit.
Loans and Borrowings and ROU Liabilities
In 2019, the Company entered new fixed-rate term loans for $24.5 million and added $10.8 million of ROU liabilities relating
to equipment and property leases. The Company made $5.1 million in principal repayments for loans and borrowings and
$7.6 million for principal repayments to ROU liabilities.
The following table provides details of outstanding loans and borrowings and ROU liabilities as at December 31, 2019, and
principal repayments due over the next five years and beyond, 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 and
beyond
Loans and borrowings
ROU Liabilities
$
$
40,621
31,100
$
$
5,881
8,024
$
$
15,223
6,723
$
$
18,491
4,318
$
$
850
3,156
$
$
176
8,879
Page 36
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 flows from 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 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
Repayment of right-of-use liabilities
Cash flows from (used in) financing activities
(unaudited)
Quarter ended December 31,
2018
2019
Year ended December 31,
2018
2019
$
$
15,525
(28,367)
67,546
54,704
$
11,045
(2,384)
77,321
85,982
112
353
(2,807)
733
-
39
(283)
(1,853)
(4,145)
29,039
-
10,000
(1,507)
(2,406)
30,981
(2,270)
280
(2,065)
314
-
-
(652)
(4,393)
(4,145)
3,260
-
571
(674)
(740)
(1,728)
$
30,201
(68,054)
(223)
(38,076)
-
1,846
(14,431)
2,661
-
1,705
-
(8,219)
(16,582)
72,832
-
24,536
(5,113)
(7,615)
68,058
12,320
66,825
22,296
101,441
(4,020)
1,873
(14,613)
3,235
(4,742)
3,107
(861)
(16,021)
(16,582)
24,734
(76,474)
14,242
(3,221)
(3,513)
(60,814)
Increase in cash and cash equivalents
$
83,832
$
79,861
$
21,763
$
24,606
Operating Activities
During of fiscal 2019, cash flows from operating activities used cash of $38.1 million compared with cash generated of
$101.4 million in 2018.
Cash flows from operations before changes in non-cash working capital increased $17.9 million year-over-year from the
$12.3 million cash generated in 2018 primarily due to the $10.5 million improvement in net income, a higher non-cash
addback for amortization and depreciation of $4.5 million compared to 2018 and a higher non-cash addback for income
tax expense year-over-year of $4.1 million from 2018. These increases were offset by other non-cash changes of $1.3
million.
Changes in contract assets – alternative finance projects in 2019 used $68.0 million of cash. This use of cash was more than
offset by the $72.8 million on proceeds from non-recourse project financing. The activity in 2019 relates to the OPP
Modernization Phase 2 alternative finance project. The OPP Modernization project was ramping up construction
throughout 2019 and therefore builds up contract assets. In 2018 the $66.8 million of cash generated by changes in contract
assets – alternative finance projects related to the completion (in the second quarter of 2018) and billing of the Avenir
Centre alternative finance project.
During 2019, the $0.2 million decrease in cash from changes in non-cash working capital and other was driven by a $26.4
million increase in accounts payable, a $54.5 million increase in contract liabilities and partially offset by a $94.8 million
decrease in accounts receivable. During 2018, the primary drivers of the $22.3 million increase in cash from the changes in
non-cash working capital and other was the $18.9 million decrease in accounts receivable, a $6.6 million decrease in
contract assets partially offset by a $2.4 million decrease in contract liabilities. The increase in accounts receivable primarily
relates to an alternative finance project that achieved substantial completion and was billed in the third quarter of 2018.
Proceeds and repayments of the non-recourse debt relating to alternative finance projects are included in financing
activities.
Page 37
Management’s Discussion and Analysis
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 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.
Page 43
Management’s Discussion and Analysis
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 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.
Page 44
Management’s Discussion and Analysis
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.
Information Systems and Cyber-security Risk
The Company relies on information technology to manage, process, store and transmit electronic information. Complete,
accurate, available and secure information is vital to the Company’s operations and any compromise in such information
could result in improper decision making, inaccurate or delayed operational and/or financial reporting, delayed resolution
to problems, breach of privacy and/or unintended disclosure of confidential information. Failure in the completeness,
accuracy, availability or security of the Company’s information systems, the risk of system interruption or failure during
system upgrades or implementation, or a breach of data security could adversely affect the Company’s operations and
financial results.
In addition, cyber-security incidents relating to the Company’s information technology systems may disrupt operations and
impact operating results. Cyber-security incidents may occur from a range of techniques, from phishing or hacking attacks
to sophisticated malware, hardware or network attacks. While the Company has implemented systems, policies,
procedures, practices, hardware and backups designed to prevent and limit the effect of cyber-security attacks, there can
be no assurance that these measures will be sufficient to prevent, detect or address the attacks in a timely matter or at all.
A successful cyber-attack may allow unauthorized interception, destruction, use or dissemination of the Company’s
confidential information, which could have a material adverse effect on the business. In the fall of 2019, Bird Construction
responded to a cyber incident that resulted in the encryption of Company files. Bird continued to function with no business
impact, as management worked with leading cyber security experts to restore access to the affected files. At the time, the
Company disclosed the incident on our website and notified appropriate authorities.
Page 45
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 47
KPMG LLP
One Lombard Place
Suite 2000 Winnipeg
MB
R3B 0X3
Telephone (204) 957-1770
Fax (204) 957-0808
www.kpmg.ca
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, 2019 and December 31, 2018, the consolidated statements of income
(loss), comprehensive income (loss), changes in equity and cash flows for the years then ended, 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, 2019 and December 31, 2018, and its consolidated financial performance and its
consolidated cash flows for the years then ended 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.
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 “2019 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.
KPMG LLP is a Canadian limited liability partnership and a member firm
of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. KPMG
Canada provides services to KPMG LLP.
Page 48
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 “2019 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.
(cid:120)
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Page 49
(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.
Chartered Professional Accountants
The engagement partner on the audit resulting in this auditors’ report is Austin Abas.
Winnipeg, Canada
March 10, 2020
Page 50
Consolidated Statement of Financial Position
As at December 31,
(in thousands of Canadian dollars, except per share amounts)
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
Right-of-use assets
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
Current portion of right-of-use liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Loans and borrowings
Right-of-use liabilities
Deferred income tax liability
Other liabilities
Total non-current liabilities
TOTAL LIABILITITES
SHAREHOLDERS’ EQUITY
Shareholders’ capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Note
2019
2018
25
25
8
6
7
10
9
9
11
11
10
14
12
12
6
7
13
13
19
15
13
13
14
15
17
$
$
$
$
180,244 $
90
–
413,649
31,018
75,180
549
2,595
13,083
6,978
5,972
729,358
6,608
46,016
34,460
10,185
11,287
2,484
16,389
127,429
856,787
$
157,151
1,769
1,705
337,663
28,412
7,126
840
2,566
5,559
3,762
–
546,553
6,852
43,153
13,073
12,517
10,909
2,575
16,389
105,468
652,021
419,923 $
112,126
1,382
6,174
85,374
5,883
8,025
7,763
2,205
648,855
383,608
60,003
1,382
3,444
11,824
2,151
3,053
8,593
2,280
476,338
34,738
23,075
13,868
8,531
80,212
729,067
42,527
1,956
83,197
40
127,720
856,787 $
19,047
5,706
7,355
7,346
39,454
515,792
42,527
1,956
91,743
3
136,229
652,021
The accompanying notes are an integral part of these consolidated financial statements.
Page 51
Consolidated Statement of Income (Loss)
For the years ended December 31,
(in thousands of Canadian dollars, except per share amounts)
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 (loss) before income taxes
Income tax expense (recovery)
Net income (loss) for the period
Basic and diluted earnings (loss) per share
Note
2019
2018
6
$
1,376,408 $
1,305,458
70,950
1,381,784
1,324,194
57,590
10
20
21
14
18
2,693
(58,722)
14,921
2,596
(5,558)
11,959
2,475
1,894
(58,933)
551
1,386
(4,611)
(2,674)
(1,661)
$
$
9,484 $
(1,013)
0.22 $
(0.02)
The accompanying notes are an integral part of these consolidated financial statements.
Page 52
Consolidated Statement of Comprehensive Income (Loss)
For the years ended December 31,
(in thousands of Canadian dollars)
Note
2019
2018
Net income (loss) for the period
$
9,484 $
(1,013)
Other comprehensive income for the period:
Exchange differences on translating equity accounted investments
Items that may be reclassified to net income in subsequent periods
10
Total other comprehensive income for the period
37
37
37
1
1
1
Total comprehensive income (loss) for the period
$
9,521 $
(1,012)
The accompanying notes are an integral part of these consolidated financial statements.
Page 53
Consolidated Statement of Changes in Equity
For the years ended December 31, 2019 and 2018
(in thousands of Canadian dollars, except per share amounts)
Note
Shareholders’
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
equity
Balance, December 31, 2017
$
42,527
$
1,949
$
109,338
$
2
$
153,816
Net income (loss) for the period
Other comprehensive income
Total comprehensive income for the period
Contributions by and dividends to owners
Stock-based compensation expense
Dividends declared to shareholders
–
–
–
–
–
–
–
–
–
7
–
7
(1,013)
–
(1,013)
–
(16,582)
(16,582)
–
1
1
–
–
–
(1,013)
1
(1,012)
7
(16,582)
(16,575)
Balance, December 31, 2018
$
42,527
$
1,956
Dividends declared per share
Balance, December 31, 2018
Impact on adoption of IFRS 16
Balance, January 1, 2019
$
4
$
42,527
–
42,527
1,956
–
1,956
Net income for the period
Other comprehensive income (loss)
Total comprehensive income for the period
Contributions by and dividends to owners
Dividends declared to shareholders
–
–
–
–
–
–
–
–
–
–
Balance, December 31, 2019
$
42,527
$
1,956
Dividends declared per share
$
$
$
$
$
91,743
$
3
$
136,229
0.39
$
91,743
(1,448)
90,295
9,484
–
9,484
(16,582)
(16,582)
3
–
3
–
37
37
–
–
$
136,229
(1,448)
134,781
9,484
37
9,521
(16,582)
(16,582)
83,197
$
40
$
127,720
0.39
The accompanying notes are an integral part of these consolidated financial statements.
Page 54
Consolidated Statement 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 period
Items not involving cash:
Amortization
Depreciation
Gain on sale of property and equipment
Income 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 related to operating activities
Interest received
Interest paid
Income taxes paid
Net cash from (used in) operating activities
Cash flows 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
Net cash used in investing activities
Cash flows from (used in) 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
Repayment of right-of-use liabilities
Net cash from (used in) financing activities
Net increase in cash and cash equivalents
Effects of foreign exchange on cash balances
Cash and cash equivalents, beginning of period
Note
2019
2018
$
9,484 $
(1,013)
12
11
10
20
21
14
16
25
10
10
11
11
12
7
7
13
13
13
873
14,941
(1,346)
(2,693)
(2,596)
5,558
3,156
349
2,475
–
30,201
(66,269)
2,521
(3,930)
(599)
(38,076)
–
1,846
(13,649)
2,661
(782)
–
1,705
–
(8,219)
(16,582)
72,832
–
24,536
(5,113)
(7,615)
68,058
21,763
(349)
158,920
473
10,763
(873)
(1,894)
(1,386)
4,611
4,622
(1,329)
(1,661)
7
12,320
95,397
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
Cash and cash equivalents, end of period
25
$
180,334 $
158,920
The accompanying notes are an integral part of these consolidated financial statements.
Page 55
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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, construction management and integrated project delivery 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 10, 2020 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 calculate 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.
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 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
Page 56
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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 complete 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, 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
Legal and warranty and other provisions involve the use of estimates. 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 are 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 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.
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 57
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Company
Fully consolidated subsidiaries
Ownership / Voting Interest
2018
2019
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 Ltee (Formerly Les Enterprises de Construction de Québec Ltee))
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
Chandos Bird Joint Venture
* Joint Venture was dissolved on November 16, 2018
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%
N/A
50%
50%
50%
60%
42.5%
50%
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%
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
Page 58
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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.
Company
Equity accounted investment in associates/joint ventures
Boreal Health Partnership*
Chinook Resources Management General Partnership
Harbour City Solutions General Partnership
Hartland Resource Management General Partnership
Joint Use Mutual Partnership #1*
Joint Use Mutual Partnership #2*
Plenary Infrastructure ERMF GP
Stack Modular Structures Ltd.
Stack Modular Structures Hong Kong Limited
Niagara Falls Entertainment Partners
Timmiak Construction Limited Partnership (Formerly Nillik Construction Limited Partnership)
* Classified as investments held for sale
Ownership / Voting Interest
2019
2018
25%
50%
20%
20%
20%
20%
10%
50%
50%
20% / 16.2%
69.99% / 33.33%
25%
50%
20%
20%
20%
20%
10%
50%
50%
20% / 16.2%
69.99% / 33.33%
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 recognizes 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 (includes: PPP, alternative finance, design-build, and stipulated sum) and cost
reimbursable (includes: cost plus and integrated project delivery “IPD”) 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. As the contract
progresses further, the constrained margin and associated revenue are 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 accounts for the contract
modification using variable consideration guidance described below. A claim against or dispute with a customer is
considered variable consideration as it is in addition to the agreed upon performance obligations outlined in the original
contract because of additional costs incurred due to delays and/or scope changes. The subsequent settlement of a claim
or dispute 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
Page 59
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
either the most likely amount or the expected value method, by contract, depending which method is considered to best
predict the amount of consideration 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.
ii.
iii.
Susceptibility of consideration to factors outside the Company’s influence.
Length of time before resolution of the uncertainty associated with the amount of consideration is expected.
The Company’s experience with similar types of contracts is limited or the experience is not relevant or has limited
predictive value.
If, historically 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.
The contract has a larger number and broad range of possible consideration amounts.
v.
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.
iv.
For most 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 projects, the budgets and
overall transaction prices are built up using the Company’s best estimate of costs associated to complete the 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 known. 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
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 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.
Page 60
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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:
Diminishing balance method
Buildings
Equipment, trucks and automotive
Heavy equipment
Furniture, fixtures and office equipment
Straight line method
Building lease improvements
5% and 10%
20% - 40%
Hours of use
20% - 55%
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 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. Monetary assets and liabilities at the exchange rate in effect at the financial statement date;
ii.
iii.
iv.
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.
Page 61
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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.
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 has 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 (“PSU”) or time-based restricted share units (“RSU”), 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 calculated 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
Page 62
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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 PSUs 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, 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.
Deferred share unit plan
The Company has a Deferred Share Unit Plan ("DSU Plan"), which is a cash-settled share-based payment plan. The fair
value of the amount payable to eligible Directors in respect of Deferred Share Units ("DSU") is equivalent to the cash value
of the common shares at the reporting date. The DSUs 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 financial 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 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.
Page 63
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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,
right-of-use lease liabilities and loans and borrowings.
The Company has not classified any financial assets or liabilities as held-to-maturity or available-for-sale (see note 26).
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.
Subsequently, goodwill is measured at cost less any accumulated impairment losses.
Intangible assets
Intangible assets with finite lives, which consists of software, are measured at cost less accumulated amortization and
accumulated impairment losses. Software is amortized over its estimated useful life of 2 to 5 years using the straight-line
method.
The Company reviews the residual value, useful lives and amortization methods on an annual basis. Amortization of
intangible assets is included in general and administrative expenses in the statements of income (loss).
Page 64
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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, 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 of the contracts, but a legal claim may take
years to settle.
ii. Provisions for potential warranty claims relating to construction projects. These claims are usually settled during the
project’s warranty period.
iii. Provisions for loss contracts are recorded when costs are estimated to be greater than total revenues for the contract.
Losses from construction contracts are recognized in full in the period the loss becomes known. 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.
Impairment
Property and equipment
At the end of each reporting period, the Company determines 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.
Page 65
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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 CGU 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.
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 ROU liabilities, 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.
Page 66
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Leases
The Company recognizes a right-of-use (“ROU”) asset and a ROU liability at the lease commencement date. The ROU asset
is initially measured at cost which is comprised of the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred, and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease
incentives received.
The ROU asset is depreciated from the commencement date to the earlier of the end of the useful life of the ROU asset
or to the end of the lease term. The estimated useful lives of ROU assets are determined on the same basis as those of
property and equipment. In addition, the ROU asset is reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The ROU liability, or lease liability, is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be determined, the
Company’s incremental borrowing rate. The ROU liability is remeasured when there is a change in future lease payments
such as a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee or if
the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
The Company has elected not to recognize ROU assets for short-term leases that have a lease term of 12 months or less
and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense
on a straight-line basis over the lease term.
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 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.
Page 67
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
4. New Accounting Standards, Amendments and Interpretations Adopted
IFRS 16, Leases
The Company has adopted IFRS 16 in its financial statements effective January 1, 2019 using a modified retrospective
approach which does not require restatement of prior period financial information. IFRS 16 introduced 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 ROU asset and a lease liability
representing its obligation to make lease payments.
On adoption of the new lease standard, the Company elected to use the following practical expedients permitted under
the standard:
i.
ii.
iii.
iv.
Apply a single discount rate to a portfolio of leases with similar characteristics;
Account for leases with a remaining term of less than 12 months as at January 1, 2019 as short-term leases;
Use hindsight in determining the lease term where the contract contains terms to extend or terminate the lease;
and
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 adoption of the standard resulted in an increase in ROU assets of $16,074, an increase in ROU liabilities of $18,270,
a reduction in prepaids of $36, a decrease in other liabilities of $250, an increase in net deferred taxes asset of $534,
and a corresponding reduction to opening retained earnings for the net difference of approximately $1,448 as at January
1, 2019. The borrowing rate applied to discount lease liabilities at January 1, 2019 was approximately 4.0%.
The following table provides a reconciliation of the operating lease commitments previously disclosed at December 31,
2018 and the ROU liabilities recognized on adoption of IFRS 16 at January 1, 2019:
Operating lease commitments at December 31, 2018
Common area maintenance (CAM) costs previously included in operating lease commitments
Recognition exemption for short-term leases
Extension and termination options reasonably certain to be exercised
Discounting of lease obligations at January 1, 2019
Additional ROU liabilities on adoption of IFRS 16 at January 1, 2019
January 1,
2019
31,635
(10,880)
(70)
943
(3,358)
18,270
$
$
CAM costs that were previously included in operating lease commitments are not included in the calculation of ROU
liabilities.
IFRIC 23, Uncertainty over Income Tax Treatments
The Company has adopted IFRIC Interpretation 23 Uncertainty over Income Tax Treatments effective January 1, 2019.
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 did not have a material
impact on the financial statements.
Page 68
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
5. Future accounting changes
The following future change to accounting standards is not effective for the year ended December 31, 2019, and has
not been applied in preparing these consolidated financial statements.
Amendments to IFRS 3 – Definition of a Business
On October 22, 2018, the IASB issued amendments to IFRS 3 Business Combinations, that seek to clarify whether a
transaction results in an asset or a business acquisition. The amendments apply to businesses acquired in annual
reporting periods beginning on or after January 1, 2020. Earlier application is permitted. The definition of a business is
narrower which could result in fewer business combinations being recognized. The Company will adopt the
amendments to IFRS 3 on a prospective basis on January 1, 2020.
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 provide details of total construction revenue by contract type for the year ended December 31, 2019:
PPP
Alternative finance projects and complex design-build
Stipulated sum, unit price and standard specification design-build
Construction management, cost plus and IPD
2019
102,105 $
176,887
792,492
304,924
1,376,408 $
2018
134,633
179,496
806,362
261,293
1,381,784
$
$
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 reporting date 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, 2019 the aggregate amount of the transaction price allocated to total remaining performance
obligations from construction contracts was $1,547,427. 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 approximately 66% 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
2019
406,682
31,018
75,180
(112,126)
400,754
$
$
2018
329,891
28,412
7,126
(60,003)
305,426
$
$
Page 69
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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. These invoices trigger
recognition of 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 completed performance under the contract. Accounts
receivable are recognized when the right to consideration becomes unconditional. Contract assets related to
construction contracts are typically invoiced within a year, while alternative finance projects follow a contractually
agreed billing schedule and contract assets are recognized in accounts receivable upon substantial performance.
Balance, January 1, 2018
Reduction of contract assets due to progress billings in year
Additions to contract assets
Balance, December 31, 2018
Reduction of contract assets due to progress billings in year
Additions to contract assets
Balance, December 31, 2019
Construction
contracts
34,962
(24,831)
18,281
28,412
(23,807)
26,413
31,018
$
$
$
$
Contract assets
Alternative
finance
projects
73,951
(73,951)
7,126
7,126
–
68,054
75,180
$
$
Total
108,913
(98,782)
25,407
35,538
(23,807)
94,467
106,198
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, $60,003 of revenue (2018 – $62,376) was recognized that was included in the contract liability balance
at the beginning of the year.
For the year ended December 31, 2019, $1,203 (December 31, 2018 – $11,450) of revenue was recognized from the
satisfaction of performance obligations related to previous periods. This amount represents 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, 2019:
Balance, December 31, 2018
Changes in contract assets relating to alternative finance projects
Balance, December 31, 2019
OPP
Modernization
Phase 2
7,126
68,054
75,180
$
$
Page 70
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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:
Non-Recourse Project Financing
Loan
facility
63,975
24,734
(76,474)
–
–
12,235
72,832
–
–
–
85,067
$
$
Transaction
costs
–
–
–
(1,024)
–
(1,024) $
–
–
655
–
(369) $
Interest
rate swap
(290)
–
–
–
903
613
–
–
–
63
676
$
$
Total
63,685
24,734
(76,474)
(1,024)
903
11,824
72,832
–
655
63
85,374
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
Proceeds
Repayment of debt
Transaction costs net of amortization
Change in fair value of interest rate swap
Balance, December 31, 2019
$
$
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 25).
iii. Contract assets
Contract assets will increase throughout the project until payment is made to the Company following substantial
completion.
iv. Loan payable
The Company has arranged a $138,475 loan facility related to the project. The loan is repayable in full, upon
substantial completion of the project, from the proceeds of the 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 match 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. Interest expense on the loan during the year ended December
31, 2019 of $1,995 (December 31, 2018 – $249) is included in finance costs.
Page 71
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Avenir Centre
The Company’s contract to build the Avenir Centre obtained substantial completion during the second quarter of 2018.
The Company had a $77,478 loan facility related to the project and the $76,474 loan drawn was repaid in-full upon
substantial completion in the second quarter of 2018. Interest expense on the loan in the year ended December 31, 2019
is $nil (December 31, 2018 - $731) is included in finance costs.
8. Accounts receivable
Progress billings on construction contracts
Holdbacks receivable (due within one operating cycle)
Other
2019
271,931
134,751
6,967
413,649
$
$
2018
221,259
108,632
7,772
337,663
$
$
Accounts receivable are reported net of an allowance for doubtful accounts of $1,538 as at December 31, 2019
(December 31, 2018 - $1,271).
Holdbacks receivable represent amounts billed on construction contracts which are not due until the contract work is
substantially complete and the applicable lien period has expired.
9. Other assets
Subcontractor / Supplier insurance deposits
Notes receivable
Other assets
Less:
Current portion – other assets
Non-current portion
$
$
2019
4,511 $
8,069
12,580
2018
5,727
1,125
6,852
5,972
6,608 $
–
6,852
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.
The Company has promissory notes outstanding from an equity accounted joint arrangement. One promissory note is
available to the borrower for working capital purposes and is due on September 8, 2022. The second promissory note is
available to the borrower for a specific project and is due upon completion of the project.
Page 72
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
10.
Projects and entities accounted for using the equity method
The Company performs some construction and concession related projects through joint ventures and associates which
are accounted for 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.
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets – 100%
Attributable to the Company
Revenue – 100%
Total comprehensive income – 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 – 100%
Attributable to the Company
Revenue – 100%
Total comprehensive income – 100%
Attributable to the Company
Joint
Ventures
124,396
615,582
739,978
88,152
614,137
702,289
37,689
10,938
155,380
6,784
$
$
$
$
$
2019
Associates
31,607
171,015
202,622
$
14,634
171,544
186,178
16,444
1,644
9,160
2,395
$
$
$
$
Total
156,003
786,597
942,600
102,786
785,681
888,467
54,133
12,582
164,540
9,179
2,459
$
234
$
2,693
Joint
Ventures
100,695
538,118
638,813
56,071
545,431
601,502
37,311
14,018
142,203
3,263
$
$
$
$
$
2018
Associates
47,410
174,038
221,448
20,766
175,211
195,977
25,471
2,547
33,283
5,812
$
$
$
$
$
Total
148,105
712,156
860,261
76,837
720,642
797,479
62,782
16,565
175,486
9,075
1,313
$
581
$
1,894
$
$
$
$
$
$
$
$
$
$
$
$
Page 73
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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 – beginning of year $
Share of net income for the year
Share of other comprehensive income for the year
Investments in equity accounted entities
Distributions from projects and entities accounted for using the equity method
Investments in equity accounted entities reclassified as held for sale
Projects and entities accounted for using the equity method – end of year
$
2019
12,517
2,693
37
-
15,247
(1,223)
(3,839)
10,185
$
$
2018
12,237
1,894
1
4,020
18,152
(1,873)
(3,762)
12,517
The Company recognizes 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 24 in the financial statements. Amounts committed for
future capital injections to concession entities are described in note 23 in the financial statements.
Investments in equity accounted entities classified as held for sale
The Company has initiated plans to sell its investments in three entities accounted for using the equity method. These
investments have been classified as investments held for sale on the Consolidated Statement of Financial Position. For
the period ended December 31, 2019, distributions of $623 were received from investments in equity accounted entities
classified as held for sale in 2018.
Page 74
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
11. Property and equipment
Land
Buildings
Building
improvements
Equipment,
trucks and
automotive
Furniture
and office
equipment
Total
2019
Cost
Balance, December 31, 2018
Reclass to ROU Assets (note 4)
Balance, January 1, 2019
Additions
Disposals
Balance, December 31, 2019
$
$
1,769
(53)
1,716
414
–
2,130
$
12,432
–
12,432
65
(368)
12,129
$
8,041
–
8,041
891
–
8,932
$
105,178
(17,030)
88,148
12,003
(8,037)
92,114
2,608
(16)
2,592
276
(116)
$ 130,028
(17,099)
112,929
13,649
(8,521)
2,752
118,057
Accumulated depreciation
Balance, December 31, 2018
Reclass to ROU Assets (note 4)
–
–
Balance, January 1, 2019
Disposals
Depreciation expense
Balance, December 31, 2019
–
–
–
–
5,583
–
5,583
(19)
628
6,192
3,844
–
3,844
–
634
4,478
62,490
(4,017)
58,473
(7,111)
8,053
59,415
1,885
(9)
1,876
(99)
179
1,956
73,802
(4,026)
69,776
(7,229)
9,494
72,041
Net book value
$
2,130 $
5,937 $
4,454 $
32,699 $
796 $
46,016
Land
Buildings
Building
improvements
2018
Equipment,
trucks and
automotive
Furniture
and office
equipment
$
1,774 $
–
–
(5)
1,769
13,446 $
443
–
(1,457)
12,432
7,355 $
686
–
–
8,041
95,651 $
11,660
3,851
(5,984)
105,178
2,294 $
314
–
–
2,608
–
–
–
–
5,165
(279)
697
5,583
3,325
–
519
3,844
57,905
(4,805)
9,390
62,490
1,728
–
157
1,885
Total
120,520
13,103
3,851
(7,446)
130,028
68,123
(5,084)
10,763
73,802
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
$
1,769 $
6,849 $
4,197 $
42,688 $
723 $
56,226
Page 75
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Right-of-use assets
The Company leases several assets including land and buildings, vehicles and furniture and equipment presented below:
Cost
Balance reclass, December 31, 2018
January 1, 2019 ROU assets (note 4)
Balance, January 1, 2019
Additions
Disposals
Balance, December 31, 2019
Accumulated depreciation
Balance reclass, December 31, 2018
January 1, 2019 ROU assets (note 4)
Balance, January 1, 2019
Disposals
Depreciation expense
Balance, December 31, 2019
Land
Buildings
$
53 $
–
53
–
–
53
–
–
–
–
–
–
– $
15,569
15,569
1,942
–
17,511
–
–
–
–
2,572
2,572
2019
Equipment,
trucks and
automotive
Furniture
and office
equipment
17,030 $
16 $
381
17,411
8,829
(115)
26,125
4,017
–
4,017
(99)
2,841
6,759
124
140
12
(16)
136
9
–
9
(9)
34
34
Total
17,099
16,074
33,173
10,783
(131)
43,825
4,026
–
4,026
(108)
5,447
9,365
Net book value
$
53 $
14,939 $
19,366 $
102 $
34,460
The statement of cash flows for the period ended December 31, 2019 excludes additions of ROU assets totalling $10,783
(December 31, 2018 - $3,851) acquired through finance leases.
Page 76
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
12. Intangible assets and goodwill
Cost
Balance, January 1, 2019
Additions
Balance, December 31, 2019
Accumulated amortization
Balance, January 1, 2019
Amortization expense
Balance, December 31, 2019
Net book value
Cost
Balance, January 1, 2018
Additions
Balance, December 31, 2018
Accumulated amortization
Balance, January 1, 2018
Amortization expense
Balance, December 31, 2018
Net book value
Goodwill
Rideau cash generating unit
Nason cash generating unit
2019
Computer
Software
Goodwill
$
$
7,760
782
8,542
30,540
–
30,540
5,185
873
6,058
14,151
–
14,151
$
2,484
$
16,389
2018
Computer
Software
Goodwill
$
$
6,250
1,510
7,760
30,540
–
30,540
4,712
473
5,185
14,151
–
14,151
$
2,575
$
16,389
2019
9,294
7,095
16,389
$
$
2018
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 economic conditions. Cash flows for the remaining periods were extrapolated using nominal growth
rates. An after-tax discount rate of 13.0%, which is based on a market-based cost of capital, was applied in determining
the recoverable amounts.
Page 77
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
13. Loans and borrowings, credit facilities and right-of-use liabilities
Loans and Borrowings and Credit facilities
Revolving credit facility
Committed revolving term loan facility
Equipment financing
Interest rate
Maturity
Variable $
Dec 31, 2022
Dec 31, 2021
Variable
2020 – 2024 Fixed 2.40% - 3.73%
Current portion of loans and borrowings
$
$
2019
15,000 $
10,000
15,621
40,621 $
2018
15,000
-
6,198
21,198
5,883 $
2,151
Non-current portion of loans and borrowings
$
34,738 $
19,047
Committed revolving operating credit facility
The Company has a committed revolving credit facility of up to $85,000, maturing December 31, 2022. As part of the
agreement, the Company provides a general secured interest in the assets of the Company. At December 31, 2019, the
Company has $28,504 letters of credit outstanding on the facility (December 31, 2018 – $24,291) and has drawn $15,000
on the facility (December 31, 2018 - $15,000). The full amount is recorded as non-current, as the facility is due and
payable December 31, 2022. 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.
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, 2021. As of
December 31, 2019, the Company has drawn $10,000 (December 31, 2018 - $nil) on the facility. 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.
Equipment financing
The Company and its subsidiaries have committed term credit facilities of up to $35,000 to be used to finance
equipment purchases. Borrowings under the facilities are secured by a first charge against the equipment financed
using the facilities. Interest on the facilities is 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 were used to finance
equipment purchases. Principal and interest are payable monthly, and these term loans are secured by specific
equipment of the Company and its subsidiaries.
Letters of credit facilities
The Company has authorized operating letters of credit facilities totalling $80,000. At December 31, 2019 the facilities
were drawn for outstanding letters of credit of $6,559 (December 31, 2018 - $8,468).
The Company also 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 $6,421 (December 31, 2018 - $5,948).
Page 78
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
The letters of credit represent performance guarantees primarily issued in connection with design-build construction
contracts related to PPP and other major construction projects. These letters of credit are supported through the
hypothecation of certain financial instruments having a market value at December 31, 2019 of $139 (December 31,
2018 - $2,645).
ROU liabilities
ROU liabilities
Maturity
2020 – 2034 $
2019
31,100 $
2018
8,759
Current portion of ROU liabilities
8,025
3,053
Non-current portion of ROU liabilities
$
23,075 $
5,706
Subsidiaries of the Company have established operating lease lines of credit of $31,800 with the financing arms of major
heavy equipment suppliers to finance equipment leases. Draws under these facilities are generally recognized as right
of use liabilities, with the lease obligations being secured by the specific leased equipment (see note 11). At December
31, 2019, the subsidiaries had used $11,653 under these facilities.
The following table provides details of the changes in the Company’s Loans and Borrowings and ROU liabilities during
the period ended December 31, 2019.
Revolving
Credit
Facility
Committed
Revolving
Term Loan
Facility
Equipment
financing
ROU
Liabilities
Balance, December 31, 2017
Proceeds
Repayment
Balance, December 31, 2018
ROU liabilities, January 1, 2019 (note 4)
Balance, January 1, 2019
Proceeds
Additions to ROU liabilities
Interest on ROU liabilities
Repayment
Balance, December 31, 2019
$
$
5,000 $
10,000
–
15,000
–
15,000
–
–
–
–
15,000 $
– $
–
–
–
–
–
10,000
–
–
–
10,000 $
5,177 $
4,242
(3,221)
6,198
–
6,198
14,536
–
–
(5,113)
15,621 $
8,421 $
3,851
(3,513)
8,759
18,270
27,029
–
10,783
903
(7,615)
31,100 $
Total
18,598
18,093
(6,734)
29,957
18,270
48,227
24,536
10,783
903
(12,728)
71,721
Page 79
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
The aggregate amount of principal repayments and future minimum lease payments for all loans and borrowings and ROU
liabilities is as follows:
Within 1 year
Year 2
Year 3
Year 4
Year 5
More than 5 years
Balance, December 31, 2019
Less: interest
$
Revolving
Credit
Facility
–
–
15,000
–
–
–
15,000
–
15,000 $
$
$
Committed
Revolving
Term Loan
Facility
– $
10,000
–
–
–
–
10,000
–
10,000 $
Equipment
financing
5,883
5,223
3,491
850
174
–
15,621
–
15,621
$
$
ROU
Liabilities
8,864
7,383
4,909
3,549
1,910
8,225
34,840
(3,740)
31,100
$
$
Total
14,747
22,606
23,400
4,399
2,084
8,225
75,461
(3,740)
71,721
Page 80
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
14. Income taxes
Provision for income taxes
Income tax expense (recovery) comprised of:
Current income taxes
Deferred income taxes
Income tax rate reconciliation
Combined federal and provincial income tax rate
Increase (reductions) applicable to:
Effect of different tax rate on equity investments
Non-taxable items
Other
Effective rate
2019
2018
$
$
(4,194) $
6,669
2,475
$
1,652
(3,313)
(1,661)
2019
27.5%
(10.4%)
1.0%
2.6%
20.7%
2018
27.3%
36.8%
(10.5%)
8.5%
62.1%
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
Right of use assets and liabilities
Intangible assets
Investment in equity accounted entities
Other
Tax loss carry forward
Balance sheet presentation
Deferred income tax asset
Deferred income tax liability
$
$
$
2019
5,071 $
(35,745)
(3,854)
620
(203)
(2,715)
(72)
34,317
(2,581) $
2018
4,254
(9,028)
(1,083)
(736)
(321)
(3,293)
(72)
13,833
3,554
11,287
(13,868)
(2,581) $
10,909
(7,355)
3,554
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.
Included in the tax loss carry forward balance is $21,768 related to an alternative finance project, which is off-set by a
deferred tax liability of $21,793 included in timing of recognition of construction profits, and a deferred tax asset of
$179 included in provisions and accruals, resulting in a net deferred tax asset of $154.
Page 81
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Movement in temporary differences for the year ended December 31, 2019:
Provisions and accruals
Timing of recognition of construction profits
Property and equipment
Right of use assets and liabilities
Intangible assets
Investments in equity accounted entities
Other
Tax loss carry forward
Balance
December 31,
2018
4,254
(9,028)
(1,083)
(736)
(321)
(3,293)
(72)
13,833
3,554
$
$
$
$
$
Recognized
in profit or
loss
817
(26,717)
(2,771)
822
118
578
–
20,484
(6,669) $
Adoption
of IFRS 16
(note 4)
–
–
–
534
–
–
–
–
534
Movement in temporary differences for the year ended December 31, 2018:
Provisions and accruals
Timing of recognition of construction profits
Property and equipment
Right of use assets and liabilities
Intangible assets
Investments in equity accounted entities
Other
Tax loss carry forward
Balance
December 31,
2017
3,173
(12,066)
(1,132)
(385)
(498)
(3,309)
(50)
14,508
241
$
$
$
$
Recognized
in profit or
loss
1,081
3,038
49
(351)
177
16
(22)
(675)
3,313
Balance
December 31,
2019
5,071
(35,745)
(3,854)
620
(203)
(2,715)
(72)
34,317
(2,581)
Balance
December 31,
2018
4,254
(9,028)
(1,083)
(736)
(321)
(3,293)
(72)
13,833
3,554
$
$
$
$
Page 82
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
15. Other liabilities
Liabilities for cash-settled share-based compensation plans (note 16)
Leasehold inducement
Deferred payment
Total return swap derivatives
Interest rate swaps
Less: current portion
Cash-settled share-based compensation plans (note 16)
Leasehold inducement
Deferred payment
Total return swap derivatives
Interest rate swaps
Non-current portion
$
$
$
$
2019
8,443
1,964
–
271
58
10,736
1,762
261
–
175
7
2,205
8,531
$
$
$
$
2018
4,374
2,224
756
2,218
54
9,626
917
218
756
389
–
2,280
7,346
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, due to changes in the fair value of
the Company’s common shares. 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.
16. Share-based compensation plans
Stock option plan
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:
Outstanding at December 31, 2017
Forfeited during the year
Outstanding at December 31, 2018
Expired during the year
Outstanding at December 31, 2019
Number of
stock options
outstanding
535,000
(45,000)
490,000
(390,000)
100,000
$
$
Weighted
average exercise
price
13.59
13.98
13.55
13.98
11.87
Page 83
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
The following table summarizes information about stock options outstanding and exercisable as at December 31,
2019:
Number of
stock
options
issued and
outstanding
Number of
stock
options
exercisable
Exercise
price
Weighted
average fair
value of the
option
Expiry
date
Remaining
contractual life
(years)
January 1, 2015 Grant
100,000
100,000
$
11.87
$
1.16
January 1, 2022
2.0
All outstanding options have fully vested. There was no stock-based compensation expense recognized during the year
ended December 31, 2019 ( December 31, 2018 - $7).
Medium term incentive plan (“MTIP”), Equity incentive plan (“EIP”) and Deferred share unit (“DSU”) plan
MTIP liability
EIP liability
DSU liability
Liabilities for cash-settled share-based compensation plans
Less: current portion
MTIP liability
EIP liability
Non-current portion
$
$
$
$
2019
1,069
3,925
3,449
8,443
257
1,505
1,762
6,681
$
$
$
$
2018
1,226
1,336
1,812
4,374
917
–
917
3,457
The Company has recognized a gain of $1,947 on its TRS derivatives for the year ended December 31, 2019 (December
31, 2018 - $4,213 loss).
Balance January 1,
Annual award of phantom shares
Cash payments for vested shares
Shares awarded – notional dividends
Change in fair value and forfeitures of phantom shares
Balance December 31,
Less: current portion
Non-current portion
MTIP & EIP
2019
2,562
2,011
(1,295)
116
1,600
4,994
1,762
$
$
3,232
$
2018
3,836
2,207
(1,854)
162
(1,789)
2,562
917
1,645
$
$
$
As at December 31, 2019, a total of 1,482,683 unvested phantom units of the MTIP and EIP (December 31, 2018 –
920,489) are outstanding and valued at $11,057 of which $4,994 has been recognized to date in the accounts of the
Company.
As at December 31, 2019, a total of 482,404 DSU phantom units (December 31, 2018 – 296,536) were issued and valued
at $3,449.
Page 84
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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 42,516,853 issued and outstanding
common shares as at December 31, 2019. 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, 2019 and December 31, 2018
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 and diluted earnings (loss) per share
2019
9,484
$
2018
(1,013)
42,516,853
–
42,516,853
42,516,853
–
42,516,853
0.22 $
(0.02)
$
$
At December 31, 2019, 100,000 options (December 31, 2018 - 490,000 options) were excluded from the diluted
weighted average number of common shares calculation as their effect would have been anti-dilutive.
19. Provisions
Balance, December 31, 2018
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Balance, December 31, 2019
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
6,666
20,588
(20,416)
(1,620)
5,218
8,777
25,142
(23,732)
(3,521)
6,666
$
$
$
$
$
$
$
$
Legal
1,927
1,365
(549)
(198)
2,545
1,926
1,634
(1,362)
(271)
1,927
$
$
$
$
Total
8,593
21,953
(20,965)
(1,818)
7,763
10,703
26,776
(25,094)
(3,792)
8,593
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.
Page 85
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
20. Finance income
Interest income
21. Finance and other costs
Interest on loans and borrowings
Interest on ROU liabilities
Loss on interest rate swaps (note 7 and note 15)
Interest on non-recourse project financing (note 7)
Other
$
$
$
2019
2,596 $
2018
1,386
2019
2,331
903
67
1,995
262
5,558
$
$
2018
1,796
–
957
980
878
4,611
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
23. Commitments and contingencies
Commitments
2019
199,420 $
$
34,214
5,354
–
$
238,988 $
2018
174,818
28,807
670
7
204,302
Outstanding surety lien bonds issued on behalf of the Company in connection with liens by subcontractors and suppliers
at December 31, 2019 totalled $56,606 (December 31, 2018 - $43,301). 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, 2018 - $5,859).
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 provision in the
financial statements for all known liabilities relating to subcontractor defaults.
Page 86
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
24. 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.
Executive & Directors
Base salary
PSU/RSU/MTIP/DSU
Stock-based compensation
Short term incentive plan
Other taxable benefits
$
$
2019
3,571 $
4,126
–
520
284
8,501 $
2018
3,857
479
7
717
311
5,371
President & Chief Executive Officer
Chief Financial Officer
The Executive comprises the following positions:
i.
ii.
iii. Executive Vice President Major Projects
iv. Executive Vice President Buildings
v.
Executive Vice President Industrial
vi. Senior Vice President Risk Management, General Counsel & Secretary
vii. Senior Vice President Buildings
viii. Vice President Financial Planning & Analysis
ix. Vice President Strategic Development
At December 31, 2019, Directors and Executive of the Company controlled 5.2% (December 31, 2018 – 4.2%) 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. The loan was fully repaid in December
2019 (December 31, 2018 - $550 remained outstanding).
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, 2019, $500 remained outstanding
on the loan (December 31, 2018 - $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 $1,935
(December 31, 2018 - $7,386) and the outstanding balance receivable at December 31, 2019 was $891 (December 31,
2018 - $4,442).
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 amount, agreed to between
the parties. The amounts recognized for services provided by the Company for the year ended December 31, 2019
totalled $35,565 (December 31, 2018 - $11,831).
The Company has accounts receivable from the joint arrangements at December 31, 2019 totaling $4,154 (December 31,
2018 - $857).
Page 87
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Transactions with equity accounted joint arrangements
The Company and its proportionately consolidated joint arrangements (note 3), 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, 2019 totaled $98,889 (December 31, 2018 – $147,008), of which
$109,574 has been recognized in revenue in 2019 (December 31, 2018 - $136,620). 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, 2019 totaled $39,867
(December 31, 2018 - $35,509). The Company also has notes receivable from an equity accounted joint arrangement at
December 31, 2019 totalling $8,069 (December 31, 2018 - $1,125).
25. 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 and other assets
Accounts payable
Contract liabilities
Provisions
Medium term incentive plan and other
$
$
2019
(75,911) $
(2,606)
(68,054)
(65)
291
36,563
52,123
(830)
(7,780)
(66,269) $
2018
18,902
6,550
66,825
(47)
(326)
10,211
(2,373)
(2,110)
(2,235)
95,397
* 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
Restricted cash and blocked accounts*
Cash held for joint operations
Restricted bankers’ acceptances and short-term deposits*
$
$
2019
36,127 $
10,102
134,015
90
180,334 $
2018
111,247
2,746
43,158
1,769
158,920
* Cash, bankers’ acceptances and short-term deposits include restricted cash and cash equivalents. 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 blocked accounts for special projects (note 7)
Restricted cash
$
$
2019
139 $
212
9,841
10,192 $
2018
2,645
1,870
–
4,515
Page 88
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
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 PPP 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 PPP projects that only involve short term financing
reach final completion and the debt is repaid, any remaining amounts in the project accounts become unrestricted
and available for general corporate purposes.
Restricted Cash
Under the Construction Act in Ontario, a bank account has been established for the benefit of persons who have
supplied services or materials to the improvement for specific projects subject to the legislation. The funds remain in
the account until all subcontractors, suppliers and direct labour are paid, as appropriate.
Page 89
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
26. 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, ROU liabilities and loans and borrowings 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.
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 25)
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
Right-of-use liabilities
Deferred payment
Total financial instruments
2019
(676)
(58)
(271)
(1,005)
180,334
413,649
6,608
–
600,591
(419,923)
(1,382)
(84,698)
(40,621)
(31,100)
–
(577,724)
21,862
$
$
$
$
$
$
$
2018
(613)
(54)
(2,218)
(2,885)
158,920
337,663
6,852
1,705
505,140
(383,608)
(1,382)
(11,211)
(21,198)
(8,759)
(756)
(426,914)
75,341
$
$
$
$
$
$
$
The following table presents information about the Company’s financial instruments measured at fair value as at
December 31, 2019 and December 31, 2018, and indicates the fair value hierarchy of inputs utilized by the Company to
determine such fair value. The hierarchy of inputs is summarized below:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
i.
ii. Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset or liability, either
directly or indirectly; and
iii. Level 3 - inputs used in a valuation technique are not based on observable market data in determining fair values of
the instruments.
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.
Page 90
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
Level 1
Quoted prices
in active
markets
Level 2
Significant
other
observable
inputs
2019
Level 3
Total
Significant
unobservable
inputs
Non-recourse project financing – interest
rate swaps
Interest rate swaps
Total return swap derivatives
Financial instruments at fair value
through profit or loss
$
– $
–
–
(676) $
(58)
(271)
– $
–
–
(676)
(58)
(271)
$
– $
(1,005) $
– $
(1,005)
Non-recourse project financing – interest
rate swaps
Interest rate swaps
Total return swap derivatives
Financial instruments at fair value
through profit or loss
$
– $
–
–
2018
(613) $
(54)
(2,218) $
– $
–
–
(613)
(54)
(2,218)
$
– $
(2,885) $
– $
(2,885)
There were no transfers between levels during both years.
The fair value of the loans and borrowings and ROU liabilities 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.
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 91
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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 17.1% (December 31, 2018 – 13.0%) of the balance of progress billings on construction contracts
receivable at December 31, 2019. Management has recorded an allowance of $1,538 (December 31, 2018 - $1,271)
against these past due receivables, net of amounts recoverable from others.
Trade receivables
Impairment
Total Trade receivables
$
$
Amounts past due
Up to 12
months
31,556 $
–
31,556 $
Over 12
months
15,618 $
(1,538)
14,080 $
2019
47,174 $
(1,538)
45,636 $
2018
28,847
(1,271)
27,576
The movement in the allowance for impairment in respect of loans and receivables during the period was as follows:
Balance, beginning of year
Impairment loss recognized
Amounts written off
Impairment loss reversed
Balance, end of year
ii. Liquidity risk
$
$
2019
1,271
313
–
(46)
1,538
$
$
2018
1,672
140
(396)
(145)
1,271
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 $80,503 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 $139 hypothecated to support
outstanding letters of credit and $10,053 held in restricted accounts, are available to meet the financial obligations
of the Company as they come due (note 25).
The Company has a committed line of credit of $85,000 available to finance operations and issue letters of credit.
As at December 31, 2019, the Company has drawn $15,000 on the facility and has $28,504 letters of credit
outstanding on the facility. The committed line of credit is available until December 31, 2021.
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. As of December 31, 2019, the Company has drawn
$10,000 on the facility. Also, the Company and its subsidiaries have $35,000 in equipment facilities, of which $15,621
is outstanding at December 31, 2019.
Subsidiaries of the Company have established operating lease lines of credit for $31,800 with the financing arms of
major heavy equipment suppliers to finance operating equipment leases. At December 31, 2019, the subsidiaries
have used $11,653 under these facilities. In addition, the Company has letters of credit facilities totalling $80,000
available for issuing letters of credit for which $6,559 was drawn at December 31, 2019. 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 92
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(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 2017, 2018 and 2019 are due on the vesting dates of November 2020, November 2021 and November 2022,
respectively, or upon retirement, if earlier. Payments pursuant to the Company's EIP granted in 2017, 2018 and 2019
are due by December 2020, December 2021 and December 2022 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, 2019:
Trade payables
Dividends payable
ROU liabilities
Non-recourse project financing
Loans and borrowings
Carrying
amount
419,923 $
1,382
31,100
85,374
40,621
578,400 $
$
$
Contractual
cash flows
419,923 $
1,382
34,840
87,480
41,422
585,047 $
Up to 12
months
397,042 $
1,382
8,864
87,480
6,325
501,093 $
2 – 3
years
22,881 $
–
12,293
–
34,055
69,229 $
4 – 5
years
–
–
13,683
–
1,042
14,725
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, 2019, the interest rate profile of the Company's loans and borrowings and non-recourse project
financing was as follows:
Fixed-rate facilities
Variable-rate facilities
Non-recourse project financing facilities
Total loans and borrowings and non-recourse project financing
$
$
2019
15,621
25,000
85,067
125,688
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, 2019, 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 $250.
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 2020 and 2022. The TRS derivatives are not designated as a hedge. The
change in the value of the TRS derivatives is 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, 2019, a 10 percent change in the share price applied to the
Company's TRS derivatives will change income before income taxes by approximately $987.
Page 93
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
iv.
Currency risk
Currency risk is the risk that fluctuations in currency exchange rates will affect the Company’s net income. The
Company uses foreign currency to settle payments to vendors and subcontractors in the foreign currency. A 10%
movement in the Canadian and U.S. dollar exchange rate would have changed income by approximately $141.
27. Capital disclosures
The Company’s capital management objectives are to:
i.
ii.
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.
Ensure that the Company has sufficient financial capacity to support the execution of its longer-term growth
strategies.
iii. 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.
The amounts of shareholders’ equity, working capital and loans and borrowings at December 31, 2019 and December
31, 2018 are as follows:
Shareholders’ equity
Working capital
Loans and borrowings
$
2019
127,720
80,503
40,621
$
2018
136,229
70,215
29,957
Page 94
Notes to the Consolidated Financial Statements
For the year ended December 31, 2019
(in thousands of Canadian dollars, except per share amounts)
28. 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.
ii.
iii.
iv.
The January dividend of $0.0325 per share will be paid on February 20, 2020 to the Shareholders of record as of
the close of business on January 31, 2020.
The February dividend of $0.0325 per share will be paid on March 20, 2020 to the Shareholders of record as of the
close of business on February 28, 2020.
The March dividend of $0.0325 per share will be paid on April 20, 2020 to the Shareholders of record as of the
close of business on March 31, 2020.
The April dividend of $0.0325 per share will be paid on May 20, 2020 to the Shareholders of record as of the close
of business on April 30, 2020.
29. Comparative figures
Certain comparative figures for the prior period have been reclassified to conform to the presentation adopted in the
current period.
Page 95
Five Year Summary
December 31, 2019
(in thousands of Canadian dollars, except Other Information)
OPERATING RESULTS
Revenue
Income before income taxes
Income taxes
Net income
Dividends
Cash flows from operations before
changes in non-cash working capital
Notes:
$
$
$
$
$
2019
2018
2017 (1)
2016
2015
1,376,408
1,381,784
1,418,557
1,589,868
1,444,806
11,959
2,475
9,484
16,582
(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
30,201
12,320
26,938
48,449
75,291
(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
Right-of-use assets
Shareholders’ equity
Notes:
2019
2018(3)
2017(1)
2016(2)
$
$
$
$
$
729,358
648,855
80,503
46,016
34,460
127,720
546,553
476,338
70,215
43,153
13,073
136,229
607,979
523,901
84,078
52,397
N/A
153,816
729,799
614,527
115,272
45,517
N/A
161,543
2015
652,864
525,506
127,358
54,281
N/A
170,891
(1) 2017 reported figures have been restated applying IFRS 15.
(2) 2016 reported figures have been restated on January 1, 2017 after the adoption of IFRS 15.
(3) 2018 Property and equipment figures have been reclassified following the adoption of IFRS 16 on January 1, 2019.
BACKLOG
Firm price
Construction management
OTHER INFORMATION
$
$
1,547,427
300,938
1,295,940
82,155
1,186,000
128,509
1,137,000
1,662,800
35,351
17,108
Number of shares outstanding
42,516,853
42,516,853
42,516,853
42,516,853
42,516,853
Return on revenue
% 0.69
(0.07)
0.62
1.57
1.49
Return on prior year shareholders’ equity
%
6.96
(0.66)
5.47
14.63
11.83
Net income per share
Book value per share
$ 0.22
(0.02)
0.21
0.59
0.51
$ 3.00
3.20
3.62
3.80
4.02
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 96