BOYD GROUP SERVICES INC.
2021 Annual Report
BOYD GROUP SERVICES INC.
2021 Annual Report
_____________________________________________________________________
Table of Contents
3
Report to Shareholders……..…………………………………………….……..….
Message from the Independent Board Chair………………..……………….…. 5
7-45
Management’s Discussion & Analysis……………………………..………...…
46-49
Certification of Annual Filings …………..……………………………..…………
Consolidated Financial Statements
51
Management’s Responsibility for Financial Reporting…………...……
Independent Auditor’s Report………………………………………….…
52-56
Consolidated Statements of Financial Position………………………... 57
58
Consolidated Statements of Changes in Equity….………...………….
59
Consolidated Statements of Earnings……….………………………….
59
Consolidated Statements of Comprehensive Earnings………....…….
Consolidated Statements of Cash Flows…………………………….…
60
Notes to Consolidated Financial Statements………..……………….… 61-100
Board of Directors…………………………………………………………………. 101-102
103
Corporate Directory……………………………………………………….……….
104
Shareholder Information……………………………………………………………..
BOYD GROUP SERVICES INC.
REPORT TO SHAREHOLDERS
_____________________________________________________________________________________________
To our Shareholders,
Financial results in the first half of 2021 showed steady improvement as demand for services began to recover from
the COVID-19 pandemic that emerged in March 2020. However, as demand continued to increase during the
second half of 2021 and approached pre-pandemic levels in most of our U.S. markets, Boyd’s ability to service this
demand was meaningfully impacted by a tight labor market and supply chain disruptions. The collision repair
industry is experiencing significant and unprecedented competition for talent, and, in particular, a limited pool of
qualified technicians and estimators. As a result, Boyd experienced increased wage costs in order to both retain and
recruit employees, causing pressure on labor margins and operating expenses.
We achieved total sales in 2021 of $1.9 billion, an 19.9% increase when compared to the $1.6 billion achieved in
2020, including same-store sales1 increases of 7.0% and contributions from 154 new locations that had not been in
operation for the full comparative period.
Adjusted EBITDA1 for 2021 was $219.5 million, or 11.7% of sales, compared with $220.0 million, or 14.1% of
sales in 2020. Adjusted EBITDA was positively impacted by the Canada Emergency Wage Subsidy (“CEWS”) in
the amount of $9.8 million, as compared to $12.7 million in 2020. Adjusted EBITDA was significantly impacted
during the second half of 2021 by the tight labor market, wage inflation and supply chain disruption.
Boyd posted net earnings of $23.5 million in 2021, or 1.3% of sales, compared to $44.1 million, or 2.8% of sales in
2020 and earnings per share of $1.10 per share for the year ended December 31, 2021 compared to $2.10 for the
same period of 2020. Impacting net earnings were fair value adjustments to financial instruments, as well as
acquisition and transaction costs (net of tax). After adjusting for these items, Adjusted net earnings1 for 2021 was
$28.0 million or 1.5% of sales. This compares to Adjusted net earnings of $41.4 million or 2.6% of sales in 2020.
Adjusted net earnings for the year ended December 31, 2021 was $1.30 per share, compared to $1.97 per share in
2020. Adjusted net earnings for the year was impacted by the lower gross margin percentage due to reduced parts
and labor margins, a higher mix of parts sales in relation to labor, and higher levels of operating expenses relative to
sales, which were impacted by capacity constraints and supply chain disruption.
With respect to the balance sheet, at December 31, 2021, BGSI held total debt, net of cash, of $957.7 million,
compared to $538.5 million at December 31, 2020. Total debt, net of cash, includes lease liabilities of $543.3
million at December 31, 2021, compared to $419.3 million at December 31, 2020. Debt, net of cash, increased
when compared to the prior year primarily as a result of acquisition activity, including draws on the revolving credit
facility, as well as increased seller notes and lease liabilities.
Based on Boyd’s continued growth, the strength of and confidence in the business, Boyd announced a Canadian
dollar dividend increase of 2.1% to 57.6 cents per share annualized, up from 56.4 cents per share.
1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to the
non-controlling interest call liability and contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted
net earnings per share and same-store sales are non-GAAP financial measures and ratios and are not recognized measures under International
Financial Reporting Standards (“IFRS”). Management believes that in addition to net earnings and cash flows, the supplemental measures of
adjusted net earnings and Adjusted EBITDA are useful as they provide investors with an indication of earnings from operations and cash
available for distribution, both before and after debt management, productive capacity maintenance and non-recurring and other adjustments.
Management believes that, in addition to sales, the supplemental measure of same-store sales is useful as it provides investors with an
indication of the increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period.
Investors should be cautioned, however, that Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share should not be
construed as an alternative to net earnings determined in accordance with IFRS as an indicator of Boyd's performance. Investors should also be
cautioned that same-store sales should not be construed as an alternative to sales in accordance with IFRS as an indicator of Boyd’s
performance. Boyd's method of calculating these measures may differ from other public issuers and, accordingly, may not be comparable to
similar measures used by other issuers. For a detailed explanation of how Boyd’s non-GAAP financial measures are calculated, please refer to the
section titled “Non-GAAP Financial Measures and Ratios” in Boyd’s MD&A filing (dated March 23, 2022) for the period ended December 31,
2021, starting on page 7 of this Annual Report. A copy of Boyd’s MD&A for the period ended December 31, 2021 can be accessed via the SEDAR
Web site (www.sedar.com).
3
In November of 2020, we announced our new five year growth strategy, in which Boyd intends to again double the
size of the business over the five year period from 2021 to 2025, based on 2019 constant currency revenues,
implying a compound annual growth rate of 15 percent. During 2021, we were able to add a record 127 new
locations, including 101 locations through acquisition, 10 start-up locations and 16 locations operating as intake
centers. Unfortunately, these new locations are also currently experiencing margin challenges as a result of a tight
labor market, wage inflation and supply chain disruptions, as well as sales per location levels that are below pre-
pandemic levels due to capacity constraints. In the short-term, we are primarily focused on addressing the labor
shortage for our core business. In the long-term, we remain confident in our business model and its ability to
increase market share by expanding Boyd’s presence in North America through new location and organic growth
from Boyd’s existing operations.
We are committed to addressing the labor market challenges through initiatives such as our Technician
Development Program and are working to more than double the number of trainees in the program to help meet our
future needs. We continue to increase recruitment support staff to improve lead generation and follow-up,
proactively evaluate compensation levels and make appropriate adjustments to ensure the Company remains
competitive in the rapidly changing environment, and drive high levels of execution for on-boarding and orientation
programs to increase retention. We continue to work with key suppliers to source parts at normal margins, but will
continue to use OE parts in place of after market parts when necessary in order to complete repairs for our clients.
We have successfully negotiated an unprecedented number of meaningful rate increases from clients, demonstrating
that insurers understand the need for increased pricing in order for us to serve their needs. While we are satisfied
with this first round of increases, further increases are required to reflect the current and evolving environment. We
continue to actively pursue and push for the necessary pricing increases. Given how significantly and rapidly wage
costs have increased, it will take some time to achieve all of the needed price adjustments, and margins will continue
to be impacted in the near-term.
Throughout 2021, we increased our focus on ESG and are proud to announce the publishing of our first ESG report
this month, which outlines priority areas in each of the environmental, social and governance pillars. The report
reflects our existing efforts to embed sustainability into our organization, and sets the baseline for future
performance as we strive to deliver against our mission to WOW all of our customers with quality work and best in
class service. We recognize that we have the potential to deliver significant, positive impacts to society and the
environment. Our ESG Report builds on existing strengths to ensure robust environmental, social and governance
principles and practices across our operations. Our approach is informed by the priorities of our key stakeholders,
including our employees, our investors, our customers, and our communities, as well as the local and global
developments that define the context in which we operate.
Our Executive Chair and former President & CEO, Brock Bulbuck retired on December 31, 2021. On behalf of our
entire Company, as well as all of our Stakeholders, I would like to thank Brock for the many years of dedicated
service he provided to Boyd. I look forward to working with Brock as he continues to serve as a Director on our
Board.
On behalf of myself, the executive team and our Board of Directors, I would like to thank all of our Boyd Group
employees for their hard work and dedication, which allowed Boyd to successfully navigate through the impacts of
the dynamic economic environment during this unprecedented year. And on behalf of the Directors of Boyd Group
Services Inc. and Boyd Group employees, thank you for your continued support.
Sincerely,
(signed)
Timothy O’Day
President & Chief Executive Officer
4
BOYD GROUP SERVICES INC.
MESSAGE FROM THE INDEPENDENT BOARD CHAIR
______________________________________________________________________________
To our Shareholders,
The 2020 fiscal year ended, and the 2021 year began, with optimism that the worst of the COVID-19 pandemic was
behind us. And, as expected, demand recovered over the year. However, although U.S. demand approached pre-
pandemic levels by the back half of 2021, our results, most notably our margins, were negatively impacted by a
number of “pandemic induced” factors.
First, significant wage inflation driven by an incredibly tight labor market combined with a major supply chain
disruption translated into material gross margin erosion. Second, in the fact of the tight labor market, Boyd has not
yet been able to add sufficient technician labor capacity to service U.S. demand. This, coupled with a slower
recovery of demand in Canada, has negatively affected fixed cost absorption, which has further compressed
Adjusted EBITDA1 margins.
The Board has continued to provide appropriate Board level guidance to the Senior Management team as they work
through the very real challenges of the current market environment. The Boyd team is committed to addressing and
resolving the labor and inflationary challenges through various initiatives, including the Technician Development
Program and rate increases from clients. Notwithstanding near-term challenges, the Board and Management remain
confident in our business model and the Company’s plan to double the size of the business on a constant currency
basis from 2021 to 2025 against 2019 sales. As a Board, we are incredibly proud of the commitment and resilience
demonstrated by the Boyd team as they have managed through ever changing and difficult market conditions over
the last couple of years.
As intended, Tim’s succession to the CEO role and Brock’s transition to Executive Chair provided a seamless
transition in the leadership of the Company, notwithstanding incredibly challenging pandemic induced challenges.
At the end of 2021, as planned, Brock Bulbuck retired from the Executive Chair position. I am very pleased that
Boyd will continue to benefit from Brock’s knowledge and experience as he continues to serve on the Board of
Directors.
In August, 2021, the Compensation Committee of the Board changed the name and mandate of the committee to
broaden the focus on human capital. The People, Culture and Compensation Committee provides oversight of the
overall People Strategy and progress against goals in areas such as talent acquisition and management, engagement,
retention, culture and Inclusion, Diversity and Equity. The enhanced mandate also expands the review of leadership
development and succession planning. The People, Culture and Compensation Committee believes that a broad
focus on human capital is critical to success in the current environment and to position Boyd well for the future.
Throughout 2021, the Board has continued to actively work with management in the development of a
comprehensive strategy with respect to Environmental, Social, and Corporate Governance (“ESG matters”). In the
1 Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, adjusted for the fair value adjustments related to the
non-controlling interest call liability and contingent consideration, as well as acquisition and transaction costs), adjusted net earnings, adjusted
net earnings per share and same-store sales are not recognized measures under International Financial Reporting Standards (“IFRS”).
Management believes that in addition to sales, net earnings and cash flows, the supplemental measures of adjusted net earnings and Adjusted
EBITDA are useful as they provide investors with an indication of earnings from operations and cash available for distribution, both before and
after debt management, productive capacity maintenance and non-recurring and other adjustments. Management believes that, in addition to
sales, net earnings and cash flows, the supplemental measure of same-store sales is useful as it provides investors with an indication of the
increase in sales without accounting for location growth and the impact of fluctuations in exchange rates during the period. Investors should be
cautioned, however, that Adjusted EBITDA, adjusted net earnings and adjusted net earnings per share should not be construed as an alternative
to net earnings determined in accordance with IFRS as an indicator of Boyd's performance. Investors should also be cautioned that same-store
sales should not be construed as an alternative to sales in accordance with IFRS as an indicator of Boyd’s performance. Boyd's method of
calculating these measures may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other
issuers. For a detailed explanation of how Boyd’s non-GAAP measures are calculated, please refer to Boyd’s MD&A filing (dated March 23, 2022)
for the period ended December 31, 2021, which can be accessed via the SEDAR Web site (www.sedar.com). Please refer to the section titled
“Non-GAAP Financial Measures”.
5
past year, the Governance and Nominating Committee was renamed the Governance and Sustainability Committee
to highlight the growing importance of ESG matters. The Committee assists the Board in its oversight
responsibilities for the Company’s commitment to ESG matters. The Company has established ten priority ESG
matters and has articulated ambition statements and goals for many of these priority areas, as outlined in Boyd’s
inaugural ESG Report.
In May of 2021, Allan Davis retired from the Board of Directors and from his role as Independent Board Chair. The
Board is grateful for the many years of dedicated service Mr. Davis provided to the Company. Coincident with Mr.
Davis’ retirement, Boyd announced the election of Robert Espey to the Board of Directors and my appointment to
the role of Independent Board Chair. The Board has an ongoing commitment to diversity and renewal, with a focus
on ensuring the Board has the necessary skills and expertise to support the growth of Boyd’s business, as defined in
the Board Composition, Diversity and Renewal Policy. The Board has also reaffirmed its commitment to diversity,
aspiring to increase from its current 22% to a minimum of 30% gender diversity on the Board by the Annual General
Meeting of 2024.
On behalf of the Board, I would like to thank the management team and all employees for their continued
commitment and hard work, and our stakeholders for their continued support.
Sincerely,
(signed)
David G. Brown
Independent Chair
6
Management’s Discussion & Analysis
OVERVIEW
Boyd Group Services Inc. (“BGSI”), through its operating company, The Boyd Group Inc. and its subsidiaries (“Boyd” or the
“Company”), is one of the largest operators of non-franchised collision repair centers in North America in terms of number of
locations and sales. The Company currently operates locations in Canada under the trade name Boyd Autobody & Glass and
Assured Automotive, as well as in the U.S. under the trade name Gerber Collision & Glass. The Company is also a major
retail auto glass operator in the U.S. under the trade names Gerber Collision & Glass, Glass America, Auto Glass Service,
Auto Glass Authority and Autoglassonly.com. In addition, the Company operates a third party administrator, Gerber National
Claims Services (“GNCS”), that offers glass, emergency roadside and first notice of loss services.
The following is a geographic breakdown of the collision repair locations by trade name and location. In response to the
reduction in demand resulting from the COVID-19 pandemic, certain collision repair locations were temporarily converted to
intake locations in order to consolidate collision repair services and to reduce Boyd’s operating costs at the temporary intake
locations while at the same time maximizing productivity of the staff at the repair locations. All temporary intake locations in
the U.S. have been converted back to production facilities. The number of locations and number of intake centers noted in
the chart below does not reflect the remaining temporary conversions from production to intake locations in Canada.
British Columbia
Alberta
Manitoba
Saskatchewan
Ontario
848 locations
48
locations
17
14
13
4
Michigan
Illinois
Florida
New York
Washington
84
locations
Indiana
Georgia
North Carolina
84
Ohio
Wisconsin
Arizona
Oklahoma
California
Texas
Colorado
South Carolina
716
locations
Louisiana
Kansas
Maryland
Oregon
Tennessee
Nevada
Pennsylvania
Alabama
Missouri
Kentucky
Utah
Hawaii
Arkansas
Idaho
Iowa
74
71
69
40
38
37
35
32
32
30
27
27
26
26
21
18
16
13
12
12
12
10
9
7
7
4
4
3
2
1
1
The above numbers include 34 intake locations.
The above numbers include 34 intake locations
and two fleet locations co-located with collision repair centers.
Boyd provides collision repair services to insurance companies and individual vehicle owners, with a high percentage of the
Company’s revenue being derived from insurance-paid collision repair services.
BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO.
7
Prior to January 1, 2020, BGSI operated as Boyd Group Income Fund (“BGIF” or the “Fund”). Pursuant to a plan of
arrangement agreement (the “Arrangement”), under the Canada Business Corporations Act (“CBCA”), on January 1, 2020,
Fund unitholders and Boyd Group Holdings Inc. (“BGHI”) Class A common shareholders received one BGSI common share
in exchange for each Fund unit and BGHI Class A common share held by them.
As the Arrangement was effective on January 1, 2020, information presented in this MD&A as at, and for periods prior to, or
ending December 31, 2019, is provided for the Fund and information provided at January 1, 2020 and later is provided for
BGSI. Therefore, as the context requires, references may be made to either the Fund or BGSI.
The following review of BGSI’s operating and financial results for the year ended December 31, 2021, including material
transactions and events of BGSI up to and including March 22, 2022, as well as management’s expectations for the year
ahead, should be read in conjunction with the annual audited consolidated financial statements of BGSI for the years ended
December 31, 2021, included on pages 50 to 100 of this report, and as filed on SEDAR at www.sedar.com.
SIGNIFICANT EVENTS
Effective January 1, 2021, BGSI changed its presentation currency from Canadian dollars to U.S. dollars, to provide
shareholders with a better reflection of the Company's business activities. Unless otherwise noted, amounts have been
presented in U.S. dollars.
On March 17, 2021, the BGSI Board of Directors declared a cash dividend for the first quarter of 2021 of C$0.141 per
common share. The dividend was paid on April 28, 2021 to common shareholders of record at the close of business on
March 31, 2021.
On March 23, 2021, BGSI announced the planned retirement of Allan Davis, Independent Chair of the Board of Directors,
subsequent to the Annual General and Special Meeting, to be held on May 12, 2021.
On May 13, 2021, BGSI announced the election of Robert Espey to the Board of Directors, and confirmed the retirement of
Allan Davis as well as the appointment of David Brown as Independent Chair of the Board of Directors.
On June 17, 2021, the BGSI Board of Directors declared a cash dividend for the second quarter of 2021 of C$0.141 per
common share. The dividend was paid on July 28, 2021 to common shareholders of record at the close of business on June
30, 2021.
On September 17, 2021, the BGSI Board of Directors declared a cash dividend for the third quarter of 2021 of C$0.141 per
common share. The dividend was paid on October 27, 2021 to common shareholders of record at the close of business on
September 30, 2021.
On December 17, 2021, the BGSI Board of Directors declared a cash dividend for the fourth quarter of 2021 of C$0.144 per
common share. The dividend was paid on January 27, 2022 to common shareholders of record at the close of business on
December 31, 2021.
On January 4, 2021, BGSI announced the completion of the CEO Succession Plan, first announced in August 2019.
On March 17, 2022, the BGSI Board of Directors declared a cash dividend for the first quarter of 2022 of C$0.144 per
common share. The dividend is payable on April 27, 2022 to common shareholders of record at the close of business on
March 31, 2022.
On March 21, 2022, BGSI proactively entered into an amendment to the Credit Facility to provide additional flexibility to the
covenant calculations for the next four quarters.
On March 22, 2022, BGSI published Boyd’s inaugural Environmental, Social and Governance Report.
8
During 2021, the Company added 101 locations through acquisition, 10 start-up locations and 16 locations operating as
intake centers, for a total of 127 new locations. From January 1, 2021 up to the reporting date of March 22, 2022, the
Company has added 106 locations through acquisition, 13 start-up locations and 16 locations operating as intake centers, for a
total of 135 new locations. These new locations are as follows:
Date
January 2, 2021
January 2, 2021
January 6, 2021
January 15, 2021
January 18, 2021
January 29, 2021
January 29, 2021
February 12, 2021
February 19, 2021
February 19, 2021
February 23, 2021
February 23, 2021
March 4, 2021
March 9, 2021
March 12, 2021
March 26, 2021
March 26, 2021
March 31, 2021
March 31, 2021
April 9, 2021
April 9, 2021
April 17, 2021
April 23, 2021
April 27, 2021
April 30, 2021
April 30, 2021
May 1, 2021
May 7, 2021
May 11, 2021
May 14, 2021
May 14, 2021
May 21, 2021
June 11, 2021
June 15, 2021
June 18, 2021
June 19, 2021
June 25, 2021
July 9, 2021
Previously operated as
n/a start-up
n/a intake center
n/a intake center
Eureka Body and Fender
n/a intake center
n/a start-up
n/a intake center
Jimmy Rivers Boyd Shop Inc.
Frankie & Dylan’s, Inc.
n/a intake center
Plains Chevrolet, Ltd.
n/a start-up
n/a intake center
n/a start-up
n/a intake center
Star Auto Body, Inc.
Universal Collision Center, Inc.
Prestige Auto Works, Inc.
n/a intake center
Perfection Paint and Body
n/a intake center
n/a intake center
Milo Johnson Automotive Service, Inc.
Pro Care Collision, LLC
Williams Auto Body Shop, Inc.
Overton Body Shop
Location
Cathedral City, CA
Schaumburg, IL
Henderson, NV
Wyandotte, MI
Las Vegas, NV
Longwood, FL
Kirkland, WA
Columbia, SC
Mentor & Streetsboro, OH (2 locations)
Fenton, MI
Amarillo, TX
Pensacola, FL
Bellevue, WA
Queen Creek, AZ
Mesa, AZ
Simi Valley, CA
Tallahassee, FL (3 locations)
Milwaukee, WI
Bellevue, WA
Vero Beach, FL
Highland, IN
Union City, GA
Escondido, CA
Denton and Flour Mound, TX (2 locations)
Green Bay, WI
Sanford and Southern Pines, NC
(2 locations)
Thornhill, ON
Kaneohe, Wahiawa & Waipahu, HI
(3 locations)
Buford, GA
Baltimore & Reisterstown, MD (2 locations) Camden Boyd & Fender
Amarillo, TX
Las Vegas, NV
Victor, NY
Pittsburgh, PA
Austin, TX (2 locations)
Gilbert, AZ
Georgia & South Carolina (16 locations)
La Habra, CA
n/a start-up
n/a intake center
Austin-Spencer Collision Repair Center
Wolbert Auto Body, Inc.
Austin Capital Collision
n/a intake center
John Harris Body Shops
California Auto Specialist Center
n/a intake center
Sigs Collision Centers
n/a start-up
9
Date
July 16, 2021
July 31, 2021
August 7, 2021
August 7, 2021
August 10, 2021
August 13, 2021
Previously operated as
Peotter’s Collision Center
Location
Appleton, WI
Oklahoma, Kansas & Missouri (35 locations) Collision Works
n/a intake center
Pensacola, FL
n/a intake center
Pensacola, FL
n/a start-up
Round Rock, TX
Quality Collision Center
Eagle River, Minocqua, Rhinelander &
Tomahawk, WI (4 locations)
San Diego, CA
Springfield, MO
Austin, TX
Jacksonville, FL
Ankeny, IA
Shreveport, LA
Qualtech Collision Center
St. Louis Street Auto Body
Don’s Paint & Body Shop, Inc.
n/a start-up
Smith’s Collision & Paint
Crown Collision, LLC
Millenium Auto Exchange, Inc.
Jensen’s Target Collision
Stevens Collision, LLC
Campbell Collision, Inc.
South of the Square Collision Center
August 13, 2021
August 20, 2021
August 31, 2021
September 7, 2021
September 7, 2021
September 17, 2021
September 17, 2021 Burbank, IL
September 27, 2021
October 1, 2021
October 8, 2021
October 15, 2021
October 22, 2021
October 29, 2021
Erie, PA
Clarence, NY
Brighton, MI
Medina & North Ridgeville, OH
(2 locations)
Sycamore, IL
Cornwall, ON
Hayes’ Body Shop, Inc.
Seaway Chevrolet Cadillac Buick GMC
Ltd.
n/a intake center
n/a start-up
Oakridge Ford Sales (1981) Limited
Precision Collision Westfield, Inc.
Dependable Collision Center
T & T Collision Center, Inc.
n/a start-up
Wallace Conley Collision
Autobody Advantage
London, ON
Amarillo, TX
November 8, 2021
November 12, 2021 Carrollton, GA
November 12, 2021
November 16, 2021 Westfield, WI
November 19, 2021 Verona, WI
Hudson, WI
December 3, 2021
Valdosta, GA
December 6, 2021
Peterborough, ON
December 10, 2021
Springhill & Thompson’s Station, TN
January 3, 2022
(2 locations)
Dallas, TX
Indianapolis, IN
Temple, TX
Signal Hill, CA
Bossier City & Shreveport, LA (2 locations) CBS Collision
January 5, 2022
January 17, 2022
February 1, 2022
February 11, 2022
March 18, 2022
n/a start-up
n/a start-up
n/a start-up
Alvin’s Auto Body Inc.
During the second quarter of 2021, the Company acquired a mobile scanning and calibration business. During the third
quarter of 2021, the Company acquired a glass business.
10
OUTLOOK
Unlike one year ago, demand for Boyd’s services is continuing to substantially exceed capacity. The ability to service
demand continues to be constrained by labor availability and parts supply chain issues, with the accompanying margin
pressure continuing into the first quarter of 2022. During the first quarter of 2022, Omicron further negatively impacted
capacity constraints with increased levels of absenteeism. In addition, the first quarter is burdened by higher payroll taxes
that occur early in the year, while the fourth quarter of 2021 benefited from expense accrual reductions, as certain expense
estimates were firmed up at amounts that were lower than previously estimated and accrued. These reduced expenses are not
expected to recur in the first quarter of 2022. The Canada Employment Wage Subsidy also ended in the fourth quarter of
2021.
Boyd has successfully negotiated an unprecedented number of meaningful rate increases from clients, demonstrating that
insurers understand the need for increased pricing in order for Boyd to serve their needs. While the Company is satisfied
with this first round of increases, it takes time for these changes to flow through the work in process and further increases are
required to reflect the current and evolving environment. By contrast, wage increases are immediately impacting the
Company’s costs. Thus far in the first quarter of 2022, the majority of the benefits of price increases have not been realized.
Boyd continues to actively pursue and push for the necessary pricing increases. Given how significantly and rapidly wage
costs have increased, it will take some time to achieve all of the needed price adjustments and margins will continue to be
impacted in the near-term.
Boyd is committed to addressing the labor market challenges through initiatives such as the Technician Development
Program, including a commitment to more than double the number of trainees in the program to help meet future needs. Boyd
continues to increase recruitment support staff to improve lead generation and follow-up, proactively evaluate compensation
levels and make appropriate adjustments to ensure the Company remains competitive in the rapidly changing environment,
and drive high levels of execution for on-boarding and orientation programs to increase retention. Boyd believes that supply
chain disruption is transitory and will normalize as the underlying manufacturing and distribution issues are resolved;
however, the Company has not experienced improvement in these conditions during the first quarter of 2022. Boyd continues
to work with key suppliers to source parts at normal margins, but will continue to use OE parts in place of aftermarket parts
when necessary in order to complete repairs for our clients.
In the short-term, Boyd is primarily focused on addressing the labor shortage for our core business. The record number of
locations added during 2021 are experiencing the same challenges of a tight labor market, wage inflation and supply chain
disruptions, as well as sales per location levels that are below pre-pandemic levels due to capacity constraints.
Notwithstanding near-term challenges, Boyd remains confident in the business model and the Company’s plan to double the
size of the business on a constant currency basis from 2021 to 2025 against 2019 sales.
In the long-term, management remains confident in its business model and its ability to increase market share by expanding
its presence in North America through strategic acquisitions alongside organic growth from Boyd’s existing operations.
Accretive growth will remain the Company’s long-term focus whether it is through organic growth, new store development,
or acquisitions. The North American collision repair industry remains highly fragmented and offers attractive opportunities
for industry leaders to build value through focused consolidation and economies of scale. As a growth company, Boyd’s
objective continues to be to maintain a conservative dividend policy that will provide the financial flexibility necessary to
support growth initiatives while gradually increasing dividends over time. The Company remains confident in its
management team, systems and experience. This, along with a strong financial position and financing options, positions
Boyd well for success into the future.
BUSINESS ENVIRONMENT & STRATEGY
The collision repair industry in North America is estimated by Boyd to represent over $37 billion U.S. in annual revenue. The
industry is highly fragmented, consisting primarily of small independent family owned businesses operating in local markets.
It is estimated that car dealerships have approximately 18% of the total market. It is believed that multi-unit collision repair
operators with greater than $20 million in annual revenues (including multi-unit car dealerships), now have approximately
31% of the total market. The collision repair industry is experiencing significant and unprecedented competition for talent,
11
and, in particular, a limited pool of qualified technicians and estimators. This is resulting in a shortage of qualified employees
as well as significant wage pressure, which is adversely impacting the volume and pace at which collision repair shops can
fix damaged vehicles.
Customer relationship dynamics in the Company’s principal markets differ from region to region. In three of the Canadian
provinces where Boyd operates, government-owned insurance companies have, by legislation, either exclusive or semi-
exclusive rights to provide insurance to automobile owners. Although Boyd’s services in these markets are predominantly
paid for by government-owned insurance companies, these insurers do not typically refer insured automobile owners to
specific collision repair centers. In these markets Boyd focuses its marketing to attract business from individual vehicle
owners primarily through consumer based advertising.
Boyd manages relationships in the government-owned insurance markets through active participation in industry
associations. In Alberta, British Columbia, Ontario and in the United States, where private insurers operate, a greater
emphasis is placed on establishing and maintaining Direct Repair Programs (“DRP’s”) and other referral arrangements with
insurance companies. DRP’s are established between insurance companies and collision repair shops to better manage
automobile repair claims and increase levels of customer satisfaction. Insurance companies select collision repair operators to
participate in their programs based on integrity, convenience and physical appearance of the facility, quality of work,
customer service, cost of repair, cycle time and other key performance metrics. There is a continuing trend among insurers in
both the public and private insurance markets towards using performance-based criteria for selecting collision repair partners
and for referring work to them. Local and regional DRP’s, and national and self-managed DRP relationships, represent an
opportunity for Boyd to increase its business. Insurers have also moved to consolidate DRP repair volumes with a fewer
number of repair shops. There is some preference among some insurance carriers to do business with multi-location collision
repairers in order to reduce the number and complexity of contacts necessary to manage their networks of collision repair
providers and to achieve a higher level of consistent performance. Boyd continues to develop and strengthen its DRP
relationships with insurance carriers in both Canada and the United States and believes it is well positioned to take advantage
of these trends.
In addition, Boyd has used consumer based advertising in some of its markets to complement and supplement its DRP growth
strategies. The Company believes this strategy is effective in increasing its brand awareness and overall sales.
As described further under “Business Risks and Uncertainties”, operating results are expected to be subject to fluctuations or
trends due to a variety of factors including availability of qualified employees, availability of parts, pricing by insurance
companies, general operating effectiveness, automobile technologies, general and regional economic downturns,
unemployment rates and weather conditions. A downturn in the economic climate has the potential to affect results
negatively. Boyd has worked to mitigate this risk by continuing to focus on meeting insurance companies’ performance
requirements, and in doing so, grow market share.
Through these strategies, Boyd expects to generate growth sufficient to double the size of the business on a constant currency
revenue basis from 2021 to 2025, based on 2019 revenues, implying a compound annual growth rate of 15 percent. Boyd will
continue to pursue accretive growth through a combination of organic growth (same-store sales1 growth) as well as adding
new locations to the network in the United States and Canada.
1 As defined in the non-GAAP financial measures and ratios section of the MD&A
12
BUSINESS STRATEGY
Operational Excellence
Operational excellence has been a key component of Boyd’s past success and has contributed to the Company being viewed
as an industry leading service provider. Delivering on our customers’ expectations related to cost of repair, time to repair,
quality and customer service are critical to being successful and being rewarded with same-store sales2 growth. The
Company’s commitment to operational excellence is embodied in its mission and goal, which is condensed into a top of mind
cheer for its employees which is ‘Wow every customer, be the best’. In 2015, Boyd rolled out and implemented its Wow
Operating Way process improvement initiative which is now in place at all of its locations, except newly acquired locations,
where it will be implemented as part of acquisition integration. In 2020, Boyd began to expand its Wow Operating Way
practices to corporate business processes. The Wow Operating Way is a series of systems, processes and measurements that
drive excellence in customer satisfaction, repair cycle times and operational metrics.
Boyd also conducts extensive customer satisfaction polling at all operating locations to assist in keeping customer satisfaction
at the forefront of its mandate.
Boyd will also continue to invest in its infrastructure, process improvement initiatives and IT systems to contribute to high
quality service to its customers and improved operational performance.
Expense Management
Boyd continues to manage its operating expenses as a percentage of sales. By working continuously to identify cost savings
and to achieve same-store sales2 growth, Boyd will continue to manage this expense ratio. Operating expenses have a fixed
component and therefore same-store sales2 growth contributes to a lower percentage of operating expenses to sales.
2 As defined in the non-GAAP financial measures and ratios section of the MD&A
13
Same-Store Sales3 / Optimize Returns
Increasing same-store sales3 has a positive impact on financial performance. Boyd continues to pursue and execute on
strategies to help grow same-store sales3. Boyd is committed to addressing the labor market challenges, that are currently
limiting capacity and same-store sales3, through initiatives such as the Technician Development Program, working to more
than double the number of trainees in the program to help meet future needs.
New Location and Acquisition Growth
In line with stated growth strategies, Boyd was successful in opening 127 new locations in 2021. Boyd will continue to
pursue accretive growth through a combination of organic growth (same-store sales3 growth) as well as acquisitions and new
store development. Acquisitions will include both single-location acquisitions as well as multi-location acquisitions.
Through organic growth, acquisitions and new store development, Boyd expects to generate growth sufficient to double the
size of its business (measured against its 2019 revenue on a constant currency basis) over the five year period from
2021-2025, implying a compound annual growth rate of 15%.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Statements made in this annual report, other than those concerning historical financial information, may be forward-looking
and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like
“may”, “will”, “anticipate”, “estimate”, “expect”, “intend”, or “continue” or the negative thereof or similar variations.
Readers are cautioned not to place undue reliance on such statements, as actual results may differ materially from those
expressed or implied in such statements.
3 As defined in the non-GAAP financial measures and ratios section of the MD&A
14
The following table outlines forward-looking information included in this MD&A:
Forward-looking Information
The stated objective of generating growth
sufficient to double the size of the business
over the five year period from 2021 to 2025,
based on 2019 revenues
Key Assumptions
Most Relevant Risk Factors
Timing of anticipated return to pre-COVID
levels of activity occurs in the short term
Return to pre-COVID levels of activity may occur on a
different timeline
Opportunities continue to be available and are
at acceptable and accretive prices
Acquisition market conditions change and repair shop
owner demographic trends change
Financing options continue to be available at
reasonable rates and on acceptable terms and
conditions
New and existing customer relationships are
expected to provide acceptable levels of
revenue opportunities
Anticipated operating results would be
accretive to overall Company results
Growth is defined as revenue on a constant
currency basis
Initiatives to increase production capacity are
successful
Credit and refinancing conditions prevent or restrict the
ability of the Company to continue growth strategies
Changes in market conditions and operating environment
Significant decline in the number of insurance claims
Integration of new stores is not accomplished as planned
Increased competition which prevents achievement of
acquisition and revenue goals
Initiatives to increase production capacity take longer than
expected or are not successful
Supply chain remains disrupted and the ability to source
parts continues to limit sales
Boyd remains confident in its business
model to increase market share by
expanding its presence in North America
through strategic and accretive acquisitions
alongside organic growth from Boyd’s
existing operations
Supply chain disruption is temporary and
normalizes in the short term
Re-emergence of stability in economic
conditions and employment rates
Pricing in the industry remains stable
The Company’s customer and supplier
relationships provide it with competitive
advantages to increase sales over time
Market share growth will more than offset
systemic changes in the industry and
environment
Anticipated operating results would be
accretive to overall Company results
Stated objective to gradually increase
dividends over time
Growing profitability of the Company and its
subsidiaries
The continued and increasing ability of the
Company to generate cash available for
dividends
Balance sheet strength and flexibility is
maintained and the dividend level is
manageable taking into consideration bank
covenants, growth requirements and
maintaining a dividend level that is supportable
over time
15
Economic conditions deteriorate, or economic recovery
post-COVID-19 is slow
Loss of one or more key customers or loss of significant
volume from any customer
Decline in the number of insurance claims
Inability of the Company to pass cost increases to
customers over time
Increased competition which may prevent achievement of
revenue goals
Changes in market conditions and operating environment
Changes in weather conditions
Inability to maintain, replace or grow technician capacity
could impact organic growth
BGSI is dependent upon the operating results of the
Company
Economic conditions deteriorate, or economic recovery
post-COVID-19 is slow
Changes in weather conditions
Decline in the number of insurance claims
Loss of one or more key customers or loss of significant
volume from any customer
Changes in government regulation
The Company plans to make capital
expenditures (excluding those related to
acquisition and development of new
locations) of approximately 1.6% of sales.
The Company plans to complete the
expansion of its Wow Operating Way
practices to corporate business processes.
The related technology and process
efficiency project will result in an additional
$1.0-1.5 million investment before the
project is complete in the second quarter of
2022. The project is expected to streamline
various processes as well as generate
economic returns once fully implemented.
The actual cost for these capital expenditures
agrees with the original estimate
Expected actual expenditures could be above or below
1.6% of sales
The purchase, delivery and installation of the
capital items is consistent with the estimated
timeline
No other new capital requirements are
identified or required during the period
The timing of the expenditures could occur on a different
timeline
BGSI may identify additional capital expenditure needs that
were not originally anticipated
All identified capital requirements are required
during the period
BGSI may identify capital expenditure needs that were
originally anticipated; however, are no longer required or
required on a different timeline
Investment in process efficiency projects will
generate positive returns
Expected positive returns are not generated due to delays,
increased costs, or unanticipated challenges in
implementation
Boyd believes that margins will return to
historical levels, however this may take
several quarters.
Price increases will be negotiated and agreed
upon by key clients
Inability of the Company to pass cost increases to
customers over time
Demand for services will continue to grow,
allowing Boyd to focus on higher margin
business
Wage inflation will return to historical levels
and will not outpace pricing increases
Decline in the number of insurance claims
Loss of one or more key customers or loss of significant
volume from any customer
Changes in market conditions and operating environment
Supply chain disruption is transitory and will
normalize as underlying issues are resolved
Wage inflation continues in excess of historical levels and
outpaces pricing increases
Internal training and development programs,
including the Technician Development
Program, will improve staffing availability
Supply chain remains disrupted
Internal training and development programs do not improve
staffing availability
We caution that the foregoing table contains what BGSI believes are the material forward-looking statements and is not
exhaustive. Therefore when relying on forward-looking statements, investors and others should refer to the “Risk Factors”
section of BGSI’s Annual Information Form, the “Business Risks and Uncertainties” and other sections of our Management’s
Discussion and Analysis and our other periodic filings with Canadian securities regulatory authorities. All forward-looking
statements presented herein should be considered in conjunction with such filings.
16
SELECTED ANNUAL INFORMATION
The following table summarizes selected financial information for BGSI over the prior three years:
For the years ended December 31,
(thousands of U.S. dollars, except per unit/share amounts)
2021
2020
2019
Sales
Net earnings
Adjusted net earnings (2)
Basic earnings per share/unit
Diluted earnings per share/unit
Adjusted net earnings per share/unit (2)
Cash dividends/distributions per share/unit declared:
Share dividends/Trust unit distributions (1)
December 31,
(thousands of U.S. dollars)
Total assets
Total long-term financial liabilities
$1,872,670
$1,561,224
$1,720,809
$23,540
$28,006
$1.10
$1.10
$1.30
$0.45
$44,114
$41,352
$2.10
$2.00
$1.97
$0.41
$48,299
$72,355
$2.43
$2.35
$3.64
$0.41
2021
2020
2019
$
$
2,027,127 $
1,571,547 $
1,463,839
933,020 $
553,783 $
682,899
(1) Dividends and distributions continue to be declared and paid in Canadian dollars. In 2021, the annual dividend declared totaled C$0.567 (2020 - C$0.555, 2019 - C$0.542)
(2) As defined in the non-GAAP financial measures and ratios section of the MD&A
Financial results, including sales, net earnings, and adjusted net earnings4, were significantly impacted by the COVID-19
pandemic beginning in March 2020 and continuing through 2020 and 2021. In 2021, financial results were further negatively
impacted by supply chain disruption and a highly competitive labor market which translated into significant wage pressure
and labor margin compression. In addition, a lack of fixed cost absorption due to lower sales per location than pre-pandemic
levels impacted financial results in 2021. After a temporary pause on acquisitions from March to August of 2020, acquisition
activity resumed; however, new locations experienced the same challenges during 2021, which constrained sales and net
earnings levels.
The change in total assets and total long-term financial liabilities was significantly impacted by acquisitions from 2019 to
2021. In addition to these changes, fluctuations in total assets from 2019 to 2021 have primarily related to increases in
property, plant and equipment, intangible assets and goodwill as a result of new location growth. During this timeframe,
long-term financial liabilities were also impacted by financing of acquisitions. The decrease in long-term financial liabilities
from 2019 to 2020 was primarily the result of the conversion from an income trust to a public corporation, which resulted in
the conversion of the exchangeable Class A common shares to shares of BGSI, and the repayment of long-term debt with
proceeds of the public offering which closed on May 14, 2020.
Since the end of 2007 through the end of 2021, BGSI increased dividends/distributions to shareholders/unitholders. As of
March 22, 2022 the dividend rate is C$0.144 per quarter or C$0.576 on an annualized basis.
BOYD GROUP INCOME FUND AND BOYD GROUP SERVICES INC.
On January 1, 2020, Boyd Group Income Fund (“BGIF”) was converted from an income trust to a public corporation named
Boyd Group Services Inc., pursuant to a plan of arrangement (the “Arrangement”) under the Canada Business Corporations
Act. The Arrangement received all required unitholder, trustee, court, TSX and regulatory approvals, as well as approval
from the shareholders of Boyd Group Holdings Inc. (“BGHI”).
4 As defined in the non-GAAP financial measures and ratios section of the MD&A
17
As a result of the Arrangement, Fund unitholders and BGHI Class A common shareholders received one BGSI common
share in exchange for each Fund unit and BGHI Class A common share held by them.
On January 1, 2021, BGHI was amalgamated with the Company. On January 2, 2021, in accordance with the plans detailed
in the Arrangement, BGIF was wound up. Immediately prior to the wind-up of BGIF, all property of BGIF was transferred
to and all liabilities of BGIF were assumed by, BGSI.
The consolidated financial statements of BGSI and their subsidiaries have been prepared in accordance with International
Financial Reporting Standards and contain the consolidated financial position, results of operations and cash flows of BGSI,
the Company and the Company’s subsidiary companies for the year ended December 31, 2021.
NON-GAAP FINANCIAL MEASURES AND RATIOS
EBITDA AND ADJUSTED EBITDA
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is not a calculation defined in International
Financial Reporting Standards (“IFRS”). EBITDA should not be considered an alternative to net earnings in measuring the
performance of BGSI, nor should it be used as an exclusive measure of cash flow. BGSI reports EBITDA and Adjusted
EBITDA because they are key measures that management uses to evaluate performance of the business and to reward its
employees. EBITDA is also a concept utilized in measuring compliance with debt covenants. EBITDA and Adjusted
EBITDA are measures commonly reported and widely used by investors and lending institutions as an indicator of a
company’s operating performance and ability to incur and service debt, and as a valuation metric. While EBITDA is used to
assist in evaluating the operating performance and debt servicing ability of BGSI, investors are cautioned that EBITDA and
Adjusted EBITDA as reported by BGSI may not be comparable in all instances to EBITDA as reported by other companies.
CPA Canada’s Canadian Performance Reporting Board defined Standardized EBITDA to foster comparability of the measure
between entities. Standardized EBITDA represents an indication of an entity’s capacity to generate income from operations
before taking into account management’s financing decisions and costs of consuming tangible and intangible capital assets,
which vary according to their vintage, technological age and management’s estimate of their useful life. Accordingly,
Standardized EBITDA comprises sales less operating expenses before finance costs, capital asset amortization and
impairment charges, and income taxes. Adjusted EBITDA is calculated to exclude items of an unusual nature that do not
reflect normal or ongoing operations of BGSI and which should not be considered in a valuation metric or should not be
included in an assessment of the ability to service or incur debt. Included in this category of adjustments prior to January 1,
2020 are the fair value adjustments to exchangeable Class A common shares, the fair value adjustments to unit based
payment obligations, and the fair value adjustments to the non-controlling interest call liability / put option. Subsequent to
January 1, 2020, included in this category of adjustments are the fair value adjustments to the non-controlling interest call
liability / put option. These items are adjustments that did not have any cash impact on BGSI or the Fund. Also included as
an adjustment to EBITDA are acquisition and transaction costs and fair value adjustments to contingent consideration, which
do not relate to the current operating performance of the business units but are typically costs incurred to expand operations.
Prior to the adoption of IFRS 16, Leases on January 1, 2019, lease expenses were included in operating expenses and were
thereby included in the calculation of both Standardized and Adjusted EBITDA. On adoption of IFRS 16, Leases on January
1, 2019, lease expenses are no longer included in operating expenses. In 2019, these amounts were deducted in arriving at
Adjusted EBITDA to enhance comparability with the prior period. Beginning January 1, 2020, these amounts are no longer
deducted in arriving at Adjusted EBITDA for the current and for the prior period. From time to time BGSI may make other
adjustments to its Adjusted EBITDA for items that are not expected to recur.
18
The following is a reconciliation of BGSI’s net earnings to Standardized EBITDA and Adjusted EBITDA:
ADJUSTED EBITDA
(thousands of U.S. dollars)
Net earnings
Add:
Finance costs
Income tax expense
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortization of intangible assets
Three Months Ended
December 31,
2021
2020
Year Ended
December 31,
2021
2020
$
4,901 $
16,253 $
23,540 $
44,114
7,673
1,810
11,723
24,177
5,625
6,370
5,156
9,834
19,639
4,729
27,653
8,674
42,602
88,523
22,569
31,664
14,839
37,183
76,080
18,527
Standardized EBITDA
$
55,909 $
61,981 $
213,561 $
222,407
Add (less):
Fair value adjustments
Acquisition and transaction costs
Adjusted EBITDA
ADJUSTED NET EARNINGS
—
1,391
(1,961)
374
148
5,835
(3,871)
1,498
$
57,300 $
60,394 $
219,544 $
220,034
In addition to Standardized EBITDA and Adjusted EBITDA, BGSI believes that certain users of financial statements are
interested in understanding net earnings excluding certain fair value adjustments and other items of an unusual or infrequent
nature that do not reflect normal or ongoing operations of the Company. This can assist these users in comparing current
results to historical results that did not include such items. The following is a reconciliation of BGSI’s net earnings to
adjusted net earnings:
(thousands of U.S. dollars, except share and per share
amounts)
Three Months Ended
December 31,
2021
2020
Year Ended
December 31,
2021
2020
Net earnings
Add (less):
Fair value adjustments (non-taxable)
Acquisition and transaction costs (net of tax)
Adjusted net earnings
Weighted average number of shares
Adjusted net earnings per share
$
4,901 $
16,253 $
23,540 $
44,114
—
1,029
(1,961)
277
148
4,318
(3,871)
1,109
5,930 $
14,569 $
28,006 $
41,352
21,472,194
21,472,194
21,472,194
21,005,596
0.28 $
0.68 $
1.30 $
1.97
$
$
19
SAME-STORE SALES
Same-store sales is a measure of sales that includes only those locations in operation for the full comparative period. Same-
store sales is presented excluding the impact of foreign exchange on the current period. Same-store sales is calculated by
applying the prior period exchange rate to the current year sales. The following is a reconciliation of BGSI’s sales to same-
store sales:
(thousands of U.S. dollars)
Sales
Less:
Sales from locations not in the comparative period
Sales from under-performing facilities closed during the
period
Foreign exchange
Three months ended
December 31,
2021
2020
Year ended
December 31,
2021
2020
$
516,206 $
403,747 $
1,872,670 $
1,561,224
(81,767)
(2,718)
(224,003)
(22,995)
(296)
(1,329)
(1,971)
—
(2,895)
(9,078)
(9,056)
—
Same-store sales (excluding foreign exchange)
$
432,814 $
399,058 $
1,636,694 $
1,529,173
Dividends
BGSI declared dividends of C$0.141 per share in the first quarter of 2021, C$0.141 per share in the second quarter of 2021,
C$0.141 per share in the third quarter of 2021 and C$0.144 per share in the fourth quarter of 2021 (2020 - C$0.138, C$0.138,
C$0.138 and C$0.141 respectively).
Dividends to shareholders of BGSI were declared and paid as follows:
(thousands of U.S. dollars)
Record date
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
(thousands of U.S. dollars)
Record date
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
Payment date
April 28, 2021
July 28, 2021
October 27, 2021
January 27, 2022
Payment date
April 28, 2020
July 29, 2020
October 28, 2020
January 27, 2021
20
Dividend
amount
2,408
2,478
2,389
2,417
9,692
Dividend
amount
1,999
2,187
2,240
2,364
8,790
$
$
$
$
RESULTS OF OPERATIONS
Results of Operations
(thousands of U.S. dollars, except per share amounts)
Three months ended December 31,
2020
% change
2021
Year ended December 31,
% change
2021
2020
Sales - Total
Same-store sales - Total (1)
(excluding foreign exchange)
Gross margin %
Operating expense %
Adjusted EBITDA (1)
Acquisition and transaction costs
Depreciation and amortization
Fair value adjustments
Finance costs
Income tax expense
516,206
27.9
403,747
1,872,670
19.9
1,561,224
432,814
8.5
399,058
1,636,694
7.0
1,529,173
43.5
32.4
57,300
1,391
41,525
—
7,673
1,810
(5.0)
4.9
45.8
30.9
44.8
33.1
(2.6)
3.4
46.0
32.0
(5.1)
271.9
21.4
(100.0)
20.5
(64.9)
60,394
374
34,202
(1,961)
6,370
5,156
219,544
5,835
153,694
148
27,653
8,674
(0.2)
289.5
16.6
(103.8)
(12.7)
(41.5)
220,034
1,498
131,790
(3,871)
31,664
14,839
Adjusted net earnings (1)
5,930
(59.3)
14,569
28,006
(32.3)
41,352
Adjusted net earnings per share (1)
0.28
(58.8)
0.68
1.30
(34.0)
1.97
Net earnings
Basic earnings per share
Diluted earnings per share
4,901
0.23
0.23
(69.8)
(69.8)
(69.7)
16,253
0.76
0.76
23,540
1.10
1.10
(46.6)
(47.8)
(45.1)
44,114
2.10
2.00
(1) As defined in the non- GAAP financial measures and ratios section of the MD&A.
21
Pandemic Impact
The Company moved quickly and decisively at the start of the pandemic to take aggressive action to both preserve liquidity
and to reduce expenses in preparation of the demand and revenue decline anticipated as the result of the pandemic. Demand
for services increased throughout 2021 and exceeded capacity in all U.S. markets during the third and fourth quarters, which
resulted in high levels of work-in-process. Adding and retaining location level administrative staff and technician capacity to
address this constraint has been challenging in an extraordinarily tight labor market, exacerbated by COVID related
absenteeism. This has resulted in increased wage costs to both retain and recruit, resulting in near-term pressure on labor
margins and operating expenses. Demand in Canada increased slowly and gradually during the third and fourth quarters of
2021 as restrictions were eased and removed, but throughout the third and fourth quarters, demand remained well below pre-
pandemic levels. In addition to a tight labor market in the U.S. and the slow recovery of demand in Canada, during the third
and fourth quarters, Boyd faced supply chain disruptions for OE and aftermarket parts in both the Canadian and U.S. markets,
which resulted in a negative impact on margins as a higher percentage of parts had to be sourced from non-primary suppliers
in order to complete repairs.
Canada Emergency Wage Subsidy
The Canada Emergency Wage Subsidy (“CEWS”) was put into place on April 11, 2020 and remained in place until October
23, 2021. As was the objective of the program, Boyd continued to employ and incur cost for employees that would have
been laid off or furloughed absent the wage subsidy. Boyd has made applications for the CEWS for the periods commencing
on April 12, 2020 to October 23, 2021. The total estimated CEWS for the year ended December 31, 2021 of $9.8 million
(2020 - $12.7 million) has been recorded, with $4.0 million (2020 - $5.3 million) being recorded as a reduction to cost of
goods sold and $5.8 million (2020 - $7.4 million) being recorded as a reduction to operating expenses. At December 31,
2021, the Company has $3.3 million (2020 - $7.4 million) accrued for amounts to be received under the CEWS program in
Accounts Receivable.
Sales
Sales totaled $1.9 billion for the year ended December 31, 2021 an increase of $311.4 million or 19.9% when compared to
the same period of 2020. The increase in sales was the result of the following:
•
•
•
Same-store sales5 excluding foreign exchange increased $107.5 million or 7.0%, partially offset by an increase of
$9.1 million due to the translation of same-store sales5 at a higher U.S. dollar exchange rate. The improvement in
same-store sales5 was the result of the continued return of business following the slow down caused by the
COVID-19 pandemic that began in mid-March of 2020. The increase in same-store sales5 percentage was
constrained by production challenges, including administrative and technician staffing capacity constraints, and
supply chain disruption, which impacted sales levels during the second half of 2021.
$201.0 million of incremental sales were generated from 154 new locations that were not in operation for the full
comparative period.
Sales were affected by the closure of under-performing facilities which decreased sales by $6.2 million.
Same-store sales5 are calculated by including sales for locations and businesses that have been in operation for the full
comparative period.
Gross Profit
Gross Profit was $839.3 million or 44.8% of sales for the year ended December 31, 2021 compared to $718.9 million or
46.0% of sales for the same period in 2020. Gross profit increased $120.4 million primarily as a result of new location
growth as well as increased sales due to the reduced impact of the COVID-19 pandemic when compared to the prior period.
The gross margin percentage was negatively impacted by reduced parts and labor margins, and a higher mix of parts sales in
relation to labor. These impacts were partially offset by a higher mix of glass sales in relation to collision sales. During the
5 As defined in the non-GAAP financial measures and ratios section of the MD&A
22
second half of 2021, Boyd faced increasing supply chain disruptions, which resulted in a negative impact on margins as a
higher percentage of parts had to be sourced from non-primary suppliers in order to complete repairs. Labor margins were
negatively impacted by the extraordinarily tight labor market, which resulted in increased wage costs to both retain and
recruit staff. The shortage of labor also resulted in a higher mix of parts sales in relation to labor. The recognition of CEWS
related to direct labor was approximately $4.0 million for the year ended December 31, 2021, compared to $5.3 million in the
prior year.
Operating Expenses
Operating Expenses for the year ended December 31, 2021 increased $120.9 million to $619.7 million from $498.8 million
for the same period of 2020. The increase in operating expenses was primarily due to the growth in number of locations, as
well as COVID-19 related cost reductions that impacted the prior year. Operating expenses benefited from the CEWS of
approximately $5.8 million, as compared to $7.4 million in the same period of the prior year, which helped mitigate
incremental COVID-19 indirect wage costs. Operating expenses were negatively impacted by the extraordinarily tight labor
market, which resulted in increased wage costs to both retain and recruit staff. Excluding the impact of foreign currency
translation which increased operating expenses by approximately $3.6 million, expenses increased $124.5 million from 2020.
Closed locations lowered operating expenses by $2.4 million.
Operating expenses as a percentage of sales were 33.1% for the year ended December 31, 2021, which compared to 32.0%
for the same period in 2020. The increase as a percentage of sales was due to capacity constraints and supply chain
disruptions, which impacted the sales level that could be achieved during 2021, as well as the addition of new locations that
did not perform at the sales level expected due to the aforementioned pressure on sales, putting further pressure on the
operating expense percentage.
Acquisition and Transaction Costs
Acquisition and Transaction Costs for the year ended December 31, 2021 were $5.8 million compared to $1.5 million
recorded for the same period of 2020. The costs relate to various acquisitions, including acquisitions from prior periods, as
well as other completed or potential acquisitions. Acquisition and transaction costs were lower in 2020 due to the pause on
completion of acquisitions from the start of the COVID-19 pandemic until mid-August in 2020.
Adjusted EBITDA6
Earnings before interest, income taxes, depreciation and amortization, adjusted for the non-controlling interest call liability
and contingent consideration, as well as acquisition and transaction costs (“Adjusted EBITDA6”) for the year ended
December 31, 2021 totaled $219.5 million or 11.7% of sales compared to Adjusted EBITDA6 of $220.0 million or 14.1% of
sales in the same period of the prior year. The $0.5 million decrease was primarily the result of a lower gross margin
percentage and higher levels of operating expenses as well as the impact of location growth. In total, Adjusted EBITDA6 for
the year ended December 31, 2021 benefited from the CEWS in the amount of approximately $9.8 million, as compared to
$12.7 million in the prior year. Changes in U.S. dollar exchange rates in 2021 increased Adjusted EBITDA6 by $0.8 million.
Depreciation and Amortization
Depreciation related to property, plant and equipment totaled $42.6 million or 2.3% of sales for the year ended December 31,
2021, an increase of $5.4 million when compared to the $37.2 million or 2.4% of sales recorded in the same period of the
prior year. The increase in depreciation expense was primarily due to acquisition growth as well as investments in capital
equipment in prior periods.
Depreciation related to right of use assets totaled $88.5 million, or 4.7% of sales for the year ended December 31, 2021, as
compared to $76.1 million or 4.9% of sales for the same period of the prior year. The increase in depreciation expense was
primarily due to acquisition growth.
6 As defined in the non-GAAP financial measures and ratios section of the MD&A
23
Amortization of intangible assets for the year ended December 31, 2021 totaled $22.6 million or 1.2% of sales, an increase of
$4.0 million when compared to the $18.5 million or 1.2% of sales expensed for the same period in the prior year. The
increase is primarily the result of the addition of new intangible assets from recent acquisitions.
Finance Costs
Finance Costs of $27.7 million or 1.5% of sales for the year ended December 31, 2021 decreased from $31.7 million or 2.0%
of sales for the same period of the prior year. The decrease in finance costs was primarily due to increased borrowing under
the credit facility during the prior period. Out of an abundance of caution during the uncertainty created by the COVID-19
pandemic, Boyd fully drew on the credit facilities near the end of March 2020, other than under the swing line credit facilities
and an accordion feature. As conditions improved and the impact of COVID-19 was better understood, Boyd made
repayments to reduce the level of outstanding debt.
Income Taxes
Current and Deferred Income Tax Expense of $8.7 million for the year ended December 31, 2021 compared to an expense of
$14.8 million for the same period of the prior year. Permanent differences did not have a significant impact on the tax
computed on accounting income.
Net Earnings and Earnings Per Share
Net Earnings for the year ended December 31, 2021 was $23.5 million or 1.3% of sales compared to $44.1 million or 2.8% of
sales in the same period of the prior year. The net earnings amount in 2021 was impacted by acquisition and transaction costs
of $4.3 million (net of tax). After adjusting for fair value and other unusual items, Adjusted net earnings7 in 2021 was $28.0
million, or 1.5% of sales. This compares to Adjusted net earnings7 of $41.4 million or 2.6% of sales in 2020. Adjusted net
earnings7 for the period was impacted by a lower gross margin percentage and higher levels of operating expenses, as well as
location growth. These new locations are subject to the same labor and supply challenges Boyd is currently facing across its
business. These market conditions are impacting the results that can be achieved in the short-term, while new location growth
has resulted in increased levels of depreciation and amortization.
Basic Earnings Per Share was $1.10 per share for the year ended December 31, 2021 compared to $2.10 for the same period
of 2020. Diluted earnings per share was $1.10 for the year ended December 31, 2021 compared to $2.00 for the same period
of 2020. Adjusted net earnings per share7 was $1.30 compared to $1.97 for the same period of 2020. The decrease in
adjusted net earnings per share7 is primarily attributed to a lower gross margin percentage and higher levels of operating
expenses as well the impact of location growth.
7 As defined in the non-GAAP financial measures and ratios section of the MD&A
24
Summary of Quarterly Results
(in thousands of U.S. dollars,
except per share amounts)
Sales
Adjusted EBITDA (1)
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per
share
$
$
$
$
$
2021 Q4
2021 Q3
2021 Q2
2021 Q1
2020 Q4
2020 Q3
2020 Q2
2020 Q1
516,206 $
490,178 $
444,643 $
421,643 $
403,747 $
381,689 $
307,951 $
467,837
57,300 $
51,500 $
57,996 $
52,748 $
60,394 $
63,514 $
35,637 $
60,489
4,901 $
434 $
10,462 $
7,743 $
16,253 $
15,855 $
(4,970) $
16,976
0.23 $
0.02 $
0.49 $
0.36 $
0.76 $
0.74 $
(0.24) $
0.23 $
0.02 $
0.49 $
0.36 $
0.76 $
0.74 $
(0.24) $
0.84
0.71
Adjusted net earnings (loss) (1)
Adjusted net earnings (loss) per
share (1)
$
(1) As defined in the non-GAAP financial measures and ratios section of the MD&A.
5,930 $
2,389 $
0.11 $
0.28 $
$
11,375 $
8,311 $
14,569 $
16,403 $
(4,841) $
15,221
0.53 $
0.39 $
0.68 $
0.76 $
(0.23) $
0.75
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations, together with cash on hand and undrawn credit on existing facilities are expected to be sufficient
to meet operating requirements, capital expenditures and dividends. At December 31, 2021, BGSI had cash, net of
outstanding deposits and cheques, held on deposit in bank accounts totaling $27.7 million (December 31, 2020 - $61.0
million). The decrease in the cash balance as at December 31, 2021 is the result of a decrease in cash flows from operations.
The net working capital ratio (current assets divided by current liabilities) was 0.64:1 at December 31, 2021 (December 31,
2020 – 0.67:1).
At December 31, 2021, BGSI had total debt outstanding, net of cash, of $957.7 million compared to $896.9 million at
September 30, 2021, $671.1 million at June 30, 2021, $539.9 million at March 31, 2021 and $538.5 million at December 31,
2020. Debt, net of cash, increased when compared to December 31, 2020 primarily as a result of acquisition activity,
including draws on the revolving credit facility, as well as increased seller notes and lease liabilities.
Total debt, net of cash
(thousands of U.S. dollars)
Revolving credit facility & swing line
(net of financing costs)
Term Loan A (net of financing costs)
Seller notes (1)
December 31,
2021
September 30,
2021
June 30,
2021
March 31,
2021
December 31,
2020
$
263,802 $
204,250 $
54,173 $
— $
—
124,680
124,667
124,641
123,760
123,705
53,591
56,168
59,452
54,580
56,523
Total debt before lease liabilities
$
442,073 $
385,085 $
238,266 $
178,340 $
180,228
Cash
27,714
31,228
35,612
61,477
61,041
Total debt, net of cash
before lease liabilities
Lease liabilities
$
414,359 $
353,857 $
202,654 $
116,863 $
119,187
543,347
543,046
468,474
423,001
419,311
Total debt, net of cash
(1) Seller notes are loans granted to the Company by the sellers of businesses related to the acquisition of those businesses.
957,706 $
671,128 $
896,903 $
$
539,864 $
538,498
25
The following table summarizes the undiscounted contractual obligations at December 31, 2021 and required payments over
the next five years:
Contractual Obligations
(thousands of U.S. dollars)
Bank indebtedness
Accounts payable and accrued
liabilities
Long-term debt
Lease liability
Purchase Obligations (1)
Total
$—
Within 1
year
$—
1 to 2
years
$—
258,423
258,423
—
442,073
13,887
628,638
110,408
13,624
99,990
2 to 3
years
$—
—
17,535
86,810
3 to 4
years
$—
—
5,135
71,817
4 to 5
years
$—
—
After 5
years
$—
—
266,892
125,000
54,714
204,899
—
unknown
unknown
unknown
unknown
unknown
unknown
$1,329,134 $382,718
$113,614
$104,345
$76,952
$321,606
$329,899
(1) Subject to fulfilling certain conditions such as meeting contractual purchase obligations and no change in control the repayment would be nil
Operating Activities
Cash flow generated from operations before considering working capital changes, was $210.8 million for the year ended
December 31, 2021 compared to $217.4 million in 2020.
For the year ended December 31, 2021, changes in working capital items used net cash of $14.1 million compared with
providing $13.5 million in the same period of 2020. Changes in accounts receivable, inventory, prepaid expenses, income
taxes, accounts payable and accrued liabilities are significantly influenced by timing of collections and expenditures. In
addition, supply chain disruption delayed the completion of many repairs and resulted in growing levels of work-in-process
inventory at December 31, 2021.
Financing Activities
Cash provided by financing activities totaled $124.4 million for the year ended December 31, 2021 compared to cash used in
financing activities of $134.5 million for the same period of the prior year. During 2021, cash was provided by draws of the
revolving credit facility in the amount of $330.5 million offset by cash used to repay draws as well as long-term debt
associated with seller notes in the amount of $83.5 million and to fund interest costs on long-term debt of $9.9 million. Cash
used by financing activities included $84.9 million in repayments of lease liabilities and cash used to fund interest costs on
lease liabilities of $18.1 million. Cash was also used to pay dividends of $9.7 million. During the year ended December 31,
2021 the Company paid $0.1 million in issue costs. During 2020, cash was provided by draws of the revolving credit facility
in the amount of $495.5 million offset by cash used to repay draws as well as long-term debt associated with seller notes in
the amount of $673.0 million and to fund interest costs on long-term debt of $15.5 million. Cash used by financing activities
included $71.2 million used to repay lease liabilities and cash used to fund interest costs on lease liabilities of $16.8 million.
Cash was also used to pay dividends of $7.1 million. During 2020, the Company completed a corporate conversion as well as
an equity offering, resulting in gross proceeds on the offering of $164.3 million, as well as the payment of $8.0 million in
issue costs. The Company also amended the revolving credit facility, resulting in the payment of $1.4 million of financing
costs. On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass LLC was
completed for $1.3 million.
Debt Financing
On March 17, 2020, the Company entered into a third amended and restated credit agreement (“Credit Agreement”),
increasing the revolving credit facility to $550 million U.S., with an accordion feature which can increase the facility to a
maximum of $825 million U.S. (the “revolving credit facility”, or the “facility”). The revolving credit facility is accompanied
by a new seven-year fixed-rate Term Loan A in the amount of $125 million U.S. at an interest rate of 3.455%. The revolving
26
credit facility is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well
as guarantees by BGSI, BGIF, BGHI, and subsidiaries, while Term Loan A is with one of the syndicated banks. The interest
rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to EBITDA as
determined under the Credit Agreement. The Company can draw the facility in either the U.S. or in Canada, in either U.S. or
Canadian dollars. The Company can make draws in tranches as required. Tranches bear interest only and are not repayable
until the maturity date but can be voluntarily repaid at any time. The Company has the ability to choose the base interest rate
between Prime, Bankers Acceptances (“BA”), U.S. Prime or London Inter Bank Offer Rate (“LIBOR”). The total syndicated
facility includes a swing line up to a maximum of $10.0 million U.S. in Canada and $30.0 million U.S. in the U.S. At
December 31, 2021, the Company has drawn $264.5 million U.S. (December 31, 2020 - $nil U.S.) and $nil Canadian
(December 31, 2020 - $nil Canadian) on the revolving credit facility and swing line and $125.0 million U.S. (December 31,
2020 - $125.0 million U.S.) on the Term Loan A.
Under the revolving credit facility, the Company is subject to certain financial covenants which must be maintained to avoid
acceleration of the termination of the Credit Agreement. The financial covenants require BGSI to maintain a senior funded
debt to EBITDA ratio of less than 3.50 and an interest coverage ratio of greater than 2.75. For four quarters following a
material acquisition, the senior funded debt to EBITDA ratio may be increased to less than 4.00. For purposes of covenant
calculations, property lease payments are deducted from EBITDA. During the second quarter of 2020, the Company
amended certain financial covenants under the revolving credit facility to provide additional covenant headroom, further
enhancing the Company’s financial flexibility. While the Company had not breached any covenants, this amendment was
intended to prevent the effects of the COVID-19 pandemic from distorting the covenant calculations and distracting the
Company or its lenders from the prudent management of the business. The amendments included a suspension to Boyd’s
requirement to comply with its leverage and interest coverage covenants from July 1, 2020 to December 30, 2020, as well as
providing more flexibility in the calculation of such covenants beginning with the second quarter of 2020 and through the
second quarter of 2021. Effective July 1, 2020 to June 30, 2021 inclusive, for the purposes of testing any financial covenants
on a trailing twelve month period, the Company was permitted to replace the EBITDA for the second and third quarters of
2020 with the EBITDA for the second and third quarters of 2019. In addition, the senior funded debt to EBITDA ratio was
increased to no greater than 4.00 to June 30, 2020. From December 31, 2020 to June 29, 2021, the senior funded debt to
EBITDA ratio was to be no greater than 3.75. For four quarters following a material acquisition during the December 31,
2020 to June 29, 2021 timeframe, the senior debt to EBITDA ratio could be increased to no greater than 4.00. During the
suspension period, the Company was required to meet a minimum liquidity covenant of $150 million U.S., which, given the
Company’s cash position and undrawn facilities, was not burdensome.
On March 21, 2022, the Company amended the Credit Agreement to provide for a covenant flex period from January 1, 2022
to March 30, 2023 and to provide for revisions to interest rates, allowing for the use of LIBOR until it is decommissioned and
allowing for the use of the Secured Overnight Financing Rate (“SOFR”) at the Company’s election. During the covenant flex
period, the financial covenants require BGSI to maintain a senior funded debt to EBITDA ratio of less than 4.00 from March
21, 2022 to March 30, 2022, less than 4.50 from March 31, 2022 to September 29, 2022, less than 4.25 from September 30,
2022 to December 30, 2022 and less than 4.00 from December 31, 2022 to March 30, 2023. For four quarters following a
material acquisition during the covenant flex period, the senior funded debt to EBITDA ratio may be increased by up to 0.50,
never exceeding 4.50.
The Company supplements its debt financing by negotiating with sellers in certain acquisitions to provide financing to the
Company in the form of term notes. The notes payable to sellers are typically at favorable interest rates and for terms of one
to 15 years. This source of financing is another means of supporting BGSI’s growth, at a relatively low cost. During the year
ended December 31, 2021, BGSI entered into 32 new seller notes for an aggregate amount of $14.6 million.
Shareholders’ Capital
During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was approved by
shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options up to an amount of
250,000 Common shares under this plan. Each tranche of the options vests equally over two, three, four and five year periods.
The term of an option shall be determined and approved by the People, Culture and Compensation Committee; provided that
the term shall be no longer than ten years from the grant date.
27
On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value of C$56.99
per option and an exercise price of C$219.21 per option. None of the options are exercisable at period end. Issue costs of
$105 were incurred with respect to the stock option plan.
On January 2, 2020, BGSI announced the completion of the conversion of the Fund from an income trust to a public
corporation, pursuant to the plan of Arrangement under the Canada Business Corporations Act. As a result of the
Arrangement, Fund unitholders and BGHI Class A common shareholders received one BGSI common share in exchange for
each Fund unit and BGHI Class A common share held by them.
On May 14, 2020, BGSI completed an equity offering consisting of 1,265,000 shares at a price of C$183.00 per share, with
net proceeds of the offering to fund potential future acquisition opportunities once the impact of COVID-19 is better
understood, as well as to further strengthen the Company’s balance sheet through either holding cash or debt repayment, and
for general corporate purposes.
Investing Activities
Cash used in investing activities totaled $354.1 million for the year ended December 31, 2021. This compares to $75.0
million used in the prior period. The investing activity in both periods related primarily to new location growth that occurred
during these periods.
28
Acquisitions and Development of Businesses
During 2021, the Company added 101 locations through acquisition, 16 locations operating as intake centers and
10 start-up locations, for a total of 127 new locations. From January 1, 2021 up to the reporting date of
March 22, 2022, the Company has added 106 locations through acquisition, 13 start-up locations and 16
locations operating as intake centers, for a total of 135 new locations. These new locations are as follows:
Date
January 2, 2021
January 2, 2021
January 6, 2021
January 15, 2021
January 18, 2021
January 29, 2021
January 29, 2021
February 12, 2021
February 19, 2021
February 19, 2021
February 23, 2021
February 23, 2021
March 4, 2021
March 9, 2021
March 12, 2021
March 26, 2021
March 26, 2021
March 31, 2021
March 31, 2021
April 9, 2021
April 9, 2021
April 17, 2021
April 23, 2021
April 27, 2021
April 30, 2021
April 30, 2021
May 1, 2021
May 7, 2021
May 11, 2021
May 14, 2021
May 14, 2021
May 21, 2021
June 11, 2021
June 15, 2021
June 18, 2021
June 19, 2021
June 25, 2021
July 9, 2021
July 16, 2021
July 31, 2021
August 7, 2021
August 7, 2021
August 10, 2021
Previously operated as
n/a start-up
n/a intake center
n/a intake center
Eureka Body and Fender
n/a intake center
n/a start-up
n/a intake center
Jimmy Rivers Boyd Shop Inc.
Frankie & Dylan’s, Inc.
n/a intake center
Plains Chevrolet, Ltd.
n/a start-up
n/a intake center
n/a start-up
n/a intake center
Star Auto Body, Inc.
Universal Collision Center, Inc.
Prestige Auto Works, Inc.
n/a intake center
Perfection Paint and Body
n/a intake center
n/a intake center
Milo Johnson Automotive Service, Inc.
Pro Care Collision, LLC
Williams Auto Body Shop, Inc.
Overton Body Shop
n/a intake center
Sigs Collision Centers
Location
Cathedral City, CA
Schaumburg, IL
Henderson, NV
Wyandotte, MI
Las Vegas, NV
Longwood, FL
Kirkland, WA
Columbia, SC
Mentor & Streetsboro, OH (2 locations)
Fenton, MI
Amarillo, TX
Pensacola, FL
Bellevue, WA
Queen Creek, AZ
Mesa, AZ
Simi Valley, CA
Tallahassee, FL (3 locations)
Milwaukee, WI
Bellevue, WA
Vero Beach, FL
Highland, IN
Union City, GA
Escondido, CA
Denton and Flour Mound, TX (2 locations)
Green Bay, WI
Sanford and Southern Pines, NC
Thornhill, ON
Kaneohe, Wahiawa & Waipahu, HI
(3 locations)
Buford, GA
Baltimore & Reisterstown, MD (2 locations)
Amarillo, TX
Las Vegas, NV
Victor, NY
Pittsburgh, PA
Austin, TX (2 locations)
Gilbert, AZ
Georgia & South Carolina (16 locations)
La Habra, CA
Appleton, WI
Oklahoma, Kansas & Missouri (35 locations) Collision Works
n/a intake center
Pensacola, FL
n/a intake center
Pensacola, FL
n/a start-up
Round Rock, TX
n/a start-up
Camden Boyd & Fender
n/a start-up
n/a intake center
Austin-Spencer Collision Repair Center
Wolbert Auto Body, Inc.
Austin Capital Collision
n/a intake center
John Harris Body Shops
California Auto Specialist Center
Peotter’s Collision Center
29
Location
Eagle River, Minocqua, Rhinelander &
Tomahawk, WI (4 locations)
San Diego, CA
Springfield, MO
Austin, TX
Jacksonville, FL
Ankeny, IA
Shreveport, LA
Date
August 13, 2021
August 13, 2021
August 20, 2021
August 31, 2021
September 7, 2021
September 7, 2021
September 17, 2021
September 17, 2021 Burbank, IL
September 27, 2021
October 1, 2021
October 8, 2021
October 15, 2021
Erie, PA
Clarence, NY
Brighton, MI
Medina & North Ridgeville, OH
(2 locations)
Sycamore, IL
Cornwall, ON
Amarillo, TX
London, ON
October 22, 2021
October 29, 2021
November 8, 2021
November 12, 2021 Carrollton, GA
November 12, 2021
November 16, 2021 Westfield, WI
November 19, 2021 Verona, WI
Hudson, WI
December 3, 2021
Valdosta, GA
December 6, 2021
Peterborough, ON
December 10, 2021
Springhill & Thompson’s Station, TN
January 3, 2022
(2 locations)
Dallas, TX
Indianapolis, IN
Temple, TX
Signal Hill, CA
Bossier City & Shreveport, LA (2 locations)
January 5, 2022
January 17, 2022
February 1, 2022
February 11, 2022
March 18, 2022
Previously operated as
Quality Collision Center
Qualtech Collision Center
St. Louis Street Auto Body
Don’s Paint & Body Shop, Inc.
n/a start-up
Smith’s Collision & Paint
Crown Collision, LLC
Millenium Auto Exchange, Inc.
Jensen’s Target Collision
Stevens Collision, LLC
Campbell Collision, Inc.
South of the Square Collision Center
Hayes’ Body Shop, Inc.
Seaway Chevrolet Cadillac Buick GMC Ltd.
n/a intake center
n/a start-up
Oakridge Ford Sales (1981) Limited
Precision Collision Westfield, Inc.
Dependable Collision Center
T & T Collision Center, Inc.
n/a start-up
Wallace Conley Collision
Autobody Advantage
n/a start-up
n/a start-up
n/a start-up
Alvin’s Auto Body Inc.
CBS Collision
The Company completed the acquisition or start-up of 70 locations from the beginning of 2020 until the fourth quarter
reporting date of March 23, 2021. Details of these acquisitions can be found in the 2020 Annual Report.
Start-ups
In 2021, the Company commenced operations in 10 new start-up collision repair facilities. The total combined investment in
leaseholds and equipment for these facilities was approximately $5.7 million. The Company commenced operations in five
new start-up collision repair facilities in 2020 with a combined investment of approximately $2.0 million. The Company
anticipates it will use similar start-up strategies as part of its continued growth in the future.
Capital Expenditures
Although most of Boyd’s repair facilities are leased, funds are required to ensure facilities are properly repaired and
maintained to ensure the Company’s physical appearance communicates Boyd’s standard of professional service and quality.
The Company’s need to maintain its facilities and upgrade or replace equipment, signage, computers, software and vehicles
30
forms part of the annual cash requirements of the business. The Company manages these expenditures by annually reviewing
and determining its capital budget needs and then authorizing major expenditures throughout the year based upon individual
business cases. Excluding expenditures related to acquisition and development, the investment in LED lighting, and the
investment in the expansion of the WOW Operating Way practices through the corporate applications and process
improvement efficiency project, the Company spent approximately $26.3 million, or 1.4% of sales on capital expenditures,
compared to $22.0 million or 1.4% of sales during the same period of 2020. During the year ended December 31, 2021, the
Company spent approximately $5.6 million on LED lighting. Additionally, the Company continued expanding its Wow
Operating Way practices to corporate business processes. During the year ended December 31, 2021, the Company spent
approximately $4.5 million on the Wow Operating Way expansion to corporate business processes. The related technology
and process efficiency project will result in an additional $1.0-1.5 million investment before the project is complete in the
second quarter of 2022. The project will also be expected to streamline various processes as well as generate economic
returns after the project is fully implemented.
During 2022, the Company plans to make cash capital expenditures, excluding those related to acquisition and development
of new locations, of approximately 1.6% of sales.
FOURTH QUARTER
Sales for the three months ended December 31, 2021 totaled $516.2 million, a increase of $112.5 million or 27.9% compared
to the same period in 2020. Overall same-store sales8 excluding foreign exchange increased $33.8 million, or 8.5% in the
fourth quarter of 2021 when compared to the fourth quarter of 2020 and increased a further $1.3 million due to the translation
of same-store sales8 at a higher U.S. dollar exchange rate. The improvement in same-store sales8 was the result of the
continued return of business following the slow down caused by the COVID-19 pandemic that began in mid-March of 2020.
The increase in same-store sales8 percentage was constrained by production challenges, including technician and
administrative staffing capacity constraints, as well as supply chain disruption, which impacted sales levels during the fourth
quarter of 2021. Sales growth of $79.0 million was attributable to incremental sales generated from 131 new locations. The
closure of under-performing facilities accounted for a decrease in sales of $1.7 million.
Gross Profit for the fourth quarter decreased to 43.5% from 45.8% in the same period in 2020. The gross margin percentage
was negatively impacted by reduced parts and labor margins, and a higher mix of parts sales in relation to labor. During the
fourth quarter of 2021, Boyd continued to face supply chain disruptions, which resulted in a negative impact on margins as a
higher percentage of parts had to be sourced from non-primary suppliers in order to complete repairs. Labor margins were
negatively impacted by the extraordinarily tight labor market, which resulted in increased wage costs to both retain and
recruit staff. The shortage of labor also resulted in a higher mix of parts sales in relation to labor. The recognition of CEWS
related to direct labor is approximately $0.9 million for the three months ended December 31, 2021 (2020 - $0.8 million).
Adjusted EBITDA8 for the fourth quarter of 2021 totaled $57.3 million or 11.1% of sales compared to Adjusted EBITDA8 of
$60.4 million or 15.0% of sales in the same period of the prior year. The $3.1 million decrease was primarily the result of a
lower gross margin percentage and higher levels of operating expenses, partially offset by proceeds from CEWS. In total,
Adjusted EBITDA8 for the three months ended December 31, 2021 benefited from CEWS in the amount of approximately
$2.3 million (2020 - $1.9 million). Adjusted EBITDA8 benefited from expense accrual reductions, as certain expense
estimates were firmed up at amounts that were lower than previously estimated and accrued. Changes in U.S. dollar
exchange rates increased Adjusted EBITDA8 by $0.1 million.
Current and Deferred Income Tax Expense for the fourth quarter of $1.8 million in 2021 compared to an expense of $5.2
million in 2020. Permanent differences did not have a significant impact on the tax computed on accounting income.
Net Earnings for the fourth quarter was $4.9 million, or 0.9% of sales, or $0.23 per fully diluted share compared to net
earnings of $16.3 million, or 4.0% of sales, or $0.76 per fully diluted share for the same period in the prior year. The net
earnings amount in the fourth quarter of 2021 was impacted by acquisition and transaction costs of $1.0 million (net of tax).
After adjusting for fair value and other unusual items, Adjusted net earnings8 for the fourth quarter of 2021 was $5.9 million,
or 1.1% of sales. This compares to Adjusted net earnings8 of $14.6 million or 3.6% of sales in the fourth quarter of 2020.
8 As defined in the non-GAAP financial measures and ratios section of the MD&A
31
Adjusted net earnings8 for the period was impacted by a lower gross margin percentage and higher levels of operating
expenses, as well as location growth. These new locations are subject to the same labor and supply challenges Boyd is
currently facing across its business. These market conditions are impacting the results that can be achieved in the short-term,
while new location growth has resulted in increased levels of depreciation and amortization.
LEGAL PROCEEDINGS
Neither BGSI, nor any of its subsidiaries are involved in any legal proceedings which are material in any respect.
RELATED PARTY TRANSACTIONS
In certain circumstances the Company has entered into property lease arrangements where an employee of the Company is
the landlord. In most cases, the Company assumes these property lease arrangements initially in connection with an
acquisition. The property leases for these locations do not contain any significant non-standard terms and conditions that
would not normally exist in an arm’s length relationship, and BGSI has determined that the terms and conditions of the leases
are representative of fair market rent values.
The following are the lease payment amounts for facilities under lease with related parties (in thousands of U.S. dollars):
Landlord
Affiliated Person(s)
Location
Kard Properties Ltd. &
D'Silva Real Estate
Holdings Inc.
Desmond D'Silva
Various locations -
Ontario
Gerber Building No. 1
Ptnrp
Eddie Cheskis,
& Tim O'Day
South Elgin, IL
As at December 31, 2020, Desmond D’Silva ceased to be a related party.
Lease
Expires
Various -
expiring
2020 to
2037
2023
December 31,
2021
December 31,
2020
$
— $
2,403
100
86
On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass LLC held by a
member of the U.S. management team was completed, and BGSI acquired the 21.16% non-controlling interest in Gerber
Glass LLC.
FINANCIAL INSTRUMENTS
In order to limit the variability of earnings due to the foreign exchange translation exposure on the income and expenses of
the Canadian operations, the Company may at times enter into foreign exchange contracts. These contracts are marked to
market monthly with unrealized gains and losses included in earnings. The Company did not have any such contracts in
place during 2021 or 2020.
Transactional foreign currency risk exists in limited circumstances where U.S. denominated cash is received in Canada. The
Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether to use forward foreign
exchange contracts. No such foreign exchange contracts were used during 2021 or 2020.
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CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements that present fairly the financial position, financial condition and results of operations
requires that BGSI make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the balance sheet date and reported amounts of revenues and expenses during the reporting
period. Actual results could differ materially from these estimates.
Impairment of Goodwill and Intangible Assets
When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash flow of the
cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the recoverable amount is then
calculated as the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected
future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The methods used to value intangible assets and goodwill require critical
estimates to be made regarding the future cash flows and useful lives of the intangible assets. Goodwill and intangible asset
impairments, when recognized, are recorded as a separate charge to earnings, and could materially impact the operating
results of BGSI for any particular accounting period.
Impairment of Other Long-lived Assets
BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering the potential
impairment indicated by such factors as business and market trends, BGSI’s ability to transfer the assets, future prospects,
current market value and other economic factors. In performing its review of recoverability, management estimates the
future cash flows expected to result from the use of the assets and their potential disposition. If the discounted sum of the
expected future cash flows is less than the carrying value of the assets generating those cash flows, an impairment loss would
be recognized based on the excess of the carrying amounts of the assets over their estimated recoverable value. The
underlying estimates for cash flows include estimates for future sales, gross margin rates and operating expenses. Changes
which may impact these estimates include, but are not limited to, business risks and uncertainties and economic conditions.
To the extent that management’s estimates are not realized, future assessments could result in impairment charges that may
have a material impact on BGSI’s consolidated financial statements.
Business Combinations
Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at
the date of acquisition and involves considerable judgment in determining the fair values assigned to property, plant and
equipment and intangible assets acquired and liabilities assumed on acquisition. The determination of these fair values
involves analysis including the use of discounted cash flows, estimated future margins, future growth rates, market rents and
capitalization rates. There is estimation in this analysis and actual results could differ from estimates.
Fair Value of Financial Instruments
BGSI has applied discounted cash flow methods to establish the fair value of certain financial liabilities recorded on the
statement of financial position, as well as disclosed in the notes to the financial statements. BGSI also establishes mark-to-
market valuations for derivative instruments, which are assumed to represent the current fair value of these instruments.
These valuations rely on assumptions regarding future interest and exchange rates as well as other economic indicators,
which at the time of establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses
on these derivative financial instruments may not be realized as markets change.
Income Taxes
BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for income taxes.
During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is
uncertain. As a result, BGSI recognizes tax liabilities based on estimates of whether additional taxes and interest will be due.
Uncertain tax liabilities may be recognized when, despite BGSI’s belief that its tax return positions are supportable, the
33
Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax
authorities. BGSI believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of
many factors including past experience and interpretations of tax law. To the extent that the final tax outcome is different
than the amounts recorded, such differences will impact income tax expense in the period in which such determination is
made.
CHANGES IN ACCOUNTING POLICIES
BGSI has adopted the amendments to IFRS 3, Business Combinations. These amendments change the definition of a business
and provide entities additional guidance to determine if the set of processes and assets acquired represents a business. The
amendments apply to business combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after January 1, 2020. BGSI has determined that there is no material impact on adoption.
CERTIFICATION OF DISCLOSURE CONTROLS
Management’s responsibility for financial information contained in this Annual Report is described on page 51. In addition,
BGSI’s Audit Committee of the Board of Directors has reviewed this Annual Report, and the Board of Directors has
reviewed and approved this Annual Report prior to its release. BGSI is committed to providing timely, accurate and balanced
disclosure of all material information about BGSI and to providing fair and equal access to such information. As of
December 31, 2021, BGSI’s management evaluated the effectiveness of the design and operation of its disclosure controls
and procedures, as defined under the rules adopted by the Canadian securities regulatory authorities. Disclosure controls are
procedures designed to ensure that information required to be disclosed in reports filed with securities regulatory authorities
is recorded, processed, summarized and reported on a timely basis, and is accumulated and communicated to BGSI’s
management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure.
BGSI’s management, including the CEO and the CFO, does not expect that BGSI’s disclosure controls will prevent or detect
all misstatements due to error or fraud. Because of the inherent limitations in all control systems, an evaluation of controls
can provide only reasonable, not absolute assurance, that all control issues and instances of fraud or error, if any, within BGSI
have been detected. BGSI is continually evolving and enhancing its systems of controls and procedures. Based on the
evaluation of disclosure controls, the CEO and the CFO have concluded that, subject to the inherent limitations noted above,
BGSI’s disclosure controls are effective in ensuring that material information relating to BGSI is made known to
management on a timely basis, and is fairly presented in all material respects in this Annual Report.
CERTIFICATION ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for the design and effectiveness of internal control over financial reporting in order to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian generally accepted accounting principles which incorporates International Financial
Reporting Standards for publicly accountable enterprises. BGSI’s management, including the CEO and the CFO, does not
expect that BGSI’s internal control over financial reporting will prevent or detect all misstatements due to error or fraud.
Because of the inherent limitations in all control systems, an evaluation of controls can provide only reasonable, not absolute
assurance, that all control issues and instances of fraud or error, if any, within BGSI have been detected. BGSI is continually
evolving and enhancing its systems of internal controls over financial reporting. The CEO and CFO of BGSI have evaluated
the design and effectiveness of BGSI’s internal control over financial reporting as at the end of the period covered by the
annual filings and have concluded that, subject to the inherent limitations noted above, the controls are sufficient to provide
reasonable assurance.
In addition, during the fourth quarter of 2021, there have been no changes in BGSI’s internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect, BGSI’s internal control over financial reporting.
34
BUSINESS RISKS AND UNCERTAINTIES
The following information is a summary of certain risk factors relating to the business of BGSI and its subsidiaries, and is
qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in
this Annual Report and the documents incorporated by reference herein.
BGSI and its subsidiaries are subject to certain risks inherent in the operation of the business. BGSI and its subsidiaries
manage risk and risk exposures through a combination of management oversight, insurance, systems of internal controls and
disclosures and sound operating policies and practices.
The Board of Directors has the responsibility to identify the principal risks of BGSI’s business and ensure that appropriate
systems are in place to manage these risks. The Audit Committee has the responsibility to discuss with management BGSI's
major financial risk exposures and the steps management has taken to monitor and control such exposures, including BGSI's
risk assessment and risk management policies. In order to support these responsibilities, management has a risk and
sustainability management committee which meets on an ongoing basis to evaluate and assess BGSI’s risks.
The process being followed by the risk and sustainability management committee is a systematic one which includes
identifying risks; analyzing the likelihood and consequence of risks; and then evaluating risks as to risk tolerance and control
effectiveness. This approach stratifies risks into four risk categories as follows:
Extreme Risks:
High Risks:
Moderate Risks:
Low Risks:
Immediate/ongoing action is required – involvement of senior management is required. Avoidance of
the item may be necessary if risk reduction techniques are insufficient to address the risk.
Risk item is significant and management responsibility should be specified and appropriate action
taken.
Managed by specific monitoring or response procedures. Additional risk mitigation techniques could
be considered if benefits exceed the cost.
Management by routine procedures. No further action is required at this time.
Risks can be reduced by limiting the likelihood or the consequence of a particular risk. This can be achieved by adjusting the
Company’s activities, implementing additional control/monitoring processes, or insuring/hedging against certain outcomes.
Residual risk remains after mitigation and control techniques are applied to an identified risk. Awareness of the residual risk
that BGSI ultimately accepts is a key benefit of the risk management process.
The following describes the risks that are most material to BGSI’s business; however, this is not a complete list of the
potential risks BGSI faces. There may be other risks that BGSI is not aware of, or risks that are not material today that could
become material in the future.
Employee Relations and Staffing
Boyd currently employs approximately 10,145 people, of which 1,250 are in Canada and 8,895 are in the U.S. The current
workforce is not unionized, except for approximately 30 employees located in the U.S. who are subject to collective
bargaining agreements. The collision repair industry is experiencing significant and unprecedented competition for talent,
and, in particular, a limited pool of qualified technicians and estimators. This is resulting in a shortage of qualified employees
as well as significant wage pressure, which is adversely impacting the volume and pace at which collision repair shops can
fix damaged vehicles and the Company’s financial results.
Attracting, training, developing and retaining employees at all levels of the organization are required to effectively manage
Boyd’s operations. The Company has rolled out various retention and recruitment initiatives to mitigate this risk. Failure to
attract, train, develop and retain employees at all levels of the organization could lead to a lack of production capacity,
knowledge, skills and experience required to effectively manage the business and could have a material adverse effect on the
Company’s business, financial condition and future performance.
35
The outbreak of a contagious illness, such as the COVID-19 pandemic, causes disruption of staffing and impacts the volume
and pace at which collision repair shops can fix damaged vehicles. Such disruption results in temporary closure of collision
repair facilities. A significant outbreak of contagious disease, such as the COVID-19 pandemic, results in a widespread
health crisis that could again adversely affect the financial performance of the Company.
Margin Pressure and Sales Mix Changes
The Company’s costs to repair vehicles, including the cost of labor, parts and materials are market driven and can fluctuate.
Disruptive events have negatively impacted supply chains, which is adversely impacting Boyd’s ability to complete repairs
due to availability of original equipment and aftermarket parts. This is resulting in high levels of work-in-process and
decreased margins as parts are sourced from non-primary suppliers in order to complete repairs. In addition, the collision
repair industry is experiencing significant and unprecedented competition for talent, and, in particular, a limited pool of
qualified technicians and estimators. This has resulted in a shortage of qualified employees as well as significant wage
pressure. Both of these issues adversely impact the Company’s financial results. Increasing vehicle complexity due to
advances in technology is also increasing the cost associated with vehicle repair. The Company is not always able to pass
these cost increases on to end users in the form of higher selling prices to its customers and/or its insurance company clients.
As a result, there can be no assurance that increases in the costs to repair vehicles will ultimately be recoverable from its
insurance company clients and customers. While negotiations with insurance companies and other influencing factors over
time can result in selling price increases, the timing and extent of such increases is not determinable. In addition, some DRP
relationships contain performance based pricing, which can impact margins. There can be no assurance that increases in the
costs to repair vehicles will ultimately be recoverable from the Company’s clients or customers.
The Company’s margin is also impacted by the mix of collision repair, retail glass and glass network sales as well as the mix
of parts, labor and materials within each business area. There can be no assurance that changes to sales mix will not occur
that could negatively impact the financial performance of the Company.
The Company currently makes its own part sourcing decisions for parts used in the provision of vehicle repair services. The
Company’s clients could, in the future, decide to source products directly, impose the use of certain parts suppliers on the
Company or otherwise change the parts sourcing process. Such a decision could have an adverse effect on the Company’s
margin.
Supply Chain Risk
The Company requires access to parts, materials and paint in order to complete repairs. Disruptive events have negatively
impacted supply chains, which has adversely impacted Boyd’s ability to complete repairs due to the lack of availability of
original equipment and aftermarket parts. This is resulting in increased repair cycle time, high levels of work-in-process and
decreased margins as parts are sourced from non-primary suppliers in order to complete repairs, and is adversely impacting
the Company’s financial results.
Certain of the Company’s suppliers operate in unionized environments, where their workers are subject to collective
bargaining agreements. A prolonged strike at a supplier could adversely impact Boyd’s ability to complete repairs. It is
possible that a prolonged strike could disrupt the Company’s supply chain, which could have a material impact on the
Company’s financial results.
The Company sources certain parts and materials from overseas vendors. Global issues, such as outbreaks and the spread of
contagious diseases, political instability, war or other disruptive events can negatively impact global supply chains, which
could adversely impact Boyd’s ability to complete repairs. It is possible that global issues could further disrupt the
Company’s supply chain, which could have a material impact on the Company’s financial results.
Pandemic Risk & Economic Downturn
A local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle
East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu or any other similar
illness, could decrease the willingness of the general population to travel or customers to patronize the Company’s facilities,
36
cause shortages of employees to staff the Company’s facilities, interrupt supplies from third parties upon which the Company
relies, result in governmental regulation adversely impacting the Company’s business and otherwise have a material adverse
effect on the Company’s business, financial condition and results of operations. Disruptions in financial markets, regional
economies and the world economy have been caused by the COVID-19 pandemic. There can be no assurance that this
disruption in financial markets, regional economies and the world economy will not continue to negatively affect the financial
performance of the Company.
Historically the auto collision repair industry has proven to be resilient to typical economic downturns along with the
accompanying unemployment, and while the Company works to mitigate the effect of current economic downturn on its
operations, economic conditions, which are beyond the Company’s control, have led to a decrease in accident repair claims
volumes due to fewer miles driven or due to vehicle owners being less inclined to have their vehicles repaired. It is difficult
to predict the severity and the duration of the decrease in claims volumes resulting from this economic downturn and the
accompanying unemployment and what affect it may have on the auto collision repair industry, in general, and the financial
performance of the Company in particular. There can be no assurance that the economic downturn will not continue to
negatively affect the financial performance of the Company.
Acquisition and New Location Risk
The Company plans to continue to increase revenues and earnings through the acquisition and start-up of additional collision
repair facilities and other businesses. The Company follows a detailed process of due diligence and approvals to limit the
possibility of acquiring or building out a non-performing location or business. There can be no assurance that the Company
will be able to find suitable acquisition targets at acceptable pricing levels, or that the Company will be able to find and
buildout locations without incurring cost overruns, or that the new locations will achieve sales and profitability levels to
justify the Company’s investment.
Boyd views the United States and Canada as having significant potential for further expansion of its business. There can be
no assurance that any market for the Company’s services and products will develop either at the local, regional or national
level. Economic instability, laws and regulations, increasing acquisition valuations and the presence of competition in all or
certain jurisdictions may limit the Company’s ability to successfully expand operations.
The Company has grown rapidly through multi-location acquisitions as well as single location growth opportunities and new
location development. Rapid growth can put a strain on managerial, operational, financial, human and other resources. Risks
related to rapid growth include administrative and operational challenges such as the management of an expanded number of
locations, the assimilation of financial reporting systems, technology and other systems of acquired companies, increased
pressure on senior management and increased demand on systems and internal controls. The ability of the Company to
manage its operations and expansion effectively depends on the continued development and implementation of plans, systems
and controls that meet its operational, financial and management needs. If Boyd is unable to continue to develop and
implement these plans, systems or controls or otherwise manage its operations and growth effectively, the Company will be
unable to maintain or increase margins or achieve sustained profitability, and the business could be harmed.
A key element of the Company’s strategy is to successfully integrate and manage new locations in order to sustain and
enhance profitability. There can be no assurance that the Company will be able to profitably integrate and manage additional
locations. Successful integration and management can depend upon a number of factors, including the ability to establish,
maintain and grow DRP relationships, the ability to attract, retain and motivate certain key management and staff,
establishing, retaining and leveraging client and supplier relationships and implementing standardized procedures and best
practices. In the event that new location growth cannot be successfully integrated into Boyd’s operations or performs below
expectations, the business could be materially and adversely affected.
To the extent that the prior owners of businesses acquired by Boyd failed to comply with or otherwise violated applicable
laws, the Company, as the successor owner, may be financially responsible for these violations and any associated
undisclosed liability. The Company seeks, through systematic investigation and due diligence, and through indemnification
by former owners, to minimize the risk of material undisclosed liabilities associated with acquisitions. The discovery of any
material liabilities, including but not limited to tax, legal and environmental liabilities, could have a material adverse effect on
the Company’s business, financial condition and future prospects.
37
Operational Performance
In order to compete in the marketplace, the Company must consistently meet the operational performance metrics expected
by its insurance company clients and its customers. Failing to deliver on metrics such as cycle time, quality of repair,
customer satisfaction and cost of repair can, over time, result in reductions to pricing, repair volumes, or both. The Company
has implemented processes as well as measuring and monitoring systems to assist it in delivering on these key metrics.
However, there can be no assurance that the Company will be able to continue to deliver on these metrics or that the metrics
themselves will not change in the future.
The Company’s principal source of funds is cash generated from operations. Fluctuations in required capital expenditures,
the need to maintain productive capacity, required funding to meet growth targets, and debt repayments expected to be
funded by cash flows generated from operations may potentially impact the amount of cash available for dividends to be
declared and paid by the Company or its subsidiaries in the future.
Brand Management and Reputation
The Company’s success is impacted by its ability to protect, maintain and enhance the value of its brands and reputation.
Brand value and reputation can be damaged by isolated incidents, particularly if the incident receives considerable publicity
or if it draws litigation. Incidents may occur as a result of events beyond the Company’s control or may be isolated to actions
that occur in one particular location. Demand for the Company’s services could diminish significantly if an incident or other
matter damages its brand or erodes the confidence of its insurance company clients or directly with the vehicle owners
themselves. With the advent of the Internet and the evolution of social media there is an increased ability for individuals to
adversely affect the brand and reputation of the Company. There can be no assurance that past or future incidents will not
negatively affect the Company’s brand or reputation.
Market Environment Change
The collision repair industry is subject to continual change in terms of regulations, repair processes and equipment,
technology and changes in the strategic direction of clients, suppliers and competitors. The Company endeavors to stay
abreast of developments and preferences in the industry and make strategic decisions to manage through these changes and
potential disruptions to the traditional business model. In certain situations, the Company is involved in leading change by
anticipating or developing new methods to address changing market needs. The Company however, may not be able to
correctly anticipate the need for change, may not effectively implement changes, or may be required to increase spending on
capital equipment to maintain or improve its relative position with competitors. There can be no assurance that market
environment changes will not occur that could negatively affect the financial performance of the Company.
Reliance on Technology
As is the case with most businesses in today’s environment, there is a risk associated with Boyd’s reliance on computerized
operational and reporting systems. Boyd makes reasonable efforts to ensure that back-up systems and redundancies are in
place and functioning appropriately. Boyd has disaster recovery programs to protect against significant system failures.
Although a computer system failure would not be expected to critically damage the Company in the long term, there can be
no assurance that a computer system crash or like event would not have a material impact on its financial results.
Reliance on technology in order to gain or maintain competitive advantage is becoming more significant and therefore the
Company is faced with determining the appropriate level of investment in new technology in order to be competitive. There
can be no assurance that the Company will correctly identify or successfully implement the appropriate technologies for its
operations.
The Company is currently expanding its Wow Operating Way practices to corporate business processes by leveraging a
cloud-based application solution. The project is expected to streamline various processes as well as generate economic
returns once fully implemented; however, there can be no assurance that the expected positive returns will be generated as the
project may be delayed, costs may increase, or unanticipated challenges could arise during implementation.
38
Increased reliance on computerized operational and reporting systems also results in increased cyber security risk, including
potential unauthorized access to customer, supplier and employee sensitive information, corruption or loss of data and release
of sensitive or confidential information. Disruptions due to cyber security incidents could adversely affect the business,
results of operations and financial condition of the Company. Cyber security incidents could result in operational delays,
disruption to work flow and reputational harm. There can be no assurance that Boyd will be able to anticipate, prevent or
mitigate rapidly evolving types of cyber-attacks.
Changes in Client Relationships
A high percentage of the Company’s revenues are derived from insurance companies. Over the past 25+ years, many private
insurance companies have implemented customer referral arrangements known as Direct Repair Programs (DRP’s) with
collision repair operators who have been recognized as consistent high quality, performance based repairers in the industry.
The Company’s ability to continue to grow its business, as well as maintain existing business volume and pricing, is largely
reliant on its ability to maintain these DRP relationships. The Company continues to develop and monitor these relationships
through ongoing measurement of the success factors considered critical by insurance clients. The loss of any existing
material DRP relationship, or a material component of a significant DRP relationship, could have a material adverse effect on
Boyd’s operations and business prospects. Of the top five insurance companies that the Company deals with, which in
aggregate account for approximately 49% (2020 – 46%) of total sales, one insurance company represents approximately 14%
(2020 – 13%) of the Company’s total sales, while a second insurance company represents approximately 10% (2020 – 10%).
DRP relationships are governed by agreements that are usually cancellable upon short notice. These relationships can change
quickly, both in terms of pricing and volumes, depending upon collision repair shop performance, cycle time, cost of repair,
customer satisfaction, competition, insurance company management, program changes and general economic activity. To
mitigate this risk, management fosters close working relationships with its insurance company clients and customers and the
Company continually seeks to diversify and grow its client base both in Canada and the U.S. There can be no assurance that
relationships with insurance company clients will not change in the future, which could impair Boyd’s revenues and/or
margins, and result in a material adverse effect on the Company’s business.
Decline in Number of Insurance Claims
The automobile collision repair industry is dependent on the number of accidents which occur and, for the most part, become
repairable insurance claims. The volume of accidents and related insurance claims can be significantly impacted by
technological disruption and changes in technology such as ride sharing, collision avoidance systems, driverless vehicles and
other safety improvements made to vehicles. Other changes which have and can continue to affect insurance claim volumes
include, but are not limited to, weather, general economic conditions, unemployment rates, changing demographics, vehicle
miles driven, new vehicle production, insurance policy deductibles and auto insurance premiums. In addition, repairable
claims volumes have been and can continue to be impacted by an increased number of non-repairable claims or total loss.
There can be no assurance that a continued decline in insurance claims will not occur, which could reduce Boyd’s revenues
and result in a material adverse effect on the Company’s business.
Environmental, Health and Safety Risk
The nature of the collision repair business means that hazardous substances must be used, which could cause damage to the
environment or individuals if not handled properly. The Company’s environmental protection policy requires environmental
site assessments to be performed on all business locations prior to acquisition, start-up or relocation so that any existing or
potential environmental situations can be remedied or otherwise appropriately addressed. It is also Boyd’s practice to secure
environmental indemnification from landlords and former owners of acquired collision repair businesses, where such
indemnification is available. Boyd also engages a private environmental consulting firm to perform regular compliance
reviews to ensure that the Company’s environmental and health and safety policies are followed.
To date, the Company has not encountered any environmental protection requirements or issues which would be expected to
have a material financial or operational effect on its current business and it is not aware of any material environmental issues
that could have a material impact on future results or prospects. No assurance can be given, however, that the prior activities
39
of Boyd, or its predecessors, or the activities of a prior owner or lessee, have not created a material environmental problem or
that future uses or evolving regulations will not result in the imposition of material environmental, health or safety liability
upon Boyd.
The outbreak of a contagious illness, such as the recent COVID-19 pandemic, could require the Company to develop and
execute revised operating procedures intended to mitigate safety and health risks in the work environment. However, there
can be no assurance that the enhanced protocols put in place will protect against an outbreak that could result in lost time and
negatively affect the financial performance of the Company.
Climate Change and Weather Conditions
Climate change is exacerbated in part by the burning of fossil fuels in order to generate electricity for consumers and
industry. Greenhouse gasses from fossil fuels is leading to climate change and global warming, which is leading to increased
frequency and severity of natural disasters and extreme weather condition events. The collision repair industry is not
particularly carbon intensive. The business is focused on the auto repair industry and as such its primary product is providing
a service. In providing this service, major inputs include replacement parts, water-based paint, skilled labor, and energy to
run spray booths, compressors, lighting, HVAC and other equipment. The industry is highly fragmented with many
independent owner operators who are not able to operate at scale. There are efforts to consolidate the industry and the
Company is a leader in this effort. By doing so, the industry can operate more efficiently and have the central coordination
and capital to invest in sustainability areas to reduce the impact the industry has on the environment.
Transitioning to a low carbon environment and sustainable business model will require additional investments in the long-
term. Capital investments in energy saving or renewable energy technologies to operate the shop, can reduce or offset the
contribution to carbon emissions that the Company currently emits. Transitioning the various vehicles used by business to
electric instead of internal combustion engine based is another action that can be taken by the Company to reduce carbon
emissions. Investments could be necessary for sensors and other systems to manage electricity usage or identify future
opportunities. Facility management and landscape management are areas of opportunity to improve the impact Boyd’s
locations have on global warming.
The primary climate related risks for the business relate to the expected increase in extreme weather events, such as blizzards,
hurricanes, torrential rain, and tornadoes. These events can cause physical damage to shops or hinder Boyd’s ability to
process work and also tend to result in higher damage levels that result in more vehicles being non-repairable. Extreme
weather can also slow or halt delivery of parts and in some cases prevent employees from attending work which slows down
cycle-time and therefore sales.
A number of initiatives related to climate change can benefit the Company. For example investing in LED lighting improves
the working conditions for our technicians and can improve the quality of the work they do, as well as lowering operating
costs and reducing emissions. Continuous improvement and efficiency gains can improve quality and reduce repair cycle
time, causing less waste, higher customer satisfaction and generating higher sales with the same level of inputs. A greater
focus on repairing damaged parts as opposed to replacing those parts reduces waste and in some cases can improve
profitability. Alignment with vehicle owner, insurance company and original equipment manufacturer objectives improves
Boyd’s customer relationships and demonstrates an ability to align and partner with these stakeholders.
There is good alignment between climate change initiatives and the Company’s strategy. Core strategies of operational
excellence, expense management and optimizing the business as well as new location and acquisition growth have overlap
with sustainability. Being efficient, reducing waste and bringing corporate resources and investment to a fragmented industry
supports a long-term alignment with sustainability. Environment, social and governance objectives are being integrated into
the Company’s strategic projects. There is often a dimension of each business initiative that relates to sustainability. Boyd is
committed to identifying those dimensions and bringing awareness throughout the company so that business objectives
naturally contribute to our sustainability goals, which have been outlined in Boyd’s first Environmental, Social and
Governance Report, which is available on the Boyd website at www.boydgroup.com/sustainability.
The Board is investing more time on sustainability issues and has assigned the oversight responsibility for sustainability,
including climate change risk management and disclosure to the Governance & Sustainability Committee. The topic is a
40
standing agenda item with internal metrics and reporting being developed. Management has an Enterprise Risk Management
Committee that has been renamed the Risk and Sustainability Committee after being tasked with developing sustainability
objectives and processes for the company. Its current mandate is to work with the various operating groups to identify the
key sustainability metrics for future reporting and target setting. These key metrics and targets will be focused on the priority
areas defined for each of the environmental, social and governance pillars that have been outlined in Boyd’s first
Environmental, Social and Governance Report.
The effect of global warming and its impact on weather conditions may reduce collision repair volume and represent an
element of risk to the Company’s ability to maintain sales. Historically, extremely mild winters and dry weather conditions
have had a negative impact on collision repair sales volumes. Natural disasters resulting in business interruption, or supply
chain interruption could also negatively impact the Company’s operations. Even with market share gains, weather-related
decline in market size can result in sales declines which could have a material impact on the Company’s business. Business
interruption due to natural disasters and extreme weather condition events, including supply chain interruption, may result in
temporary store closures or limit production volume and could adversely impact Boyd’s ability to complete repairs, which
could have a material adverse effect on the Company’s business.
Competition
The collision repair industry in North America, estimated at almost $37 billion U.S. is very competitive. The main
competitive factors are cost of repair, cycle time, quality, customer satisfaction and adherence to various insurance company
processes and performance requirements. There can be no assurance that Boyd’s competitors will not achieve greater market
acceptance due to pricing or other factors.
Although competition exists mainly on a regional basis, Boyd competes with a small number of other multi-location collision
repair operators in multiple markets in which it operates.
Given these industry characteristics, existing or new competitors, including other automotive-related businesses, may become
significantly larger and have greater financial and marketing resources than Boyd. Competitors may compete with Boyd in
rendering services in the markets in which Boyd currently operates and also in seeking existing facilities to acquire, or new
locations to open, in markets in which Boyd desires to expand. There can be no assurance that the Company will be able to
maintain or achieve its desired market share.
Access to Capital
The Company grows, in part, through future acquisitions or start-up of collision and glass repair and replacement businesses.
There can be no assurance that Boyd will have sufficient capital resources available to implement its growth strategy.
Inability to raise new capital, in the form of debt or equity, could limit Boyd’s future growth through acquisition or start-up.
The Company will endeavor, through a variety of strategies, to ensure in advance that it has sufficient capital for growth.
Potential sources of capital that the Company has been successful at accessing in the past include public and private equity
placements, convertible debt offerings, using equity securities to directly pay for a portion of acquisitions, capital available
through strategic alliances with trading partners, lease financing, seller financing and both senior and subordinate debt
facilities or by deferring possible future purchase price payments using contingent consideration and call or put options.
There can be no assurance that the Company will be successful in accessing these or other sources of capital in the future.
The Company and its subsidiaries use financial leverage through the use of debt, which have debt service obligations. The
Company’s ability to refinance or to make scheduled payments of interest or principal on its indebtedness will depend on its
future operating performance and cash flow, which are subject to prevailing economic conditions, prevailing interest rates,
and financial, competitive, business and other factors, many of which are beyond its control.
The Company’s revolving credit facilities contain restrictive covenants that limit the discretion of the Company’s
management and the ability of the Company to incur additional indebtedness, to make acquisitions of collision repair
businesses, to create liens or other encumbrances, to pay dividends, to redeem any equity or debt, or to make investments,
capital expenditures, loans or guarantees and to sell or otherwise dispose of assets and merge or consolidate with another
41
entity. In addition, the revolving credit facilities contain a number of financial covenants that require BGSI and its
subsidiaries to meet certain financial ratios and financial condition tests. A failure to comply with the obligations under these
credit facilities could result in an event of default, which, if not cured or waived, could permit acceleration of the relevant
indebtedness. If the indebtedness were to be accelerated, there can be no assurance that the assets of the Company and its
subsidiaries would be sufficient to repay the indebtedness in full. There can also be no assurance that the Company will be
able to refinance the credit facilities as and when they mature. The revolving credit facility is secured by the assets of the
Company.
Dependence on Key Personnel
The success of the Company is dependent on the services of a number of members of management. The experience and
talent of these individuals is a significant factor in Boyd’s continued success and growth. The loss of one or more of these
individuals could have a material adverse effect on the Company’s business operations and prospects. The Company has
entered into management agreements with key members of management in order to mitigate this risk.
Tax Position Risk
BGSI and its subsidiaries account for income tax positions in accordance with accounting standards for income taxes, which
require that the Company recognize in the financial statements, the impact of a tax position, if that position is more likely
than not of being sustained on examination by taxation authorities, based on the technical merits of the position.
Inherent risks and uncertainties can arise over tax positions taken, or expected to be taken, with respect to matters including
but not limited to acquisitions, transfer pricing, inter-company charges and allocations, financing charges, fees, related party
transactions, tax credits, tax based incentives and stock based transactions. In addition, there are inherent risks and
uncertainties with respect to government assistance received through various programs developed to support the business
during the economic downturn brought about by the COVID-19 pandemic. Management uses tax experts to assist in
correctly applying and accounting for tax and government assistance program rules, however there can be no assurance that a
position taken will not be challenged by the taxation authorities that could result in an unexpected material financial
obligation.
Expenses incurred by BGSI and its subsidiaries are only deductible to the extent they are reasonable. There can be no
assurance that the taxation authorities will not challenge the reasonableness of certain expenses. If such a challenge were
successful, it may materially and adversely affect the financial results of BGSI and its subsidiaries.
BGSI’s shares are qualified investments for a Registered Plan under the Tax Act as the Shares are listed on a “designated
stock exchange” (as defined in the Tax Act).
There can be no assurance that additional changes to the taxation of corporations or changes to other government laws, rules
and regulations, either in Canada or the U.S., will not be undertaken which could have a material adverse effect on BGSI’s
share price and business. There can be no assurance BGSI will benefit from these rules, that the rules will not change in the
future or that BGSI will avail itself of them.
Corporate Governance
Securities law imposes statutory civil liability for misrepresentations in continuous disclosure documents including failure to
make timely disclosure. Investors have a right of action if they are harmed by a misrepresentation in an issuer’s disclosure
document or in a public oral statement relating to an issuer, or the failure of an issuer to make timely disclosure of a material
change. Potentially liable parties include the issuer, each officer, and each Director of the issuer who authorizes, permits or
acquiesces in the release of the document containing a misrepresentation, the making of the public statement containing a
misrepresentation or in the failure to make a timely disclosure.
Under the Ontario Securities Act, section 138.4(6), a due diligence defense is available. The due diligence defense requires
the following items to be addressed:
42
•
•
•
the issuer must have a system designed to ensure the issuer is meeting its disclosure obligations;
the defendant must have conducted a reasonable investigation to support reliance on the system; and
defendants must have no reasonable grounds to believe that the document or a public oral statement contained a
misrepresentation or that the failure to make the required disclosure would occur.
BGSI is keenly aware of the significance of these laws and the interrelationships between civil liability, disclosure controls
and good governance. BGSI has adopted policies, practices and processes to reduce the risk of a governance or control
breakdown. A statement of BGSI’s governance practices is included in its most recent information circular which can be
found at www.sedar.com. Although BGSI believes it follows good corporate governance practices, there can be no assurance
that these practices will eliminate or mitigate the impact of a material lawsuit in this area.
The area of governance is growing to encompass not only traditional governance matters, but also environmental and social
matters. This area is often referred to as Environmental, Social and Governance, or “ESG”. Increased awareness and
attention by investors to ESG matters means that the Company needs to become more transparent in developing and reporting
on ESG initiatives and increase or add ESG initiatives where there are significant gaps. BGSI is developing and enhancing
ESG reporting and initiatives. Boyd has recently published an ESG report, which complements previously adopted policies
on reporting and anti-retaliation, occupational health and safety, non-discrimination, human rights, diversity and anti-
corruption. These policies, along with the ESG Report, are available on the Boyd website at www.boydgroup.com/
sustainability.
Increased Government Regulation and Tax Risk
BGSI and its subsidiaries are subject to various federal, provincial, state and local laws, regulations and taxation authorities.
Various federal, provincial, state and local agencies as well as other governmental departments administer such laws,
regulations and their related rules and policies. New laws governing BGSI or its business could be enacted or changes or
amendments to existing laws and regulations could be enacted which could have a significant impact on Boyd. For example,
privacy legislation continues to evolve rapidly and tariff changes are being introduced with greater frequency. BGSI utilizes
the services of professional advisors in the areas of taxation, environmental, health and safety, labor and general business law
to mitigate the risk of non-compliance. Failure to comply with the applicable laws, regulations or tax changes may subject
BGSI to civil or regulatory proceedings and no assurance can be given that this will not have a material impact on financial
results.
A number of jurisdictions in which the Company operates have regulations to limit emissions and pollutants. The Company
has adapted its processes in an effort to comply with these regulations. Although to date, there have been no negative
consequences as a result of these regulations, there can be no assurance that these regulations will not have a material adverse
impact on BGSI’s business or financial results. Future emission or pollutant regulation compliance requirements may have a
material adverse impact on BGSI’s business or financial results.
Fluctuations in Operating Results and Seasonality
The Company’s operating results have been and are expected to continue to be subject to quarterly fluctuations due to a
variety of factors including changes in customer purchasing patterns, pricing paid to insurance companies, general operating
effectiveness, automobile technologies, general and regional economic downturns, unemployment rates, employee vacation
timing and weather conditions. These factors can affect Boyd’s ability to fund ongoing operations and finance future
activities.
43
Risk of Litigation
BGSI and its subsidiaries could become involved in various legal actions in the ordinary course of business. Litigation loss
accruals may be established if it becomes probable that BGSI will incur an expense and the amount can be reasonably
estimated. BGSI’s management and internal and external experts are involved in assessing the probability of litigation loss
and in estimating any amounts involved. Changes in these assessments may lead to changes in recorded litigation loss
accruals. Claims are reviewed on a case by case basis, taking into consideration all information available to BGSI.
The actual costs of resolving claims could be substantially higher or lower than the amounts accrued. In certain cases, legal
claims may be covered under BGSI’s various insurance policies.
Execution on New Strategies
New initiatives are introduced from time to time in order to grow Boyd’s business. Initiatives such as entering new markets,
introducing and improving related products and services, or identifying new strategies to capture additional market share
have the potential to be accretive to the Company’s business when the opportunity is accurately identified and executed.
There can be no assurance that the Company identifies new strategies that are accretive to the business or that it is successful
in implementing such initiatives.
Insurance Risk
BGSI insures its property, plant and equipment, including vehicles, through insurance policies with insurance carriers located
in Canada and the U.S. Included within these policies is insurance protection against property loss and general liability.
BGSI also insures its directors and officers against liabilities arising from errors, omissions and wrongful acts. Management
uses its knowledge, as well as the knowledge of experienced brokers, to ensure that insurable risks are insured appropriately
under terms and conditions that would protect BGSI and its subsidiaries from losses. There can be no assurance that all perils
would be fully covered or that a material loss would be recoverable under such insurance policies.
Interest Rates
The Company occasionally fixes the interest rate on its debt using interest rate swap contracts or other provisions available in
its debt facilities. There can be no guarantee that interest rate swaps or other contract terms that effectively turn variable rate
debt into fixed rates will be an effective hedge against long-term interest rate fluctuations.
The Company has not fixed interest rates within its revolving credit facility. There can be no assurance that interest rates
either in Canada or the U.S. will not increase in the future, which could result in a material adverse effect on the Company’s
business.
U.S. Health Care Costs and Workers Compensation Claims
BGSI accrues for the estimated amount of U.S. health care claims and workers compensation claims that may have occurred
but were not reported at the end of the reporting period under its health care and workers compensation plans. The accruals
are based upon the Company’s knowledge of current claims as well as third party estimates derived from past experience.
Significant claim occurrences which remain unreported for a number of months could materially impact this accrual. In
addition, as U.S health care costs increase, there can be no assurance given that the Company can continue to offer health
care insurance to its employees at a reasonable cost.
44
Foreign Currency Risk
A substantial portion of Boyd’s revenue and cash flow are now, and are expected to continue to be, generated in U.S. dollars.
Fluctuations in the exchange rates between the Canadian dollar and the U.S. currency may have a material adverse effect on
BGSI’s share price, which is denominated and trades in Canadian dollars as well as BGSI’s ability to make future Canadian
dollar cash dividends.
Low Capture Rates
Sales growth can be enhanced if the Company is effective at booking repair orders for all sales opportunities that are
identified. The Company is exposed to missed jobs when capacity is constrained and to the extent that employees are
ineffective at capturing all sales opportunities. Measurement of capture rates, management support and training are methods
that are employed to enhance capture rates. Efforts to increase capacity are limited by availability of qualified labor. It is
possible that the Company may not be able to capture sales effectively enough to maximize sales.
Capital Expenditures
The business of the Company requires ongoing capital maintenance. Moreover, opportunities may arise for capital upgrades
providing returns or cost savings that may not be realized in the immediate future, but rather over several years. As vehicle
technology advances and market needs change, the capital intensity of the industry is changing, requiring expenditures in
excess of historical capital maintenance levels. To the extent that capital expenditures are in excess of amounts budgeted, the
amounts of cash available for dividends may decrease.
Energy Costs
The Company is exposed to fluctuations in the price of energy. These costs not only impact the costs associated with
occupying and operating collision repair facilities but may also affect costs of parts and materials used in the repair process as
well as miles driven by automobile owners. There can be no assurance that escalating costs which cannot be offset by energy
conservation practices, price increases to clients and customers or productivity gains, would not result in materially lower
operating margins. As well, there can be no assurance that escalating energy costs will not materially reduce automobile
miles driven and in turn reduce the number of collisions.
ADDITIONAL INFORMATION
BGSI’s shares trade on the Toronto Stock Exchange under the symbol TSX: BYD.TO. Additional information relating to the
BGSI is available on SEDAR (www.sedar.com) and the Company website (www.boydgroup.com).
45
FORM 52-109F1
CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Timothy O’Day, Chief Executive Officer, Boyd Group Services Inc., certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for
greater certainty, all documents and information that are incorporated by reference in the AIF (together, the
“annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31,
2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings
do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or
that is necessary to make a statement not misleading in light of the circumstances under which it was made,
for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial
statements together with other financial information included in the annual filings present fairly in all
material respects the financial condition, financial performance and cash flows of the issuer, as of the date
of and for the periods presented in the annual filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying
officer(s) and I have, as at the financial year end
a.
designed DC&P, or caused it to be designed under our supervision, to provide reasonable
assurance that
i.
ii.
material information relating to the issuer is made known to us by others, particularly
during the period in which the annual filings are being prepared; and
information required to be disclosed by the issuer in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in securities legislation; and
b.
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the
issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The
Committee of Sponsoring Organizations of the Treadway Commission.
5.2 ICFR – material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Evaluation: The issuer’s other certifying officer(s) and I have
a.
b.
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P
at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about
the effectiveness of DC&P at the financial year end based on that evaluation; and
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR
at the financial year end and the issuer has disclosed in its annual MD&A
i.
ii.
our conclusions about the effectiveness of ICFR at the financial year end based on that
evaluation; and
N/A
46
c. N/A
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s
ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that
has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and
the board of directors or the audit committee of the board of directors any fraud that involves management
or other employees who have a significant role in the issuer’s ICFR.
Date: March 23, 2022
(signed)
Timothy O’Day
President & Chief Executive Officer
47
FORM 52-109F1
CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Narendra Pathipati, Chief Financial Officer, Boyd Group Services Inc., certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for
greater certainty, all documents and information that are incorporated by reference in the AIF (together, the
“annual filings”) of Boyd Group Services Inc. (the “issuer”) for the financial year ended December 31,
2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings
do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or
that is necessary to make a statement not misleading in light of the circumstances under which it was made,
for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial
statements together with other financial information included in the annual filings present fairly in all
material respects the financial condition, financial performance and cash flows of the issuer, as of the date
of and for the periods presented in the annual filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying
officer(s) and I have, as at the financial year end
a.
designed DC&P, or caused it to be designed under our supervision, to provide reasonable
assurance that
i.
ii.
material information relating to the issuer is made known to us by others, particularly
during the period in which the annual filings are being prepared; and
information required to be disclosed by the issuer in its annual filings, interim filings or
other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in securities legislation; and
b.
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the
issuer’s ICFR is the Internal Control – Integrated Framework (COSO 2013 Framework), published by The
Committee of Sponsoring Organizations of the Treadway Commission.
5.2 ICFR – material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Evaluation: The issuer’s other certifying officer(s) and I have
a.
b.
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P
at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about
the effectiveness of DC&P at the financial year end based on that evaluation; and
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR
at the financial year end and the issuer has disclosed in its annual MD&A
i.
ii.
our conclusions about the effectiveness of ICFR at the financial year end based on that
evaluation; and
N/A
48
c. N/A
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer’s
ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that
has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and
the board of directors or the audit committee of the board of directors any fraud that involves management
or other employees who have a significant role in the issuer’s ICFR.
Date: March 23, 2022
(signed)
Narendra Pathipati
Executive Vice President & Chief Financial Officer
49
BOYD GROUP SERVICES INC.
Consolidated Financial Statements
Year Ended December 31, 2021
50
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
These consolidated financial statements have been prepared by management in accordance with Canadian generally
accepted accounting principles. Management is responsible for their integrity, objectivity and reliability, and for the
maintenance of financial and operating systems, which include effective controls, to provide reasonable assurance
that Boyd Group Services Inc.’s assets are safeguarded and that reliable financial information is produced.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial
reporting, disclosure control and internal control. The Board exercises these responsibilities through its Audit
Committee, all members of which are not involved in the daily activities of Boyd Group Services Inc. The Audit
Committee meets with management and, as necessary, with the independent auditors, Deloitte LLP, to satisfy itself
that management’s responsibilities are properly discharged and to review and report to the Board on the consolidated
financial statements.
In accordance with Canadian generally accepted auditing standards, the independent auditors conduct an
examination each year in order to express a professional opinion on the consolidated financial statements.
(signed)
(signed)
Timothy O’Day
President & Chief Executive Officer
Narendra Pathipati
Executive Vice President & Chief Financial Officer
Winnipeg, Manitoba
March 22, 2022
51
Deloitte LLP
360 Main Street
Suite 2300
Winnipeg MB R3C 3Z3
Canada
Tel: 204-942-0051
Fax: 204-947-9390
www.deloitte.ca
March 22, 2022
Independent Auditor's Report
To the Shareholders of
Boyd Group Services Inc.,
Opinion
We have audited the consolidated financial statements of Boyd Group Services Inc. (the "Company"), which
comprise the consolidated statements of financial position as at December 31, 2021, December 31, 2020, and
January 1, 2020, and the consolidated statements of income, comprehensive income, changes in equity and
cash flows for the years ended December 31, 2021 and December 31, 2020, and notes to the consolidated
financial statements, including a summary of significant accounting policies (collectively referred to as the
"financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2021, December 31, 2020 and January 1, 2020, and its financial
performance and its cash flows for the years ended December 31, 2021 and December 31, 2020 in accordance
with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS").
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements for the year ended December 31, 2021. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Goodwill and Intangible Assets — Canadian segment— Refer to the Financial Statement Notes 3 and 11
Key Audit Matter Description
The Company’s evaluation of goodwill and intangible assets for impairment involves the comparison of the
recoverable amount of each cash generating units to their carrying value. The Company used the discounted
cash flow model to estimate the value-in-use of both the U.S. Segment and Canadian segment. As a result of the
annual assessments of impairment of goodwill and intangible assets for the U.S. segment and Canadian
segment, management has determined that there was no impairment of goodwill or intangible assets.
The continuing impact of the COVID-19 pandemic in Canada has a resulted in a slower economic re-opening
when compared to the U.S., as well as greater restrictions, which has caused a more significant decline in
demand for services. As a result, we have identified the evaluation of the goodwill and intangible assets
impairment analysis for the Canadian segment as a key audit matter. While there are several estimates and
assumptions that are required to determine the recoverable amount of the Canadian segment, the estimates,
and assumptions with the highest degree of subjectivity are future revenue forecasts and the selection of the
discount rate. Auditing these estimates and assumptions required a high degree of auditor judgment and an
increased extent of effort, including the involvement of fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the future revenue forecasts and the selection of the discount rate used to
determine the recoverable amount for the Canadian segment included the following, among others:
• Evaluated management’s ability to accurately forecast future revenues and revenue growth rates by
comparing actual results to management’s historical forecasts.
• Evaluated the reasonableness of the forecast of future revenues, revenue growth rates and operating
margins by comparing the forecasts to:
o Historical revenues and operating margins.
o Known changes in the Company’s operations and its industry, including the impact of the COVID-19
pandemic, which are expected to impact future operating performance; and
Internal communications to management and the Board of Directors.
o
• With the assistance of fair value specialists, evaluated the reasonableness of the discount rates by testing
the source information underlying the determination of the discount rates, developing a range of
independent estimates, and comparing those to the discount rate selected by management.
Valuation of customer relationship intangible assets within acquisitions - Refer to Financial Statement Notes 3
and 5
Key Audit Matter Description
The Company, pursuant to its growth strategy, completes acquisitions of single and multi-shop operators
throughout the year. These acquisitions are accounted for using the acquisition method of accounting. The fair
values of certain customer relationships are determined using the multi-period excess earning method. This
requires management to make significant estimates and assumptions related to discount rates, customer
attrition rates and forecasted EBITDA margins attributable to the customer relationships.
Given the significant judgments made by management to determine the fair value of these customer
relationships, performing audit procedures to evaluate the reasonableness of the estimates and assumptions
related to discount rates, customer attrition rates and forecasted EBITDA margins required a high degree of
auditor judgments and an increased extent of audit effort, including the need to involve fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to discount rates, customer attrition rates and forecasted EBITDA margins included
the following, among others:
• Evaluated the reasonableness of management’s forecasts of EBITDA margins of the acquired company by
comparing forecasts to:
o Historical EBITDA margins;
o Actual cash flows of revenue and EBITDA after acquisition;
o
Internal communications from management to the board of directors;
o Underlying analyses detailing business strategies and growth plans; and
o With the assistance of our fair value specialists.
• Evaluated the reasonableness of the customer relationships discount rates based on the overall business
rates of return (the weighted average cost of capital and the internal rate of return) and the risk of the
customer relationships intangible relative to the overall business.
• Evaluated the reasonableness of the attrition rates by considering historical customer sales data as available,
precedent transaction benchmarking, and qualitative considerations with respect to future customer
expectations.
Other Information
Management is responsible for the other information. The other information comprises:
• Management's Discussion and Analysis.
• The information, other than the financial statements and our auditor’s report thereon, in the 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, or
otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the
work we have performed on this other information, we conclude that there is a material misstatement of this
other information, we are required to report that fact in this auditor’s report. We have nothing to report in this
regard.
The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian GAAS 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 these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company 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.
We 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.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Michael Boucher.
/s/ Deloitte LLP
Chartered Professional Accountants
Winnipeg, Manitoba
March 22, 2022
BOYD GROUP SERVICES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31,
(thousands of U.S. dollars)
Assets
Current assets:
Cash
Accounts receivable
Income taxes recoverable
Inventory
Prepaid expenses
Property, plant and equipment
Right of use assets
Deferred income tax asset
Intangible assets
Goodwill
Other long-term assets
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities
Dividends payable
Current portion of long-term debt
Current portion of lease liabilities
Long-term debt
Lease liabilities
Deferred income tax liability
Unearned rebates
Exchangeable Class A common shares
Non-controlling interest put option
Equity
Accumulated other comprehensive earnings
Retained earnings
Shareholders’ capital
Contributed surplus
Note
$
2021
2020
January 1,
2020
27,714 $
103,024
7,576
66,784
29,554
61,041 $
86,957
6,087
32,079
20,272
234,652
332,189
502,036
1,737
348,727
601,991
5,795
206,436
237,945
381,966
649
276,381
463,734
4,436
27,308
86,808
975
36,889
23,230
175,210
227,579
364,042
—
267,449
427,005
2,554
$
2,027,127 $
1,571,547 $
1,463,839
$
258,423 $
2,439
13,887
92,924
210,185 $
2,364
15,594
77,941
367,673
428,186
450,423
48,602
5,809
—
—
1,300,693
65,987
56,720
600,047
3,680
306,084
164,634
341,370
41,355
6,424
—
—
859,867
65,157
42,872
600,047
3,604
207,710
717
17,033
84,354
309,814
302,694
310,911
30,036
7,039
28,742
3,477
992,713
47,088
7,548
412,886
3,604
726,434
2,027,127 $
711,680
1,571,547 $
471,126
1,463,839
$
18
6
7
8
9
10
11
12
13
14
15
14
15
9
16
18
18
20
21
22
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board:
TIMOTHY O’DAY
Director
DAVID BROWN
Director
57
BOYD GROUP SERVICES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(thousands of U.S. dollars except share amounts)
Balances - January 1, 2020
Issue costs (net of tax of $2,106)
Shares issued through public offering
Shares issued in connection with conversion to corporate form
Other comprehensive earnings
Net earnings
Comprehensive earnings
Dividends to shareholders
Balances - December 31, 2020
Issue costs (net of tax of $29)
Stock option accretion
Other comprehensive earnings
Net earnings
Comprehensive earnings
Dividends to shareholders
Balance - December 31, 2021
Shareholders’ Capital
Shares
Amount
Contributed
Surplus
Accumulated
Other
Comprehensive
Earnings
Retained
Earnings
Total Equity
20,022,381 $
1,265,000
184,813
412,886 $
(5,871)
164,297
28,735
3,604 $
47,088 $
7,548 $
18,069
18,069
44,114
44,114
(8,790)
471,126
(5,871)
164,297
28,735
18,069
44,114
62,183
(8,790)
21,472,194 $
600,047 $
3,604 $
65,157 $
42,872 $
711,680
—
—
—
(76)
152
830
830
21,472,194 $
600,047 $
3,680 $
65,987 $
(76)
152
830
23,540
24,370
(9,692)
726,434
23,540
23,540
(9,692)
56,720 $
Note
21
21
21
13
31
31
13
The accompanying notes are an integral part of these consolidated financial statements
58
BOYD GROUP SERVICES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31,
(thousands of U.S. dollars, except share and per share amounts)
Sales
Cost of sales
Gross profit
Operating expenses
Acquisition and transaction costs
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortization of intangible assets
Fair value adjustments
Finance costs
Earnings before income taxes
Income tax expense
Current
Deferred
Net earnings
The accompanying notes are an integral part of these consolidated financial statements
Basic earnings per share
Diluted earnings per share
Basic weighted average number of shares outstanding
Diluted weighted average number of shares outstanding
BOYD GROUP SERVICES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
For the years ended December 31,
(thousands of U.S. dollars)
Net earnings
Other comprehensive earnings
Items that may be reclassified subsequently to Consolidated Statements of Earnings
Change in unrealized earnings on
foreign currency translation
Other comprehensive earnings
Comprehensive earnings
The accompanying notes are an integral part of these consolidated financial statements
2021
2020
Note
25
$
1,872,670 $
1,033,410
1,561,224
842,345
839,260
619,716
5,835
42,602
88,523
22,569
148
27,653
807,046
32,214
2,499
6,175
8,674
718,879
498,845
1,498
37,183
76,080
18,527
(3,871)
31,664
659,926
58,953
1,955
12,884
14,839
$
23,540 $
44,114
$
$
1.10 $
1.10 $
2.10
2.00
21,472,194
21,472,194
21,005,596
21,014,859
7
8
10
17
9
9
30
30
30
30
2021
2020
$
23,540 $
44,114
830
830
24,370 $
18,069
18,069
62,183
$
59
BOYD GROUP SERVICES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(thousands of U.S. dollars)
Cash flows from operating activities
Net earnings
Adjustments for
Fair value adjustments
Deferred income taxes
Finance costs
Amortization of intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use assets
Other
Changes in non-cash working capital items
Cash flows from (used in) financing activities
Shares issued through public offering
Issue costs
Increase in obligations under long-term debt
Repayment of long-term debt, principal
Repayment of obligations under property
leases, principal
Repayment of obligations under vehicle and
equipment leases, principal
Interest on long-term debt
Interest on property leases
Interest on vehicle and equipment leases
Acquisition of non-controlling interest
Dividends paid
Payment of financing costs
Cash flows used in investing activities
Proceeds on sale of equipment, software and sale / leaseback agreements
Equipment purchases and facility improvements
Acquisition and development of businesses
(net of cash acquired)
Software purchases and licensing
Increase in other long-term assets
Effect of foreign exchange rate changes on cash
Net (decrease) increase in cash position
Cash, beginning of year
Cash, end of year
Income taxes paid
Interest paid
The accompanying notes are an integral part of these consolidated financial statements
60
2021
2020
Note
$
23,540 $
44,114
17
10
7
8
32
21
14
14
15
15
14
15
15
18
14
7
5
10
148
6,175
27,653
22,569
42,602
88,523
(421)
(3,871)
12,884
31,664
18,527
37,183
76,080
858
210,789
217,439
(14,075)
13,467
196,714
230,906
—
(105)
330,500
(83,504)
164,297
(7,977)
495,502
(673,009)
(82,622)
(69,075)
(2,275)
(9,874)
(17,797)
(302)
—
(9,653)
—
(2,101)
(15,499)
(16,513)
(283)
(1,300)
(7,132)
(1,395)
124,368
(134,485)
1,145
(31,479)
(317,488)
(4,917)
(1,358)
(354,097)
(312)
(33,327)
61,041
$
$
$
27,714 $
4,014 $
27,554 $
11,097
(24,084)
(58,142)
(2,038)
(1,841)
(75,008)
12,320
33,733
27,308
61,041
7,029
31,844
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
1. GENERAL INFORMATION
Boyd Group Services Inc. (“BGSI” or the “Company”) is a Canadian corporation and controls The Boyd
Group Inc. and its subsidiaries. Prior to January 1, 2020 BGSI operated as Boyd Group Income Fund (“the
Fund”).
The Company’s business consists of the ownership and operation of autobody/autoglass repair facilities and
related services. At the reporting date, the Company operated locations in Canada under the trade name Boyd
Autobody & Glass and Assured Automotive, as well as in the U.S. under the trade name Gerber Collision &
Glass. In addition, the Company is a major retail auto glass operator in the U.S. under the trade names Gerber
Collision & Glass, Glass America, Auto Glass Service, Auto Glass Authority and Autoglassonly.com. The
Company also operates Gerber National Claim Services (“GNCS”), that offers glass, emergency roadside and
first notice of loss services.
The shares of the Company are listed on the Toronto Stock Exchange and trade under the symbol “BYD.TO”.
The head office and principal address of the Company are located at 1745 Ellice Avenue, Winnipeg, Manitoba,
Canada, R3H 1A6.
The consolidated financial statements for the year ended December 31, 2021 (including comparatives) were
approved and authorized for issue by the Board of Directors on March 22, 2022.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation
The consolidated financial statements of BGSI have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). The functional currency of Boyd Group Services Inc. is the Canadian dollar (“CAD”). These
consolidated financial statements are presented in thousands of U.S. dollars (“USD”), except share and per
share amounts.
b) Revenue recognition
BGSI is in the business of collision repair. The Company recognizes revenue upon completion and delivery
of the repair to the customer, which has been determined to be the performance obligation that is distinct
and the point at which control of the asset passes to the customer. Revenue is measured at the fair value of
the consideration received.
c) Inventory
Inventory is valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out
basis. Net realizable value is the estimated selling price in the ordinary course of business less any
applicable selling expenses.
d) Property, plant and equipment
Property, plant and equipment assets are stated at cost less accumulated depreciation and accumulated
impairment losses. The cost of an item of property, plant and equipment consists of the purchase price, any
costs directly attributable to bringing the asset to the location and condition necessary for its intended use
61
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
and an estimate of the costs of dismantling and removing the item and restoring the site on which it is
located.
Depreciation is calculated using the declining balance and straight line rates as disclosed in the property,
plant and equipment note. Leasehold improvements are amortized on the straight line basis over the period
of estimated benefit.
An item of property, plant and equipment is reclassified as held for sale or derecognized upon disposal, or
when no future economic benefits are expected to arise from the continued use of the asset. Any gain or
loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the
carrying amount of the asset, is recognized in the Consolidated Statement of Earnings.
The Company conducts an annual assessment of the residual balances, useful lives and depreciation
methods being used for property, plant and equipment and any changes arising from the assessment are
applied by BGSI prospectively.
e) Leases
At inception, the Company assesses whether a contract is or contains a lease. Leases are recognized as a
right of use asset and a lease liability at the lease commencement date.
The Company recognizes a right of use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short term leases, defined as leases with a lease term of 12
months or less, and leases of low value assets. For these leases, the Company recognizes the lease payments
as operating expenses on a straight-line basis over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are consumed.
Right of use assets are subsequently measured at cost less accumulated depreciation and impairment losses.
Depreciation is recorded on a straight line basis over the term of the lease.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If the interest rate implicit in the
leases cannot be readily determined, the Company uses its incremental borrowing rate. In order to calculate
the incremental borrowing rate, reference interest rates are derived from the yields of corporate bonds in
Canada and the U.S. The reference interest rates are supplemented by a leasing risk premium. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
and by reducing the carrying amount to reflect lease payments made.
f) Consolidation
The financial statements of the Company consolidate the accounts of the Company and its subsidiaries. All
intercompany transactions, balances and unrealized gains and losses from intercompany transactions are
eliminated on consolidation.
Subsidiaries are those entities which the Company controls by having the power to govern the financial and
operating policies. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Company controls another entity. Subsidiaries are
fully consolidated from the date on which control is obtained by the Company and are de-consolidated from
the date that control ceases.
62
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
g) Business combinations, goodwill and other intangible assets
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting.
The cost of the acquisition is measured at the aggregate of the fair values (at the acquisition date) of assets
transferred, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for
control of the acquired company. Acquisition costs are expensed as incurred. The acquired company’s
identifiable assets (including previously unrecognized intangible assets), liabilities and contingent liabilities
are recognized at their fair values at the acquisition date.
Goodwill represents the excess of the cost of an acquisition over the fair value of BGSI’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is carried at cost less
accumulated impairment losses.
Intangible assets are recognized only when it is probable that the expected future economic benefits
attributable to the assets will accrue to the Company and the cost can be reliably measured. Intangible
assets acquired in a business combination are recorded at fair value. Intangible assets that do not have
indefinite lives are amortized over their useful lives using an amortization method which reflects the
economic benefit of the intangible asset. Customer relationships are amortized on a straight-line basis over
the expected period of benefit of 20 years. Contractual rights, which consist of non-compete agreements
and favourable lease agreements, are amortized on a straight-line basis over the term of the contract.
Software is amortized on a straight-line basis over periods of three and five years. Brand names which the
Company continues to use in the conduct of its business are considered indefinite life because their value is
not expected to degrade over time. To the extent the Company decides to discontinue the use of a certain
brand, an estimate of the remaining useful life is made and the intangible asset is amortized over the
remaining period.
h) Impairment of non-financial assets
Property, plant and equipment and definite life intangible assets are tested for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of
measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows (cash-generating unit or “CGU”). The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use (being the present value of the expected future cash
flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount.
Goodwill and indefinite lived intangible assets are reviewed for impairment annually or at any time if an
indicator of impairment exists. As well, newly acquired goodwill is reviewed for impairment at the end of
the year in which it was acquired.
Goodwill acquired through a business combination is allocated to each CGU, or group of CGUs, that are
expected to benefit from the related business combination. A group of CGUs represents the lowest level
within the entity at which the goodwill is monitored for internal management purposes, which is not higher
than an operating segment. Impairment losses on goodwill are not reversed.
The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when
events or circumstances warrant such consideration.
i) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly
liquid investments with original maturities of three months or less.
63
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
j) Income taxes
Income tax comprises current and deferred tax. Income tax is recognized in the Consolidated Statement of
Earnings except to the extent that it relates to items recognized directly in equity, in which case the income
tax is recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or
substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of
previous years.
In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income
tax is determined on a non-discounted basis using tax rates and laws that have been enacted or
substantively enacted at the statement of financial position date and are expected to apply when the
deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable
that the assets can be recovered.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries except, in
the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by BGSI
and it is probable that the temporary difference will not reverse in the foreseeable future.
k) Unearned rebates
Prepaid purchase rebates are recorded as unearned rebates on the statement of financial position and
amortized, as a reduction of the cost of purchases, on a straight-line basis over the term of the contract.
l) Shareholders’ capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are
recognized as a deduction from equity.
Under IAS 32, a financial instrument that gives the holder the right to put the instrument back to the issuer
for cash or another financial asset (a ‘puttable instrument’) is a financial liability, except for those
instruments that meet the exceptions to be classified as equity instruments. The trust units of the Fund met
the puttable equity exceptions and therefore were classified as equity as at January 1, 2020.
The Fund’s declaration of trust allowed a unitholder to tender their units for cash redemption. This cash
redemption right was restricted, at the Fund’s option, to an aggregate cash amount of $25 per month. The
Fund was not asked to redeem units for cash.
m) Share-based compensation plans
Equity settled plans
The Company's stock option plan allows for the granting of options up to an amount of 250,000 Common
shares. Each tranche of the options vests equally over two, three, four and five year periods. Options are
awarded and vest over a five year period. The term of an option shall be determined and approved by the
People, Culture and Compensation Committee; provided that the term shall be no longer than ten years
from the grant date. The fair value of each option is measured at the date of grant using the Black-Scholes
option pricing model. Compensation expense is recognized over the option vesting period, based on the
number of options expected to vest, with the offset credited to contributed surplus.
64
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
Cash settled plans
The Company’s Performance Share Units, Restricted Share Units and Directors Deferred Share Unit Plan
are cash settled share-based payments. The fair value of each outstanding Performance Share Unit and
Restricted Share Unit is estimated based on the fair market value of the Company’s units/shares at the grant
date, subsequently adjusted for additional shares granted based on the reinvestment of notional dividends
and the market value of the shares at the end of each reporting period. The associated compensation
expense is recognized over the vesting period, factoring in the probability of the performance criteria being
met during that period. The fair value of each outstanding Director Deferred Share Unit is estimated based
on the fair market value of the BGSI’s shares at the grant date, subsequently adjusted for additional shares
granted based on the reinvestment of notional dividends and the market value of the shares at the end of
each reporting period.
n) Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net earnings for the period attributable to
equity owners of the Company by the weighted average number of shares outstanding during the period.
Diluted EPS is calculated by adjusting the weighted average number of shares outstanding and
corresponding earnings impact for dilutive instruments. The Company’s dilutive instruments comprise non-
controlling interest put option and call liability and stock options. The dilutive impact of the non-
controlling interest put option and call liability is calculated using the “if converted” method. The dilutive
impact of the stock options are calculated using the treasury stock method.
o) Foreign currency translation
Items included in the financial statements of each subsidiary are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”). The Company
operates with multiple functional currencies. The consolidated financial statements are presented in U.S.
dollars as this provides a better reflection of the Company’s business activities, given the significance of
revenues denominated in U.S. dollars. Entities that have a functional currency different from that of U.S.
dollars are translated into U.S. dollars. BGSI’s functional currency is Canadian dollars. Assets and
liabilities are translated into U.S. dollars at the noon rate of exchange prevailing at the statement of
financial position dates and income and expense items are translated at the average exchange rate during
the period (as this is considered a reasonable approximation to actual rates). The adjustment arising from
the translation of these accounts is recognized in other comprehensive earnings (loss) as cumulative
translation adjustments.
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or
significant influence over a foreign operation, the foreign currency gains or losses accumulated in other
comprehensive earnings (loss) related to the foreign operation are recognized in earnings. If an entity
disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of
foreign currency gains or losses accumulated in other comprehensive earnings related to the subsidiary are
reallocated between controlling and non-controlling interests.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement
of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an operation’s functional currency are recognized in
earnings.
65
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
p) Financial instruments
Recognition
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument.
Classification
BGSI classifies its financial assets and liabilities in the following categories depending on the Company’s
business model for managing the financial assets and the contractual terms of the cash flows:
•
•
Those to be measured subsequently at fair value, either through profit or loss (“FVPL”) or through
OCI, and
Those to be measured at amortized cost
Cash and accounts receivable are classified as amortized cost. After their initial fair value measurement,
they are measured at amortized cost using the effective interest method, as reduced by appropriate
allowances for estimated lifetime expected credit losses.
Accounts payable and accrued liabilities, dividends payable, and long-term debt are classified as amortized
cost and are net of any related financing fees or issue costs. After their initial fair value measurement, they
are measured at amortized cost using the effective interest method.
Derivative contracts including the non-controlling interest put option and call liability are classified as
financial assets or financial liabilities at FVPL with mark-to-market adjustments being recorded to net
earnings at each period end.
The Class A common shares of BGHI were exchangeable into units of the Fund until January 1, 2020. As a
result of the Fund’s units being redeemable for cash, the exchangeable Class A shares of the Fund’s
subsidiary BGHI, were presented as financial liabilities and classified as financial assets or financial
liabilities at FVPL. Exchangeable Class A shares were measured at the market price of the units of Fund as
of the statement of financial position date.
Measurement
At initial recognition, BGSI measures a financial asset at its fair value. In the case of a financial asset not
measured at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset are
included in the initial fair value. Transaction costs of financial assets carried at FVPL are expensed in
profit or loss.
For those financial instruments where fair value is recognized in the Consolidated Statement of Financial
Position the methods and assumptions used to develop fair value measurements have been classified into
one of the three levels of the fair value hierarchy for financial instruments:
•
•
•
Level 1 includes quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 includes inputs that are observable other than quoted prices included in Level 1
Level 3 includes inputs that are not based on observable market data
q) Non-controlling interests
The Company accounts for transactions where a non-controlling interest exists, and where a put option has
been granted to third parties under IFRS 10 whereby the non-controlling interest is initially recognized at
fair value and then immediately derecognized upon the issuance and recognition of the put option.
Differences between the put option liability recognized at fair value and the amount of any non-controlling
interest derecognized is recognized directly in equity.
66
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
When there is no allocation of profit or loss to non-controlling partners, no non-controlling interest is
recognized in the Consolidated Statement of Financial Position. Distributions to non-controlling partners
are recognized as an expense when paid or payable based on the distribution formula of the agreement.
r) Pensions and other post-retirement benefits
The Company contributes to defined contribution pension plans of employees. Contributions are
recognized within operating expenses at an amount equal to contributions payable for the period. Any
outstanding contributions are recognized as liabilities within accrued liabilities.
s) Provisions
Provisions are recognized when BGSI has a present legal or constructive obligation that has arisen as a
result of a past event and it is probable that a future outflow of resources will be required to settle the
obligation, provided that a reliable estimate can be made of the amount of the obligation.
Provisions are measured at management’s best estimate of the expenditure required to settle the obligation
at the end of the reporting period, and are discounted to present value where the effect is significant. The
increase in the provision due to the passage of time is recognized as a finance cost.
t) Segment reporting
The chief operating decision-maker is responsible for allocating resources and assessing performance of the
operating segments and has been identified as the joint responsibility of the President and Chief Executive
Officer of BGSI and the Executive Vice President and Chief Financial Officer of BGSI.
The Company’s primary line of business is automotive collision and glass repair and related services, with
the majority of revenues relating to this group of similar services. This line of business operates in Canada
and the U.S. and both regions exhibit similar long-term economic characteristics. In this circumstance,
IFRS requires the Company to provide specific geographical disclosure. For the years reported, the
Company’s revenues were derived within Canada or the U.S. and all property, plant and equipment, right of
use assets, goodwill and intangible assets are located within these two geographic areas.
u) Government assistance
Government grants are recognized at their fair value in accordance with IAS 20, Accounting for
Government Grants and Disclosure of Government Assistance, when there is reasonable assurance that the
grant will be received and any specified conditions are met.
Grants received in relation to COVID-19 relief are recorded in the Consolidated Statement of Earnings as a
reduction of cost of sales, operating expenses and finance costs when it is determined there is reasonable
assurance the grants will be received.
v) Reporting Interest Paid on the Statement of Cash Flows
In accordance with IAS 7 Statement of Cash Flows, the Company has made the accounting policy choice to
disclose these amounts as “Financing Activities” in the cash flow statement as this best reflects the nature
of these expenses.
67
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
COVID-19 Impact
On March 11, 2020, the World Health Organization declared the novel Coronavirus (COVID-19) as a global
pandemic. In response, governments worldwide enacted emergency measures to combat the spread of the
virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and
social distancing, have caused material disruption to businesses resulting in a global economic slowdown as
well as significant volatility in equity markets. The pandemic impacted the demand for collision repair
services throughout the remainder of 2020 and 2021. A slower economic re-opening, as well as greater
restrictions, caused a more significant decline in demand for services in Canada when compared to the U.S.
As at December 31, 2021, BGSI is not able to reliably forecast the severity or duration of the impact that
COVID-19 will have on the economy, or on BGSI's operations. The extent to which the impacts of the
COVID-19 pandemic affects the judgments and estimates described further in this note depend on future
developments, which are highly uncertain and cannot be predicted. Management will continue to monitor and
assess the impact of the pandemic on its judgments, estimates, accounting policies and amounts recognized in
these consolidated financial statements.
Critical accounting estimates
BGSI makes estimates, including the assumptions applied therein, concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are addressed below.
Impairment of Goodwill and Intangible Assets
When testing goodwill and intangibles for impairment, BGSI uses a five year forward looking discounted cash
flow of the cash generating unit (“CGU”) or group of CGU’s to which the asset relate. An estimate of the
recoverable amount is then calculated as the higher of an asset’s fair value less costs to sell and value in use
(being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The methods
used to value intangible assets and goodwill require critical estimates to be made regarding the future cash
flows and useful lives of the intangible assets. Goodwill and intangible asset impairments, when recognized,
are recorded as a separate charge to earnings, and could materially impact the operating results of the
Company for any particular accounting period. A slower economic re-opening, as well as greater restrictions,
caused a more significant decline in demand for services in Canada when compared to the U.S.; however,
BGSI concluded that there was no impairment of goodwill or intangible assets as a result of the assessment as
at December 31, 2021.
Impairment of Other Long-lived Assets
BGSI assesses the recoverability of its long-lived assets, other than goodwill and intangibles, after considering
the potential impairment indicated by such factors as business and market trends, the Company’s ability to
transfer the assets, future prospects, current market value and other economic factors. In performing its review
68
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
of recoverability, management estimates the future cash flows expected to result from the use of the assets and
their potential disposition. If the discounted sum of the expected future cash flows is less than the carrying
value of the assets generating those cash flows, an impairment loss would be recognized based on the excess of
the carrying amounts of the assets over their estimated recoverable value. The underlying estimates for cash
flows include estimates for future sales, gross margin rates and operating expenses. Changes which may
impact these estimates include, but are not limited to, business risks and uncertainties and economic
conditions. To the extent that management’s estimates are not realized, future assessments could result in
impairment charges that may have a material impact on the Company’s consolidated financial statements.
Business Combinations
Fair value of assets acquired and liabilities assumed in a business combination is estimated based on
information available at the date of acquisition and involves considerable judgment in determining the fair
values assigned to property, plant and equipment and intangible assets acquired and liabilities assumed on
acquisition. The determination of these fair values involves analysis including the use of discounted cash
flows, estimated future margins, future growth rates, market rents and capitalization rates. There is estimation
in this analysis and actual results could differ from estimates.
Fair Value of Financial Instruments
BGSI has applied discounted cash flow methods to establish the fair value of certain financial liabilities
recorded on the Consolidated Statement of Financial Position, as well as disclosed in the notes to the
consolidated financial statements. BGSI also establishes mark-to-market valuations for derivative instruments,
which are assumed to represent the current fair value of these instruments. These valuations rely on
assumptions regarding interest and exchange rates as well as other economic indicators, which at the time of
establishing the fair value for disclosure, have a high degree of uncertainty. Unrealized gains or losses on
these derivative financial instruments may not be realized as markets change.
Income Taxes
BGSI is subject to income tax in several jurisdictions and estimates are used to determine the provision for
income taxes. During the ordinary course of business, there are transactions and calculations for which the
ultimate tax determination is uncertain. As a result, the Company recognizes tax liabilities based on estimates
of whether additional taxes and interest will be due. Uncertain tax liabilities may be recognized when, despite
the Company’s belief that its tax return positions are supportable, the Company believes that certain positions
are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company
believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many
factors including past experience and interpretations of tax law. To the extent that the final tax outcome of
these matters is different than the amounts recorded, such differences will impact income tax expense in the
period in which such determination is made.
4. CHANGES IN ACCOUNTING POLICIES
Presentation Currency
Effective January 1, 2021, the Company changed its presentation currency from Canadian dollars (“CAD”) to
U.S. dollars (“USD”). This change will provide shareholders with a better reflection of the Company's business
activities, given the significance of revenues denominated in USD. The change in presentation currency
represents a voluntary change in accounting policy. The Company has applied the presentation currency
69
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
change retrospectively. All periods presented in the consolidated financial statements have been translated into
the new presentation currency, in accordance with the guidance in IAS 21, The Effects of Changes in Foreign
Exchange Rates.
The consolidated statements of earnings and the consolidated statements of cash flows have been translated
into the presentation currency using the average exchange rates prevailing during each reporting period. In the
consolidated statements of financial position, all assets and liabilities have been translated using the period-end
exchange rates, and all resulting exchange differences have been recognized in accumulated other
comprehensive earnings. Asset and liability amounts previously reported in CAD have been translated into
USD as at January 1, 2020, and December 31, 2020 using the period-end exchange rates below and
shareholders' equity balances have been translated using historical rates in effect on the date of the
transactions.
USD/CAD Exchange Rate
Closing rate at the reporting date
Average rate for the period
December 31,
2021
0.7888
0.7979
December 31,
2020
0.7854
0.7456
January 1,
2020
0.7699
0.7537
The change in presentation currency resulted in the following impact on the January 1, 2020, opening
consolidated statement of financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity
Previously reported in
CAD
January 1, 2020
Presentation currency
change
Reported in
USD
January 1, 2020
$
$
$
$
$
227,567 $
1,673,686
1,901,253 $
402,381 $
886,960
1,289,341 $
(52,357) $
(385,057)
(437,414) $
(92,567) $
(204,061)
(296,628) $
175,210
1,288,629
1,463,839
309,814
682,899
992,713
611,912 $
(140,786) $
471,126
70
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The change in presentation currency resulted in the following impact on the December 31, 2020, consolidated
statement of financial position:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity
Previously reported in
CAD
December 31, 2020
Presentation currency
change
Reported in
USD
December 31, 2020
$
$
$
$
$
262,835 $
1,738,070
2,000,905 $
389,701 $
705,078
1,094,779 $
(56,399) $
(372,959)
(429,358) $
(83,617) $
(151,295)
(234,912) $
206,436
1,365,111
1,571,547
306,084
553,783
859,867
906,126 $
(194,446) $
711,680
The change in presentation currency resulted in the following impact on the year ended December 31, 2020
consolidated statements of statement of earnings and comprehensive income:
Previously reported
in CAD
December 31, 2020
Presentation currency
change
Reported in
USD
December 31, 2020
$
Sales
Gross profit
Operating expenses
Net earnings
Comprehensive earnings
2,089,115 $
961,930
668,379
57,734
45,266
(527,891) $
(243,051)
(169,534)
(13,620)
16,917
1,561,224
718,879
498,845
44,114
62,183
The change in presentation currency resulted in the following impact on the year ended December 31, 2020
basic and diluted earnings per share:
Previously reported
in CAD
December 31, 2020
Presentation currency
change
Reported in
USD
December 31, 2020
$2.75
$2.60
$(0.65)
$(0.60)
$2.10
$2.00
Basic earnings per share for the year
ended
Diluted earnings per share for the year
ended
Stock Option Plan
During the first quarter of 2021, the Company adopted a stock option plan, which was approved by
shareholders on May 12, 2021, for senior management. Options are awarded and vest over a five year period.
The fair value of each option is measured at the date of grant using the Black-Scholes option pricing model.
Compensation expense is recognized over the option vesting period, based on the number of options expected
to vest, with the offset credited to contributed surplus.
71
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
5. ACQUISITIONS
The Company completed 39 acquisitions that added 101 locations during the year ended December 31, 2021 as
follows:
Acquisition Date
January 15, 2021
February 12, 2021
February 19, 2021
February 23, 2021
March 26, 2021
March 26, 2021
March 31, 2021
April 9, 2021
April 23, 2021
April 27, 2021
April 30, 2021
April 30, 2021
May 7, 2021
May 14, 2021
June 11, 2021
June 15, 2021
June 18, 2021
June 25, 2021
July 9, 2021
July 16, 2021
July 31, 2021
August 13, 2021
August 13, 2021
August 20, 2021
August 31, 2021
September 7, 2021
September 17, 2021
September 17, 2021
September 27, 2021
October 1, 2021
October 8, 2021
October 15, 2021
Location
Wyandotte, MI
Columbia, SC
Mentor & Streetsboro, OH (2 locations)
Amarillo, TX
Simi Valley, CA
Tallahassee, FL (3 locations)
Milwaukee, WI
Vero Beach, FL
Escondido, CA
Denton and Flour Mound, TX (2 locations)
Green Bay, WI
Sanford and Southern Pines, NC
(2 locations)
Kaneohe, Wahiawa & Waipahu, HI
(3 locations)
Baltimore & Reisterstown, MD (2 locations)
Victor, NY
Pittsburgh, PA
Austin, TX (2 locations)
Georgia & South Carolina (16 locations)
La Habra, CA
Appleton, WI
Oklahoma, Kansas & Missouri (35 locations)
Eagle River, Minocqua, Rhinelander & Tomahawk, WI (4 locations)
San Diego, CA
Springfield, MO
Austin, TX
Ankeny, IA
Shreveport, LA
Burbank, IL
Erie, PA
Clarence, NY
Brighton, MI
Medina & North Ridgeville, OH
(2 locations)
72
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
Acquisition Date
October 22, 2021
October 29, 2021
November 12, 2021
November 16, 2021
November 19, 2021
December 3, 2021
December 10, 2021
Location
Sycamore, IL
Cornwall, ON
London, ON
Westfield, WI
Verona, WI
Hudson, WI
Peterborough, ON
During the second quarter of 2021, the Company acquired a mobile scanning and calibration business. During
the third quarter of 2021, the Company acquired a glass business.
The Company has accounted for the 2021 acquisitions using the acquisition method as follows:
Acquisitions in 2021
Identifiable net assets acquired at fair value:
Cash
Other currents assets
Property, plant and equipment
Right of use assets
Identified intangible assets
Customer relationships
Non-compete agreements
Brand name
Liabilities assumed
Lease liabilities
Identifiable net assets acquired
Goodwill
Total purchase consideration
Consideration provided
Cash paid or payable
Seller notes
Total consideration provided
73
Total
acquisitions
$
$
$
$
$
2,258
10,063
44,231
140,273
85,079
3,606
1,077
(10,707)
(140,273)
135,607
137,836
273,443
258,873
14,570
273,443
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The Company completed 12 acquisitions that added 39 locations during the year ended December 31, 2020 as
follows:
Acquisition Date
January 2, 2020
March 6, 2020
March 13, 2020
March 23, 2020
Location
Parksville, BC
Indiana & Michigan (14 locations)
Waukesha, WI
Saanichton, BC
September 4, 2020
Farmington & Rogers, AR (2 locations)
September 25, 2020
Milwaukee & Hales Corners, WI (2 locations)
October 30, 2020
November 17, 2020
November 30, 2020
December 4, 2020
December 14, 2020
December 31, 2020
Escanaba, Kingsford & Marquette, MI (3 locations)
Oshkosh, WI
Pflugerville, TX
Riverside & San Bernadino, CA (11 locations including one intake center)
Morrow, GA
Avon, CO
74
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The Company has accounted for the 2020 acquisitions using the acquisition method as follows:
Acquisitions in 2020
Identifiable net assets acquired at fair value:
Other currents assets
Property, plant and equipment
Right of use assets
Identified intangible assets
Customer relationships
Non-compete agreements
Lease liabilities
Identifiable net assets acquired
Goodwill
Total purchase consideration
Consideration provided
Cash paid or payable
Seller notes
Total consideration provided
Total
acquisitions
(Note 4)
$
$
$
$
$
798
13,030
22,130
23,025
1,305
(22,130)
38,158
34,711
72,869
33,234
39,635
72,869
The preliminary purchase prices for the 2021 acquisitions may be revised as additional information becomes
available. Further adjustments may be recorded in future periods as purchase price adjustments are finalized.
Canadian acquisition transactions are initially recognized in U.S. dollars at the rates of exchange in effect on
the transaction dates. Subsequently, the assets and liabilities are translated at the rate in effect at the
Consolidated Statement of Financial Position date.
A significant part of the goodwill recorded on the acquisitions can be attributed to the assembled workforce
and the operating know-how of key personnel. However, no intangible assets qualified for separate
recognition in this respect.
Goodwill recognized during 2021 is expected to be deductible for tax purposes.
On the statement of cash flows, included as part of cash used for acquisition and development of business were
costs related to the acquisition of businesses, as well as the development of businesses which consisted
primarily of property, plant and equipment additions.
75
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The results of operations reflect the revenues and expenses of acquired operations from the date of acquisition.
During 2021, revenue contributed by 2021 acquisitions since being acquired were $130,751. Net losses
incurred by 2021 acquisitions since being acquired were $3,626. If 2021 acquisitions had been acquired on
January 1, 2021, BGSI’s revenue and net earnings for the year ended December 31, 2021 would have been
$2,029,394 and $15,501 (unaudited), respectively.
6.
INVENTORY
As at
Parts and materials
Work in process
December 31,
2021
December 31,
2020
(Note 4)
$
$
20,837 $
45,947
66,784 $
14,796
17,283
32,079
Included in cost of sales for the year ended December 31, 2021 are parts and material costs of $615,418 (2020
– $492,144) and labour costs of $295,671 (2020 – $242,549) with the balance of cost of sales primarily made
up of sublet charges.
7. PROPERTY, PLANT AND EQUIPMENT
Depreciation rates
As at January 1, 2021
Cost
Accumulated
depreciation
Net book value
For the year ended December 31,
2021
Acquired through
business
combinations
Additions
Proceeds on
disposal
Gain (loss) on
disposal
Transfers from
right of use
assets
Depreciation
Foreign exchange
Net book value
As at December 31, 2021
Cost
Accumulated
depreciation
Net book value
Land
Buildings
Shop
Equipment
Office
Equipment
Computer
Hardware
Signage
Vehicles
5%
15%
20%
30%
15%
30%
Leasehold
Improvements
10 to 25 years
straight line
Total
$10,149
$27,212
$183,037
$15,403
$26,314
$13,955
$6,746
$143,144
$425,960
—
$10,149
(3,472)
$23,740
(87,031)
$96,006
(8,998)
$6,405
(15,670)
$10,644
(6,644)
$7,311
(5,435)
$1,311
(60,765)
$82,379
(188,015)
$237,945
2,953
16,434
6,098
13,454
19,383
23,357
—
2,190
—
(9)
(8)
(55)
(9)
9
10
(6)
6
—
—
2
—
4,226
—
(3)
(9)
—
2,220
—
(30)
1
873
498
14,924
30,618
44,231
92,997
(991)
(131)
(1,145)
409
—
327
328
214
(37)
(1,723)
(18,857)
(1,517)
(3,668)
(1,300)
8
51
3
—
4
324
(502)
3
(175)
(15,035)
(42,602)
37
108
$29,538
$41,587
$120,091
$7,035
$11,190
$8,206
$1,925
$112,617
$332,189
$29,538
$46,782
$224,502
$17,437
$30,364
$15,917
$7,430
$187,034
$559,004
—
(5,195)
(104,411)
(10,402)
$29,538
$41,587
$120,091
$7,035
(19,174)
$11,190
(7,711)
$8,206
(5,505)
$1,925
(74,417)
(226,815)
$112,617
$332,189
76
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
(Note 4)
Land
Buildings
Shop
Equipment
Office
Equipment
Computer
Hardware
Signage
Vehicles
Leasehold
Improvements
Total
Depreciation rates
5%
15%
20%
30%
15%
30%
10 to 25 years
straight line
As at January 1, 2020
Cost
Accumulated
depreciation
Net book value
For the year ended December 31,
2020
Acquired through
business
combinations
Additions
Proceeds on
disposal
Gain (loss) on
disposal
Transfers from
right of use
assets
Depreciation
Foreign exchange
Net book value
As at December 31, 2020
Cost
Accumulated
depreciation
Net book value
$10,240
$25,169
$159,984
$14,172
$21,491
$12,625
$6,706
$129,045
$379,432
—
(2,860)
(70,381)
(7,520)
(11,658)
(5,487)
(5,215)
(48,732)
(151,853)
$10,240
$22,309
$89,603
$6,652
$9,833
$7,138
$1,491
$80,313
$227,579
534
4,591
2,255
3,620
5,250
17,071
(5,009)
(4,420)
(14)
(231)
141
(285)
—
1,214
(3)
(13)
—
4,470
—
(8)
—
—
1,322
—
(10)
—
205
129
4,786
12,794
13,030
45,211
(403)
(1,248)
(11,097)
68
(166)
(504)
240
(458)
39
(1,294)
491
(12,904)
(37,183)
98
418
—
—
24
1,160
385
—
(1,369)
(16,156)
(1,457)
(3,679)
(1,160)
44
152
12
28
21
$10,149
$23,740
$96,006
$6,405
$10,644
$7,311
$1,311
$82,379
$237,945
$10,149
$27,212
$183,037
$15,403
$26,314
$13,955
$6,746
$143,144
$425,960
—
(3,472)
(87,031)
$10,149
$23,740
$96,006
(8,998)
$6,405
(15,670)
$10,644
(6,644)
$7,311
(5,435)
$1,311
(60,765)
(188,015)
$82,379
$237,945
77
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
8. RIGHT OF USE ASSETS
As at
Property
Vehicles
Equipment
December 31,
2021
Balance, beginning of period
Acquired through business
combinations
Additions and modifications
Depreciation
Transfers to property, plant and
equipment
Foreign exchange
Net book value
$
376,105 $
5,813 $
48 $
381,966
140,273
64,467
(86,327)
—
182
494,700 $
$
—
3,994
(2,185)
(328)
5
7,299 $
—
—
(11)
—
—
37 $
140,273
68,461
(88,523)
(328)
187
502,036
Property
Vehicles
Equipment
December 31,
2020
(Note 4)
Balance, beginning of period
Acquired through business
combinations
Additions and modifications
Depreciation
Loss on disposal
Transfers to property, plant and
equipment
Foreign exchange
Net book value
$
358,105 $
5,567 $
370 $
364,042
22,130
69,904
(74,365)
—
—
331
—
2,213
(1,692)
(251)
164
(188)
—
(23)
(23)
—
327
(603)
22,130
72,094
(76,080)
(251)
491
(460)
$
376,105 $
5,813 $
48 $
381,966
9.
INCOME TAXES
BGSI accounts for deferred income tax assets and liabilities in respect of accounting and tax basis differences.
Deferred income tax assets and liabilities which relate to the same jurisdiction are netted on the Consolidated
Statement of Financial Position.
78
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
a. The reconciliation between income tax expense and the accounting earnings multiplied by the combined
basic Canadian and U.S. federal, provincial and state tax rates is as follows:
Earnings before income taxes
Combined basic Canadian and U.S. federal, provincial and state tax
rates
For the years ended December
31,
2021
2020
(Note 4)
$
32,214
$
58,953
26.36 %
26.02 %
Income tax expense at combined statutory tax rates
$
8,492
$
15,340
Adjustments for the tax effect of:
Other non-deductible expenses
Non-deductible fair value adjustments
Other
Income tax expense
130
—
52
282
(1,022)
239
$
8,674
$
14,839
b. Deferred income taxes consist of the Canadian and U.S. tax jurisdictions, respectively, as follows:
As at
Intangible assets
Net operating losses carried forward
Accrued liabilities
Property, plant and equipment
Issue costs
Right of use assets net of lease liabilities
Other
Deferred income tax asset
December 31,
2021
December 31,
2020
(Note 4)
$
$
(4,272) $
2,430
195
(314)
1,446
1,522
730
1,737 $
(3,607)
1,049
(123)
(731)
1,828
1,347
886
649
79
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
As at
Intangible assets
Non-capital losses carried forward
Accrued liabilities
Property, plant and equipment
Acquisition costs
Right of use assets net of lease liabilities
Other
Deferred income tax liability
December 31,
2021
December 31,
2020
(Note 4)
$
$
36,288 $
(8,158)
(5,001)
40,038
(3,964)
(9,255)
(1,346)
48,602 $
29,004
—
(9,916)
34,236
(2,904)
(8,485)
(580)
41,355
c. The movement in deferred income tax assets and liabilities in Canada and U.S. tax jurisdictions,
respectively, during the year is as follows:
Deferred income tax asset as at
Balance, beginning of year
Issue costs
Deferred income tax recovery
Foreign exchange
Balance, end of year
Deferred income tax liability as at
Balance, beginning of year
Deferred income tax expense
Foreign exchange
Balance, end of year
December 31,
2021
December 31,
2020
(Note 4)
$
$
649 $
—
1,072
16 $
1,737 $
(1,855)
2,106
290
108
649
December 31,
2021
December 31,
2020
(Note 4)
$
$
41,355 $
7,247
—
48,602 $
28,180
13,175
—
41,355
d. Deferred income tax assets are recognized to the extent it is probable that sufficient future taxable income
will be available to allow a deferred income tax asset to be realized. At December 31, 2021 BGSI has
recognized all of its deferred income tax assets with the exception of $5,898 (2020 - $5,898) in capital losses
available in Canada. At December 31, 2021 the Company has non-capital losses in Canada of $9,238 (2020 -
$3,991) and net operating losses in the U.S. of $31,376 (2020 - $nil). The net operating losses in the U.S. do
not expire.
80
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The losses in Canada expire as follows:
Year of expiry
2038
2039
2040
2041
10. INTANGIBLE ASSETS
Customer
Relationships
Brand
Name
Software
Non-
compete
Agreements
Favourable
Lease
Agreements
(Note 4)
As at January 1, 2020
Cost
Accumulated amortization
Net book value
For the year ended
December 31, 2020
Acquired through business combinations
Additions
Amortization
Foreign exchange
Net book value
As at December 31, 2020
Cost
Accumulated amortization
Net book value
For the year ended
December 31, 2021
Acquired through business combinations
Additions
Amortization
Foreign exchange
Net book value
As at December 31, 2021
Cost
Accumulated amortization
Net book value
$293,421
(57,001)
$236,420
$22,339
(4,962)
$17,377
23,025
—
(14,737)
847
—
—
—
217
$5,973
(4,262)
$1,711
—
2,038
(861)
30
$245,555
$17,594
$2,918
$317,293
(71,738)
$245,555
$22,556
(4,962)
$17,594
85,079
—
(17,793)
218
1,077
—
(208)
48
$313,059
$18,511
$402,598
(89,539)
$313,059
$23,681
(5,170)
$18,511
$8,041
(5,123)
$2,918
—
4,917
(1,138)
(55)
$6,642
$12,464
(5,822)
$6,642
$18,418
(11,101)
$7,317
1,305
—
(2,509)
(3)
$6,110
$19,720
(13,610)
$6,110
3,606
—
(3,010)
22
$6,728
$23,353
(16,625)
$6,728
81
$
$
$
$
301
1,535
8
7,394
Total
$346,452
(79,003)
$267,449
24,330
2,038
(18,527)
1,091
$6,301
(1,677)
$4,624
—
—
(420)
—
$4,204
$276,381
$6,301
(2,097)
$4,204
$373,911
(97,530)
$276,381
—
—
(420)
3
89,762
4,917
(22,569)
236
$3,787
$348,727
$6,301
(2,514)
$3,787
$468,397
(119,670)
$348,727
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
11. GOODWILL
As at
Balance, beginning of year
Acquired through business combination
Foreign exchange
Balance, end of period
December 31,
2021
December 31,
2020
(Note 4)
$
463,734 $
427,005
137,836
421
34,711
2,018
$
601,991 $
463,734
The COVID-19 pandemic has brought significant disruption to the worldwide economy and significantly
impacted the Company’s sales as demand for services decreased. COVID-19 continues to have an impact on
operations which has resulted in lower financial performance than initial budgeted expectations. As such, the
ongoing impact of COVID-19 continues to be a trigger to assess the carrying amount of goodwill as at
December 31, 2021.
When testing goodwill for impairment, BGSI uses a five year forward looking discounted cash flow of the
cash generating unit (“CGU”) or group of CGU’s to which the asset relate. BGSI has used the fair value less
costs to sell method to evaluate the carrying amount of goodwill. The key assumptions used in the assessment
include an estimate of current and future cash flows, taxes, future acquisition growth, future capital
expenditures, a terminal growth rate of 2% and a weighted average cost of capital of 7% to 9%. A slower
economic re-opening, as well as greater restrictions, caused a more significant decline in demand for services
in Canada when compared to the U.S. There remains judgement and estimation in the timing and degree to
which demand for services in Canada recovers to pre-COVID levels. BGSI concluded that there was no
impairment to the carrying amount of goodwill as at December 31, 2021. The carrying amount of goodwill for
the Canadian segment was $101,149 as at December 31, 2021.
Sensitivity testing is conducted as part of the annual impairment tests. After considering all key assumptions,
management considers that a reasonably possible change in only the following assumptions would cause the
Canadian segment’s carrying amount to exceed its recoverable amount:
•
•
If the discount rate increased by approximately 2.2%
If Adjusted EBITDA margins are lower by approximately 2.2% throughout the forecast period,
representing a 16-18% decline in Adjusted EBITDA
12. OTHER LONG TERM ASSETS
Other long term assets consist primarily of rent deposits in the amount of $3,783 (2020 - $2,895), which are
long term in nature.
Investments which do not qualify for equity treatment are recorded as other long term assets at cost. Any
derivatives associated with such investments are recorded at fair value, with fair value adjustments recorded to
earnings. The value of such derivatives was $nil as at December 31, 2021 (2020 - $nil).
82
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
13. DIVIDENDS
The Company’s Directors have discretion in declaring dividends. The Company declares and pays dividends
from its available cash from operations taking into account current and future performance amounts necessary
for principal and interest payments on debt obligations, amounts required for maintenance capital expenditures
and amounts allocated to reserves.
The Company declared dividends of C$0.141 per share in the first, second and third quarters of 2021 and
C$0.144 in the fourth quarter of 2021. The Company declared dividends of C$0.138 per share in the first,
second and third quarter of 2020 and C$0.141 in the fourth quarter of 2020.
Dividends to shareholders were declared and paid in thousands of U.S. dollars as follows:
Record date
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
Payment date
April 28, 2021
July 28, 2021
October 27, 2021
January 27, 2022
Record date
Payment date
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
April 28, 2020
July 29, 2020
October 28, 2020
January 27, 2021
Dividend amount
$
$
2,408
2,478
2,389
2,417
9,692
Dividend amount
(Note 4)
$
$
1,999
2,187
2,240
2,364
8,790
83
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
14. LONG-TERM DEBT
The Company has a credit facility agreement expiring in March 2025 which consists of a revolving credit
facility of $550,000 with an accordion feature which can increase the facility to a maximum of $825,000 (the
“revolving credit facility”, or the “facility”). The revolving credit facility is accompanied by a new seven-year
fixed-rate Term Loan A in the amount of $125,000 at an interest rate of 3.455%. The revolving credit facility
is with a syndicate of Canadian and U.S. banks and is secured by the shares and assets of the Company as well
as guarantees by BGSI and subsidiaries, while Term Loan A is with one of the syndicated banks. The interest
rate for draws on the revolving credit facility are based on a pricing grid of BGSI’s ratio of total funded debt to
EBITDA as determined under the credit agreement. The Company can draw the facility in either the U.S. or in
Canada, in either U.S. or Canadian dollars. The Company can make draws in tranches as required. Tranches
bear interest only and are not repayable until the maturity date but can be voluntarily repaid at any time. The
Company has the ability to choose the base interest rate between Prime, Bankers Acceptances (“BA”), U.S.
Prime or London Inter Bank Offer Rate (“LIBOR”). The total syndicated facility includes a swing line up to a
maximum of $10,000 U.S. in Canada and $30,000 in the U.S. At December 31, 2021, the Company has drawn
$264,500 U.S. (December 31, 2020 - $nil U.S.) and $nil Canadian (December 31, 2020 - $nil) on the revolving
credit facility and swing line and $125,000 (December 31, 2020 - $125,000) on the Term Loan A.
Under the revolving credit facility, the Company is subject to certain financial covenants which must be
maintained to avoid acceleration of the termination of the credit agreement. The financial covenants require
BGSI to maintain a senior funded debt to EBITDA ratio of less than 3.50 and an interest coverage ratio of
greater than 2.75. For four quarters following a material acquisition, the senior funded debt to EBITDA ratio
may be increased to less than 4.00. For purposes of covenant calculations, property lease payments are
deducted from EBITDA.
During the second quarter of 2020, the Company amended certain financial covenants under the revolving
credit facility to provide additional covenant headroom. While the Company had not breached any covenants,
this amendment was intended to prevent the effects of the COVID-19 pandemic from distorting the covenant
calculations and distracting the Company or its lenders from the prudent management of the business. The
amendments included a suspension to Boyd’s requirement to comply with its leverage and interest coverage
covenants from July 1, 2020 to December 30, 2020, as well as providing more flexibility in the calculation of
such covenants beginning with the second quarter of 2020 and through the second quarter of 2021. Effective
July 1, 2020 to June 30, 2021 inclusive, for the purposes of testing any financial covenants on a trailing twelve
month period, the Company will be permitted to replace the EBITDA for the second and third quarters of 2020
with the EBITDA for the second and third quarters of 2019. In addition, the senior funded debt to EBITDA
ratio was increased to no greater than 4.00 to June 30, 2020. From December 31, 2020 to June 29, 2021, the
senior funded debt to EBITDA ratio will be no greater than 3.75. For four quarters following a material
acquisition during the December 31, 2020 to June 29, 2021 timeframe, the senior debt to EBITDA ratio may
be increased to no greater than 4.00. During the suspension period, the Company was required to meet a
minimum liquidity covenant of $150,000 U.S., which, given the Company’s cash position and undrawn
facilities, was not burdensome.
84
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
Deferred finance costs of C$859 were incurred in 2017 to complete the second amended and restated credit
agreement. These fees were amortized to finance costs on a straight line basis over the five year term of the
second amended and restated credit agreement until March 17, 2020 when the third amended and restated
credit agreement was signed. At that time, the unamortized deferred financing costs of $320 were recorded as
finance costs. Financing costs of $1,395 incurred during 2020 to complete the third amended and restated
credit agreement have been deferred. These fees are amortized to finance costs on a straight line basis over the
five year term of the third amended and restated credit agreement and over the seven year term for fees
incurred related to Term Loan A. The unamortized deferred financing costs of $1,018 have been netted against
the debt drawn as at December 31, 2021.
As at December 31, 2021, the Company was in compliance with all financial covenants.
Seller notes payable of $53,591 (of which $53,461 are U.S. denominated) on the financing of certain
acquisitions are unsecured, at interest rates ranging from 1% to 8%. The notes are repayable from January
2022 to January 2027 in the same currency as the related note.
Long-term debt is comprised of the following:
As at
Revolving credit facility & swing line (net of financing costs)
Term Loan A (net of financing costs)
Seller notes
Current portion
December 31,
2021
December 31,
2020
(Note 4)
$
$
$
263,802 $
124,680
53,591
442,073 $
13,887
—
123,705
56,523
180,228
15,594
428,186 $
164,634
85
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
The following is the continuity of long-term debt:
As at
Balance, beginning of period
Consideration on acquisition
Draws
Repayments
Deferred financing costs
Amortization of deferred finance costs
Foreign exchange
December 31,
2021
December 31,
2020
(Note 4)
$
180,228 $
14,570
330,500
(83,504)
—
286
(7)
319,727
39,635
495,502
(673,009)
(1,395)
520
(752)
Balance, end of period
$
442,073 $
180,228
The following table summarizes the repayment schedule of the long-term debt:
Principal Payments
Less than 1 year
1 to 5 years
Greater than 5 years
December 31,
2021
13,887
303,186
125,000
442,073
$
$
Included in finance costs for the year ended December 31, 2021 is interest on long-term debt of $9,874 (2020 -
$15,499).
86
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
15. LEASE LIABILITIES
The following is the continuity of lease liabilities:
Balance, beginning of period
Assumed on acquisition
Additions and modifications
Repayments
Financing costs
Foreign exchange
Balance, end of period
Current portion
December 31,
2021
December 31,
2020
(Note 4)
$
419,311 $
395,265
140,273
68,461
(102,996)
18,099
199
543,347 $
92,924
450,423 $
22,130
72,094
(87,972)
16,796
998
419,311
77,941
341,370
$
$
Lease expenses are presented in the Consolidated Statement of Earnings as follows:
Operating expenses
Depreciation of right of use assets
Finance costs
Year ended December 31,
2021
2020
(Note 4)
$
$
$
4,928 $
88,523 $
18,099 $
3,555
76,080
16,796
The following table summarizes the undiscounted repayment schedule of the lease liabilities:
Less than 1 year
1 to 5 years
Greater than 5 years
$
$
110,408
313,331
204,899
628,638
Included in operating expenses are short-term and low-value asset lease expenses of $4,851 for the year ended
December 31, 2021 (2020 - $3,475).
87
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
16. UNEARNED REBATES
In connection with a 2019 acquisition, the Company recognized prepaid rebates received from a trading partner
of $7,500. These rebates have been deferred as unearned rebates. Under the terms of this agreement, the
Company will amortize the unearned rebate on a straight line basis over a term of 12 years, as a reduction of
cost of sales.
The Company is obliged to purchase the suppliers’ products on an exclusive basis over this term. In exchange
for this exclusive arrangement, and subject to certain conditions, the trading partners are required to continue to
price their products competitively to the Company. Termination of the arrangement by the Company, the
occurrence of an event of default or a change in control, as defined by the agreement, require the Company to
repay all unamortized balances and all other amounts as outlined within the agreement.
At December 31, 2021, the Company has unearned rebates of $5,809 (December 31, 2020 – $6,424).
17. FAIR VALUE ADJUSTMENTS
Non-controlling interest call liability /
put option
Contingent consideration
Year ended December 31,
2021
2020
(Note 4)
—
148
(2,177)
(1,694)
Total fair value adjustments
$
148 $
(3,871)
88
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
18. FINANCIAL INSTRUMENTS
Carrying value and estimated fair value of financial instruments
December 31, 2021
December 31, 2020
(Note 4)
Classification
Fair value
hierarchy
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Financial assets
Cash
Amortized cost
Accounts receivable
Amortized cost
Financial liabilities
Accounts payable and
accrued liabilities
Amortized cost
Dividends payable
Amortized cost
Long-term debt
Amortized cost
n/a
n/a
n/a
n/a
n/a
27,714
27,714
61,041
61,041
103,024
103,024
86,957
86,957
258,423
258,423
210,185
210,185
2,439
2,439
2,364
2,364
442,073
437,717
180,228
180,251
For the Company’s current financial assets and liabilities, including accounts receivable, accounts payable and
accrued liabilities, and dividends payable, which are short term in nature and subject to normal trade terms, the
carrying values approximate their fair value. The fair value of BGSI’s long-term debt has been determined by
calculating the present value of the interest rate spread that exists between the actual Term Loan A and the rate
that would be negotiated with the economic conditions at the reporting date. As there is no ready secondary
market for BGSI’s other long-term debt, the fair value has been estimated using the discounted cash flow
method.
Collateral
The Company’s syndicated loan facility is collateralized by a General Security Agreement. The carrying
amount of the financial assets pledged as collateral for this facility at December 31, 2021 was approximately
$130,738 (December 31, 2020 - $147,998).
Interest rate risk
The Company’s operating line and syndicated loan facility are exposed to interest rate fluctuations and the
Company does not hold any financial instruments to mitigate this risk. Seller notes and Term Loan A are at
fixed interest rates.
Foreign currency risk
The Company’s operations in Canada are more closely tied to its domestic currency. Accordingly, the
Canadian operations are measured in Canadian dollars and the Company’s foreign exchange translation
exposure relates to these operations. When the Canadian operation’s net asset values are converted to U.S.
89
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
dollars, currency fluctuations result in period to period changes in those net asset values. BGSI’s equity
position reflects these changes in net asset values as recorded in accumulated other comprehensive earnings.
The income and expenses of the Canadian operations are translated into U.S. dollars at the average rate for the
period in order to include their financial results in the consolidated financial statements. Period to period
changes in the average exchange rates cause translation effects that have an impact on net earnings. Unlike the
effect of exchange rate fluctuations on transaction exposure, the exchange rate translation risk does not affect
local currency cash flows.
Transactional foreign currency risk also exists in circumstances where U.S. denominated cash is received in
Canada. The Company monitors U.S. denominated cash flows to be received in Canada and evaluates whether
to use forward foreign exchange contracts. No forward foreign exchange contracts were used during 2021 or
2020.
BGSI earns interest on promissory notes issued to The Boyd Group (U.S.) Inc., the parent of the Company’s
U.S. operations. As at December 31, 2021 and December 31, 2020, promissory notes denominated in Canadian
dollars are as follows:
Promissory notes
As at
December 31,
2021
December 31,
2020
Promissory note at 5.0% due September 29, 2027
$
108,000 $
108,000
Promissory note at 5.75% due January 1, 2030
Promissory note at 8.58% due January 1, 2024
Promissory note at 8.58% due January 1, 2024
Promissory note at 8.58% due January 1, 2024
Promissory note at 4.3% due December 30, 2030
41,800
6,800
25,000
30,000
70,000
41,800
6,800
25,000
30,000
50,000
$
281,600 $
261,600
BGSI’s U.S. operations purchase Canadian dollars at market rates to fund the monthly interest payments.
Credit risk
The carrying amount of financial assets represents the maximum credit exposure. Cash is in the form of
deposits on demand with major financial institutions that have strong long-term credit ratings. BGSI is subject
to risk of non-payment of accounts receivable; however, the Company’s receivables are largely collected from
the insurers of its customers. Accordingly, the Company’s accounts receivable comprises mostly amounts due
from national and international insurance companies or provincial crown corporations.
Aging of accounts receivable
As at
Neither impaired nor past due
Past due:
Over 90 days
Allowance for doubtful accounts
Accounts receivable
December 31,
2021
December 31,
2020
(Note 4)
$
$
$
97,804 $
83,656
8,174
105,978 $
(2,954)
103,024 $
5,226
88,882
(1,925)
86,957
90
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
BGSI uses an allowance account to record an estimate of potential impairment for accounts receivables.
Allowance for doubtful accounts
As at
Balance, beginning of period
Increase in the allowance (net of recoveries and amounts
written off)
Balance, end of period
December 31,
2021
December 31,
2020
(Note 4)
$
$
1,925 $
1,066
1,029
2,954 $
859
1,925
Liquidity risk
The following table details the Company’s remaining undiscounted contractual maturities for its financial
liabilities.
Accounts payable and
accrued liabilities
Long-term debt
Lease liabilities
Total
Within 1
year
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
After 5
years
$258,423
442,073
628,638
$258,423
13,887
110,408
$1,329,134 $382,718
$—
13,624
99,990
$113,614
$—
17,535
86,810
$104,345
$—
5,135
71,817
$76,952
$—
266,892
54,714
$321,606
$—
125,000
204,899
$329,899
Obligations of the Company are generally satisfied through future operating cash flows and the collection of
accounts receivable.
Market Risk and Sensitivity Analysis
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of
changes in market prices. Components of market risk to which the Company is exposed are interest rate risk
and foreign exchange rate risk as discussed above.
BGSI has used a sensitivity analysis technique that measures the estimated change to net earnings and equity of
a 1% (100 basis points) difference in market interest rates. The sensitivity analysis assumes that changes in
market interest rates only affect interest income or expense of variable financial instruments not covered by
hedging instruments. For the year ended December 31, 2021 it is estimated that the impact of a 1% increase to
market rates would result in a $2,215 decrease (2020 – $2,694 decrease) to net earnings as well as
comprehensive earnings.
The currency risk sensitivity analysis is based on a 5% strengthening or weakening of the Canadian Dollar
against the U.S. Dollar and assumes that all other variables remain constant. Under this assumption, net
earnings for the year ended December 31, 2021 as well as comprehensive earnings would have changed by $nil
due to no foreign exchange contracts being in place at the end of 2021 and 2020.
Exchangeable Class A Common Shares
The Class A common shares of BGHI were exchangeable into units of the Fund until January 1, 2020. To
facilitate the exchange, BGHI issued one Class B common share to the Fund for each Class A common share
91
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
that had been retracted. The Fund in turn issued a trust unit to the Class A common shareholder. The
exchangeable feature resulted in the Class A common shares of BGHI being presented as financial liabilities of
the Fund. Exchangeable Class A shares were measured at the market price of the units of the Fund as at the
statement of financial position date. Exchanges were recorded at carrying value. Pursuant to the Arrangement,
BGHI Class A common shareholders received one BGSI common share for each BGHI Class A common share
held as at December 31, 2019.
Non-controlling interest call liability / put option
On May 31, 2013, in connection with the acquisition of Glass America, the Company amended and restated the
limited liability company agreement of Gerber Glass LLC (the “Gerber Glass Company Agreement”) which
provides a member of its U.S. management team the opportunity to participate in the future growth of the
Company’s U.S. glass business. Within the agreement was a put option held by the non-controlling member
that provided the member an option to put the business back to the Company according to a valuation formula
defined in the agreement. On October 31, 2016, the Company amended the Gerber Glass Company Agreement.
The put option held by the non-controlling member continued to provide the member an option to put the
business back to the Company according to a valuation formula defined in the Gerber Glass Company
Agreement until June 26, 2020 when the Company provided notice of exercise of the call option. All fair value
changes in the estimated liability are recorded in earnings.
On July 31, 2020, the call option transaction to acquire the 21.16% non-controlling interest in Gerber Glass
LLC held by a member of the U.S. management team was completed, and BGSI acquired the 21.16% non-
controlling interest in Gerber Glass LLC.
The change in the non-controlling interest call liability / put option is summarized as follows:
Balance, beginning of period
Fair value adjustments
Payment to non-controlling interests
Balance, end of period
December 31,
2020
(Note 4)
Glass-business
operating
partner
$
$
3,477
(2,177)
(1,300)
—
During 2021, a fair value adjustment recovery in the amount of $nil (2020 – recovery of $2,177) was recorded to
earnings related to the non-controlling interest put option and call liability.
19. CONTINGENCIES
BGSI has two letters of credit for $225 (2020 –$225).
92
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
20. ACCUMULATED OTHER COMPREHENSIVE EARNINGS
Balance, beginning of period
Unrealized earnings on foreign currency translation
Balance, end of period
December 31,
2021
December 31,
2020
(Note 4)
$
$
65,157 $
830
65,987 $
47,088
18,069
65,157
There is no tax impact of translating the financial statements of the Canadian operations.
21.
CAPITAL
Shareholders’ Capital
Authorized:
Unlimited number of common shares
An unlimited number of common shares are authorized and may be issued pursuant to the Articles of
Incorporation of BGSI. All common shares have equal rights and privileges. Each common share is
redeemable and transferable. A common share entitles the holder thereof to participate equally in dividends,
including the dividends of net earnings and net realized capital gains of BGSI and dividends on termination or
winding-up of BGSI, is fully paid and non-assessable and entitles the holder thereof to one vote at all meetings
of shareholders for each share held.
On January 2, 2020, BGSI announced the completion of the conversion of the Fund from an income trust to a
public corporation, pursuant to the plan of Arrangement under the Canada Business Corporations Act. Issuance
costs, net of tax, of $613 have been deducted from equity as a result of the Arrangement. A total of 184,813
BGHI Class A common shares were exchanged for BGSI common shares as a result of the Arrangement
increased equity by $28,735.
On May 14, 2020, BGSI completed a bought deal public offering where it sold to an underwriting syndicate
1,265,000 common shares out of treasury at a price of C$183.00 per share for gross proceeds of $164,297.
Issuance costs, net of tax, of $5,258 were netted against the gross proceeds.
22.
CONTRIBUTED SURPLUS
Units purchased under the Fund’s Normal Course Issuer Bid for a value below their carrying amount represent
a contribution to the benefit of the remaining unitholders and the difference is credited to contributed surplus.
The Fund purchased units for cancellation under Normal Course Issuer Bids in 2009, 2008, and 2007.
During the year, stock option accretion (net of issue costs) of $76 was credited to contributed surplus.
23. CAPITAL STRUCTURE
The Company’s objective when managing capital is to maintain a flexible capital structure which optimizes the
cost of capital at acceptable risk. The Company includes in its definition of capital: equity, long-term debt,
convertible debentures, convertible debenture conversion features, non-controlling interest put options and call
93
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
liability, share based payment obligations, non-property obligations under lease liabilities, and unearned
rebates, net of cash.
The Company manages the capital structure and make adjustments to it by taking into account changing
economic conditions, operating performance and growth opportunities. In order to maintain or adjust the
capital structure, the Company may adjust the amount of dividends it pays, purchase shares for cancellation
pursuant to a normal course issuer bid, issue new shares, issue new debt or replace existing debt with different
characteristics, issue convertible debentures, issue share options, expand the revolver, increase or decrease its
non-property lease liabilities, pursue alternative structuring of acquisitions, trigger call options on certain
acquisition obligations, negotiate unearned rebates, or settle certain acquisition obligations using a greater
amount of cash, or shares.
The Company monitors capital on a number of bases, including an interest coverage ratio, total debt to
Adjusted EBITDA ratios, return on invested capital, a debt to capital ratio, a current ratio, diluted earnings per
share and dividends per share. The fixed charge coverage ratio is the ratio of Adjusted EBITDA, adding back
rental expense, less unfunded capital expenditures, less income tax expense, less dividends to debt, rental
expense and non-property lease liability payments. Total debt to Adjusted EBITDA is calculated as the
Company’s total debt and non-property lease liabilities but excluding convertible debentures divided by
Adjusted EBITDA. Return on invested capital is the ratio of Adjusted EBITDA to average invested capital.
Adjusted EBITDA is a non-GAAP financial measure, whose nearest GAAP measure is Cash Flow from
Operations.
The Company’s strategy has been to maintain a strong statement of financial position including its cash
position and financial flexibility while maintaining consistent dividends in order to capitalize on growth
opportunities. In addition, the Company believes that, from time to time, the market price of the shares may
not fully reflect the underlying value of the shares and that at such times the purchase of shares would be in the
best interest of BGSI. Such purchases increase the proportionate ownership interest of all remaining
shareholders.
The Company grows, in part, through the acquisition or start-up of collision and glass repair and replacement
businesses, or other businesses. Sources of capital that the Company has been successful at accessing in the
past include public and private equity placements, convertible debt offerings, the use of equity securities to
directly pay for a portion of acquisitions, capital available through strategic alliances with trading partners,
non-property lease financing, seller financing and both senior and subordinate debt facilities or by deferring
possible future purchase price payments using contingent consideration and call or put options.
94
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
24.
RELATED PARTY TRANSACTIONS
In certain circumstances the Company has entered into property lease arrangements where an employee of the
Company is the landlord. In most cases, the Company assumes these property lease arrangements initially in
connection with an acquisition. The property leases for these locations do not contain any significant non-
standard terms and conditions that would not normally exist in an arm’s length relationship, and the Company
has determined that the terms and conditions of the leases are representative of fair market rent values.
The following are the lease payment amounts for facilities under lease with related parties:
Landlord
Affiliated Person(s) Location
Lease
Expires
December 31,
2021
December 31,
2020
(Note 4)
Kard Properties Ltd. &
D'Silva Real Estate
Holdings Inc.
Desmond D'Silva
Various locations -
Ontario
Various -
expiring
2020 to
2037
$
— $
2,403
Gerber Building No. 1
Ptnrp
Eddie Cheskis,
& Tim O'Day
South Elgin, IL
2023
100
86
As at December 31, 2020, Desmond D’Silva ceased to be a related party.
25. SEGMENTED REPORTING
BGSI has one reportable line of business, being automotive collision repair and related services, with all
revenues relating to a group of similar services. In this circumstance, IFRS requires BGSI to provide
geographical disclosure. For the periods reported, all of BGSI’s sales were derived within Canada or the
United States of America. Reportable assets include property, plant and equipment, right of use assets,
goodwill and intangible assets which are all located within these two geographic areas.
Sales
Canada
United States
Reportable Assets
As at
Canada
United States
Year ended December 31,
2021
2020
(Note 4)
$
148,467 $
1,724,203
159,263
1,401,961
$
1,872,670 $
1,561,224
December 31,
2021
December 31,
2020
(Note 4)
$
233,024 $
1,551,919
231,751
1,128,275
$
1,784,943 $
1,360,026
95
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
BGSI’s revenues are largely derived from the insurers of its customers, who are generally automobile owners.
Formal relationships with insurance companies such as Direct Repair Programs (“DRPs”) play an important
role in generating sales volumes for the Company. Although automobile owners still have the freedom of
choice of repair provider, insurance companies may educate the owner on the benefits of choosing a repairer in
their DRP network. Of the top five insurance companies that BGSI deals with, which in aggregate account for
approximately 49% (2020 – 46%) of total sales, one insurance company represents approximately 14% (2020
– 13%) of the Company’s total sales, while a second insurance company represents approximately 10% (2020
– 10%).
26. COMPENSATION OF KEY MANAGEMENT
For the years ended December 31,
2021
2020
(Note 4)
Salaries and short-term employee benefits
$
4,136 $
Post-employment benefits
Long-term incentive plan
Share options
86
2,217
352
$
6,791 $
4,045
77
2,160
—
6,282
Key management includes BGSI’s Directors as well as the most senior officers of the Company and
Subsidiary Companies.
27. SHARE-BASED COMPENSATION
Certain members of the management team of the Company, as well as the Board of Directors of the Company
participate in share-based compensation plans. These plans are cash-settled, with compensation expense
determined based on the fair value of the associated liability at the end of the reporting period until the awards
are settled.
Long-term incentive plan
On January 1, 2019, January 1, 2020, and January 1, 2021, Performance Share Unit awards were granted to
certain executive officers for the 2019, 2020 and 2021 grant years. Performance Share Units are tied to unit/
share value from date of grant to the date of vesting and will be paid out in cash over a three-year period,
subject to the terms of the plan. Performance Share Units represent the right to receive payments linked to
BGSI’s share value, conditional upon the achievement of one or more objective performance goals. The
dividend rate declared by BGSI on issued and outstanding shares of the Company is also applied to the
Performance Share Units. The dividend amount on the Performance Share Units is converted into additional
Performance Share Units based on the market value of the Company’s shares at the time of the dividend.
These additional Performance Share Units vest at the same time as the Performance Share Units that the
dividend rate was applied on.
The 2019, 2020, and 2021 awards granted include non-market performance conditions. The impact of market
and non-market performance conditions is recognized through the adjustment of the award that is expected to
vest. At the end of each reporting period, BGSI re-assesses its estimates of the number of Performance Share
96
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
Units that are expected to vest and recognizes the impact of the revision to compensation expense in earnings
over the vesting period.
The fair value of each outstanding Performance Share Unit is estimated based on the fair market value of the
Company’s units/shares at the grant date, subsequently adjusted for additional shares granted based on the
reinvestment of notional dividends and the market value of the shares at the end of each reporting period. The
associated compensation expense is recognized over the vesting period, factoring in the probability of the
performance criteria being met during that period.
On January 1, 2021, Restricted Share Units were granted to certain executive officers for the 2021 grant year.
Restricted Share Units are valued by reference to share value from date of grant to the date of vesting and will
be paid out in cash over a three-year period, subject to the terms of the plan. The dividend rate declared by
BGSI on issued and outstanding shares of the Company is also applied to the Restricted Share Units. The
dividend amount on the Restricted Share Units is converted into additional Restricted Share Units based on the
market value of the Company’s shares at the time of the dividend. These additional Restricted Share Units
vest at the same time as the Restricted Share Units that the dividend rate was applied on.
Directors Deferred Share Unit Plan
A Directors Deferred Share Unit Plan (“DSUP”) is administered through BGSI and requires independent
Directors to receive at least 60% of their Director compensation in the form of deferred shares, which are
essentially notional shares of BGSI and are redeemable for cash on termination. Directors may elect to receive
up to 100% of their Director compensation in the form of deferred shares. The number of deferred shares to
which a Director is entitled will be adjusted for the payment of dividends.
The fair value of each outstanding Director Deferred Share Unit is estimated based on the fair market value of
BGSI’s shares at the grant date, subsequently adjusted for additional shares granted based on the reinvestment
of notional dividends and the market value of the shares at the end of each reporting period.
28. EMPLOYEE EXPENSES
For the years ended December 31,
2021
2020
(Note 4)
Salaries and short-term employee benefits
$
723,003 $
583,230
Post-employment benefits
Long-term incentive plan
Share options
86
2,721
352
77
2,639
—
$
726,162 $
585,946
During the year ended December 31, 2021, the Company was eligible for the Canada Emergency Wage
Subsidy (“CEWS”). The total estimated CEWS for the year ended December 31, 2021 of $9,822 (2020 -
$12,749) has been recorded, with $4,018 (2020 - $5,336) being recorded as a reduction to cost of sales and
$5,804 (2020 - $7,413) being recorded as a reduction to operating expenses. At December 31, 2021, the
Company has $3,347 accrued for amounts to be received under the CEWS program in Accounts Receivable.
97
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
29. DEFINED CONTRIBUTION PENSION PLANS
The Company has defined contribution pension plans for certain employees. The Company matches U.S.
employee contributions at rates up to 6.0% of the employees’ salary. The expense and payments for the year
were $4,329 (2020 - $2,942). The Company has established a Retirement Defined Contribution Arrangement
Trust Agreement for the Executive Chair which qualifies as retirement compensation arrangement as defined
in the Income Tax Act (Canada), RSC 1985, c.1 (5th Supplement), as amended. The agreement specifies that
quarterly contributions are to be made until the end of 2024. During 2021, $86 (2020 - $77) was paid related
to these arrangements.
30. EARNINGS PER SHARE
Net earnings
Less:
Non-controlling interest call liability / put option
Net earnings - diluted basis
Basic weighted average number of shares
Add:
Non-controlling interest call liability / put option
Average number of shares outstanding - diluted basis
Basic earnings per share
Diluted earnings per share
Year ended December 31,
2021
2020
(Note 4)
$
23,540 $
44,114
—
$
23,540 $
(2,177)
41,937
21,472,194
21,005,596
—
9,263
21,472,194
$
$
1.10 $
1.10 $
21,014,859
2.10
2.00
Stock options are instruments that could have potentially diluted basic earnings per share for the years ended
December 31, 2021, but were not included in the calculation of diluted earnings per share because they were
anti-dilutive for the period.
31. STOCK OPTION PLAN
During the first quarter of 2021, the Company instituted a stock option plan for senior management, which was
approved by shareholders on May 12, 2021. The Company's stock option plan allows for the granting of options
up to an amount of 250,000 Common shares under this plan. Each tranche of the options vests equally over two,
three, four and five year periods. The term of an option shall be determined and approved by the People,
Culture and Compensation Committee; provided that the term shall be no longer than ten years from the grant
date.
On March 31, 2021 the Company issued 13,831 options under the stock option plan with a grant date fair value
of C$56.99 per option and an exercise price of C$219.21 per option. None of the options are exercisable at
period end. Issue costs of $105 were incurred with respect to the stock option plan.
98
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
32. CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS
Accounts receivable
Inventory
Prepaid expenses
Accounts payable and accrued liabilities
Income taxes, net
For the years ended December 31,
2021
2020
(Note 4)
$
(10,397) $
(30,821)
(8,760)
37,407
(1,504)
$
(14,075) $
(58)
5,571
2,947
10,110
(5,103)
13,467
33. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
As at
Non-cash changes
December 31,
2020
(Note 4)
Cash
Flows
Acquisition Other items
Fair value
changes
Foreign
exchange
December 31,
2021
Long-term debt
Lease liabilities
Dividends
Issue costs
$
180,228
419,311
2,364
—
237,122
(102,996)
(9,653)
(105)
14,570
140,273
—
—
10,160
86,560
9,692
—
$
601,903
124,368
154,843
106,412
—
—
—
—
—
(7) $
199
36
—
442,073
543,347
2,439
—
228 $
987,859
As at
December 31,
2019
(Note 4)
Cash
Flows
Non-cash changes
Acquisition Other items
Fair value
changes
Foreign
exchange
December 31,
2020
(Note 4)
Long-term debt
$
319,727
(194,401)
39,635
16,019
Lease liabilities
Dividends
Non-controlling
interest put option
and call liability
Issue costs
Shares issued through
public offering
395,265
706
(87,972)
(7,132)
22,130
—
88,890
8,790
3,477
—
—
(1,300)
(7,977)
164,297
—
—
—
—
—
—
(2,177)
—
—
—
—
—
(752) $
180,228
998
—
—
—
—
419,311
2,364
—
—
—
$
719,175
(134,485)
61,765
113,699
(2,177)
246 $
601,903
34. SUBSEQUENT EVENTS
On March 21, 2022, the Company amended the Credit Agreement to provide for a covenant flex period from
January 1, 2022 to March 30, 2023 and to provide for revisions to interest rates, allowing for the use of LIBOR
99
BOYD GROUP SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(thousands of U.S. dollars, except share and per share amounts)
until it is decommissioned and allowing for the use of the Secured Overnight Financing Rate (“SOFR”) at the
Company’s election. During the covenant flex period, the financial covenants require BGSI to maintain a
senior funded debt to EBITDA ratio of less than 4.00 from March 21, 2022 to March 30, 2022, less than 4.50
from March 31, 2022 to September 29, 2022, less than 4.25 from September 30, 2022 to December 30, 2022
and less than 4.00 from December 31, 2022 to March 30, 2023. For four quarters following a material
acquisition during the covenant flex period, the senior funded debt to EBITDA ratio may be increased by up to
0.50, never exceeding 4.50.
100
BOARD OF DIRECTORS
Boyd Group Services Inc. Board of Directors consists of nine members – two that are officers or retired officers of
BGSI and seven that are independent Directors. The Independent Chair of the Board is David Brown. Boyd Group
Services Inc. Board of Directors has established three standing committees: The Corporate Governance and
Sustainability Committee, The Audit Committee, and the People, Culture and Compensation Committee.
The Corporate Governance and Sustainability Committee is chaired by Sally Savoia and includes Robert Espey and
William Onuwa. The Audit Committee is chaired by William Onuwa and includes John Hartmann and Violet
Konkle. The People, Culture and Compensation Committee is chaired by Violet Konkle and includes Robert Gross
and John Hartman.
David Brown is an Executive Vice-President of Richardson Financial Group Limited and a Managing Director of
RBM Capital Limited (a private investment firm). He was previously the CEO of Richardson Capital Limited, a
private equity arm of James Richardson & Sons, Limited, the Corporate Secretary of James Richardson & Sons,
Limited, and a partner in the independent law and accounting firm of Gray & Brown. Mr. Brown has considerable
experience in private equity investment and management, senior management and in advising and working with
family businesses in the areas of taxation, mergers, acquisitions, divestitures, corporate reorganizations, financings,
management, ownership transitions and estate planning. Mr. Brown also has considerable public company
experience. He currently serves as the Independent Chair of the Board of Boyd Group Services Inc. and serves as a
director and Chair of the Audit Committee of Pollard Banknote Limited and a director of RF Capital Group Inc. He
has served various Manitoba charities including acting as a director of the Misericordia Hospital and Pavilion
Gallery Museum, Inc. and as Co-chair of Major Donors for the Children’s Hospital Foundation’s Capital Campaign.
He is a graduate of the University of Manitoba law school (gold medalist), and is a Chartered Professional
Accountant.
Brock Bulbuck acted as Executive Chair of BGSI from 2020 to 2021. Prior to this role, Mr. Bulbuck served as
Chief Executive Officer from 2010 to 2020. After joining Boyd in 1993, Mr. Bulbuck served in many senior
leadership roles and played a leading role in the overall development and growth of the business. Mr. Bulbuck also
serves as a Director on the Board of The North West Company. He is also a past Chairperson of the Winnipeg
Football Club Board of Directors, a past member of the Canadian Football League Board of Governors and a current
Director of Pan Am Clinic Foundation. Mr. Bulbuck has a Bachelor of Commerce (Honors) degree from the
University of Manitoba and is a Chartered Professional Accountant.
Robert Espey was appointed President and Chief Executive Officer in 2011 of Parkland Corporation ("Parkland")
and has successfully led the transformation of Parkland from a Western Canadian regional independent into a
leading international consolidator of convenience retail and fuel marketing businesses with operations in 25
countries. Under Mr. Espey's leadership, and in addition to network of over 3,200 retail locations, Parkland is a
leader in manufacturing low carbon fuels and is rapidly building an electric vehicle charging network to serve
growing demand in select markets. Mr. Espey has overseen over 60 acquisitions, including of Chevron Canada’s
convenience retail and downstream fuel business, the Ultramar retail business from CST brands, the expansion of
Parkland into the U.S., and in January 2019 the addition of the Sol which expanded Parkland’s operations into the
Caribbean region. Previously, Mr. Espey served as Chief Operating Officer from 2010 to 2011, and Vice President,
Retail Markets from 2008 to 2010. Prior to joining Parkland, Mr. Espey held a variety of senior management roles
across a diverse group of industry sectors, both internationally and domestically, including as President and Chief
Executive Officer of FisherCast Global Corporation. Mr. Espey holds a Bachelor of Engineering (Mechanical) from
Royal Military College and a Masters in Business Administration from the University of Western Ontario. Mr.
Espey serves as Chair of the Board of Directors for the Canadian Fuels Association and is a member of the Board of
Directors of Parkland Corporation.
Robert Gross is the past Executive Chair of Monro, Inc., the largest chain of company-operated automotive
undercar repair and tire service facilities in the United States. He served as CEO of Monro from 1999 until October
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2012 and as Executive Chair from October 2012 to August 2017. Prior to his time at Monro, he served as Chair and
CEO at Tops Appliance City, Inc. and before that as President and COO at Eye Care Centers of America, Inc., a
Sears, Roebuck & Co. company.
John Hartmann is currently the COO of Bed Bath & Beyond and President of buybuyBaby. Prior to recently
joining Bed Bath & Beyond in 2020, he held the position of President & Chief Executive Officer at True Value
Company, a privately owned U.S. hardware wholesaler for seven years. Mr. Hartmann also led New Zealand-based
cooperative Mitre 10 as Chief Executive Officer from 2010 to 2013. Mr. Hartmann recently served on the Audit
Committee of AmeriGas, prior to UGI’s acquisition.
Violet Konkle is the past President and Chief Executive Officer of The Brick Ltd. Prior to joining The Brick in
2010 as President, Business Support, she held a number of positions with Walmart Canada, including Chief
Operating Officer and Chief Customer Officer. Ms. Konkle also held a number of senior executive positions with
Loblaw Companies Ltd., including Executive Vice President, Atlantic Wholesale Division. Ms. Konkle is a director
of The North West Company Inc. and GFL Environmental, as well as three privately held companies including
Bailey Metal Products, Elswood Investment Corporation and Abarta. Ms. Konkle previously served on the Advisory
Board of Longo’s Brothers Fruit Markets Inc., a privately held company. She is a past director of Dare Foods, The
Brick Ltd., Trans Global Insurance, the Canadian Chamber of Commerce and the National Board of Habitat for
Humanity.
Timothy O’Day is the President and CEO of BGSI. He joined Gerber Collision & Glass in February 1998. With
Boyd Group’s acquisition of Gerber in 2004, he was appointed COO for Boyd’s U.S Operations. In 2008, he was
appointed President and COO for U.S. Operations. On January 4, 2017, Mr. O’Day was appointed President and
COO of Boyd Group Income Fund, and on January 2, 2020, he was appointed President and CEO of BGSI. Earlier
in his career, he was with Midas International, where he was elevated to Vice President–Western Division,
responsible for a territory that encompassed 500 Midas locations. Mr. O’Day also serves on the I-CAR Board as
Immediate Past Chair and served on the Board of the Collision Repair Education Foundation until March 2016 for a
period of six years.
William Onuwa is currently EVP and Chief Audit Executive at Royal Bank of Canada (“RBC”). Prior to this role,
he was the SVP & Chief Risk Officer for Wealth Management, RBC Georgia and the Insurance Group. He held a
number of executive positions for GE Capital Corporation in both the U.S. and the U.K. before joining RBC in
2007. He holds a Doctorate degree from the University of Surrey, U.K. Mr. Onuwa was recently the Chair of two
not-for-profit boards, Yonge Street Mission and Holland Bloorview Kids Rehabilitation Hospital, and had also
served on the subsidiary boards of various RBC insurance companies as a director from 2007 to 2016.
Sally Savoia is a former Vice President and Chief Human Resource Officer for Praxair Inc. Subsequent to her
retirement in 2014, and until 2020, Ms. Savoia served as an independent corporate consultant. Ms. Savoia’s human
resources experience includes diversity and inclusion efforts, executive compensation design and implementation,
executive level succession planning, global talent management, leadership development, and global benefits design.
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CORPORATE DIRECTORY
COMPANY OFFICERS & PRIMARY SUBSIDIARY COMPANY OFFICERS
Timothy O’Day
President & Chief Executive Officer
Brock Bulbuck
Executive Chair
(until December 31, 2021)
Jeff Murray
Vice President,
Finance
Eddie Cheskis *
Chief Executive Officer,
Glass America and Gerber National
Claim Services
Srikanth Venkataraman*
Vice President,
Information Services
Gary Bunce *
Senior Vice President,
Sales
US Operations
Vince Claudio *
Senior Vice President,
U.S. Collision
Narendra (Pat) Pathipati
Executive Vice President,
Chief Financial Officer &
Secretary-Treasurer
Kevin Burnett *
Chief Operating Officer,
U.S. Collision
Eric Olhava*
Senior Vice President,
U.S. Collision
Susie Frausto*
Vice President,
Marketing
Kim Morin *
Vice President & Chief Human
Resources Officer
Peter Toni
Corporate Counsel & Assistant
Secretary
Tony Canade*
Chief Operating Officer, Canadian
Operations
Jason Hope *
Vice President, Corporate
Development and Strategic
Projects
Mark Miller*
Vice President, OEM and Quality
*
*Officers of subsidiary companies only
———————————————————————————————————————
CORPORATE OFFICE
1745 Ellice Avenue, Unit C1 Telephone: (204) 895-1244
Winnipeg, Manitoba, Canada Fax: (204) 895-1283
R3H 1H9 Website: www.boydgroup.com
———————————————————————————————————————
For location information, please visit us at www.boydgroup.com
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SHAREHOLDER INFORMATION
BOYD GROUP SERVICES INC. SHARES AND EXCHANGE LISTING
Shares of BGSI are listed on the Toronto Stock Exchange under the symbol BYD.TO.
Registrar, Transfer Agents and
Distribution Agents
Computershare Trust Company
8th Floor, 100 University Avenue
Toronto, Ontario
M5J 2Y1
Legal Counsel
Auditors
Thompson Dorfman Sweatman LLP
1700-242 Hargrave Street
Winnipeg, Manitoba
R3C 0V1
Deloitte LLP
2200 – 360 Main Street
Winnipeg, Manitoba
R3C 3Z3
Bank Syndicate Lead Member
Additional Bank Syndicate Members
Toronto-Dominion Bank
TD North Tower
77 King Street West, 25th Floor
Toronto, Ontario
M5K 1A2
Bank of America N.A.
The Bank of Nova Scotia
National Bank of Canada
———————————————————————————————————————
Annual General Meeting
www.virtualshareholdermeeting.com/BOYD2022
Wednesday, May 11, 2022
1:00 p.m. (CT)
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