BUHLER INDUSTRIES INC.
ANNUAL REPORT
2020
INTRODUCTION VERSATILE
Like many in manufacturing, the Company adapted
Before travel restrictions were implemented in early
to industry challenges and the COVID-19 pandemic.
2020, three regional dealer meetings were held in
Fortunately, most areas in Canada and the United States
Canada and the US to update the dealer network on
had above average yields and higher quality crops than
changes to Company policies. These meetings offered
the previous three years. This, combined with increasing
the dealers an opportunity for candid discussions on the
commodity prices, resulted in optimism and higher
future of the Company. Eight new Versatile dealers were
demand. The order writing program for 2021 was a success
added in 2020, including new representation in regions
and more production is forecast as a result. Necessary
of Pennsylvania and northern Alberta. With the increase
steps were taken during the pandemic to ensure the
in optimism in the agriculture industry, the Company
safety of our employees, dealers, and customers. In-
expects to add 10 to 12 new dealers in the coming year.
person calls to dealers were reduced and the Company
made use of virtual tools such as video conference calls
Further investment in product development continued
to maintain relationships and provide assistance. Despite
in 2020. The Versatile Fury high speed disc was a
some supply chain challenges, a significant effort was
highlight of the year and continued to attract new
made to deliver parts and support to our customers and
customers across North America. The product exceeded
dealers through these unprecedented times.
sales forecasts and is expected to be a cornerstone of
the tillage product line moving forward. Future product
We have continued our commitment to improving
development includes expanded models and options
the dealer-manufacturer relationship through open
on the Fury and Viking vertical tillage machine, and the
communication, consistent programs and a predictable
introduction of the Versatile Nemesis tractors in 235
pricing
strategy. The 2020 Equipment Dealers
and 255 horsepower. Looking forward towards 2021
Association’s annual satisfaction survey which ranks
and beyond, Versatile is well positioned to capitalize on
dealer feedback on several aspects of the relationship
increasing market demand and will continue to build
with manufacturers showed a significant improvement
on the momentum of this past year, expanding its reach
for Versatile, with improvements in nearly all categories
with new and legacy products and renewed dealership
and the highest overall satisfaction rating since 2014.
confidence.
2
Adam Reid
Vice President of Sales & Marketing, Versatile
INTRODUCTION FARM KING
The Farm King Division experienced both successes and
included a reduction in staff and structure of the
challenges in 2020.
Company. During the year, Maxim Loktionov was
appointed Vice President of Farm King. Maxim has re-
This year Farm King celebrated 50 years of auger
evaluated our priorities and focused on improving
manufacturing. During the year, the Company introduced
relationships with our dealership network and reducing
38 new dealerships and opened up 11 new hub locations
internal costs.
across Canada and the United States. The hub locations
offer set up services for our dealers. Offsetting the growth
During the year and subsequent to year end, Farm King
in the dealer network during the year was the uncertainty
made the decision to optimize production at the facility
driven by the Covid-19 pandemic which resulted in
in Morden, Manitoba. Product lines manufactured at the
relatively flat sales compared to 2019. Additional factors
facilities in Fargo, North Dakota and Willmar, Minnesota
included decreased tillage sales due to dealer carry over
will be relocated to Morden in 2021.
in Western Canada and the severe droughts and fires in
Australia leading to reduced export sales.
We believe we are in a strong position moving forward
and look forward to future as we reduce cost and improve
In order to manage the external challenges, significant
our relationships with our dealers.
Company changes were necessary and the actions
Maxim Loktionov
Vice President, Buhler Industries Inc.
3
REPORT TO SHAREHOLDERS
This year we’ve begun to see the impact of the strategy
States. Despite the growth in dealers’ the division
rolled out in early 2019, focusing on improving our dealer
experienced relatively flat sales compared to 2019.
and customer relationships and further aligning our
Similar to Versatile we found our dealer’s carrying excess
goals and listening to the market. This improved focus
inventory in the prior year, resulting in slower sales this
has allowed us to rationalize our inventory levels with
year as they sold off older product.
dealers, better stock our warehouses to ensure quick
responses to orders and increase our dealer network.
These improvements had clear impacts with increased
sales over the prior year. While making these changes we
also took the opportunity to look inside and optimize our
costs to improve our financial position.
Action and flexibility were necessary to meet the
challenges before us. New key appointments included
Maxim Loktionov as Vice President of Farm King,
reevaluating the priorities of the brand. Internal reviews
have helped optimize staffing levels throughout the
organization, and difficult
reviews of production
Despite the improvements made, our sales remained
capacity and requirements have resulted in further
below our forecasts and below the volumes necessary
announcements.
to achieve the efficiencies to cover all overhead costs.
Both external and internal factors contributed to this. A
key focus of the Versatile division was to assist dealers
in retailing aged and aging inventory prior to delivering
new tractors. This effort, while necessary, resulted in
delays in orders being received, stretching and slow-
ing our production schedules. Once the orders did start
rolling in we were hit with the uncertainty of continuing
production in the midst of a world wide pandemic.
While we saw sustained demand for our products, the
During, and subsequent to the year, announcements
have been made to optimize production. Production
lines previously located at the facilities in Fargo, ND, and
Willmar, MN are currently being relocated to Morden,
MB. Further changes are planned for the fall of 2021
with tillage production moving from Vegreville, AB to
our Winnipeg, MB facility. These moves will allow more
flexibility in meeting production demands for both
our tractor and tillage production and help reduce the
pandemic wasn’t without any impact. Despite these
overall overhead costs.
external factors, Versatile was proud to see the first batch
of our new Nemesis tractors roll off the line and hit the
fields. Additional models will be added to that product
line in the coming year.
Farm King proudly celebrated its fiftieth anniversary of
manufacturing augers while adding 38 new dealers and
11 new hub locations across Canada and the United
In 2021 we will continue the course set in 2019, we’ve
seen the improvements and see a bright future ahead.
We’ll continue to adapt to the challenges presented in
this ever changing world while bringing a quality product
to our customers with great after-market support. We
continue to invest heavily in research and development
for new products and continuously improve our existing
products. For all of these reasons we are targeting
4
strong growth in 2021. We would like to thank all of
the stakeholders for their trust and dedication to the
Company.
Yury Ryazanov
Marat Nogerov
Chief Executive Officer and Director
President
5
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Certain statements made in the following Management’s
more. In addition, the Company maintains several well-
Discussion and Analysis contain
forward-looking
stocked parts warehouses.
statements including, but not limited to, statements
concerning possible or assumed future results of
operations of Buhler Industries Inc. (the Company).
Forward-looking statements represent the Company’s
intentions, plans, expectations and beliefs, and are not
guarantees of future performance. Such forward-looking
statements represent the Company’s current views based
on information as at the date of this report. They involve
risks, uncertainties and assumptions and the Company’s
actual results could differ, which in some cases may be
In 2007, Combine Factory Rostselmash Ltd, a major
combine manufacturer located in Rostov-on-Don, Russia,
acquired 80% of the common shares of the Company.
The Company continues to grow with additional
investment in engineering, research and development
and production. The dealer/distribution network in
North America remains steady, however the Rostselmash
network adds more than 200 dealers in Russia, Ukraine
and Kazakhstan that provides for additional sales growth
material, from those anticipated in these forward-looking
into the future.
Buhler Industries remains committed to continuous
product improvement and incorporating new value-
added features. That tradition of excellence will continue
well into the future.
statements. Unless otherwise required by applicable
securities law, the Company disclaims any intention or
obligation to publicly update or revise this information,
whether as a result of new information, future events or
otherwise. The Company cautions investors not to place
undue reliance upon forward-looking statements.
Company Overview
The Company is headquartered in Winnipeg, Manitoba,
Canada. Established in 1932 as an agricultural equipment
manufacturer, the original company was purchased by
John Buhler in 1969. Through expansion, new products
and acquisitions, the Company has added many brands:
Farm King, Ezee-On, Allied, Inland and Versatile. Today
the Company operates several modern manufacturing
plants and distribution centers. Factories in Morden and
Winnipeg (Manitoba), Vegreville (Alberta) and Willmar
(Minnesota) build tractors, augers, snow blowers,
mowers, tillage equipment, compact implements and
6
TEN YEAR HIGHLIGHTS
In thousands of Canadian dollars (except per share amounts)
Year ended Sept. 30
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
IFRS
IFRS
IFRS
IFRS
IFRS
IFRS
IFRS
IFRS
IFRS
IFRS
Revenue
279.495
357.749
340.349
325.521
245,676
274,067
311,974
287,984
229,119
249,550
Gross profit
42,297
54,858
57,318
47,730
22,266
21,226
36,153
3,474
10,343
14,325
GP%
15.1%
15.3%
16.8%
14.7%
9.1%
7.7%
11.6%
1.2%
4.5%
5.7%
Income from operations
21,588
31,750
34,789
22,491
(4,012)
(4,668)
9,387
(22,505)
(13,631)
(10,466)
As percentage of
revenue
8%
9%
10%
7%
(2%)
(2%)
3%
(8%)
(6%)
(4%)
Net earnings
11,917
16,363
19,891
12,458
(5,316)
(2,677)
Earnings per share (EPS)
0.48
0.65
0.80
0.50
(0.21)
(0.11)
520
0.02
(49,532)
(29,489)
(25,809)
(1.98)
(1.18)
(1.03)
EBITDA
22,131
27,247
34,927
24,081
(6,489)
561
7,249
(28,792)
2,075
(14,341)
Total assets
241,355
250,569
283,403
362,844
339,029
278.415
319,739
290,378
262,604
227,759
Working capital
120,827
130,863
141,365
148,223
130,989
122,974
120,987
81,826
77,592
53,900
Shareholders’ equity
144,562
160,925
180,816
193,274
187,958
185,281
185,801
136,269
106,780
80,971
Book value per share
5.78
6.44
7.23
7.73
7.52
7.41
7.43
5.45
4.27
3.24
Return on average
capital
Return on average
equity
8%
9%
10%
11%
11%
12%
6%
7%
(3%)
(1%)
(3%)
(1%)
0%
0%
(31%)
(24%)
(11%)
(31%)
(24%)
(27%)
In this table, IFRS refers to the International Financial Reporting Standards. GAAP refers to the Canadian Generally Accepted
Accounting Principles that were the standard until 2011.
General Information
The following discussion and analysis dated December 24, 2020 was prepared by management and should be
read in conjunction with the consolidated financial statements prepared in accordance with International Financial
Reporting Standards (IFRS). The following discussion and analysis is presented in millions of Canadian dollars except
where otherwise noted. The consolidated financial statements include the accounts of all subsidiaries. All subsidiaries
in the United States operate with the U.S. dollar as the functional currency, while the Company and all its Canadian
subsidiaries operate with the Canadian dollar as the functional currency.
7
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Highlights
Revenue
Revenue for the year was $249.6, up 20.5 from sales of
$229.1 in 2019. The Company’s increased sales levels
are as a result of dealers reducing field inventory in
the previous year, strong harvest conditions and crop
yields. Sales to North America have increased but were
somewhat offset by sales in Eastern Europe and other
international sales.
Gross Profit
Gross profit rose to $14.3, an increase of $4.0 from the
prior year’s $10.3. As a percentage of sales, gross profits
were 5.7%, an increase of 1.2% from the prior year’s 4.5%.
The Company has continued to focus efforts on margin
improvements in 2020 which has resulted in the two
consecutive years of margin improvements.
Sales (millions C$)
2016
2017
2018
2019
2020
Gross Profit (millions C$)
2016
2017
2018
2019
2020
350
300
250
200
150
100
50
0
40
35
30
25
20
15
10
5
0
Loss from Operations
Loss from Operations (millions C$)
Loss from operations came in at $10.5 compared with
a loss of $13.6 in 2019. Selling and administration
expenses were $24.8, up from the prior year’s $24.0. As a
percentage of sales, selling and administration was 9.9%,
down from the prior year percentage of 10.5% primarily
due to efficiencies as a result of the increase in revenues.
10
5
0
-5
-10
-15
-20
-25
8
2016
2017
2018
2019
2020
Net Loss
Net Loss (millions C$)
The net loss for the year was $25.8, an improvement
of $3.7 from the loss in the prior year. In the current
year the Company continued cost saving measures
from the previous year that has resulted in continued
improvements to gross margin and reductions in the
loss from operations. The Company was able to reduce
interest expense by managing to reduce its inventory and
accounts receivable. In addition the Company reduced its
R&D expenses during the period. The Company recorded
a small gain on sale of capital assets of $0.5 as compared
with the prior year gain of $19.4.
EBITDA
EBITDA is the earnings before interest, income taxes,
depreciation and amortization, and is considered to be
a useful measure of the cash flow from operations of the
Company. EBITDA for 2020 was $(14.3), a decrease from
the prior year of $16.4. The decline from the prior year
was due primarily to gains on the sale of surplus assets
in the prior year.
10
0
-10
-20
-30
-40
-50
10
5
0
-5
-10
-15
-20
-25
-30
2016
2017
2018
2019
2020
EBITDA (millions C$)
2016
2017
2018
2019
2020
9
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Working Capital
Working Capital (millions C$)
Working capital is a measure of the Company's ability
to discharge its current obligations by using its current
assets. The Company continues to be in a strong position
as the working capital at year end was $53.9, down from
the prior year’s $77.6. Accounting for much of the change
were decreases in inventories of $18.7 and accounts
receivable of $12.8 and increased advances from related
parties of $12.3 and accounts payable of $9.5, these were
offset by improvements in bank indebtedness of $30.9.
Research and Development
150
120
90
60
30
0
2016
2017
2018
2019
2020
Consistent with the Company’s strategy over the past several years, the Company continues to invest in the development
of new products for the future so expenditures for research and development continued to be high. The Company
reduced spending to $6.9, compared to $7.8 in 2019. Management believes this strategy will maintain the Company’s
competitive position in the marketplace.
(thousands C$)
QUARTERLY NET EARNINGS RESULTS
2016
2017
2018
2019
2020
1st Quarter
(8,694)
(2,440)
(5,798)
(4,444)
(5,453)
2nd Quarter
1,534
(251)
(6,554)
7,041
(8,460)
3rd Quarter
3,062
2,581
(2,876)
(1,170)
462
4th Quarter
1,421
Total
(2,677)
630
520
(34,304)
(30,916)
(12,358)
(49,532)
(29,489)
(25,809)
Summary of Quarterly Results
(millions C$)
NET QUARTERLY INCOME
5
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
4th Quarter
10
0
-5
-10
-15
-20
-25
-30
-35
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
Sales for the fourth quarter was $63.9 as compared to $49.5 in the fourth quarter of 2019. The Company experienced
increased sales levels and efficiencies in manufacturing coupled with reduced discounts that led to improvements
10
over the prior year. The current year fourth quarter saw decreased interest expense, and favourable exchange rates,
which were offset somewhat by increased research and development spending.
Cash Flow and Capital Resources
Operating Activities
Net Cash Flow (millions C$)
Cash for the year was up $30.9 from 2019, coming in
at an indebtedness of $6.8, compared to the prior year
indebtedness of $37.7. The net loss of $25.8 were offset
by decreases in accounts receivable of $12.8, inventories
of $18.7 and increases in accounts payable and accrued
liabilities of $9.5 and advances from related parties of
$12.3.
Management has diligently worked to control the
investment in inventory in order to keep a strong cash
position. The increase in sales has resulted in an increase
in the Company’s inventory turns, improving to 1.5 in
2020 from 1.3 in 2019.
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
2.0
1.5
1.0
0.5
0.0
2016
2017
2018
2019
2020
Inventory Turns
2016
2017
2018
2019
2020
11
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Investing Activities
Asset Purchases (millions C$)
Cash utilized during the year for investing activities
was $0.3, compared to cash received of $18.6 in 2019.
Purchases of property, plant and equipment amounted
to $1.1, which were offset by the proceeds on the sale
of surplus assets of $0.8. In the prior year, purchases
of property, plant and equipment was $0.9, offset by
proceeds on sale of surplus assets of $19.5
Financing Activities
5
4
3
2
1
0
2016
2017
2018
2019
2020
The Company’s financing activities resulted in an inflow of $12.9 for the year, compared to $10.5 in the prior year.
During the year the Company received advances from a related party of $12.3 and $0.6 from recovery of tax credits,
compared with $9.1 and $1.2 respectively in the prior year.
Resources
In order for the Company to operate and grow, continued funding resources are required. The Company has several
options for funding available to it such as cash in the bank, cash provided by operations and acquiring new debt.
Under the current agreements in place, the Company has access to $75.0 in credit facilities.
Risks and Financial Instruments
The Company recognizes that net earnings are exposed to changes in market interest rates, foreign exchange rates, prices
of raw materials and risks regarding the financial condition of customers. These market conditions are regularly monitored
and actions are taken when appropriate. Despite the methods employed to manage these risks, future fluctuations in
interest rates, exchange rates, raw material costs and customers condition can be expected to impact net earnings.
The Company may enter into fixed-rate debt to minimize the risk associated with interest rate fluctuations. In addition, the
Company may employ hedging programs to minimize foreign exchange risks associated with the changes in the value of
the Canadian dollar relative to the U.S. dollar. To the extent possible, the Company maximizes natural currency hedging by
matching inflows from sales in either currency with outflows of costs and expenses denominated in the same currency. A
12
portion of the remaining exposure to fluctuations in exchange rates may be mitigated with forward and option contracts.
The Company currently has a variable interest bank credit facility. Should future cash requirements result in additional
debt be taken on, management would evaluate the financing options available at that time and take a course of action
that is in the best interests of the Company in the long term. Currently, all of the financing needs of the Company are
being met by the bank credit facility, which carries a low rate of variable interest.
With respect to foreign exchange, the Company manages risk by use of the natural hedge that exists between the U.S.
dollar denominated accounts receivables and accounts payable. Where a large difference in this hedge is anticipated,
forward foreign exchange contracts may be entered into to mitigate the risk. Purchases of foreign exchange products
for the purpose of speculation are not permitted. Transactions are only conducted with certain approved financial
institutions. Fluctuations in foreign exchange rates represent a material exposure for the Company’s financial results.
Hedging programs employed may mitigate a portion of exposures to short-term fluctuations in foreign currency
exchange rates. The Company’s financial results over the long term will be affected by sizeable changes in the value of the
Canadian dollar relative to the U.S. dollar.
Credit risk arises from cash held with banks and credit exposure to customers, including outstanding accounts receivable.
The Company assesses the credit quality of customers, taking into account their financial position, past experience and
other factors. Management regularly monitors customer credit limits, performs credit reviews and, in certain cases, insures
accounts receivable balances against credit losses. Nonetheless, unexpected deterioration in the financial condition of a
customer can have a negative impact on net earnings in the case of default.
Looking Forward
Sales increased nine percent from 2019 to 2020 and projections for 2021 are favorable as sales are expected to continue
to grow in 2021. The backlog has increased as we have seen increased order activity for our products. Increased sales
will require additional inventories and receviables to support the sales growth. In the past year the Company revised
the manufacturing capacity and made changes to reduce the overall footprint and cost of operations. The results of
these changes will begin to be seen in 2021 will the full impact of these cost reductions showing up in 2022.
Critical Accounting Estimates
The Company believes the following accounting estimates are critical to determining and understanding the operating
results and the financial position of the Company.
13
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Critical Accounting Estimates
Allowance for doubtful accounts. The Company estimates allowances for potential losses resulting from the inability of
customers to make required payments of accounts receivable. Additional allowances may be required if the financial
condition of any customer deteriorates.
Expected Credit Losses. The Company recognizes expected credit losses on financial assets and changes in such losses,
at each reporting date to reflect changes in credit risk since the initial recognition of the financial assets. For accounts
receivable, the Company applied the simplified approach permitted by IFRS 9, under which the lifetime expected credit
losses must be recognized upon initial recognition. For loans classified under receivables, the Company measures
credit risk based on the 12-month expected credit risk if there has not been a significant increase in credit risk since
initial recognition.
Allowance for inventory obsolescence and net realizable value. The Company estimates allowances for potential losses
resulting from inventory becoming obsolete or net realizable value declining below the carrying values. Additional
allowances may be required if the physical condition of inventory deteriorates or customer requirements change.
Impairment of property, plant and equipment. An integral component of impairment testing is determining the asset’s
recoverable amount. The determination of the recoverable amount involves significant management judgment,
including projections of future cash flows and the appropriate discount rates. The cash flows are derived from financial
forecasts and do not include restructuring activities that the Company is not yet committed to or significant future
investments that will enhance the asset’s performance. Qualitative factors, including market presence and trends,
strength of customer relationships, strength of local management, strength of debt and capital markets, and degree of
variability in cash flows, as well as other factors, are considered when making assumptions with regard to future cash
flows and the appropriate discount rate. The recoverable amount is most sensitive to the discount rate used for the
discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation
purposes. A change in any of the significant assumptions or estimates could result in a material change in the
recoverable amount.
Contingencies and litigation. Should a lawsuit or claim be brought against the Company, management assesses the
potential financial exposure of the Company. In assessing any probable losses, the amount of possible insurance
recoveries will be projected. The Company accrues such liabilities when a loss becomes probable and the net amount
of the loss can reasonably be estimated. Due to the inherent uncertainties relating to the eventual outcome of litigation
and potential insurance recovery, certain matters could ultimately be resolved for amounts materially different to
provisions or disclosures previously made by the Company.
14
Critical Accounting Estimates Continued
Warranty obligation. The Company offers warranties for its sale of equipment. Management estimates the related
provision for future warranty claims based on historical warranty claim information, as well as recent trends that
might suggest that past cost information may differ from future claims. Factors that could impact the estimated claim
information include the success of the Company’s productivity and quality initiatives, as well as parts and labor costs.
Economic Conditions. In the context of the COVID-19 pandemic and the related climate of uncertainty, the Company
revised some of its most complex estimated and assumptions , including significant judgement areas, used in preparing
the consolidated financial statements for the year ended September 30, 2020. The main estimates revised to reflect
the impact of COVID-19 pandemic on financial reporting were the determination of whether there was an indication
that assets, CGU’s or groups of CGU’s may be impaired, the assumption used in the establishment of their recoverable
amount when an impairment test was deemed necessary, and the assessment of the credit risk on receivables.
Additional revisions might be required in the future depending on the development of the pandemic and its impact
on the final measurement of the carrying amount of the Company’s assets.
Income taxes. Estimation of income taxes includes evaluating the recoverability of deferred tax assets based on an
assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income
before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income.
If the assessment of the Company’s ability to utilize the underlying future tax deductions changes, the Company would
be required to recognize more or fewer of the tax deductions as assets, which would decrease or increase the income
tax expense in the period in which this is determined.
The Company makes claims for Scientific Research and Experimental Development (SRED) expenditures which are
included in deferred taxes. The amounts recorded are based on the Company's interpretation of the Income Tax Act
of Canada provisions which govern the eligibility of SRED costs. The claims may be subject to review by the Canada
Revenue Agency (CRA) before refunds are received. Actual collection may be materially different than what is recorded
in the financial statements. The Company is currently challenging CRA in court in regards to certain of its SRED credits
and believes that it will be successful in defending its SRED claim. The Company's SRED credits are recorded on the
balance sheet after review of the relevant accounting pronouncements and collectability or recovery is reasonably
assured.
The Company is subject to taxation in multiple jurisdictions. Significant judgment is required in determining the
worldwide provision for taxation. There are many transactions and calculations for which the ultimate tax determination
15
MANAGEMENT DISCUSSION & FINANCIAL ANALYSIS
Disclosure Controls and Internal Controls
is uncertain during the ordinary course of business. The Company maintains provisions for uncertain tax positions that
it believes appropriately reflect its risk with respect to tax matters under active discussion, audit, dispute or appeal with
tax authorities, or which are otherwise considered to involve uncertainty. These provisions for uncertain tax positions
are made using management’s best estimate of the amount expected to be paid based on a qualitative assessment of
all relevant factors. Management reviews the adequacy of these provisions at each consolidated balance sheet date.
However, it is possible that at some future date an additional liability could result from audits by taxing authorities.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences
will affect the tax provisions in the period in which such determination is made.
The operations and organizational structure of the Company are complex, and related tax interpretations, regulations
and legislation are continually changing. As a result, there are usually some tax matters in question that result in
uncertain tax positions. The Company approaches uncertain tax positions from a liability or exposure perspective. The
Company provides for future liabilities in respect of uncertain tax positions where additional tax may become payable
in future periods and such provisions are based on management’s assessment of exposures.
Disclosure Controls
Management is responsible for establishing and maintaining disclosure controls and procedures in order to provide
reasonable assurance that material information relating to the Company is made known to them in a timely manner and
that information required to be disclosed is reported within time periods prescribed by applicable securities legislation.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control
objectives. Based on management’s evaluation of the design and effectiveness of the Company’s disclosure controls
and procedures, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls
and procedures are designed and operating effectively as of September 30, 2020 to provide reasonable assurance that
the information being disclosed is recorded, summarized and reported as required.
Internal Controls Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS. Internal control systems, no matter how well designed, have
16
inherent limitations and therefore can only provide reasonable assurance as to the effectiveness of internal controls
over financial reporting, including the possibility of human error and the circumvention or overriding of the controls
and procedures. Based on management’s design and testing of the effectiveness of the Company’s internal controls
over financial reporting, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these
controls and procedures are designed and operating effectively as of September 30, 2020 to provide reasonable
assurance that the financial information being reported is materially accurate. During the year ended September 30,
2020, there have been no changes in the design of the Company’s internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The accompanying consolidated financial statements
The Board of Directors is responsible for ensuring
and all the information in this annual report are the
management fulfills
its responsibilities for financial
responsibility of management and have been approved
reporting and is ultimately responsible for reviewing and
by the Board of Directors. The financial statements
approving the financial statements. The Board carries
have been prepared by management in accordance
out this responsibility through its Audit Committee.
with International Financial Reporting Standards. When
The Audit Committee is appointed by the Board and
alternative accounting methods exist, management
its directors are unrelated and
independent. The
has chosen those it deems most appropriate in the
Committee meets periodically with management, as well
circumstances. Financial statements are not precise since
as the external auditors, to discuss internal controls over
they include certain amounts based on estimates and
the financial reporting process, auditing matters and
judgments. Management has determined such amounts
financial reporting issues; to satisfy itself that each party
on a reasonable basis in order to ensure that the financial
is properly discharging its responsibilities; and, to review
statements are presented fairly, in all material respects.
the annual report, the financial statements and the
Management has prepared the financial information
external auditors’ report. The Audit Committee reports its
presented elsewhere in the annual report and has
findings to the Board for consideration when approving
ensured that it is consistent with the financial statements.
the financial statements for issuance to the shareholders.
Management has a system of internal controls designed
The Committee also considers, for review by the Board
to provide reasonable assurance that the financial
and approval by the shareholders, the engagement or
statements are accurate and complete in all material
re-appointment of the external auditors.
respects. The internal control system includes an internal
audit function and an established business conduct
The financial statements have been audited by MNP
policy that applies to all employees. Management
LLP, the external auditors, in accordance with Canadian
believes that the systems provide reasonable assurance
generally accepted auditing standards on behalf of the
that transactions are properly authorized and recorded,
shareholders.
financial information is relevant, reliable and accurate
Willy Janzen, CPA, CGA, B.Comm.
Yury Ryazanov
and that the Company’s assets are appropriately
accounted for and adequately safeguarded.
Chief Financial Officer
December 24, 2020
Chief Executive Officer
December 24, 2020
17
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Buhler Industries Inc.:
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a
Opinion
basis for our opinion.
We have audited the consolidated financial statements of
Other Information
Buhler Industries Inc. and its subsidiaries (the "Company"),
which comprise the consolidated statement of financial
position as at September 30, 2020 and September 30,
2019, and the consolidated statements of loss and
comprehensive loss, change in shareholders’ equity and
cash flows for the years then ended, and notes to the
Management is responsible for the other information. The
other information comprises Management’s Discussion
and Analysis. The other information also comprises the
information included in the Annual Report, but does not
include the consolidated financial statements and our
consolidated financial statements, including a summary
auditor's report thereon.
Our opinion on the consolidated financial statements
does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audits of the consolidated
financial statements, our responsibility is to read the
other information and, in doing so, consider whether
the other information is materially inconsistent with
the consolidated financial statements or our knowledge
obtained in the audits or otherwise appears to be
materially misstated. We obtained Management’s
Discussion and Analysis and the Annual Report 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. We have
nothing to report in this regard.
of significant accounting policies.
In our opinion, the accompanying consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as at
September 30, 2020 and September 30, 2019, and its
consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Basis for Opinion
We conducted our audits
in accordance with
Canadian generally accepted auditing standards. Our
responsibilities under those standards are
further
described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of
our report. We are independent of the Company in
accordance with the ethical requirements that are
relevant to our audits of the consolidated financial
statements in Canada, and we have fulfilled our other
ethical
responsibilities
in accordance with
these
18
Responsibilities of Management and Those Charged
accepted auditing standards will always detect a
with Governance for the Consolidated Financial
material misstatement when it exists. Misstatements can
Statements
Management is responsible for the preparation and fair
presentation of the consolidated financial statements
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 consolidated financial
in accordance with International Financial Reporting
statements.
Standards, and for such internal control as management
determines is necessary to enable the preparation of
As part of an audit in accordance with Canadian generally
consolidated financial statements that are free from
accepted auditing standards, we exercise professional
material misstatement, whether due to fraud or error.
judgment and maintain professional
skepticism
In preparing the consolidated 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
Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about
whether the consolidated 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 generally
throughout the audit. We also:
•
Identify and assess the risks of material
misstatement of the consolidated 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.
19
INDEPENDENT AUDITOR’S REPORT
•
Evaluate the appropriateness of accounting
We communicate with those charged with governance
policies used and the reasonableness of accounting
regarding, among other matters, the planned scope
estimates and related disclosures made by
and timing of the audits and significant audit findings,
management.
including any significant deficiencies in internal control
•
Conclude on the appropriateness of management's
that we identify during our audits.
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
We also provide those charged with governance with
a material uncertainty exists related to events or
a statement that we have complied with relevant
conditions that may cast significant doubt on the
ethical requirements regarding independence, and to
Company’s ability to continue as a going concern.
communicate with them all relationships and other
If we conclude that a material uncertainty exists,
matters that may reasonably be thought to bear on
we are required to draw attention in our auditor's
our independence, and where applicable, related
report to the related disclosures in the consolidated
safeguards.
financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions
The engagement partner on the audit resulting in this
are based on the audit evidence obtained up to the
independent auditor's report is Jeffrey Eckstein.
Winnipeg, Manitoba
December 24, 2020
Chartered
Professional Accountants
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 consolidated financial statements,
including the disclosures, and whether the
consolidated 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 consolidated financial statements.
We are responsible for the direction, supervision and
performance of the group audit. We remain solely
responsible for our audit opinion.
20
CONSOLIDATED BALANCE SHEET
As at September 30 (000's C$)
Assets
Current Assets
Accounts receivable, net (note 22)
Income taxes receivable
Inventories, net (note 7)
Prepaid expenses
Total Current Assets
Property, plant and equipment (note 8)
Deferred income tax assets (note 10)
Interests in joint ventures and other entities (note 11
2020
2019
$
46,607
$
59,373
242
146,931
6,446
200,226
15,770
5,624
6,139
4,414
165,631
3,544
232,962
18,040
5,557
6,045
Total Assets
$
227,759
$
262,604
Liabilities and Shareholders’ Equity
Current Liabilities
Bank indebtedness (note 6)
Accounts payable and accrued liabilities (note 12)
Income taxes payable
Advances from related party (note 9)
Total Current Liabilities
Deferred income tax liabilities (note 10)
Long term debt (note 13)
Total Liabilities
Shareholders’ Equity
Share capital (note 14)
Retained earnings
Total Shareholders' Equity
Total Liabilities and Equity
Subsequent events (note 23)
$
6,807
$
37,722
104,933
414
34,172
146,326
48
414
95,422
368
21,858
155,370
43
411
146,788
155,824
30,000
50,971
80,971
30,000
76,780
106,780
$
227,759
$
262,604
The accompanying notes are an integral part of the consolidated financial statements.
Approved on behalf of the board:
Yury Ryazanov
Dmitry Udras
Chief Executive Officer
December 24, 2020
Chairman of the Board
December 24, 2020
21
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
For the years ended September 30 (000's C$)
Revenue net (note 9)
Cost of goods sold (note 9)
Gross Profit
Selling & administration expenses
Loss from Operations
Gain on disposal of assets (notes 8 and 9)
Interest income
Interest expense
Loss on foreign exchange
Share of income from interests in joint ventures and other entities (note 11)
Research and development costs
Net Loss Before Taxes
Current income taxes (note 10)
Deferred income taxes (note 10)
Total income taxes
$
2020
249,550
235,225
$
2019
229,119
218,776
14,325 5.7%
24,791 9.9%
10,343 4.5%
23,974 10.5%
(10,466)
(4.2%)
(13,631)
(5.9%)
(526)
(309)
7,074
1,022
(94)
6,909
(19,437)
(568)
9,050
494
(540)
7,802
(24,542)
(9.8%)
(10,432)
(4.6%)
1,384
(117)
1,267
(415)
19,472
19,057
Net Loss and Comprehensive Loss
$
(25,809)
(10.3%)
$
(29,489)
(12.9%)
CONSOLIDATED STATEMENT OF CHANGE IN SHAREHOLDERS’ EQUITY
For the years ended September 30 (000's C$ except per share amounts)
Capital Stock, beginning and end of year
Retained Earnings, beginning of year
Net loss and comprehensive loss for the year
Retained Earnings, end of year
Shareholders’ Equity, end of year
Loss per share
Basic and fully diluted
2020
30,000
76,780
(25,809)
50,971
80,971
(1.03)
$
$
$
2019
30,000
106,269
(29,489)
76,780
106,780
(1.18)
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
22
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended September 30 (000's C$)
Cash provided by (used in) operating activities
Net loss and comprehensive income loss
$
(25,809)
$
(29,489)
2020
2019
Add (deduct) non-cash items
Depreciation of property, plant and equipment
Gain on disposal of assets
Loss on foreign exchange
Deferred income taxes
Share of income from interests in joint ventures and other entities
Net change in non-cash working capital balances (note 18)
Investing activities
Purchase of property, plant and equipment
Proceeds on sale of assets
Financing activities (note 19)
Recovery of tax credits
Advances from related party
Foreign exchange (loss) gain on the above items, net
Foreign exchange (loss) gain on bank indebtedness
Net cash provided in the year
Bank indebtedness, beginning of year
3,127
(526)
1,011
(117)
(94)
(22,408)
41,478
19,070
(1,096)
765
(331)
566
12,314
(3)
12,877
(701)
30,915
3,457
(19,437)
494
19,472
(540)
(26,043)
(4,259)
(30,302)
(943)
19,530
18,587
1,217
9,056
208
10,481
766
(468)
(37,722)
(37,254)
Bank indebtedness, end of year
$
(6,807)
$
(37,722)
The accompanying notes are an integral part of the consolidated financial statements.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Operations
(b)
Business combinations
Buhler Industries Inc. (the Company) was incorporated under the laws
of accounting. The consideration transferred for the acquisition of
of Canada on February 1, 1994. On March 24, 1994 the Company was
a subsidiary is the fair values of the assets transferred, the liabilities
listed and posted for trading on the TSX under the stock exchange
incurred by the former owners of the acquiree and the equity interests
symbol “BUI”. The address of the registered office is 1260 Clarence
issued by the Company. The consideration transferred includes the fair
Business combinations are accounted for using the acquisition method
Avenue, Winnipeg, Manitoba.
The Company, through its subsidiaries and a joint venture, has
manufacturing and warehousing facilities in Canada and the United
States of America (U.S.). The Company produces farm equipment for
sale in Canada, U.S. and overseas.
2.
Basis of Presentation
value of any asset or liability resulting from a contingent consideration
arrangement. Acquisition costs incurred are expensed and included in
general and administrative expenses. Any contingent consideration
to be transferred by the acquirer will be recognized at fair value at
the acquisition date. Subsequent changes to the fair value of the
contingent consideration which is deemed to be an asset or liability
will be recognized in accordance with IAS 39 either in the statement
of income or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not re-measured, and its
The Company prepares its consolidated financial statements in
subsequent settlement is accounted for within equity.
accordance with International Financial Reporting Standards.
The Company’s functional currency is the Canadian dollar. The Canadian
dollar is the reporting currency as much of the Company’s business,
as well as the majority of the Company’s financing, is conducted in
Canadian dollars.
The consolidated financial statements have been prepared under the
historical-cost convention, except that certain financial instruments are
stated at their fair value.
The consolidated financial statements were approved by the Board of
Directors on December 24, 2020.
3.
Significant Accounting Policies
(a)
Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its active wholly-owned subsidiaries, Buhler Versatile
Inc., Buhler Trading Inc., B.I.I. Fargo, Inc., Buhler Versatile USA Inc.,
Implement Sales Co. Inc., Haskett Properties Inc., ISCO Inc., Progressive
Manufacturing Ltd., John Buhler Inc., and Amarillo Service and
Supply Inc. Control exists when the Company has the power to
govern the financial and operating policies so as to obtain benefits
from its activities. The Company holds 100% of the voting rights of
the subsidiaries, and therefore controls these entities. The financial
statements of all subsidiaries are prepared as of the same reporting
date using consistent accounting policies. All inter-company balances
and transactions, including any unrealized profits arising from inter-
company transactions have been eliminated.
24
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any non-
controlling interest. Goodwill is initially measured as the excess of the
aggregate of the consideration transferred over the net identifiable
assets acquired and liabilities assumed. If this consideration is less than
the fair value of the net assets of the subsidiary acquired, the difference
is recognized directly in the statement of income.
(c)
Foreign currency translation
The functional currency for each of the Company’s subsidiaries is
the currency of the primary economic environment in which the
entity operates. For all subsidiaries the functional currency has
been determined to be the Canadian dollar. Transactions in foreign
currencies are translated to the respective functional currencies of
each entity within the consolidated group using the exchange rates
in effect at the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated
to the functional currency at the exchange rates prevailing at the end
of the reporting period. Nonmonetary items measured at historical
cost in a foreign currency are translated to the functional currency
using the exchange rate prevalent at the date of acquisition. Non-
monetary items denominated in foreign currencies that are measured
at fair value are translated to the functional currency at the exchange
rate prevalent at the date that the fair value was determined. Foreign
currency differences arising from translation are recognized in net
income, except for exchange differences arising on the translation
of financial instruments qualifying as a cash flow hedge, which are
recognized directly in other comprehensive income (“OCI”).
(d)
Inventories
Inventories are stated at the lower of cost and net realizable value.
The cost of inventories is based on the first-in first-out principle and
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies - continued
includes expenditures incurred in acquiring the inventories and
sale or the time an incentive is announced to dealers, the Company
bringing them to their existing location and condition. In the case
records the estimated impact of sales allowances in the form of dealer
of manufactured inventories, cost includes an appropriate share of
and customer incentives as a reduction of revenue. Subsequent
variable and fixed overheads based on normal operating capacity. Any
adjustments to sales incentive programs related to products previously
excess, unallocated, fixed overhead costs are expensed as incurred. Net
sold are recognized as an adjustment to revenues in the period the
realizable value is the estimated selling price in the ordinary course of
adjustment is determinable. The determination of sales allowances
business, less the estimated costs of completion and selling expenses.
requires management to make estimates based upon historical data,
Inventories are written down to net realizable value if net realizable
estimated future market demand for products, field inventory levels,
value declines below carrying amount. When circumstances that
announced incentive programs, competitive pricing and interest rates,
previously caused inventories to be written down below cost no longer
among other things.
exist or when there is clear evidence of an increase in selling price, the
amount of the write-down previously recorded is reversed.
(f)
Sales allowances
(e)
Revenue recognition
The Company grants certain sales incentives to support sales of its
products to retail customers. At the later of the time of sale or the
Revenue is recognized when control of the equipment or parts has
time an incentive is announced to dealers, the Company records the
been transferred and the Company’s performance obligations to the
estimated impact of sales allowances in the form of dealer and customer
customers have been satisfied. Revenue is measured as the amount
incentives as a reduction of revenue. The expense for new programs is
of consideration the Company expects to receive in exchange for
accrued at the inception of the program. The amounts of incentives to
transferring the goods.
The timing of when the Company transfers the goods to the customer
may differ from the timing of the customer’s payment.
Revenues are stated net of discounts, allowances, settlement discounts
and rebates, as well as costs for sales incentive programs, which are
determined on the basis of historical costs and charged against profit
for the period in which the corresponding sales are recognized.
The Company has determined that the customers from the sale of
equipment and parts are generally dealers. Transfer of control, and
thus related revenue recognition, generally corresponds to when the
equipment and parts are made available to the customer, based on
the shipping terms negotiated with customers. Most product is sold
FOB Origin, while sales to related parties are shipped FOB Destination.
Therefore, the Company recognizes revenue at a point in time, when
control is transferred to the customer at a sale price that the Company
expects to receive.
be paid are estimated. The determination of sales allowances requires
management to make estimates based upon historical data, estimated
future market demand for products, field inventory levels, announced
incentive programs, competitive pricing and interest rates, among
other things.
(g)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and any impairment losses. Cost includes any directly
attributable costs, borrowing costs on qualifying construction projects,
and the costs of dismantling and removing the items and restoring the
site on which they are located. When major components of an item of
property and equipment have different useful lives, they are accounted
for as separate items. Depreciation is calculated using the following
methods to allocate the cost of assets less their residual values over
their estimated useful lives as follows:
Buildings
Equipment
Computer equipment
4 - 5%
20 - 100%
30 - 100%
Straight line
Declining balance
Declining balance
For all sales, no significant uncertainty exists surrounding the
purchaser’s obligation to pay for equipment and parts. The Company
Depreciation methods, useful lives and residual values are reviewed
records appropriate allowance for credit losses.
at each reporting date. Assets under construction and land are not
depreciated.
The cost of incentives, if any, are estimated at the inception of a
contract at the amount that is expected to be paid and is recognized
Leases of property, plant and equipment on terms that provide a
as a reduction to revenue at the time of the sale. If the estimate of the
contractual right of use are measured at cost, comprised of the initial
incentive changes following the sale to the customer, the change in
measurement of the corresponding finance lease payable, lease
estimate is recognized as an adjustment to revenue in the period of
payments made at or before the commencement date and any initial
the change. The Company grants certain sales incentives to support
direct costs. They are subsequently depreciated on a straight-line basis
sales of its products to retail customers. At the later of the time of
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies - continued
and reduced by impairment losses. At year end, the Company had no
liability is settled, based on the income tax laws that have been enacted
right of use assets.
or substantively enacted at the reporting date.
(h)
Research and development expenses
The Company expenses all research and development costs as they
are incurred unless they meet the criteria for deferral in accordance
with IAS 38 Intangible Assets. No such development costs have been
deferred to date.
Deferred tax assets are recognized only to the extent that it is probable
that future taxable income will be available against which the assets
can be utilized. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the
related income tax benefit will be realized.
(i)
Interest in joint ventures and other entities
The Company accounts for its interest in joint ventures using the
equity method. Interests in other entities where there is no significant
influence are recorded at fair value.
(j)
Cash/bank indebtedness
Cash/bank indebtedness includes cash on hand, bank overdrafts
and bankers acceptances. Bank overdrafts are repayable on demand.
Bank overdrafts and bankers acceptances form an integral part of the
Company’s cash management and are included as a component of
cash/bank indebtedness for the purpose of the statement of cash flows.
(k)
Income taxes
Income tax expense comprises current and deferred tax. Income tax
expense is recognized in the statement of comprehensive income
except to the extent that it relates to items recorded directly to equity,
in which case it is recognized directly in equity.
Current income tax expense is the expected income tax payable on
the taxable income for the period, using income tax rates enacted or
substantively enacted in the jurisdictions the Company is required to
pay income tax at the reporting date, and any income adjustments to
income taxes payable in respect of previous periods. Current income
tax expense is adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial statements,
and by the availability of unused income tax losses.
Deferred tax expense is recognized using the balance sheet method
in which temporary differences are calculated based on the carrying
amounts of assets and liabilities for financial reporting purposes and
the tax bases of assets and liabilities for income taxation purposes.
Deferred tax is not recognized for the following temporary timing
differences: the initial recognition for both goodwill and assets and
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable income; and differences relating
to investments in subsidiaries to the extent that it is probable that they
will not reverse in the foreseeable future. Deferred tax is measured
at the income tax rates that are expected to be applied when the
temporary difference reverses, that is, when the asset is realized or the
26
Current tax assets and liabilities are offset when the Company and
its subsidiaries have a legally enforceable right to offset the amounts
and intend to either settle on a net basis, or to realize the asset and
settle the liability simultaneously. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset and when the
deferred tax balances relate to the same income tax authority.
(l)
Financial instruments
In accordance with IFRS 9 - Financial Instruments, financial assets are
classified as measured at either amortized cost, fair value through other
comprehensive income or fair value through profit or loss, depending
on the business model for managing such financial assets and the
asset’s contractual cash flow characteristics. Financial liabilities are
classified as measured at amortized cost using the effective interest
method.
The Company’s financial instruments are classified as follows: a) cash
and cash equivalents (bank indebtedness) - fair value through profit
and loss, b) accounts receivable - amortized cost, c) advances to related
parties - amortized cost, d) accounts payable and accrued liabilities -
amortized cost, d) interests in other entities - fair value through profit
and loss, e) advances from related parties - amortized cost and f ) long
term debt - amortized cost. All financial instruments are included in the
consolidated balance sheet and are measured at fair value except loans
and receivables and other financial liabilities, which are measured at
amortized cost.
All changes in fair value are recorded to the statement of comprehensive
income unless cash flow hedge accounting is used, in which case
changes in fair value are recorded in other comprehensive income.
The Company’s policy is not to utilize derivative financial instruments
for trading or speculative purposes. The Company may utilize derivative
instruments in the management of its foreign currency and interest
rate exposures.
FVTPL financial instruments are subsequently measured at fair value
and all gains and losses are included in net income in the period in which
they arise. Available-for-sale financial instruments are subsequently
measured at fair value with revaluation gains and losses included in
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies - continued
other comprehensive income until the instrument is derecognized or
intangible assets excluding goodwill, the CGU is the smallest group of
impaired.
(m)
Derivative financial instruments
The Company operates principally in Canada and the United States,
which gives rise to risks that its income and cash flows may be adversely
impacted by fluctuations in foreign exchange rates. The Company
may enter into foreign currency forward contracts to manage foreign
exchange exposures on accounts receivable expected to be recovered
in US dollars.
The fair value of each contract is included on the consolidated balance
sheet within derivative financial
instrument assets or
liabilities,
depending on whether the fair value was in an asset or liability position.
Changes in fair value are recognized in the consolidated statement of
comprehensive income through gains/losses on foreign exchange.
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine
whether there is any objective evidence that they are impaired. A
financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on
the estimated future cash flows of that asset. An impairment loss is
calculated as the difference between its carrying amount, and the
present value of the estimated future cash flows discounted at their
original effective interest rate. All impairment losses are recognized in
the consolidated statement of comprehensive income. An impairment
loss is reversed if the reversal can be related objectively to an event
occurring after the impairment loss was recognized.
4. Critical Accounting Estimates and Judgments
(n)
Comprehensive income
Comprehensive income includes all changes in equity of the Company,
except those resulting from
investments by shareholders and
dividends paid. Comprehensive income is the total of net income and
other comprehensive income. Other comprehensive income comprises
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates may, by definition, not equal
the actual results. The estimates and assumptions that are critical to the
determination of carrying value of assets and liabilities are addressed
revenues, expenses, gains and losses that require recognition, but are
below.
excluded from net income. The Company does not have any items giving
rise to other comprehensive income, nor is there any accumulated
balance of other comprehensive income. All gains and losses, including
those arising from measurement of all financial instruments have been
recognized in net income for the year.
(a)
Sales incentives
The Company provides certain sales incentives on some sales that may
be settled after year end. An estimate of these amounts that may be
payable is accrued, but may vary based on the programs in place at the
time of settlement. These have been accrued for in accounts payable
(o)
Product warranties
and accrued liabilities.
The Company makes provisions for estimated expenses related
to product warranties at the time products are sold. Management
establishes these estimates based on historical information on the
nature, frequency and average cost of warranty claims. The Company
seeks to improve product quality and minimize warranty expenses
arising from claims. Warranty costs may differ from those estimated if
actual claim rates are higher or lower than historical rates.
(p)
Impairment
Impairment of non-financial assets
Tangible assets and definite life intangible assets are reviewed at
each balance sheet date to determine whether events or conditions
indicate that their carrying amount may not be recoverable. If any such
indication exists, the recoverable amount of the asset, which is the
higher of its fair value less costs to sell and its value in use, is estimated
in order to determine the extent of the impairment loss. Where the
asset does not generate cash flows that are independent from other
assets, the Company estimates the recoverable amount of the cash-
generating unit (CGU) to which the asset belongs. For tangible and
(b)
Expected Credit Losses
The Company recognizes expected credit losses on financial assets
and changes in such losses, at each reporting date to reflect changes
in credit risk since the initial recognition of the financial assets. For
accounts receivable, the Company applied the simplified approach
permitted by IFRS 9, under which the lifetime expected credit losses
must be recognized upon initial recognition. For loans classified under
receivables, the Company measures credit risk based on the 12-month
expected credit risk if there has not been a significant increase in credit
risk since initial recognition.
(c)
Allowance for inventory obsolescence
The Company estimates allowances for potential losses resulting from
inventory becoming obsolete and that cannot be processed and/
or sold to customers. Additional allowances may be required if the
physical condition of inventory deteriorates or customer requirements
change and cost exceeds net realizable value.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Critical Accounting Estimates and Judgments - continued
(d)
Impairment of property, plant and equipment
SRED costs. The claims may be subject to review by the Canada Revenue
An integral component of impairment testing is determining the asset’s
Agency (CRA) before refunds are received. Actual collection may be
recoverable amount. The determination of the recoverable amount
materially different than what is recorded in the financial statements. The
involves significant management judgment, including projections of
Company is currently challenging CRA in court in regards to certain of its
future cash flows and the appropriate discount rates. The cash flows
SRED credits and believes that it will be successful in defending its SRED
are derived from financial forecasts and do not include restructuring
claim. The Company's SRED credits are recorded on the balance sheet after
activities that the Company is not yet committed to or significant
review of the relevant accounting pronouncements (note 10).
future
investments that will enhance the asset’s performance.
The Company is subject to taxation in multiple jurisdictions. Significant
Qualitative factors, including market presence and trends, strength
judgment is required in determining the worldwide provision for taxation.
of customer relationships, strength of local management, strength of
There are many transactions and calculations for which the ultimate
debt and capital markets, and degree of variability in cash flows, as well
tax determination is uncertain during the ordinary course of business.
as other factors, are considered when making assumptions with regard
The Company maintains provisions for uncertain tax positions that it
to future cash flows and the appropriate discount rate. The recoverable
believes appropriately reflect its risk with respect to tax matters under
amount is most sensitive to the discount rate used for the discounted
active discussion, audit, dispute or appeal with tax authorities, or which
cash flow model as well as the expected future cash inflows and the
are otherwise considered to involve uncertainty. These provisions for
growth rate used for extrapolation purposes. A change in any of the
uncertain tax positions are made using management’s best estimate of
significant assumptions or estimates could result in a material change
the amount expected to be paid based on a qualitative assessment of all
in the recoverable amount.
No impairment losses were recognized in 2020 nor 2019.
(e)
Provision for warranty costs
The Company offers warranties for its sale of equipment. Management
estimates the related provision for future warranty claims based on
historical warranty claim information, as well as recent trends that
might suggest that past cost information may differ from future claims.
Factors that could impact the estimated claim information include the
success of the Company’s productivity and quality initiatives, as well as
parts and labor costs.
(f)
Income taxes
Estimation of income taxes includes evaluating the recoverability of
deferred tax assets based on an assessment of the Company’s ability
to utilize the underlying future tax deductions against future taxable
income before they expire. Management plans to take all necessary
steps to utilize deferred tax attributes before they expire and believe
they have a plan that ensures they will ultimately fully utilize these
attributes. The Company’s assessment is based upon existing tax
laws and estimates of future taxable income. If the assessment of
the Company’s ability to utilize the underlying future tax deductions
changes, the Company would be required to recognize more or fewer
of the tax deductions as assets, which would decrease or increase the
income tax expense in the period in which this is determined.
The Company makes claims for Scientific Research and Experimental
Development (SRED) expenditures which are included in deferred taxes.
The amounts recorded are based on the Company's interpretation of
the Income Tax Act of Canada provisions which govern the eligibility of
28
relevant factors. Management reviews the adequacy of these provisions
at each consolidated balance sheet date. However, it is possible that at
some future date an additional liability could result from audits by taxing
authorities. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will affect the
tax provisions in the period in which such determination is made.
The operations and organizational structure of the Company are complex,
and related tax interpretations, regulations and legislation are continually
changing. As a result, there are usually some tax matters in question that
result in uncertain tax positions. The Company approaches uncertain tax
positions from a liability or exposure perspective. The Company provides
for future liabilities in respect of uncertain tax positions where additional
tax may become payable in future periods and such provisions are based
on management’s assessment of exposures.
(g)
Economic Conditions
In the context of the COVID-19 pandemic and the related climate of
uncertainty, the Company revised some of its most complex estimated and
assumptions , including significant judgement areas, used in preparing
the consolidated financial statements for the year ended September
30, 2020. The main estimates revised to reflect the impact of COVID-19
pandemic on financial reporting were the determination of whether there
was an indication that assets, CGU’s or groups of CGU’s may be impaired,
the assumption used in the establishment of their recoverable amount
when an impairment test was deemed necessary, and the assessment of
the credit risk on receivables. Additional revisions might be required in the
future depending on the development of the pandemic and its impact on
the final measurement of the carrying amount of the Company’s assets.
(h)
Government Grants
Government assistance that requires payment and that is non-interest
bearing is accounted for at its fair value, based on management’s best
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Critical Accounting Estimates and Judgments - continued
estimates. The difference between the assistance amount and its
7. Inventories (000's C$)
fair value is accounted for as a government grant and recognized in
income over the period in which the related cost they are intended to
compensate for are recognized.
5. Accounting Standards Implemented in 2020 (000’s C$)
The following accounting standards came into effect commencing in
Raw materials
Work in process
Finished goods
2020
2019
$ 50,786
5,896
90,249
$ 146,931
$ 55,200
3,866
106,565
$ 165,631
the 2020 fiscal year:
(a)
Leases
The Company has adopted IFRS 16 “Leases” with a date of initial
application of October 1, 2019. IFRS introduced new standards for
During the year, inventories in the amount of $170,674 (2019 - $157,399)
were expensed to cost of goods sold, which included net inventory
reversals of write-downs of $1,551 (2019 - $4,442). The carrying value
of inventories is pledged as security against the Company’s credit
the recognition and measurement of leases under a single model.,
facilities.
eliminating the distinction between operating and finance leases. As
a result, most leases will be recognized on the statement of financial
Included in inventories are units sold on consignment being held at
position. Certain exemptions continue to apply for short-term leases
dealers locations in the amount of $3,861 (2019 - $10,570).
and leases for low-value assets. The revised standards had no significant
impact on the recognition and measurement of leases.
8. Property, Plant and Equipment (000’s C$
(b)
Uncertainty over Income Tax Treatments
The Company has adopted IFRIC 23 with a date of initial application of
October 1, 2019. IFRIC 23 “Uncertainty over Income Tax Treatments” is
aimed to reduce the diversity of recognition and measurement of tax
liabilities and assets. The adoption of these interpretations have not
impacted the Company’s consolidated financial statements .
6. Credit Facilities (000’s C$)
The Company has available a financing facility in the amount of $60,000
(2019 - $60,000). This facility is an asset-based credit agreement with
the Canadian Imperial Bank of Commerce. The credit facility is secured
by a general security agreement and assignment of specific receivables
and inventory in Canada and the US. The financing facility is at Bankers
Acceptance and/or LIBOR rates plus stamping fees. At September 30,
2020, the amount drawn on this facility is $6,673 (2019 - $39,769).
During the year the company also accessed loans in the amount of
$1,534 ($1,146 USD) with Alerus Financial. These loans bore interest
at 1% per annum. These loans were scheduled to have repayments
commence on December 15, 2020, however prior to scheduled
repayments commencing, but subsequent to year end, the loans were
repaid in full through receipt of government grants from the United
States Small Business Administration’s Paycheck Protection Program.
Cash balances of $1,400 (2019 - $2,047) have been netted with the
above facilities.
Land
Buildings
Equipment
Computer
Equip
Total
2018 net
book value
3,673
10,046
5,978
1,036
20,733
Additions
-
Disposals
(116)
(37)
-
965
(63)
15
-
943
(179)
Depreciation
-
(913)
(2,235)
(309)
(3,457)
3,557
9,096
4,645
742
18,040
-
-
-
-
(110)
(908)
1,064
(127)
(1,988)
$3,557
$8,078
$3,594
32
(2)
(231)
$541
1,096
(239)
(3,127)
$15,770
2019 net
book value
Additions
Disposals
Depreciation
2020 net
book value
Recorded as:
Cost
$3,557
$28,519
$61,652
$8,452
$102,180
Accumulated
depreciation
2019 net
book value
-
(19,423)
(57,007)
(7,710)
(84,140)
$3,557
$9,096
$4,645
$742
$18,040
Cost
$ 3,557
$28,361
$58,412
$6,847
$97,177
Accumulated
depreciation
2020 net
book value
-
(20,283)
(54,818)
(6,306)
(81,407)
$3,557
$8,078
$3,594
$541
$15,770
The Company reviewed
its property, plant and equipment for
indicators of impairment. No assets were identified as impaired.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included in property, plant and equipment is $19 of equipment not
10. Income Taxes (000's C$)
being depreciated as the assets are not yet in use (2019 - $748).
sold certain intellectual properties to the controlling shareholder.
Adjustments for prior years
These relate to an older tractor model that no longer has a market in
SR&ED credits earned
9. Related Party Transactions (000's C$)
Accounts receivable from
controlling shareholder
Accounts payable to
controlling shareholder
Advances from controlling
shareholder
Net sales to controlling
sharehold
Net purchases from
controlling shareholder
2020
2019
$3,076
$6,342
2,086
2,313
34,172
21,858
$6,052
$19,282
378
321
All transactions with related parties are recorded at the exchange
amount agreed to by the related parties. In the prior year, the Company
North America for $10,000 USD and a sprayer under development that
the Company has decided not to produce for $3,000 USD. There was
no cost basis for these intellectual properties, which resulted in a gain
on sale of $17,471. The amounts agreed upon are based on external
valuations.
The advances from the controlling shareholder of $25,618 USD (2019 -
$16,505 USD) bears interest at 5.0% and are due on demand.
Compensation of Key Management
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities of
the Company. The Board of Directors and Executive Committee are key
management personnel. The following table details the compensation
paid to these key management personnel (note - no amounts were
paid for.
Salaries, fees and short term
employee benefits
2020
$1,822
2019
$1,872
30
Current year
Adjustment for prior years
2020
$602
782
2019
$(445)
30
Current income tax expense (recovery)
$1,384
$(415)
Origination and reversal of timing
differences
Derecognition of tax credits
SR&ED credits earned
$(117)
$(2,022)
-
-
21,494
-
Deferred taxes (recovery) expense
$(117)
$19,472
Combined Canadian federal and
provincial income tax rate
Foreign tax rate differences applied to
profits (losses)
27.0%
27.0%
(0.4)
(24.2)
Derecognition of tax credits
(26.8)
(215.7)
Losses carried back at a higher tax rate
-
(3.2)
-
-
(1.8)
(0.2)
(0.3)
10.1
17.3
3.3
Non-taxable portion of capital gains
Permanent differences and other
Effective income tax rate
(5.2%)
(182.7%)
Income taxes paid during the year were $317 (2019 - $214).
Deferred income taxes are recorded to reflect the timing differences
arising from deduction of warranty costs for income tax purposes,
the amounts of depreciation and amortization provided in the year
compared to the allowances deducted for income tax purposes,
taxable losses carried forward to future periods, expected Scientific
Research and Experimental Development (SRED) tax credit claims and
other temporary timing differences.
The following are the components of the deferred tax assets and
liabilities recognized by the Company:
Deferred income tax assets
Property, plant and equipment
SRED credits
Deferred income tax liabilities
Property, plant and equipment
2020
$931
4,693
$5,624
2020
$48
20189
$864
4,693
$5,557
2019
$43
Deferred tax assets are recognized for tax loss carry-forwards to the
extent that the realization of the related tax benefit through future
taxable profits is probable. The ability to realize the tax benefits of
these losses is dependent upon a number of factors, including the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
future profitability of operations in the jurisdictions in which the tax
Balance sheet information
2020
2019
losses arose.
The Company has a deferred tax asset of $34,058 in Canada (2019
- $19,469). In the current year, only $5,576 has been recorded.
Assets
Current
Non-current
The remaining $28,482 will be recognized in future periods when
Total Assets
profitability returns in Canada. These losses begin to expire in 2033.
Deferred tax assets of $19,296 in the US (2019 - $17,044) in excess of the
deferred tax losses are available to be carried forward to future periods.
Management believes that these assets will be realized in future
periods. As a result of losses over the past few years, management has
Liabilities
Current
Non-current
Total Liabilities
Equity
decided to not recognize these assets as at September 30, 2020. These
Total Liabilities and Equity
assets will be recognized in future periods when profitability returns in
the US. These losses begin to expire in 2034.
The current value of all SRED claims net of estimated taxes and
allowances is $4,693 (September 30, 2019 - $4,693). The Company's
claims for SRED credits for the tax years 2005 - 2011 ($5,506) are
currently being challenged by Canada Revenue Agency (CRA). The
claim for 2005 will be reviewed by tax court, while claims for 2006 and
2007 are being held in abeyance by CRA pending the outcome of the
2005 claim. Tax years 2008 through to 2011 have received refunds in
Income statement
information
Revenues
Profit from continuing
operations
Net income and
comprehensive income
Other information
Dividends received from joint
ventures and other entities
the amount of $813 during the prior year and the assessments for
Depreciation
these years will be appealed. Final settlement for these claims may take
Income tax expense
several years to resolve.
$6,123
249
$6,372
$233
-
233
6,139
$6,372
$6,331
166
$6,497
$452
-
452
6,045
$6,497
$4,140
$5,555
$131
$94
$26
$2
$36
$653
$540
$231
$9
$113
The 2012, 2013 and 2014 claims ($2,206) have been approved and
were paid out by CRA in prior years. The 2015, 2016 and 2017 claims
have been approved and partially paid out by CRA ($1,633), with the
The Company generally provides its customers with a warranty on the
goods sold. The movement in the provision for warrant costs during
12.
Warranty provision (000’S C$)
remaining payment expected in a future period when there is taxable
the year is as follows
income. The 2018 claim for $482 is current under review. The 2019 and
2020 SRED claims will be filed with CRA prior to any filing deadlines.
11. Interests in Joint Ventures and Other Entities (000’s C$)
Opening balance
Warranty accrual (recovery) (net)
The Company has a joint venture operating as Bradley Steel Processors
Effect of exchange rate
2020
$5,810
3,490
15
2019
$6,748
(958)
20
Inc. and minority interests in other various entities.
Closing balance
$9,315
$ 5,810
The summarized financial information of the Company’s share of the
investments in joint ventures and other entities is as follows:
The Company’s warranty costs for the year, net of recoveries from
suppliers, was $10,635 (2019 - $6,525).
13.
Long term debt (000’S C$)
The Company’s long term debt consists of an amount of $414, 2019
-$411 ($310 USD, 2019 -$310 USD) due to The City of Willmar. This
amount bears interest at the annual rate of the implicit price deflator
for Minnesota and is due June 2025.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.
Capital Stock and Options (000’s C$)
17.
Segmented Information (000’s C$)
Authorized, an unlimited number of Class A & B common shares.
2020
2020
2019
Shares
Shares
Issued Class A
common
25,000 $30,000
25,000
$30,000
Canada
U.S.
CIS
Other
Revenue
$104,692 $118,975 $12,558 $13,325
Property, plant,
and equipment
10,460
5,143
167
-
2019
There are no options outstanding as of September 30, 2020 nor
Canada
U.S.
CIS
Other
September 30, 2019.
15.
Interest Paid (000’s C$)
Bank indebtedness
Wholesale financing
Revenue
$94,789
$91,372
$21,197
$21,761
Property, plant, and
equipment
12,194
5,679
167
-
2020
$2,957
4,117
$7,074
2019
$3,070
6,194
$9,264
CIS is the Commonwealth of Independent States, including Russia and
Kazakhstan.
18.
Changes in non-cash working capital (000’s C$)
Details of changes in financing activities for the year ended September
30, 2020 are as follows:
2020
$12,766
18,700
(2,902)
9,511
4,218
(815)
2019
$(1,101)
5,981
(734)
(5,627)
(1,836)
(942)
$41,478
$(4,259)
Interest expense includes interest on long term, bank indebtedness
and wholesale financing. Through an agreement with DLL, the initial
wholesale financing interest expense for the dealer is paid by Buhler
Industries Inc. to DLL to support a segment of Buhler’s North American
dealer network. Under the agreement, dealers have dedicated credit
Accounts receivable
lines with DLL, customized service, and competitive terms that allow
them to manage and grow their businesses effectively. The floorplan
financing terms and interest costs are variable and may change from
time to time.
16.
Expenses by nature (000’s C$)
Raw materials and
consumables used
Depreciation and amortization
Personnel expenses
Freight
2020
2019
$200,395
$176,335
3,127
57,095
6,308
3,457
64,361
6,399
$266,925
$250,552
Inventories
Prepaid expenses
Accounts payable and accrued
liabilities
Income taxes receivable/
payable
Foreign exchange loss on the
above items
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19.
Cash Flow Changes from Financing Activities (000’s C$)
The Company’s financial objectives and strategy are reviewed on
an annual basis. The Company believes that its ratios are within
Details of changes in financing activities for the year ended September
reasonable limits, in light of the relative size of the Company and its
30, 2020 are as follows:
capital management objectives.
Advances
to related
party
Long
term
debt
Advances
from
related
party
Total
There are no externally imposed capital restrictions on the Company.
There were no changes in the Company’s approach to capital
management during the year.
September 30,
2018
Cash flows
Foreign
exchange
September 30,
2019
Cash flows
Foreign
exchange loss
September 30,
2020
$2,173
$(401)
$(14,775)
$(13,003)
21.
Financial Instruments (000’s C$)
(2,214)
-
(6,842)
(9,056)
41
(10)
(241)
(210)
Company’s financial instruments:
The following presents the carrying value and fair value of the
-
-
-
(411)
(21,858)
(22,269)
-
(3)
(12,314)
(12,314)
-
(3)
$-
$(414)
$(34,172)
$(34,586)
Financial Asset/
Liability
Bank
indebtedness
Accounts
receivable
2020
Classification
Carried at cost/
Amortized cost
Fair value
Amortized cost
$(6,807)
Amortized cost
46,607
In addition to the above, during the year the Company also received
Interest in other
entities
FVTPL
157
$566 (2019 - $1,217) of tax credits.
20.
Capital Management
The Company’s fundamental objectives in managing capital are to
maintain financial flexibility in order to preserve its ability to meet
financial obligations, ensure adequate liquidity and financial flexibility
at all times, and deploy capital to provide an appropriate investment
return to its shareholders while maintaining prudent levels of financial
risk. The Company believes that the aforementioned objectives are
appropriate in the context of the Company’s business.
The Company defines
its capital as cash, bank
indebtedness,
shareholders’ equity, long- term debt, net of any cash and cash
equivalents. The Company’s financial strategy is designed to maintain
a flexible capital structure consistent with the objectives stated above
and to respond to changes in economic conditions and the risk
characteristics of underlying assets. In order to maintain or adjust its
capital structure, the Company may purchase shares for cancellation
pursuant to normal course issuer bids, issue new shares, raise debt
(secured, unsecured, convertible and/or other types of available debt
instruments), enter into hedging arrangements and refinance existing
debt with different characteristics, amongst others.
The Company constantly monitors and assesses
its
financial
performance and economic conditions in order to ensure that its net
debt levels are prudent.
Accounts payable
and accured
liabilities
Advances from
related parties
Amortized cost
(104,933)
Amortized cost
(34,172)
Long term debt
Amortized cost
(414)
Classification
Amortized cost
2019
Carried at cost/
amortized cost
$(37,722)
Fair value
Amortized cost
59,373
Financial asset/
Liability
Bank
indebtedness
Accounts
receivable
Interest in other
entities
FVTPL
157
Accounts payable
and accrued
liabilities
Advances from
related parties
Amortized cost
(95,422)
Amortized cost
(21,858)
Long term debt
Amortized cost
(411)
Financial instruments includes bank indebtedness, accounts receivable,
advances to related parties, financial instruments, long term receivables,
interests in other entities not subject to significant influence, accounts
payable and accrued liabilities, advances from related parties and
long term debt. Except for the long term receivables, interests in other
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Financial Instruments - continued
entities and long term debt, the carrying values of these financial
corporate finance function. Significant risks are regularly monitored
instruments approximate fair value due to the short term nature of the
and actions are taken, when appropriate, according to the Company’s
financial instruments or they are carried at fair value.
approved policies, established for that purpose. In addition, as required,
these risks are reviewed with the Company’s Board of Directors.
The Company has classified its interest in other entities as FVTPL. These
shares are not actively traded in a quoted market and accordingly fair
Interest Rate Risk
value has been estimated to be cost.
The Company’s interest rate risk arises from its variable rate bank
indebtedness, wholesale financing and long term debt. The long-term
The Company has classified its interest in other entities as FVTPL. These
debt at a very low rate, and therefore carries minimal interest rate risk.
shares are not actively traded in a quoted market and accordingly fair
As the bank indebtedness is all variable rate, the Company is exposed
value has been estimated to be cost.
to a certain level of interest rate risk. Management feels that these risks
are manageable as the interest rate on this debt is less than prime and
The Company categorizes its fair value measurements of financial
therefore has not entered into any instruments to mitigate this risk.
instruments according to a three-level hierarchy. The hierarchy
Based on the level of bank indebtedness outstanding at September 30,
prioritizes the inputs used by the Company’s valuation techniques. A
2020, a 1% increase/decrease in the rate being charged to the Company
level is assigned to each fair value measurement based on the lowest
would result in a $82 (2019 - $467) decrease/ increase in net earnings.
level input significant to the fair value measurement in its entirety. The
three levels of the fair value hierarchy are defined as follows:
Commodity Price Risk
Level 1 – fair value measurements that reflect unadjusted, quoted
materials, namely steel. In order to manage its risk, the Company
prices in active markets for identical assets and liabilities that the
applies a steel surcharge to its product when the cost of steel increases
Company has the ability to access at the measurement date.
significantly. The Company’s preferred practice is to match raw
The Company’s manufacturing costs are affected by the price of raw
materials cost changes with selling price adjustments, although there
Level 2 – fair value measurements using inputs other than quoted
is a time lag. This matching is not always possible, as customers react
prices included within Level 1 that are observable for the asset or
to selling price pressures related to raw material price fluctuations
liability, either directly or indirectly. These include quoted prices
according to conditions pertaining to their markets.
for similar assets and liabilities in active markets, quoted prices for
identical or similar assets and liabilities in inactive markets, inputs that
Foreign Exchange Risk
are observable that are not prices (such as interest rates and credit
The Canadian dollar is the Company’s functional currency. The
risks) and inputs that are derived from or corroborated by observable
Company operates primarily in Canada and the United States. The
market data. The fair values of interest in other entities are disclosed at
reporting currency of the Company is Canadian dollars, whereas the
fair value based on a level 2 classification.
functional currency for operations in the United States and sales to
the CIS region are the U.S. dollar. Fluctuations in the exchange rate
Level 3 – fair value measurements using significant non-market
between the U.S. dollar and Canadian dollar will affect the Company’s
observable inputs. These include valuations for assets and liabilities
reported results. However, the impact of changes in foreign exchange
that are derived using data, some or all of which is not market
rates on the Company’s reported results differs over time depending
observable data, including assumptions about risk. The Company does
on whether the Company is generating a net cash inflow or outflow of
not have any financial instruments measured at fair values based on
Canadian dollars. This is largely dependent on the Company’s revenue
level 3 inputs.
mix by currency as operating costs denominated in Canadian dollars
have been relatively stable.
22.
Financial Risk Management (000’s C$)
In addition, translation differences arise when foreign currency
The Company’s
risk management program
focuses on
the
monetary assets and liabilities are translated at foreign exchange
unpredictability of financial markets and seeks to minimize potential
rates that change over time. These foreign exchange gains and losses
adverse effects on the Company’s financial performance. The Company
are recorded in revenues. As a result of the Company’s U.S. dollar net
manages its risks and risk exposures through a combination of
monetary position within the Canadian dollar reporting currency
insurance, a system of internal and disclosure controls and sound
operations through to September 30, 2020, a one-cent strengthening/
business practices.
weakening in the year-end foreign exchange rate from Canadian
Risk management is primarily the responsibility of the Company’s
dollars to U.S. dollars would have decreased/ increased net earnings by
$243 (2019 - $263).
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. Financial Risk Management - continued
The Company’s exposure to foreign currency risk reported in U.S.
dollars was as follows:
2020
2019
Accounts receivable
$18,849
$36,332
Accounts payable and other accrued
liabilities
(11,157)
(5,955)
Advances from related party
(25,618)
(16,505)
Long term debt
(310)
(310)
$(18,236)
$13,562
The Company is partially insulated from large foreign exchange gains
and losses by virtue of its mix of cash inflows and outflows in U.S.
dollars. Gains and losses generated by fluctuations in the exchange
2021
2022
2023
2024
2025
2026
Total
$6,807
$ -
$ -
$ -
$ -
$ -
$6,807
Post
104,933
34,172
-
-
-
-
-
-
-
-
-
-
-
-
414
$145,912
$ -
$ -
$ -
$414
-
-
-
-
104,933
34,172
414
$146,326
Bank
indebt-
edness
Accounts
payable
and
accrued
liabilities
Due to
related
party
Long
term
debt
Total
rates used to translate U.S. dollar assets are offset by similar gains and
Credit Risk
losses on U.S. dollar liabilities. The Company also uses forward contracts
Financial instruments which potentially subject the Company to credit
to further mitigate these fluctuations when the natural hedges are
risk and concentrations of credit risk consist principally of accounts
forecasted to be insufficient.
receivable. Management has assessed that the credit risk associated
with accounts receivable is mitigated by the credit agreements
As at September 30, 2020 the Company had US to CAD foreign currency
the Company has in place including personal guarantees from the
contracts with a notional value of $2,500 in place (2019—$nil) Fair
counterparties.
value adjustments are recognized with (gain) loss on foreign exchange
in the consolidated statement of comprehensive income. A one-cent
The maximum exposure to the risk of credit for accounts receivable
strengthening/weakening in the period end foreign exchange rate
corresponds to their book value. Historically, the Company has
from CAD to USD would have increased/decreased the value of these
experienced nominal bad debts as a result of the security agreements
contracts by $25 (2019—$nil) before taxes.
Liquidity Risk
Investments to drive growth can require significant financial resources.
in place that allow the Company to recovery goods from dealers that
has not been paid for as well as personal guarantees. During 2020 , the
Company recorded a bad debt expense of $161 (2019 - $253).
A range of funding alternatives is available to the Company including
The carrying amount of accounts receivable is reduced through the
cash on hand, cash flow provided by operations, additional debt, the
use of an allowance account and the amount of the loss is recognized
issuance of equity or a combination thereof. The Company has current
in the consolidated statements of net loss and loss within selling &
credit facilities of $60,000 in place. Actual bank funding may differ as
administration expenses. When a receivable balance is considered
the result of margin availability. As at September 30, 2020 the Company
uncollectible, it is written off against the allowance for doubtful
had access to $58,000 (2019 - $54,000) The Company manages its
accounts. Subsequent recoveries of amounts previously written off are
liquidity risk by forecasting cash flows and determining if the credit
credited against selling & administration expenses.
facilities in place are adequate or if additional financing would be
required.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. Subsequent Events - continued
The following table sets out the aging details of the Company’s
shareholder the right to manufacture an older tractor model for sale
accounts receivable balances outstanding based on the status of the
outside of North America. This license was granted for a thirty- seven
receivable in relation to when the receivable was due and payable and
month period ending October 31, 2023 in exchange for $2,000 USD.
related allowance for doubtful accounts:
There is no cost basis for this intellectual property.
Current - neither impaired nor
past due
Not impaired but past the due
date; Within 30 days
31-60 days
Over 60 days
Less: Allowance for doubtful
accounts
2020
2019
$34,234
$47,572
1,657
828
11,028
47,747
2,558
1,541
8,973
60,644
(1,140)
(1,271)
Total receivables, net
$46,607
$59,373
The following table details the continuity of the allowance for doubtful
accounts:
2020
2019
Balance, beginning of year
$(1,271)
$(1,013)
Provisions for the year, net of recoveries
Uncollectible amounts written off
Foreign exchange impact
Balance, end of year
(161)
289
3
(253)
-
(5)
$(1,140)
$(1,271)
23.
Subsequent Events
During the year the Company announced the closure of the Fargo. ND
facilitiy. At year end the company was in the process of transferring
production lines and inventory out of the facility. Subsequent to year
end the Company also announced that the company would cease
production at its Willmar, MN facility and Vegreville, AB facility. The
production lines from both Fargo and Willmar will be transferred
to Morden, MB during the 2021 fiscal year. The production line at
Vegreville is expected to be transferred to Winnipeg, MB following the
2021 fiscal year.
Subsequent to year end the Company amended its financing facility
with the Canadian Imperial Bank of Commerce, extending a further
$15,000 secured by a mortgage on the Company’s Winnipeg properties.
The existing $60,000 facility remains in place under similar terms to
those at year end.
On October 1, 2020 the Company licensed intellectual property rights
to it’s controlling shareholder. These rights provide the controlling
36
37
COMPANY INFORMATION
Audit Committee
Allan L.V. Stewart
Konstantin Babkin
Oleg Gorbunov
Legal Counsel
Thompson Dorfman Sweatman LLP
Winnipeg, Manitoba
Exchange Listing
The shares of Buhler Industries Inc. are
listed on the Toronto Stock Exchange
and trading under the symbol “BUI”.
Corporate Banker
Canadian Imperial Bank of Commerce
Winnipeg, Manitoba
Cusip Number
119 918 100
Transfer Agent
Computershare Trust Company of Canada
Calgary, Alberta
Corporate Office
1260 Clarence Avenue
Winnipeg, Manitoba, R3T 1T2
Ph: (204) 661-8711
Fax: (204) 654-2503
Web site: www.buhlerindustries.com
Auditors
MNP LLP
Winnipeg, Manitoba
Annual Meeting
The annual meeting of shareholders will be
held on March 25, 2021
11:00 AM at the Head Office,
1260 Clarence Avenue, Winnipeg Manitoba.
DIRECTORS, OFFICERS AND SENIOR MANAGEMENT
Name
Dmitry Udras
Yury Ryazanov
Konstantin Babkin
Oleg Gorbunov
Allan Stewart, B.A., LL.B.
John Buhler
Office
Principal Occupation
Chairman/Officer
Member and Co-owner of Novoe Sodrugestvo Ltd.
Director/Chief Executive Officer
Vice President and Co-owner of Novoe Sodrugestvo Ltd.
Director
Director
Director
Director
President and Co-owner of Novoe Sodrugestvo Ltd.
Adviser to the CEO of “Novoe Sodrugestvo”, CJSC"
Lawyer, Thompson Dorfman Sweatman LLP
President, Highland Park Financial Inc.
Grant Adolph, P.Mgr
Officer/Director
Chief Operating Officer, Buhler Industries Inc.
Marat Nogerov
Maxim Loktionov
Officer
Officer
President, Buhler Industries Inc.
Vice President, Buhler Industries Inc.
Willy Janzen, CPA, CGA., B.Comm.
Officer
Chief Financial Officer, Buhler Industries Inc.
Adam Reid
Neil Frechette
Min Lee, I.S.M.
Management
Management
Management
Vice President of Sales & Marketing, Versatile
Director of Information Technology
Chief Information Officer, Buhler Industries Inc.
Todd Trueman, C.I.M., P.Mgr., C.Mgr. Management
Director of Human Resources, Buhler Industries Inc.
38
STOCK DATA
10 YEAR SUMMARY
SUMMARY OF OPERATIONS
Reported standards utilized
2011
GAAP
2012
IFRS
2013
IFRS
2014
IFRS
2015
IFRS
2016
IFRS
2017
IFRS
2018
IFRS
2019
IFRS
2020
IFRS
In thousands of Canadian dollars (except per share amounts)
Cash, receivables and prepaid expenses
71,919
78,054
85,491
102,473
80,555
73,680
73,983
63,884
67,331
53,295
Revenue
Cost of goods sold
Gross profit
Selling & admin. expense
(Loss) Income from operations
Gain on sale of capital assets
Interest income
Interest expense
Foreign exchange (gain) loss
Share of income of joint venture
Research & development exp.
Net earnings before taxes
Income tax expense (recovery)
Net earnings
CASH FLOW SUMMARY
Capital asset purchases
Long term debt incurred
Reduction of long term debt
Dividends paid
Net cash flow
Net cash (bank indebtedness)
BALANCE SHEET SUMMARY
Inventory
Total current assets
Total assets
Total current liabilities
Total short and long term debt
Total liabilities
Total shareholders equity
Shares o/s (avg. in millions)
Working capital
DATA PER COMMON SHARE
Revenue
EBITDA
Price to EBITDA
EBIT
Net earnings
Price to earnings
Cash flow
Dividends paid
Closing share price
Shareholders’ equity
STATISTICAL DATA
Current ratio
Interest bearing debt/ equity ratio
Inventory turnover
279,495
357,749
340,349
325,521
245,676
274,067
311,974
287,984
229,119
249,550
237,198
302,891
283,031
277,791
223,410
252,841
275,821
284,510
218,776
235,225
42,297
20,709
21,588
(1,184)
(557)
3,004
(1,940)
(529)
7,480
15,314
3,397
11,917
9,662
17,068
1,550
-
16,287
(10,515)
54,858
23,108
31,750
(1,212)
(553)
3,507
2,701
(521)
8,375
19,453
3,090
16,363
57,318
22,529
34,789
(74)
(300)
4,459
47,730
25,239
22,491
(401)
(314)
3,741
(3,586)
(3,497)
(605)
8,533
26,362
6,471
19,891
(628)
8,663
14,927
(14,517)
2,469
12,458
(9,201)
(5,316)
22,266
26,278
(4,012)
(114)
(376)
3,345
(200)
(473)
8,323
21,226
25,894
(4,668)
(8,160)
(332)
4,315
(789)
(780)
8,739
(7,661)
(4,984)
(2,677)
36,153
26,766
3,474
25,979
9,387
(22,505)
(4,066)
(2,381)
(511)
7,894
622
(481)
12,345
(332)
5,926
1,152
(521)
9,604
(2,376)
(2,896)
10,343
23,974
(13,631)
(19,437)
(568)
9,050
494
(540)
7,802
14,325
24,791
(10,466)
(526)
(309)
7,074
1,022
(131)
6,909
(39,993)
(10,432)
(24,505)
9,539
19,057
1,304
520
(49,532)
(29,489)
(25,809)
2,440
5,857
4,639
3,216
2,785
2,963
-
-
-
-
-
5,949
2,139
3,191
4,968
2,642
-
-
-
4,799
385
-
-
943
1,096
-
-
-
-
-
-
-
-
-
17,871
(633)
1,230
4,219
(46,225)
(49,841)
(52,830)
(20,452)
(12,553)
(37,254)
(26,032)
(37,722)
30,915
(6,807)
-
21,203
19,293
-
24,297
24,160
126,604
131,248
153,325
213,089
201,463
142,372
180,911
171,612
165,631
146,931
198,523
209,302
238,816
315,562
282,018
216,052
254,894
235,496
232,962
200,226
241,355
250,569
283,403
362,844
339,029
278,415
319,739
290,378
262,604
227,759
77,696
17,695
96,793
78,439
11,746
89,644
97,451
167,339
151,029
93,078
133,907
153,670
155,370
146,326
9,607
6,857
2,669
-
-
401
411
414
102,587
169,570
151,071
93,134
133,938
154,109
155,824
146,788
144,562
160,925
180,816
193,274
187,958
185,281
185,801
136,269
106,780
80,971
25.0
25.0
25.0
25.0
25.0
25.0
25.0
25.0
25.0
25.0
120,827
130,863
141,365
148,223
130,989
122,974
120,987
81,826
77,592
53,900
11.18
14.31
13.61
13.02
0.89
6.3
0.71
0.48
11.75
0.65
-
5.60
5.78
2.6
0.2
2.1
1.09
4.9
0.90
0.65
8.17
0.85
-
5.35
6.44
2.7
0.1
2.3
1.40
4.6
1.22
0.80
8.04
0.97
-
6.40
7.23
2.5
0.1
2.0
0.96
5.7
0.73
0.50
11.06
0.71
-
5.51
7.73
1.9
0.3
1.5
9.83
(0.26)
(22.0)
(0.46)
(0.21)
(26.81)
(0.03)
-
5.70
7.52
1.9
0.3
1.1
9.1%
11%
(3%)
(2%)
(3%)
(3%)
10.96
0.02
196.1
(0.15)
(0.11)
12.48
0.29
15.3
0.13
0.02
(41.09)
213.94
0.05
-
4.40
7.41
2.3
0.1
1.5
7.7%
9%
0%
(1%)
(1%)
(1%)
0.17
-
4.45
7.43
1.9
0.1
1.7
11.6%
9%
2%
0%
0%
0%
11.52
(1.15)
(3.1)
(1.30)
(1.98)
(1.82)
(1.85)
-
3.60
5.45
1.5
0.3
1.6
1.2%
9%
(10.0%)
(17%)
(31%)
(31%)
9.16
0.08
44.9
(0.08)
(1.18)
(3.16)
(1.04)
-
3.73
4.27
1.5
0.4
1.3
4.5%
10%
0.9%
(13%)
(24%)
(24%)
9.98
(0.57)
(4.4)
(0.69)
(1.03)
(2.42)
1.23
-
2.51
3.24
1.4
0.4
1.5
5.7%
10%
(6)%
(10%)
(11%)
(27%)
Gross margin (% of revenue)
15.1%
15.3%
16.8%
14.7%
Selling & Admin. (% of revenue)
EBITDA (% of revenue)
Net earnings (% of revenue)
Return on average capital
Return on average equity
7%
8%
4%
8%
9%
6%
8%
5%
10%
11%
7%
10%
6%
11%
12%
8%
7%
4%
6%
7%
NOTES
41
NOTES
42
NOTES
43
Buhler Industries Inc.
1260 Clarence Avenue
Winnipeg
Manitoba
Canada
R3T 1T2
Ph: 204.661.8711
Fax: 204.654.2503
buhlerindustries.com
info@buhler.com