Buhler Industries Inc.
Annual Report 2021

Plain-text annual report

2021 ANNUAL REPORT TABLE OF CONTENTS Introduction Versatile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Introduction Farm King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 President's Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Management Discussion & Financial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Management's Responsibility for the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 19 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) . . . . 24 Consolidated Statement of Change in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Stock Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 10 Year Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 3 Introduction Versatile Versatile celebrated numerous successes and faced plant in Winnipeg, Manitoba, will begin manufacturing many challenges in 2021. At the beginning of the year, tillage equipment in 2022. This change will improve farmers across North America were in a position to logistics and bring the product closer to key markets buy equipment due to the high commodity prices and throughout Canada and the United States. More increased international trade led by China's demand parts became available through the U.S. distribution for corn, soybeans and pork. Even with inconsistent centers in Blair, Nebraska; Clarksville, Indiana; and West weather patterns and droughts resulting in lower than Memphis, Arkansas. The warehouse in West Memphis expected crop yields in Western Canada and the United became a primary distribution point for Versatile service States, there was strong product demand throughout parts as the central location and proximity to the FedEx the year ensuring all available inventory sold to dealers. World Hub allow this location to efficiently serve most Versatile has continued to grow the dealer network and of the United States. focus on all areas of business that strengthen dealer Further investment into product development and relationships. Results of the 2021 Equipment Dealers marketing continued. Last year saw the release of the Association’s annual satisfaction survey substantiate 2022 4WD and DeltaTrack models, and the return of the success of this approach. The dealer survey ranks trade shows since the COVID-19 pandemic began. manufacturers based on several factors including, parts The new DeltaTrack was first introduced at the Farm quality and availability, communication, warranty and Progress Show in Decatur, Illinois, followed by the marketing. Versatile has improved year-over-year and Big Iron Farm Show in Fargo, North Dakota and the in 2021 received the highest overall satisfaction rating Agri-Trade Equipment Expo in Red Deer, Alberta. since first participating in the survey. Feedback on the 2022 models was overwhelming The only notable area of decline was in product availability. The manufacturing industry was affected greatly by supply chain issues brought on by the COVID-19 pandemic. Versatile was not exempt positive. The favorable response was cemented as the fall order writing program sold out all available production slots. More than one-third of the tractors on order have been pre-sold to end-users. from these challenges and maintained regular Versatile is in a strong position communication with vendors, suppliers and internal moving forward with our current teams to reduce delays and maintain product quality. product lineup, operational Despite our best efforts, many suppliers experienced improvements and strong delays and material shortages, creating an inconsistent dealer support. The supply chain production schedule based on component availability. issues will continue to be a Steps were taken to reinforce product lines and streamline North American operations. The facility in Vegreville, Alberta, previously responsible for tillage production, ceased operation in September 2021. The 4 challenge but we are optimistic that production and demand will thrive throughout 2022. Adam Reid Vice President of Sales & Marketing, Versatile Introduction Farm King Farm King continued to navigate through supply Farm King pursued capital and critical infrastructure chain, logistical and manpower challenges in 2021 investments in the Morden facility. The conventional due to COVID-19. Despite those challenges, product auger consolidation project was initiated as a part of lines formerly built in Fargo, North Dakota and product development. The project’s aim is, to integrate Willmar, Minnesota were successfully relocated to the the best features of current and legacy conventional Morden, Manitoba facility and streamlined. Capacity auger models and to remove product duplication. Farm King will continue to work towards product quality, service and dealer relationship improvements. consolidation enabled Farm King to substantially increase manpower in Morden and reinstate a second shift. Strong commodity prices and some competitors’ in season product shortages allowed Farm King to increase market share in select product categories and grow sales by 4%. 25 new dealers were added to Farm King’s extensive dealer network in North America. 18 hub locations across Canada and United States continued to provide set up services to Farm King customers. Maxim Loktionov Vice President, Buhler Industries Inc. 5 President's Message First, I would like to express words of support and ag equipment. This growth was also largely due to sympathy to all those people whose relatives or friends the increased support and confidence of our dealers, passed away because of the COVID-19 pandemic. Our including multiple organizations which joined our Company has done everything possible to minimize dealer network in 2020-2021. As of February, a large risks and the safety of the Company's employees and portion of 2022 planned production is also booked and visitors remains a priority. I also express my gratitude to I have strong confidence there will be no impediments all the employees who selflessly continued to do their to finding homes for every tractor built this year. As one work at the height of the pandemic. of the consequences of limited and unstable flow of The agenda of 2021 was mostly dictated by global supply chain disruptions caused by the pandemic. The Company was faced with ongoing delays in new inventory shipments because of significant constrains components, the decision was made to postpone our export sales until the end of the third quarter in 2022 and to stay focused on catching up the backlog of North American orders. caused by capacity limitations experienced by some I want to thank all our dealers for their cooperation and of the key suppliers as well as innumerable delays of also for their patience and willingness to support us the components deliveries. To overcome the effect of when we have had trouble getting tractors out on time. these negative impacts the Buhler Industries team is working closely with our supply chain on a daily basis and has kept focus on specific issues to make sure that production lines continue to operate. Looking into 2022, the supply chain issues will remain in place and will continue to impact our operations. The production of Versatile tillage products as well as sales programs have been put on pause since last September due to moving tillage production capacities from our plant in Vegreville, Alberta to Winnipeg, Manitoba. This transition was made with the goals of improving efficiency and having better control over all I express my appreciation and gratitude to all Buhler business processes in the product life-cycle. The first Industries’ suppliers for their efforts to support our high-speed compact disc, the Fury, just recently left the production schedule and overall business relationships quality check area so the Company will be working on a in these tough times. relaunch and acceleration of tillage production over the From sales prospective, 2021 was a very special year. next few months. With unprecedented support from Versatile dealers, One of the noticeable highlights of the 2021 results is the entire years volume of production had been that increased level of Buhler Industries operational fully booked by early March of 2021. This has never profitability and positive net earnings which can be been seen in the recent history of Versatile. The total observed in the financial statement. The Company volume of orders in 2021 went up by 441% compared succeeded in absorbing significant losses of previous to 2020, which was partly caused by the drastically years, sustaining its capabilities of manufacturing, increased demand in the North American market of continuing new product development, and maintaining 6 an appropriate margin. I appreciate efforts and equipment. We also understand that with pushing our contribution of every Company stakeholder who made sales higher we provide more opportunities to all our this progress possible. dealers, suppliers and other partners. My vision of 2022 prospects is cautiously optimistic In Q1-Q3 of 2022, our main focus in operations will since the Company will still be affected by global supply remain in North America. Our goals are to catchup the chain challenges as well as by growing prices and production backlog and eventually satisfy both, already lead-time caused by limited manufacturing capacities existing orders and expected ones. The Company will observed in many businesses across the globe. At the proceed with new development as scheduled so new same time the Buhler Industries management team generations of our product will come to fruition as will continue to drive the Company in the direction of we planned. growth and efficiency driving our ultimate goal which is making customers happy when owning brand-new Yury Ryazanov Chief Executive Officer and Director Marat Nogerov President 7 Management Discussion & Financial Analysis Certain statements made in the following Versatile has the claim of being the first North American Management’s Discussion and Analysis contain manufacturer to mass-produce and market articulated forward-looking statements including, but not limited four-wheel drive tractors. Since Versatile opened more to, statements concerning possible or assumed future than 50 years ago, the Company has built over 100,000 results of operations of Buhler Industries Inc. (the tractors at its plant in Winnipeg, Manitoba, Canada. Company). Forward-looking statements represent the Currently, the plant builds fixed-frame front-wheel assist Company’s intentions, plans, expectations and beliefs, tractors from 175 to 365 horsepower and articulated and are not guarantees of future performance. Such four-wheel drives and DeltaTrack models from 405 forward-looking statements represent the Company’s to 620, designed on the cornerstones of reliability, current views based on information as at the date durability, and ease of service and maintenance. Farm of this report. They involve risks, uncertainties and King products are manufactured in Morden, Manitoba, assumptions and the Company’s actual results could Canada. The dealer network of over 1,200 North differ, which in some cases may be material, from American locations provides first class service and those anticipated in these forward-looking statements. professional expertise to farmers and customers. 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. Buhler Industries remains committed to continuous product improvement and incorporating new value- added features. That tradition of excellence will The Company cautions investors not to place undue continue well into the future. 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) build tractors, augers, snow blowers, mowers, tillage equipment, compact implements and more. In addition, the Company maintains Versatile and Farm King warehouses in both Canada and the United States. 8 Management Discussion & Financial Analysis TEN YEAR HIGHLIGHTS In thousands of Canadian dollars (except per share amounts) PERIOD END 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Revenue Gross profit GP% IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS 357.749 340.349 325.521 245,676 274,067 311,974 287,984 229,119 249,550 317,178 54,858 57,318 47,730 22,266 21,226 36,153 3,474 10,343 11,685 33,079 15.3% 16.8% 14.7% 9.1% 7.7% 11.6% 1.2% 4.5% 5.7% 10.4% Income from operations 31,750 34,789 22,491 (4,012) (4,668) 9,387 (22,505) (13,631) (10,444) 6,305 As percentage of revenue 9% 10% 7% (2%) (2%) Net earnings 16,363 19,891 12,458 (5,316) (2,677) 3% 520 (8%) (6%) (4%) 2% (49,532) (29,489) (25,809) 8,911 Earnings per share (EPS) 0.65 0.80 0.50 (0.21) (0.11) 0.02 (1.98) (1.18) (1.03) 0.36 EBITDA Total assets 27,247 34,927 24,081 (6,489) 561 7,249 (28,792) 2,075 (14,341) 19,177 250,569 283,403 362,844 339,029 278.415 319,739 290,378 262,604 227,759 224,949 Working capital 130,863 141,365 148,223 130,989 122,974 120,987 81,826 77,592 88,072 84,898 Shareholders’ equity 160,925 180,816 193,274 187,958 185,281 185,801 136,269 106,780 80,971 89,882 Book value per share Return on average capital Return on average equity 6.44 10% 11% 7.23 11% 12% 7.73 6% 7% 7.52 (3%) (3%) 7.41 (1%) (1%) 7.43 5.45 4.27 3.24 0% 0% (16%) (10%) (27%) (31%) (24%) (27%) 3.60 10% 10% In this table, IFRS refers to the International Financial Reporting Standards. In 2021 the Company changed from it's year end to December 31 that included 15 months. All prior years ended September 30. General Information The following discussion and analysis dated March 31, include the accounts of all subsidiaries. The Company 2022 was prepared by management and should be read in conjunction with the consolidated financial and all its Canadian subsidiaries operate with the Canadian dollar as the functional currency. During the statements prepared in accordance with International year the Company changed the year end to December Financial Reporting Standards (IFRS). The following discussion and analysis is presented in millions of 31 and as a result comparisons will be December 31, 2021 (five quarters) versus September 30, 2020 Canadian dollars. The consolidated financial statements (four quarters). 9 Management Discussion & Financial Analysis Highlights Revenue Revenue for the fifteen month period was $317.2, up $67.6 from sales of $249.6 in 2020. The Company’s increased sales growth for the period primarily results from the accounting change to a December year end in 2021. Included in 2021 are fifteen months of sales versus twelve months of sales in 2020. Gross Profit Gross profit jumped to $33.1, an increase of $21.4 from the prior year’s $11.7. As a percentage of sales, gross profits were 10.4%, an increase from the prior year’s 4.7%. Strong demand for agricultural equipment coupled with the Company’s continued focus on margin improvements including the closure of manufacturing facilities during the period have resulted in significant margin improvements in the fifteen month period. 350 300 250 200 150 100 50 0 40 35 30 25 20 15 10 5 0 Sales (millions C$) 2017 2018 2019 2020 2021 Gross Profit (millions C$) 2017 2018 2019 2020 2021 Income from Operations Income from Operations (millions C$) Income from operations came in at $6.3 compared with a loss of $10.5 in 2020. Selling and administration expenses were $26.8, up from the prior year’s $22.1 primarily due to the change in accounting year end. As a percentage of sales, selling and administration was 8.4%, down from the prior year percentage of 8.9%. 10 5 0 -5 -10 -15 -20 -25 10 2017 2018 2019 2020 2021 Management Discussion & Financial Analysis Income and Comprehensive Income Net Earnings (millions C$) The net earnings for the fifteen month period was $8.9, an improvement of $34.7 from the loss in the prior year. Increased gross profit of $21.4 drove most of the improvement over the prior year. In addition, the Company recorded a gain on sale of intellectual property of $12.7 and increased asset disposals of $0.8 when compared to the prior year. Exchange rate gains contributed $3.1 compared with the prior year. Finally, a gain on forgiveness of debt of $1.5 and reduced taxes of $1.2 were offset by increased spending on selling and administration costs of $4.6 and R&D of $1.2 due mostly to having five quarters in 2021 instead of four quarters in 2020. 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 2021 was $19.2, an increase from the prior year of $33.5. The improvement from the prior year was due primarily to gains on gross margin, gain on sale, exchange rate gains and forgiveness of debt. Working Capital 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 period end was $84.9, a decrease from the prior year’s $88.1. Accounting for much of the change were decreases in accounts receivable of $24.2 and an increase in bank indebtedness of $15.3 and an increase in long-term debt of $12.9 offset by increases in inventories of $19.5 and a reduction in accounts payable of $29.9. 10 0 -10 -20 -30 -40 -50 20 15 10 5 0 -5 -10 -15 -20 -25 -30 150 120 90 60 30 0 2017 2018 2019 2020 2021 EBITDA (millions C$) 2017 2018 2019 2020 2021 Working Capital (millions C$) 2017 2018 2019 2020 2021 11 Management Discussion & Financial Analysis Research and Development 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 increased spending to $8.1, compared to $6.9 in 2020. The change in accounting year end accounts for most of the increase in spending due to reporting five quarters in 2021 versus four quarters in 2020. Management believes this strategy of continued investment in R&D will maintain the Company’s competitive position in the marketplace. (thousands C$) (millions C$) QUARTERLY NET EARNINGS RESULTS 5 NET QUARTERLY INCOME 2017 2018 2019 2020 2021 1st Quarter (2,440) (5,798) (4,444) (5,453) (3,815) 2nd Quarter (251) (6,554) 7,041 (8,460) 436 3rd Quarter 2,581 (2,876) (1,170) 462 3,759 4th Quarter 630 (34,304) (30,916) (12,358) (743) 5th Quarter - - - - 9,274 Total 520 (49,532) (29,489) (25,809) 8,911 10 0 -5 -10 -15 -20 -25 -30 -35 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 5th Quarter 17 7 1 0 2 18 8 1 0 2 19 9 1 0 2 20 0 2 0 2 21 1 2 0 2 17 7 1 0 2 18 8 1 0 2 19 9 1 0 2 20 0 2 0 2 21 1 2 0 2 17 7 1 0 2 18 8 1 0 2 19 9 1 0 2 20 0 2 0 2 21 1 2 0 2 17 7 1 0 2 18 8 1 0 2 19 9 1 0 2 20 0 2 0 2 21 1 2 0 2 17 7 1 0 2 18 8 1 0 2 19 9 1 0 2 20 0 2 0 2 21 1 2 0 2 Summary of Quarterly Results The change in accounting for the fiscal period resulted in five quarters during 2021 versus four quarters in 2020 and the resulting quarterly discussion compares the October to December 2021 period versus the October to December 2020 prior period. Sales for the quarter were $63.8 an increase of 12.5 from the prior period. Company sales has continued to grow, as demand for agricultural equipment remains strong. Net income improved for the quarter to $13.1 an improvement of 13.0 when compared to the prior period. Contributing to the increase in net income was improved margin of $1.8 over the prior period and a gain on sale of intellectual property of $12.1 for Tier III tractors that can no longer be sold in North America due to emissions standards. This was offset by the gain on forgiveness of debt of $1.5 that was recognized in the prior period and not repeated in the current period. Changes in the balance sheet include, increases in inventory of $12.8 due to increased sales and supply chain challenges and a reduction in accounts receivable of $14.3. Accounts payable dropped by $13.2 to $72.1 in the current period and related party long term debt was reduced by $7.7. 12 Management Discussion & Financial Analysis Cash Flow and Capital Resources Operating Activities Net Cash Flow (millions C$) Cash for the period was down $15.3 from 2020, coming in at an indebtedness of $22.1, compared to the prior year indebtedness of $6.8. Accounting for the increase in cash was net income of $8.9, net proceeds from investing activities of $6.5 and net proceeds from financing activities of $5.0. This was offset by a reduction in non-cash working capital at $20.2 and a reduction in non-cash operating activities of $15.4. Management has diligently worked to control the investment in inventory in order to keep a strong cash position. The increase in sales has resulted in an increase in the Company's inventory turns, improving to 1.8 in 2021 from 1.5 in 2020. 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 2.0 1.5 1.0 0.5 0.0 2017 2018 2019 2020 2021 Inventory Turns 2017 2018 2019 2020 2021 13 Management Discussion & Financial Analysis Investing Activities Asset Purchases (millions C$) Cash received during the period for investing activities was $6.5 compared to cash utilized of $0.3 in 2020. Purchases of property, plant and equipment amounted to $5.0, which were offset by the cash proceeds on the sale of intellectual property of $11.2 and surplus assets of $0.3. In the prior year, purchases of property, plant and equipment was $1.1, offset by proceeds on sale of surplus assets of $0.8. 5 4 3 2 1 0 2017 2018 2019 2020 2021 Financing Activities The Company's financing activities resulted in an inflow of $5.0 for the period, compared to $12.9 in the prior year. The Company received $15.0 from proceeds of long-term debt issuance and this was offset by a repayment of debt of $10.0. In the prior year the Company received tax credits of $0.6 and $12.3 in advances from a related party. 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 $72.9 ($60.0 line of credit, $12.9 mortgage facility) in credit facilities. 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 portion of the remaining exposure to fluctuations in exchange rates may be mitigated with forward and option contracts. Risks and Financial Instruments The Company currently has a variable interest bank 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 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 14 Management Discussion & Financial Analysis needs of the Company are being met by the bank credit of strong demand for agricultural machinery and facility, which carries a low rate of variable interest. equipment. Increased sales will require additional 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 inventories and receivables to support the sales growth. The Company continues to experience supply chain challenges faced by the agricultural manufacturers as it works to improve shipments. The Company expects to see margin improvement stemming from increased customer demand and the reduction in manufacturing costs that were implemented in the prior year. Critical Accounting Estimates are only conducted with certain approved financial The Company believes the following accounting institutions. Fluctuations in foreign exchange rates estimates are critical to determining and understanding represent a material exposure for the Company's the operating results and the financial position of the financial results. Hedging programs employed Company. 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. 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 Credit risk arises from cash held with banks and credit receivable, the Company applied the simplified exposure to customers, including outstanding accounts approach permitted by IFRS 9, under which the lifetime receivable. The Company assesses the credit quality of expected credit losses must be recognized upon initial customers, taking into account their financial position, recognition. For loans classified under receivables, the past experience and other factors. Management Company measures credit risk based on the 12-month regularly monitors customer credit limits, performs expected credit risk if there has not been a significant credit reviews and, in certain cases, insures accounts increase in credit risk since initial recognition. 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 Increased sales are projected for the year. The Company has a large backlog that continues to grow as a result 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. 15 Management Discussion & Financial Analysis lmpairment of Property, Plant and Equipment matters could ultimately be resolved for amounts materially different to provisions or disclosures An integral component of impairment testing is previously made by the Company. 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 16 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 period ended December 31, 2021. 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. In general the Company has not seen significant impacts from COVID-19 to date other than the supply chain challenges. Management Discussion & Financial Analysis 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 ultimate tax determination 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 The Company makes claims for Scientific Research and final tax outcome of these matters is different from the Experimental Development (SRED) expenditures which amounts that were initially recorded, such differences are included in deferred taxes. The amounts recorded will affect the tax provisions in the period in which such are based on the Company's interpretation of the determination is made. 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 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. 17 Management Discussion & Financial Analysis 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 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 required to be disclosed is reported within time periods of financial statements for external purposes in prescribed by applicable securities legislation. There are accordance with IFRS. Internal control systems, no inherent limitations to the effectiveness of any system matter how well designed, have inherent limitations 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 December 31, 2021 to provide reasonable assurance that the information being disclosed is recorded, summarized and reported as required. 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 December 31, 2021 to provide reasonable assurance that the financial information being reported is materially accurate. During the period ended December 31, 2021, 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. 18 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 by the Board of Directors. The financial statements and approving the financial statements. The Board have been prepared by management in accordance carries out this responsibility through its Audit with International Financial Reporting Standards. When Committee. The Audit Committee is appointed alternative accounting methods exist, management by the Board and its directors are unrelated and has chosen those it deems most appropriate in the independent. The Committee meets periodically with circumstances. Financial statements are not precise management, as well as the external auditors, to discuss since they include certain amounts based on estimates internal controls over the financial reporting process, and judgments. Management has determined such auditing matters and financial reporting issues; to amounts on a reasonable basis in order to ensure that satisfy itself that each party is properly discharging the financial statements are presented fairly, in all its responsibilities; and, to review the annual report, material respects. Management has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent with the financial statements. Management has a system of internal controls designed to provide reasonable assurance that the financial statements are accurate and complete in all material respects. The internal control system the financial statements and the external auditors' report. The Audit Committee reports its findings to the Board for consideration when approving the financial statements for issuance to the shareholders. The Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial statements have been audited by BDO LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on includes an internal audit function and an established behalf of the shareholders. business conduct policy that applies to all employees. Management believes that the systems provide reasonable assurance that transactions are properly authorized and recorded, financial information is relevant, reliable and accurate and that the Company's assets are appropriately accounted for and adequately safeguarded. Yury Ryazanov Willy Janzen, CPA, CGA, B.Comm. Chief Executive Officer March 31, 2021 Chief Financial Officer March 31, 2021 19 Independent Auditor’s Report To the Shareholders of Buhler Industries Inc.: Opinion We have audited the consolidated financial statements The consolidated financial statements for the years ended September 3, 2020 and 2019 (not presented of Buhler Industries Inc. and its subsidiaries (the Group), herein but from which the comparative information which comprise the consolidated balance sheet as at as at October 1, 2019 has been derived) excluding December 31, 2021, and the consolidated statements the adjustments that were applied to restate certain of income (loss) and comprehensive income (loss) and comparative information were audited by another cash flows for the fifteen month period then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. auditor who expressed an unmodified opinion on those consolidated financial statements on December 24, 2020. As part of our audit of the consolidated financial In our opinion, the accompanying consolidated financial statements for the year ended December 31, 2021, statements present fairly, in all material respects, the we also audited the adjustments that were applied to consolidated financial position of the Group as at restate certain comparative information for the year December 31, 2021, and its consolidated financial ended September 30, 2020. performance and its consolidated cash flows for the fifteen month period then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance In our opinion, such adjustments are appropriate and have been properly applied. Other than with respect to the adjustments that were applied to restate certain comparative information, we were not engaged to audit, review, or apply any procedures to the consolidated financial statements for the year ended September 30, 2020. Key Audit Matters Key audit matters are those matters that, in our with the ethical requirements that are relevant to our professional judgment, were of most significance in audit of the consolidated financial statements in Canada, our audit of the consolidated financial statements of and we have fulfilled our other ethical responsibilities the current period. These matters were addressed in in accordance with these requirements. We believe that the context of our audit of the consolidated financial the audit evidence we have obtained is sufficient and statements as a whole, and in forming our opinion appropriate to provide a basis for our opinion. thereon, and we do not provide a separate opinion on Emphasis of Matter – Restated Comparative Information We draw attention to Note 24 to the consolidated these matters. Valuation of Inventory Description of the key audit matter financial statements, which explains that certain The provision for obsolescence of inventory requires the comparative information presented for the year application of significant judgment by the Company, September 30, 2020 has been restated. Our opinion is particularly in the identification of slow moving and not modified in respect of this matter. obsolete inventory and the quantification of the 20 provision to apply to the inventory identified. The discussion on the assessment of the estimate and the underlying assumptions is included in Note 4c of the consolidated financial statements. How the key audit matter was addressed in the audit We assessed the key assumptions applied by the Company to calculate the provision. We tested the calculation of the provision and we compared the results of the analysis to comparable entities. Other Information Management is responsible for the other information. The other information comprises: Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, • The information, other than the consolidated as applicable, matters related to going concern and financial statements and our auditor’s report using the going concern basis of accounting unless thereon, included in the Annual Report, and management either intends to liquidate the Group or • The information included in the Management Discussion & Financial Analysis. 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 audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’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 We obtained the Annual Report and the Management audit conducted in accordance with Canadian generally Discussion & Financial Analysis prior to the date of accepted auditing standards will always detect a this auditor’s report. If, based on the work we have material misstatement when it exists. Misstatements can performed on this other information, we conclude arise from fraud or error and are considered material if, that there is a material misstatement of this other individually or in the aggregate, they could reasonably information, we are required to report that fact in this be expected to influence the economic decisions of auditor’s report. We have nothing to report in this users taken on the basis of these consolidated financial regard. statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise 21 Independent Auditor’s Report professional judgment and maintain professional of our auditor’s report. However, future events skepticism throughout the audit. We also: or conditions may cause the Group to cease to • Identify and assess the risks of material continue as a going concern. misstatement of the consolidated financial • Evaluate the overall presentation, structure and statements, whether due to fraud or error, design content of the consolidated financial statements, and perform audit procedures responsive to those including the disclosures, and whether the risks, and obtain audit evidence that is sufficient consolidated financial statements represent the and appropriate to provide a basis for our opinion. underlying transactions and events in a manner The risk of not detecting a material misstatement that achieves fair presentation. 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 sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial • Obtain an understanding of internal control statements. We are responsible for the direction, relevant to the audit in order to design supervision and performance of the group audit. audit procedures that are appropriate in the We remain solely responsible for our audit opinion. circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, • Evaluate the appropriateness of accounting including any significant deficiencies in internal control policies used and the reasonableness of accounting that we identify during our audit. estimates and related disclosures made by management. We also provide those charged with governance with a statement that we have complied with relevant • Conclude on the appropriateness of management’s ethical requirements regarding independence, and to use of the going concern basis of accounting and, communicate with them all relationships and other based on the audit evidence obtained, whether matters that may reasonably be thought to bear on a material uncertainty exists related to events or our independence, and where applicable, related conditions that may cast significant doubt on the safeguards. Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date 22 The engagement partner on the audit resulting in this independent auditor’s report is Justin Friesen. Winnipeg, Manitoba March 31, 2022 Chartered Professional Accountants Consolidated Balance Sheet (000's C$) Assets Current Assets As at December 31, As at September 30, 2021 2020 Restated - Note 24 Accounts receivable, net (note 9 and 22) $ 22,366 $ 46,607 Income taxes receivable Inventories, net (note 7) Prepaid expenses Total Current Assets Property, plant and equipment (note 8) Assets held for sale (note 8) Deferred income tax assets (note 10) Interests in joint ventures and other entities (note 11) 493 166,404 5,801 195,064 14,735 2,932 5,624 6,594 242 146,931 6,446 200,226 15,770 - 5,624 6,139 Total Assets $ 224,949 $ 227,759 Liabilities and Shareholders’ Equity Current Liabilities Bank indebtedness (note 6) Accounts payable and accrued liabilities (note 12) Income taxes payable Current portion of long-term debt (note 13) Total Current Liabilities Deferred income tax liabilities (note 10) Long term debt (note 13) Advance from related party (notes 9 and 24) Total Liabilities Shareholders’ Equity Share capital (note 14) Retained earnings Total Shareholders' Equity Total Liabilities and Equity Subsequent events (note 23) $ 22,074 75,057 178 12,857 110,166 39 393 24,469 135,067 30,000 59,882 89,882 $ 6,807 104,933 414 112,154 48 414 34,172 146,788 30,000 50,971 80,971 $ 224,949 $ 227,759 The accompanying notes are an integral part of the consolidated financial statements. Approved on behalf of the board: Yury Ryazanov Chief Executive Officer March 31, 2022 Grant Adolph P. Mgr. Chairman of the Board March 31, 2022 23 Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) For the fifteen month period ended December 31, 2021 and the year ended September 30, 2020 (000's C$ except per share amounts) Revenue net (note 9) Cost of goods sold (note 9) Gross Profit Selling & administration expenses Income/(Loss) from Operations Gain on disposal of assets (notes 8 and 9) Gain on forgiveness of debt (note 6) Interest income Interest expense (notes 15) (Gain)/Loss on foreign exchange Share of income from interests in joint ventures and other entities (note 11) Research and development costs Net Income/(Loss) Before Taxes Current income taxes (note 10) Deferred income taxes (note 10) Total income taxes $ 2021 317,178 284,099 $ 2020 249,550 237,865 33,079 10.4% 26,774 8.4% 11,685 4.7% 22,129 8.9% 6,305 2.0% (10,466) (4.2%) (14,068) (1,525) (20) 7,429 (2,097) (508) 8,106 (526) - (309) 7,074 1,022 (94) 6,909 8,988 2.8% (24,542) (9.8%) 77 - 77 1,384 (117) 1,267 Net Income/(Loss) and Comprehensive Income/(Loss) $ 8,911 2.8% $ (25,809) (10.3%) Consolidated Statement of Change in Shareholders’ Equity For the fifteen month period ended December 31, 2021 and the year ended September 30, 2020 (000's C$ except per share amounts) Capital Stock, beginning and end of period Retained Earnings, beginning of period Net income/(loss) and comprehensive income/(loss) for the period Retained Earnings, end of period Shareholders’ Equity, end of period Loss per share Basic and fully diluted 2021 30,000 50,971 8,911 59,882 80,882 0.36 $ $ $ 2020 30,000 76,780 (25,809) 50,971 80,971 (1.03) $ $ $ The accompanying notes are an integral part of the consolidated financial statements. 24 Consolidated Statement of Change in Shareholders’ Equity Consolidated Statement of Cash Flows For the fifteen month period ended December 31, 2021 and the year ended September 30, 2020 (000's C$) Cash provided by (used in) operating activities Net income/(loss) and comprehensive income/(loss) $ 8,911 $ (25,809) 2021 2020 Add (deduct) non-cash items Depreciation of property, plant and equipment Gain on disposal of assets Gain on forgiveness of debt (Gain)/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 Proceeds on sale of property Financing activities (note 19) Recovery of tax credits Repayment of long-term debt Proceeds on long-term debt issuance Advances/(repayment) from related party Foreign exchange (loss) gain on bank indebtedness Net cash in the period Bank indebtedness, beginning of period 2,760 (14,068) (1,525) (2,097) - (508) (6,527) (20,242) (26,769) (4,961) 252 11,184 6,475 - (2,143) 15,000 (7,833) 5,024 3 (15,267) (6,807) 3,127 (526) - 1,011 (117) (94) (22,408) 41,475 19,067 (1,096) 765 - (331) 566 - - 12,314 12,880 (701) 30,915 (37,722) Bank indebtedness, end of period $ (22,074) $ (6,807) 25 Notes to Consolidated Financial Statements 1. Basis of Operations as at December 31, 2021 incorporating financial results for the Buhler Industries Inc. (the Company) was incorporated under the laws fifteen-month transition period from October 1, 2020 to December of Canada on February 1, 1994. On March 24, 1994 the Company was 31, 2021 (with a comparative of the year ended September 30, 2020). listed and posted for trading on the TSX under the stock exchange As a result, the amounts presented in these consolidated financial symbol “BUI”. The address of the registered office is 1260 Clarence statements are not entirely comparable. The Company will revert to Avenue, Winnipeg, Manitoba. The majority shareholder is Combine a customary reporting calendar on a December 31 year end, with Factory Rostselmash Ltd. and as of December 31, 2021 owns 96.7% fiscal quarters ending on the last day of March, June, September and of all outstanding shares of the Company. December each year. The Company, through its subsidiaries and a joint venture, has The consolidated financial statements have been prepared under the manufacturing and warehousing facilities in Canada and the United historical-cost convention, except that certain financial instruments States of America (U.S.). The Company produces farm equipment for are stated at their fair value. sale in Canada, U.S. and overseas. The consolidated financial statements were approved by the Board of The geopolitical situation in Eastern Europe intensified on February Directors on March 31, 2022. 24, 2022, with Russia’s invasion of Ukraine. The situation continues to evolve as military activity proceeds and additional sanctions are imposed. The war is increasingly affecting economic and global financial markets and exacerbating ongoing economic challenges, including issues such as rising inflation and global supply-chain disruption. The Company’s majority owner is Combine Factory Rostselmash Ltd. ("Rostselmash"), a privately held Russian-based manufacturer of agricultural equipment. No sanctions have been imposed on the Company's majority shareholder, the owners of the majority shareholder or any officers or directors of the Company. The Company has not paid dividends to the majority owner since it was purchased by Rostselmash. The Company has had limited sales and purchases in the region and is not materially impacted by the conflict. In addition, the Company does not store inventories or other assets in the region and as a result the Company has no exposure to its assets. Political events and sanctions are continually changing and differ across the globe. As a result, volatility in commodity prices and currencies may impact the supply chain, demand for equipment and profit margins. The Company continues to monitor the situation. 2. Basis of Presentation The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). 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. 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. (b) Business combinations Business combinations are accounted for using the acquisition method of accounting. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred by the former owners of the acquiree and the equity interests issued by the Company. The consideration transferred includes the fair 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 On March 25, 2021, the Company voted on changing its financial year with IAS 39 either in the statement of income or as a change to other end to December 31 from its previous year end of September 30. As a comprehensive income. Contingent consideration that is classified as result, the Company has prepared consolidated financial statements equity is not re-measured, and its subsequent settlement is accounted 26 Notes to Consolidated Financial Statements for within equity. (e) Revenue recognition 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 Revenue is recognized when control of the equipment or parts has been transferred and the Company’s performance obligations to the customers have been satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods. assets acquired and liabilities assumed. If this consideration is less The timing of when the Company transfers the goods to the customer than the fair value of the net assets of the subsidiary acquired, the may differ from the timing of the customer’s payment. 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 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. been determined to be the Canadian dollar. Transactions in foreign The Company has determined that the customers from the sale of currencies are translated to the respective functional currencies of equipment and parts are generally dealers. Transfer of control, and each entity within the consolidated group using the exchange rates thus related revenue recognition, generally corresponds to when the in effect at the date of the transactions. Monetary assets and liabilities equipment and parts are made available to the customer, based on denominated in foreign currencies at the reporting date are translated the shipping terms negotiated with customers. Most product is sold to the functional currency at the exchange rates prevailing at the end FOB Origin, while sales to related parties are shipped FOB Destination. of the reporting period. Non-monetary items measured at historical Therefore, the Company recognizes revenue at a point in time, when cost in a foreign currency are translated to the functional currency control is transferred to the customer at a sale price that the Company using the exchange rate prevalent at the date of acquisition. Non- expects to receive. 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 includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories, cost includes an appropriate share of variable and fixed overheads based on normal operating capacity. Any excess, unallocated, fixed overhead costs are expensed as incurred. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Inventories are written down to net realizable value if net realizable value declines below carrying amount. When circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in selling For all sales, no significant uncertainty exists surrounding the purchaser’s obligation to pay for equipment and parts. The Company records appropriate allowance for credit losses. 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 as a reduction to revenue at the time of the sale. If the estimate of the incentive changes following the sale to the customer, the change in estimate is recognized as an adjustment to revenue in the period of the change. 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 time an incentive is announced to dealers, the Company records the estimated impact of sales allowances in the form of dealer and customer incentives as a reduction of revenue. Subsequent adjustments to sales incentive programs related to products previously sold are recognized as an adjustment to revenues in the period the adjustment is determinable. 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. price, the amount of the write-down previously recorded is reversed. (f) Sales allowances The Company grants certain sales incentives to support sales of its 27 Notes to Consolidated Financial Statements products to retail customers. At the later of the time of sale or the (j) Cash/bank indebtedness time an incentive is announced to dealers, the Company records Cash/bank indebtedness includes cash on hand, bank overdrafts the estimated impact of sales allowances in the form of dealer and and bankers acceptances. Bank overdrafts are repayable on demand. customer incentives as a reduction of revenue. The expense for new Bank overdrafts and bankers acceptances form an integral part of the programs is accrued at the inception of the program. The amounts Company’s cash management and are included as a component of of incentives to be paid are estimated. The determination of sales cash/bank indebtedness for the purpose of the statement of allowances requires management to make estimates based upon cash flows. 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 (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, Property, plant and equipment are stated at cost less accumulated in which case it is recognized directly in equity. 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 Depreciation methods, useful lives and residual values are reviewed at each reporting date. Assets under construction and land are not depreciated. 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 Leases of property, plant and equipment on terms that provide a liabilities in a transaction that is not a business combination and contractual right of use are measured at cost, comprised of the initial that affects neither accounting nor taxable income; and differences measurement of the corresponding finance lease payable, lease relating to investments in subsidiaries to the extent that it is probable payments made at or before the commencement date and any initial that they will not reverse in the foreseeable future. Deferred tax is direct costs. They are subsequently depreciated on a straight-line basis measured at the income tax rates that are expected to be applied and reduced by impairment losses. At period end, the Company had when the temporary difference reverses, that is, when the asset is no right of use assets. (h) Research and development expenses realized or the liability is settled, based on the income tax laws that have been enacted or substantively enacted at the reporting date. The Company expenses all research and development costs as they Deferred tax assets are recognized only to the extent that it is are incurred unless they meet the criteria for deferral in accordance probable that future taxable income will be available against which with IAS 38 Intangible Assets. No such development costs have been the assets can be utilized. Deferred tax assets are reviewed at each deferred to date. 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 Current tax assets and liabilities are offset when the Company and The Company accounts for its interest in joint ventures using the its subsidiaries have a legally enforceable right to offset the amounts equity method. Interests in other entities where there is no significant and intend to either settle on a net basis, or to realize the asset and influence are recorded at fair value. settle the liability simultaneously. Deferred tax assets and liabilities are 28 Notes to Consolidated Financial Statements offset when there is a legally enforceable right to offset and when the position. Changes in fair value are recognized in the consolidated deferred tax balances relate to the same income tax authority. statement of comprehensive income through gains/losses on foreign (l) Financial instruments exchange. In accordance with IFRS 9 - Financial Instruments, financial assets are (n) Comprehensive income classified as measured at either amortized cost, fair value through Comprehensive income includes all changes in equity of the Company, other comprehensive income or fair value through profit or loss, except those resulting from investments by shareholders and depending on the business model for managing such financial assets dividends paid. Comprehensive income is the total of net income and and the asset’s contractual cash flow characteristics. Financial liabilities other comprehensive income. Other comprehensive income comprises are classified as measured at amortized cost using the effective revenues, expenses, gains and losses that require recognition, but 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 are 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 period. liabilities - amortized cost, d) interests in other entities - fair value (o) Product warranties through profit and loss, e) advances from related parties - amortized The Company makes provisions for estimated expenses related cost and f ) long-term debt - amortized cost. All financial instruments to product warranties at the time products are sold. Management are included in the consolidated balance sheet and are measured at establishes these estimates based on historical information on the fair value except loans and receivables and other financial liabilities, nature, frequency and average cost of warranty claims. The Company 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 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. which case changes in fair value are recorded in other comprehensive (p) Impairment income. Impairment of non-financial assets The Company’s policy is not to utilize derivative financial instruments Tangible assets and definite life intangible assets are reviewed at for trading or speculative purposes. The Company may utilize each balance sheet date to determine whether events or conditions derivative instruments in the management of its foreign currency and indicate that their carrying amount may not be recoverable. If any 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 other comprehensive income until the instrument is derecognized or 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 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 intangible assets excluding goodwill, the CGU is the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. Impairment of financial assets Company may enter into foreign currency forward contracts to Financial assets are assessed at each reporting date to determine manage foreign exchange exposures on accounts receivable expected whether there is any objective evidence that they are impaired. A to be recovered in U.S. 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 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 29 Notes to Consolidated Financial Statements present value of the estimated future cash flows discounted at their attributes. The Company’s assessment is based upon existing tax original effective interest rate. All impairment losses are recognized in laws and estimates of future taxable income. If the assessment of the consolidated statement of comprehensive income. An impairment the Company’s ability to utilize the underlying future tax deductions loss is reversed if the reversal can be related objectively to an event changes, the Company would be required to recognize more or fewer occurring after the impairment loss was recognized. of the tax deductions as assets, which would decrease or increase the 4. Critical Accounting Estimates and Judgments 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 below. (a) Sales incentives The Company provides certain sales incentives on some sales that may be settled after period 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 and accrued liabilities. (b) Allowance for inventory obsolescence and net realizable value 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. The Company has high estimation uncertainty regarding its inventory provision. The Company provision ranges from 20% to 30% on selected items. If this assumption changed by 10% the provision would increase or decrease by $4.5 million. (c) Provision for warranty costs 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 (note 10). 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 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 The Company offers warranties for its sale of equipment. Management reviews the adequacy of these provisions at each consolidated estimates the related provision for future warranty claims based on balance sheet date. However, it is possible that at some future date historical warranty claim information, as well as recent trends that an additional liability could result from audits by taxing authorities. might suggest that past cost information may differ from future Where the final tax outcome of these matters is different from the claims. Factors that could impact the estimated claim information include the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. success of the Company’s productivity and quality initiatives, as well The operations and organizational structure of the Company are as parts and labor costs. (d) 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 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. 30 Notes to Consolidated Financial Statements (e) Economic conditions Russian ownership (Note 1), management is monitoring ongoing In the context of the Covid-19 pandemic and the related climate of compliance. 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 period ended December 31, 2021. 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. In the prior period, the Company also accessed loans in the amount of $1,534 ($1,146 USD) with Alerus Financial. These loans bore interest at 1% per annum. These loans were scheduled to have repayments commence on December 15, 2020, however prior to scheduled repayments commencing, but subsequent to period end, the loans were repaid in full through receipt of government grants from the United States Small Business Administration’s Paycheck Protection Program. Additional revisions might be required in the future depending 7. Inventories (000's C$) on the development of the pandemic and its impact on the final measurement of the carrying amount of the Company’s assets. The Covid-19 pandemic continues to disrupt supply chains and the Companies ability to produce all parts on a timely basis. (f) 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 estimates. The difference between the assistance amount and its 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. Raw materials Work in process Finished goods December 31, 2021 September 30, 2020 $ 83,048 4,284 79,072 $ 50,786 5,896 90,249 $ 166,404 $ 146,931 During the period, inventories in the amount of $206,678 (2020 - $170,674) were expensed to cost of goods sold, which included net inventory reversals of write-downs of $4,212 (2020 - recoveries $1,556). The carrying value of inventories is pledged as security against the 5. Accounting Standards Implemented in 2021 No new accounting standards came into effect in 2021 fiscal year. Company’s credit facilities. Included in inventories are units sold on consignment being held at dealers locations in the amount of $782 (2020 - $3,861). 6. Credit Facilities (000’s C$) The Company has available a financing facility in the amount of $60,000 (2020 - $60,000). This facility is an asset-based credit agreement with the Canadian Imperial Bank of Commerce (CIBC). The credit facility is secured by a general security agreement and assignment of specific receivables and inventory in Canada and the U.S. In addition, certain Canadian properties are also secured by CIBC. The Company convenants that the value of its accounts receivable and inventories are less than or equal to 85% of it's calculated borrowing base or it is subjected to a Fixed Charge Coverage Ratio of not less than 1.05:1.00. The financing facility is at Bankers Acceptance and/or LIBOR rates plus stamping fees. At December 31, 2021, the amount drawn on this facility is $27,299 (2020 - $6,673). Cash balances of $5,224 (2020 - $1,400) have been netted with the above facilities. The financing agreement incorporates an Anti-Corruption Laws and Sanctions covenants requiring the Company and its officers, directors, employees and agents to not be a sanctioned person. The agreement also contains and a Material Adverse Effect covenant. Due to its 31 Notes to Consolidated Financial Statements 8. Property, Plant and Equipment (000’s C$ 9. Related Party Transactions (000's C$) Land Buildings Equipment Computer Equipment Total 3,557 9,096 - - - - (110) (908) 4,645 1,064 (127) 742 32 (2) 18,040 1,096 (239) (1,988) (231) (3,127) 3,557 8,078 - - 1,708 - 3,594 2,772 (274) (1,275) (1,657) - 541 481 (30) - 15,770 4,961 (304) (2,932) Sept. 30, 2019 net book value Additions Disposals Depreciation Sept. 30, 2020 net book value Additions Disposals Transfer to held for sale Accounts receivable from controlling shareholder 2021 2020 $4,229 $3,076 Accounts payable to controlling shareholder 83 2,086 Advances from controlling shareholder 24,469 34,172 Net sales to controlling shareholder including intellectual property sales recorded as gains on disposal of assets $19,572 $6,052 Net purchases from controlling shareholder 143 378 All transactions with related parties are recorded at fair value agreed to by the related parties. In the current period, the Company sold certain intellectual properties to the controlling shareholder. These relate to Tier III tractor models that no longer have a market in North Depreciation - (1,054) (1,509) (197) (2,760) America for $14,400. There was no cost basis for these intellectual Dec. 31, 2021 net book value $2,282 $7,075 $4,583 $795 $14,735 agreed upon are based on external valuations. properties, which resulted in a gain on sale of $14,400. The amounts Land Buildings Equipment Computer Equipment Total 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 Cost $ 3,557 $30,015 $54,278 $5,026 $90,705 (1,275) (1,657) - - (2,932) - (21,283) (49,695) (4,231) (75,970) Transfer to held for sale Accumulated depreciation 2021 net book value The advances from the controlling shareholder of $19,300 USD (2020 - $25,618 USD) bears interest at 5.0%. Amounts are repayable in USD as follows: Due Date November 2023 January 2024 January 2024 Accrued interest Total 2021 2020 Restated (note 24) $8,000 $8,000 3,020 8,280 - 9,020 8,280 318 $19,300 $25,618 $2,282 $7,075 $4,583 $795 $14,735 Compensation of Key Management The Company reviewed its property, plant and equipment for indicators of impairment. No assets were identified as impaired. 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 Included in property, plant and equipment is $709 of equipment not are key management personnel. The following table details the being depreciated as the assets are not yet in use (2020 - $19). During the previous year, and into the current period the Company transitioned operations from its Fargo, ND and Willmar, MN to it’s Morden, MB facility. As a result the facilities and related land in these two locations is now considered redundant to the needs of the Company and are actively listed for sale. It is anticipated both facilities will be sold in the coming year. compensation paid to these key management personnel (note - no amounts were paid for post-retirement benefits nor were there any share based payments): Salaries, fees and short term employee benefits 2021 2020 $2,781 $2,460 32 Notes to Consolidated Financial Statements 10. Income Taxes (000's C$) Current period Adjustment for prior years Current income tax expense (recovery) Origination and reversal of timing differences Derecognition of tax credits SR&ED credits earned Deferred taxes (recovery) expense 2021 $107 (30) $77 - - - - 2020 $602 782 $1,384 $(117) - - $(117) taxable profits is probable. The ability to realize the tax benefits of these losses is dependent upon a number of factors, including the future profitability of operations in the jurisdictions in which the tax losses arose. The Company has a deferred tax asset of $35,308 in Canada (2020 - $34,058). In the current period, only $5,624 (2020 - $5,624) has been recorded. The remaining $29,684 will be recognized in future periods when profitability returns in Canada. These losses begin to expire in 2037. Deferred tax assets of $18,211 in the U.S. (2020 - $19,296) in excess of the deferred tax losses are available to be carried forward to Combined Canadian federal and provincial income tax rate Foreign tax rate differences applied to profits (losses) 27.0% 27.0% 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 decided to not recognize these assets as at Derecognition of tax credits (4.6%) (27.2%) Losses carried back at a higher tax rate Adjustments for prior years SR&ED credits earned Non-taxable portion of capital gains Permanent differences and other Effective income tax rate - 3.6% (4.0%) (24.4%) 3.3% 0.9% - (3.2%) - - (1.8%) (5.2%) Income taxes paid during the period were $468 (2020 - $317). December 31, 2021. These assets will be recognized in future periods when profitability returns in the U.S.. 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, 2020 - $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 Deferred income taxes are recorded to reflect the timing differences in the amount of $813 during the prior year and the assessments for arising from deduction of warranty costs for income tax purposes, these years will the amounts of depreciation and amortization provided in the period be appealed. Final settlement for these claims may take several years compared to the allowances deducted for income tax purposes, to resolve. taxable losses carried forward to future periods, expected Scientific Research and Experimental Development (SRED) tax credit claims and other temporary timing differences. 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 following are the components of the deferred tax assets and the remaining payment expected in a future period when there is liabilities recognized by the Company: taxable income. The 2018 claim for $482 is currently under review. The 2020 and 2021 SRED claims will be filed with CRA prior to any filing deadlines. Deferred income tax assets Property, plant and equipment SRED credits Total 2021 $931 4,693 2020 $931 4,693 $5,624 $5,624 Deferred income tax liabilities Property, plant and equipment 2021 $39 2020 $48 Deferred tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future 33 Notes to Consolidated Financial Statements 11. Interests in Joint Ventures and Other Entities (000’s C$) 13. Short and Long-Term Debt (000’S C$) The Company has a joint venture operating as Bradley Steel Processors The Company’s long-term debt consists of a $15,000 facility with Inc. and minority interests in other various entities. Canadian Imperial Bank of Commerce, secured by a mortgage on The summarized financial information of the Company’s share of the investments in joint ventures and other entities is as follows: Balance sheet information 2021 2020 Assets Current Non-current Total Assets Liabilities Current Non-current Total Liabilities Equity Total Liabilities and Equity Income statement information Revenues Profit from continuing operations Net income and comprehensive income Other information Dividends received from joint ventures and other entities Depreciation Income tax expense $6,942 174 $7,116 $520 2 522 6,594 $7,116 $6,123 249 $6,372 $231 2 233 6,139 $6,372 $7,239 $4,140 $697 $508 $10 $38 $189 $131 $94 $26 $18 $36 12. Warranty Provision (000’S C$) The Company generally provides its customers with a warranty on the goods sold. The movement in the provision for warrant costs during the Company’s Winnipeg properties and a guarantee from Export Development Canada. The loan matures on October 8, 2022 and is amortized over 84 months with principal repayments commencing February 2021 in the amount of $179 per month. It is anticipated that this will be renewed in October 2022. The long-term debt facility incorporates the same Anti-Corruption Laws and Sanctions and Material Adverse Effect covenants as the credit facility discussed in Note 6. The Company has long-term debt of $393, 2020 - $414 ($310 USD, 2020 - $310 USD) due to The City of Willmar. This amount bears interest at the annual rate of the implicit price deflator for Minnesota and is due June 2025. 14. Capital Stock and Options (000’s C$) Authorized, an unlimited number of Class A & B common shares. 2021 2020 Shares Shares Issued Class A common 25,000 $30,000 25,000 $30,000 There are no options outstanding as of December 31, 2021 nor September 30, 2020. 15. Interest Paid (000’s C$) Bank indebtedness Wholesale financing Long-term debt 2021 $691 4,161 2,577 $7,429 2020 $1,602 4,117 1,355 $7,074 the period is as follows: Opening balance Warranty accrual (recovery) (net) Effect of exchange rate Closing balance 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 2020 $5,810 3,490 15 lines with DLL, customized service, and competitive terms that allow 2021 $9,315 2,045 (48) $11,312 $9,315 them to manage and grow their businesses effectively. The floorplan The Company’s warranty costs for the period, net of recoveries from suppliers, was $15,179 (2020 - $11,671). financing terms and interest costs are variable and may change from time to time. As part of the agreement with DLL, the Company guarantees the repurchase of equipment in certain instances such as dealer bankruptcy. 34 Notes to Consolidated Financial Statements 16. Expenses by Nature (000’s C$) Raw materials and consumables used Depreciation and amortization Personnel expenses Freight 2021 2020 $240,921 $197,952 2,760 64,095 8,443 1,937 61,918 5,118 $316,219 $266,925 17. Segmented Information (000’s C$) 2021 Canada U.S. CIS Other Revenue $122,170 $154,847 $7,381 $32,780 Property, plant, and equipment 10,460 5,143 167 - 19. Cash Flow Changes from Financing Activities (000’s C$) Details of changes in financing activities for the period ended December 31, 2021 and September 30, 2020 are as follows: Short-term debt Long-term debt Advances from related party Total Sept 30, 2019 Cash flows Foreign exchange Sept 30, 2020 Cash flows - - - - - Foreign exchange 12,857 $(411) $(21,858) $(22,269) - (3) (12,314) (12,314) - (3) (411) (34,172) (34,586) - 21 7,833 1,870 7,833 1,891 Dec 31, 2021 $12,857 $ (393) $(24,469) $(24,862) 2020 20. Capital Management The Company’s fundamental objectives in managing capital are to Canada U.S. CIS Other maintain financial flexibility in order to preserve its ability to meet Revenue $102,192 $120,840 $8,887 $28,850 Property, plant, and equipment 10,460 5,143 167 - CIS is the Commonwealth of Independent States, including Russia, Kazakhstan and Ukraine. 18. Changes in non-cash working capital (000’s C$) Details of changes in financing activities for the period ended December 31, 2021 and September 30, 2020 are as follows: Accounts receivable Inventories Prepaid expenses Accounts payable and accrued liabilities Income taxes receivable/ payable Foreign exchange loss on the above items 2021 $24,240 (19,473) 644 (29,875) (487) 4,709 2020 $12,766 18,700 (2,902) 9,511 4,218 (815) 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, advances from related party, 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 $(20,242) $41,478 debt levels are prudent. The Company’s financial objectives and strategy are reviewed on an annual basis. The Company believes that its ratios are within reasonable limits, in light of the relative size of the Company and its capital management objectives. There are no externally imposed capital restrictions on the Company. There were no changes in the Company’s approach to capital management during the period. 35 Notes to Consolidated Financial Statements 21. Financial Instruments (000’s C$) values of these financial instruments approximate fair value due to the The following presents the carrying value and fair value of the short term nature of the financial instruments or they are carried at Company’s financial instruments: fair value. Bank indebtedness Accounts receivable 2021 Financial Asset/ Liability Classification Carried at cost/ Amortized cost Fair value Amortized cost $(22,074) The Company has classified its interest in other entities as FVTPL. These shares are not actively traded in a quoted market and accordingly fair value has been estimated to be cost. The Company categorizes its fair value measurements of financial instruments according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A Amortized cost 19,197 level is assigned to each fair value measurement based on the lowest Interest in other entities FVTPL Accounts payable and accured liabilities Current portion of long-term debt Amortized cost (71,888) Amortized cost (12,875) Long term debt Amortized cost (393) level input significant to the fair value measurement in its entirety. The 103 three levels of the fair value hierarchy are defined as follows: Level 1 – fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 2 – fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices Advances from related parties Amortized cost (24,469) for similar assets and liabilities in active markets, quoted prices for 2020 Financial asset/ Liability Classification Carried at cost/ Amortized cost Fair value Bank indebtedness Accounts receivable Amortized cost $(6,807) Amortized cost 46,607 Interest in other entities FVTPL Amortized cost (104,933) Accounts payable and accrued liabilities Current portion of long-term debt Amortized cost Long term debt Amortized cost - (414) Advances from related parties Amortized cost (34,172) identical or similar assets and liabilities in inactive markets, inputs that are observable that are not prices (such as interest rates and credit risks) and inputs that are derived from or corroborated by observable market data. The fair values of interest in other entities are disclosed at fair value based on a level 2 classification. Level 3 – fair value measurements using significant non-market observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable data, including assumptions about risk. The Company 157 does not have any financial instruments measured at fair values based on level 3 inputs. 22. Financial Risk Management (000’s C$) The Company’s risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company manages its risks and risk exposures through a combination of insurance, a system of internal and disclosure controls and sound business practices. Financial instruments includes bank indebtedness, accounts Risk management is primarily the responsibility of the Company’s receivable, advances to related parties, financial instruments, long- corporate finance function. Significant risks are regularly monitored term receivables, interests in other entities not subject to significant and actions are taken, when appropriate, according to the Company’s influence, accounts payable and accrued liabilities, advances approved policies, established for that purpose. In addition, as from related parties and long-term debt. Except for the long-term required, these risks are reviewed with the Company’s Board of receivables, interests in other entities and long-term debt, the carrying Directors. 36 Notes to Consolidated Financial Statements Interest Rate Risk In addition, translation differences arise when foreign currency The Company’s interest rate risk arises from its variable rate bank monetary assets and liabilities are translated at foreign exchange indebtedness, wholesale financing and long-term debt. The long- rates that change over time. These foreign exchange gains and losses term debt at a very low rate, and therefore carries minimal interest are recorded in revenues. As a result of the Company’s U.S. dollar net rate risk. As the bank indebtedness is all variable rate, the Company is monetary position within the Canadian dollar reporting currency exposed to a certain level of interest rate risk. Management feels that operations through to December 31, 2021 a one-cent strengthening/ these risks are manageable as the interest rate on this debt is less than weakening in the period-end foreign exchange rate from Canadian prime and therefore has not entered into any instruments to mitigate dollars to U.S. dollars would have decreased/increased net earnings by this risk. Based on the level of bank indebtedness outstanding at $90 (2020 - $81). December 31, 2021, a 1% increase/decrease in the rate being charged to the Company would result in a $273 (2020 - $67) decrease/increase in net earnings. As the mortgage financing is all variable rate, the Company is exposed to certain level of interest rate risk. Based on the level of mortgage 22. Financial Risk Management (000’s C$) - continued The Company’s exposure to foreign currency risk reported in U.S. dollars was as follows: 2021 2020 $5,949 $18,849 (4,821) (11,157) financing at December 31, 2021, a 1% increase/decrease to the Accounts receivable Company would result in a $129 (2020 - $nil) decrease/increase in net earnings. Accounts payable and other accrued liabilities As the wholesale financing is all variable rate, the Company is exposed to certain level of interest rate risk. Based on the level of mortgage financing at December 31, 2021, a 1% increase/decrease to the Advances from related party (19,300) (25,618) Long term debt (310) (310) $(18,482) $(18,236) Company would result in a $555 (2020 - $1,139) decrease/increase in The Company is partially insulated from large foreign exchange gains net earnings. Commodity Price Risk The Company’s manufacturing costs are affected by the price of raw materials, namely steel. In order to manage its risk, the Company applies a steel surcharge to its product when the cost of steel increases significantly. The Company’s preferred practice is to match raw materials cost changes with selling price adjustments, although there is a time lag. This matching is not always possible, as customers react to selling price pressures related to raw material price fluctuations according to conditions pertaining to their markets. Foreign Exchange Risk 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 rates used to translate U.S. dollar assets are offset by similar gains and losses on U.S. dollar liabilities. The Company also uses forward contracts to further mitigate these fluctuations when the natural hedges are forecasted to be insufficient. As at December 31, 2021 the Company had US to CAD foreign currency contracts with a notional value of $nil in place (2020 - $2,500) Fair value adjustments are recognized with (gain) loss on foreign exchange in the consolidated statement of comprehensive income. A one-cent strengthening/weakening in the period end foreign exchange rate from CAD to USD would have increased/decreased the value of these The Canadian dollar is the Company’s functional currency. The contracts by $nil (2020 - $25) before taxes. Company operates primarily in Canada and the United States. The reporting currency of the Company is Canadian dollars, whereas the Liquidity Risk functional currency for operations in the United States and sales to the CIS region are the U.S. dollar. Fluctuations in the exchange rate between the U.S. dollar and Canadian dollar will affect the Company’s reported results. However, the impact of changes in foreign exchange rates on the Company’s reported results differs over time depending on whether the Company is generating a net cash inflow or outflow of Canadian dollars. This is largely dependent on the Company’s revenue mix by currency as operating costs denominated in Canadian dollars have been relatively stable. Investments to drive growth can require significant financial resources. A range of funding alternatives is available to the Company including cash on hand, cash flow provided by operations, additional debt, the issuance of equity or a combination thereof. The Company has current credit facilities of $60,000 in place. Actual bank funding may differ as the result of margin availability subject to meeting certain accounts receivable and inventory covenants. As at December 31, 2021 the Company had access to $42,970 (2020 - $38,700), subject to compliance to covenants in the credit facility (Note 6). The Company 37 Notes to Consolidated Financial Statements manages its liquidity risk by forecasting cash flows and determining accounts receivable balances outstanding based on the status of the if the credit facilities in place are adequate or if additional financing receivable in relation to when the receivable was due and payable and would be required. related allowance for doubtful accounts: The 2021 requirements for capital expenditures, working capital and debt repayments can be financed from cash resources, cash flow provided by operating activities and unused credit facilities. The following table outlines the maturity analysis of the Company’s financial liabilities: 2021 2022 2023 2024 2025 Post 2026 Total $22,074 $ - $ - $ - $ - $ - $22,074 Bank indebtedness 71,888 - - - Accounts payable and accrued liabilities - - Due to related party 10,143 14,326 Short-term debt - - - - 2,143 2,143 2,143 2,143 2,143 2,143 12,858 - - - Long-term debt - Total 393 - 393 $ 96,105 $ 2,143 $12,286 $16,469 $2,536 $2,143 $131,682 Current - neither impaired nor past due $17,007 $34,234 2021 2020 Not impaired but past the due date; Within 30 days 31-60 days Over 60 days 623 47 1,657 828 2,455 11,028 20,132 47,747 Less: Allowance for doubtful accounts (935) (1,140) Total receivables, net $19,197 $46,607 71,888 The following table details the continuity of the allowance for doubtful accounts: 24,469 2021 2020 Balance, beginning of period $(1,140) $(1,271) Provisions for the period, net of recoveries Uncollectible amounts written off Foreign exchange impact Balance, end of period 23. Subsequent Events (617) 763 59 (161) 289 3 $(935) $(1,140) Credit Risk Financial instruments which potentially subject the Company to credit risk and concentrations of credit risk consist principally of accounts receivable. Management has assessed that the credit risk associated with accounts receivable is mitigated by the credit agreements During the year the Company announced the closure of the Vegreville, Alberta facility. At year end the Company was in the process of transferring production lines and inventory out of the facility. The production line at Vegreville is expected to be transferred to Winnipeg, MB following the 2021 fiscal year. the Company has in place including personal guarantees from the 24. Comparative Period Balances counterparties. The maximum exposure to the risk of credit for accounts receivable corresponds to their book value. Historically, the Company has Certain prior period amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. experienced nominal bad debts as a result of the security agreements In the prior period, advance from related party was shown as short- in place that allow the Company to recovery goods from dealers that term debt and has been re-classed to long-term debt based on has not been paid for as well as personal guarantees. During 2021, the the contractual terms to properly reflect the agreed upon terms of Company recorded a bad debt expense of $617 (2020 - $161). repayment of the obligation. The carrying amount of accounts receivable is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statements of net loss and loss within selling and administration expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for doubtful accounts. Subsequent recoveries of amounts previously written off are credited against selling and administration expenses. The following table sets out the aging details of the Company’s 38 Company Information Audit Committee Ossama AbouZeid - Audit Chairman Allan L .V . Stewart 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 BDO LLP Winnipeg, Manitoba Annual Meeting The annual meeting of shareholders will be held on June 22, 2022, 11:00 AM at 1260 Clarence Avenue, Winnipeg, Manitoba Directors NAME Grant Adolph P .Mgr Yury Ryazanov OFFICE Director/Chairman Director/CEO PRINCIPAL OCCUPATION Chief Operating Officer, Buhler lndustries lnc . Vice President and Co-owner of Novoe Sodrugestvo Ltd . Ossama AbouZeid PhD, MBA Director/Audit Chairman Partner/Consultant of NXT partners Adam Reid Allan Stewart В .А ., LL .B . Dmitry Udras Oleg Gorbunov Director Director Director Director Vice President of Sales & Marketing, Versatile Lawyer, Thompson Dorfman Sweatman LLP Member and Co-owner of Novoe Sodrugestvo Ltd . Adviser to the СЕО of Novoe Sodrugestvo Ltd . Officers and Senior Management Marat Nogerov Maxim Loktionov Grant Adolph P .Mgr Willy Janzen СРА, CGA ., B .Comm . Officer Officer Officer Officer President, Buhler lndustries lnc . Vice President, Buhler lndustries lnc . Chief Operating Officer, Buhler lndustries lnc . Chief Financial Officer, Buhler lndustries lnc . Adam Reid Management Vice President of Sales & Marketing, Versatile Todd Trueman С .1 .М ., P .Mgr ., C .Mgr . Management Director of Human Resources, Buhler lndustries lnc . Neil Frechette Louis Lepine Doug White Olga Shopp Natalia Nikushkina Management Management Management Management Management Director of Information Technology, Buhler Industries Inc . Director of Corporate Quality, Buhler lndustries lnc . Operations Manager, Versatile Director of Engineering, Versatile Director of Purchasing, Versatile 39 Stock Data Buhler (excl. dividends) compared with TSX Index 1994 to December 31, 2021 Buhler TSX n e p O 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 Daily Closing Price Opened March 25, 1994 at $1.05 Closed December 31, 2021 at $2.96 4 9 - r a M 5 9 - t c O 7 9 - y a M 9 9 - n a J 0 0 - g u A 2 0 - r a M 3 0 - t c O 5 0 - y a M 6 0 - c e D 8 0 - l u J 0 1 - b e F 1 1 - p e S 3 1 - r p A 4 1 - v o N 6 1 - l u J 8 1 - b e F 9 1 - p e S 1 2 - r p A 750 675 600 525 450 375 300 225 150 75 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 (cid:31)(cid:30)(cid:29)(cid:28)(cid:27)(cid:26)(cid:25)(cid:24)(cid:31) (cid:23)(cid:22)(cid:22)(cid:21) (cid:27)(cid:23)(cid:22)(cid:22)(cid:20) (cid:27)(cid:23)(cid:22)(cid:22)(cid:19) (cid:27)(cid:23)(cid:22)(cid:22)(cid:18) (cid:27) (cid:23)(cid:22)(cid:22)(cid:17) (cid:27) (cid:23)(cid:22)(cid:22)(cid:22) (cid:27) (cid:16)(cid:15)(cid:15)(cid:15) (cid:27) (cid:16)(cid:15)(cid:15)(cid:23) (cid:27) (cid:16)(cid:15)(cid:15)(cid:16) (cid:27) (cid:16)(cid:15)(cid:15)(cid:14) (cid:27) (cid:16)(cid:15)(cid:15)(cid:21) (cid:27) (cid:16)(cid:15)(cid:15)(cid:20) (cid:27) (cid:16)(cid:15)(cid:15)(cid:19) (cid:27) (cid:16)(cid:15)(cid:15)(cid:18) (cid:27) (cid:16)(cid:15)(cid:15)(cid:17) (cid:27) (cid:16)(cid:15)(cid:15)(cid:22) (cid:27) (cid:16)(cid:15)(cid:23)(cid:15) (cid:27) (cid:16)(cid:15)(cid:23)(cid:23) (cid:27) (cid:16)(cid:15)(cid:23)(cid:16) (cid:27) (cid:16)(cid:15)(cid:23)(cid:14) (cid:27) (cid:16)(cid:15)(cid:23)(cid:21) (cid:27) (cid:16)(cid:15)(cid:23)(cid:20) (cid:27) (cid:16)(cid:15)(cid:23)(cid:19) (cid:27) (cid:16)(cid:15)(cid:23)(cid:18) (cid:27) (cid:16)(cid:15)(cid:23)(cid:17) (cid:27) (cid:16)(cid:15)(cid:23)(cid:22) (cid:27) (cid:16)(cid:15)(cid:16)(cid:15) (cid:27) (cid:16)(cid:15)(cid:16)(cid:23) (cid:27) (cid:30)(cid:29)(cid:28)(cid:27)(cid:31) (cid:15)(cid:14)(cid:13)(cid:31) (cid:26)(cid:25)(cid:24)(cid:23)(cid:31) (cid:24)(cid:25)(cid:22)(cid:23)(cid:31) (cid:24)(cid:25)(cid:21)(cid:20)(cid:31) (cid:26)(cid:25)(cid:19)(cid:18)(cid:31) (cid:18)(cid:25)(cid:26)(cid:19)(cid:31) (cid:17)(cid:25)(cid:26)(cid:19)(cid:31) (cid:17)(cid:25)(cid:16)(cid:18)(cid:31) (cid:17)(cid:25)(cid:16)(cid:19)(cid:31) (cid:19)(cid:25)(cid:19)(cid:23)(cid:31) (cid:19)(cid:25)(cid:21)(cid:26)(cid:31) (cid:16)(cid:25)(cid:17)(cid:23)(cid:31) (cid:16)(cid:25)(cid:22)(cid:17)(cid:31) (cid:16)(cid:25)(cid:22)(cid:23)(cid:31) (cid:16)(cid:25)(cid:26)(cid:19)(cid:31) (cid:22)(cid:25)(cid:21)(cid:23)(cid:31) (cid:22)(cid:25)(cid:17)(cid:18)(cid:31) (cid:22)(cid:25)(cid:23)(cid:23)(cid:31) (cid:22)(cid:25)(cid:19)(cid:23)(cid:31) (cid:19)(cid:25)(cid:22)(cid:21)(cid:31) (cid:16)(cid:25)(cid:26)(cid:19)(cid:31) (cid:16)(cid:25)(cid:17)(cid:23)(cid:31) (cid:22)(cid:25)(cid:19)(cid:23)(cid:31) (cid:22)(cid:25)(cid:23)(cid:23)(cid:31) (cid:19)(cid:25)(cid:23)(cid:23)(cid:31) (cid:18)(cid:25)(cid:20)(cid:21)(cid:31) (cid:17)(cid:25)(cid:21)(cid:20)(cid:31) (cid:17)(cid:25)(cid:20)(cid:21)(cid:31) (cid:17)(cid:25)(cid:20)(cid:21)(cid:31) (cid:24)(cid:25)(cid:23)(cid:19)(cid:31) (cid:24)(cid:25)(cid:24)(cid:23)(cid:31) (cid:24)(cid:25)(cid:17)(cid:16)(cid:31) (cid:24)(cid:25)(cid:16)(cid:23)(cid:31) (cid:26)(cid:25)(cid:18)(cid:19)(cid:31) (cid:26)(cid:25)(cid:17)(cid:19)(cid:31) (cid:26)(cid:25)(cid:16)(cid:23)(cid:31) (cid:17)(cid:25)(cid:23)(cid:23)(cid:31) (cid:17)(cid:25)(cid:18)(cid:20)(cid:31) (cid:19)(cid:25)(cid:26)(cid:23)(cid:31) (cid:19)(cid:25)(cid:18)(cid:20)(cid:31) (cid:16)(cid:25)(cid:23)(cid:23)(cid:31) (cid:18)(cid:25)(cid:17)(cid:19)(cid:31) (cid:19)(cid:25)(cid:17)(cid:23)(cid:31) (cid:19)(cid:25)(cid:23)(cid:23)(cid:31) (cid:18)(cid:25)(cid:16)(cid:19)(cid:31) (cid:19)(cid:25)(cid:24)(cid:19)(cid:31) (cid:19)(cid:25)(cid:26)(cid:23)(cid:31) (cid:19)(cid:25)(cid:23)(cid:18)(cid:31) (cid:19)(cid:25)(cid:26)(cid:23)(cid:31) (cid:19)(cid:25)(cid:19)(cid:24)(cid:31) (cid:18)(cid:25)(cid:18)(cid:23)(cid:31) (cid:18)(cid:25)(cid:18)(cid:23)(cid:31) (cid:18)(cid:25)(cid:24)(cid:18)(cid:31) (cid:17)(cid:25)(cid:19)(cid:17)(cid:31) (cid:26)(cid:25)(cid:22)(cid:31) (cid:26)(cid:25)(cid:26)(cid:19)(cid:31) (cid:26)(cid:25)(cid:26)(cid:19)(cid:31) (cid:12)(cid:11)(cid:14)(cid:10)(cid:9)(cid:31) (cid:24)(cid:25)(cid:18)(cid:23)(cid:31) (cid:24)(cid:25)(cid:18)(cid:19)(cid:31) (cid:24)(cid:25)(cid:22)(cid:22)(cid:31) (cid:26)(cid:25)(cid:17)(cid:21)(cid:31) (cid:17)(cid:25)(cid:23)(cid:19)(cid:31) (cid:17)(cid:25)(cid:23)(cid:22)(cid:31) (cid:17)(cid:25)(cid:19)(cid:16)(cid:31) (cid:17)(cid:25)(cid:22)(cid:23)(cid:31) (cid:19)(cid:25)(cid:26)(cid:19)(cid:31) (cid:19)(cid:25)(cid:19)(cid:16)(cid:31) (cid:16)(cid:25)(cid:26)(cid:23)(cid:31) (cid:16)(cid:25)(cid:17)(cid:19)(cid:31) (cid:19)(cid:25)(cid:22)(cid:23)(cid:31) (cid:22)(cid:25)(cid:21)(cid:23)(cid:31) (cid:19)(cid:25)(cid:18)(cid:23)(cid:31) (cid:19)(cid:25)(cid:26)(cid:19)(cid:31) (cid:19)(cid:25)(cid:20)(cid:24)(cid:31) (cid:19)(cid:25)(cid:22)(cid:23)(cid:31) (cid:19)(cid:25)(cid:17)(cid:19)(cid:31) (cid:22)(cid:25)(cid:18)(cid:23)(cid:31) (cid:19)(cid:25)(cid:19)(cid:24)(cid:31) (cid:19)(cid:25)(cid:16)(cid:23)(cid:31) (cid:18)(cid:25)(cid:18)(cid:23)(cid:31) (cid:18)(cid:25)(cid:18)(cid:19)(cid:31) (cid:17)(cid:25)(cid:22)(cid:23)(cid:31) (cid:17)(cid:25)(cid:16)(cid:17)(cid:31) (cid:26)(cid:25)(cid:19)(cid:23)(cid:31) (cid:26)(cid:25)(cid:21)(cid:22)(cid:31) (cid:24)(cid:129)(cid:17)(cid:24)(cid:24)(cid:31) (cid:20)(cid:22)(cid:16)(cid:31)(cid:24)(cid:129)(cid:21)(cid:26)(cid:16)(cid:31)(cid:17)(cid:129)(cid:23)(cid:24)(cid:19)(cid:31) (cid:18)(cid:129)(cid:24)(cid:17)(cid:18)(cid:31) (cid:26)(cid:129)(cid:26)(cid:16)(cid:18)(cid:31) (cid:24)(cid:129)(cid:23)(cid:21)(cid:26)(cid:31) (cid:26)(cid:129)(cid:20)(cid:23)(cid:23)(cid:31) (cid:24)(cid:129)(cid:20)(cid:17)(cid:22)(cid:31) (cid:24)(cid:129)(cid:17)(cid:26)(cid:24)(cid:31) (cid:19)(cid:129)(cid:23)(cid:26)(cid:18)(cid:31) (cid:24)(cid:129)(cid:16)(cid:23)(cid:17)(cid:31) (cid:17)(cid:129)(cid:23)(cid:24)(cid:23)(cid:31) (cid:19)(cid:129)(cid:22)(cid:17)(cid:16)(cid:31) (cid:26)(cid:129)(cid:24)(cid:17)(cid:20)(cid:31) (cid:16)(cid:18)(cid:19)(cid:31) (cid:24)(cid:129)(cid:21)(cid:21)(cid:22)(cid:31) (cid:22)(cid:20)(cid:18)(cid:31) (cid:24)(cid:129)(cid:26)(cid:18)(cid:19)(cid:31) (cid:20)(cid:21)(cid:16)(cid:31) (cid:24)(cid:129)(cid:23)(cid:17)(cid:16)(cid:31) (cid:22)(cid:23)(cid:17)(cid:31) (cid:17)(cid:18)(cid:18)(cid:31) (cid:24)(cid:24)(cid:22)(cid:31) (cid:24)(cid:26)(cid:17)(cid:31) (cid:24)(cid:18)(cid:24)(cid:31) (cid:24)(cid:24)(cid:19)(cid:31) (cid:24)(cid:21)(cid:21)(cid:31) (cid:8)(cid:7)(cid:6)(cid:5)(cid:29)(cid:4)(cid:28)(cid:31) (cid:3)(cid:14)(cid:11)(cid:25)(cid:31) (cid:2)(cid:23)(cid:23)(cid:23)(cid:1) (cid:10)(cid:127)(cid:31) (cid:31) 40 10 Year Summary SUMMARY OF OPERATIONS Reported standards utilized 2012 IFRS 2013 IFRS 2014 IFRS 2015 IFRS 2016 IFRS 2017 IFRS 2018 IFRS 2019 IFRS 2020 IFRS 2021 IFRS In thousands of Canadian dollars (except per share amounts) 361,234 340,349 325,501 245,676 274,067 311,974 287,984 229,119 305,480 283,031 277,791 223,410 252,841 275,821 254,510 218,776 55,754 23,292 32,462 (1,213) (553) 3,507 2,705 - 8,375 19,641 (3,278) 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 (2,469) 12,458 22,266 26,278 (4,012) (114) (376) 3,345 (200) (473) 8,323 (14,517) (9,201) (5,316) 21,226 25,894 (4,668) (8,160) (332) 4,315 (789) (780) 8,739 (7,661) (4,984) (2,677) 249,550 237,865 11,685 22,129 (10,466) (526) (309) 7,074 1,022 (94) 6,909 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 (39,993) (10,432) (24,505) 9,539 19,057 1,267 520 (49,532) (29,489) (25,809) 4,799 385 - - 943 1,096 - - - - - - - - - 317,178 284,099 33,079 26,774 6,305 (15,593) (20) 7,429 (2,097) (508) 8,106 8,988 77 8,911 (4,961) 15,000 (2,143) - 2,444 5,857 4,639 3,216 2,785 2,963 - - - - - Reduction of long-term debt 5,949 2,139 3,191 4,968 2,642 Dividends paid Net cash flow Net cash (bank indebtedness) BALANCE SHEET SUMMARY - 21,203 19,293 - 24,336 24,160 - - - 17,871 (633) 1,230 4,219 (46,225) (468) (22,682) (11,671) (51,715) (52,830) (20,452) (12,553) (37,254) (37,722) (6,807) (22,074) Cash, receivables and prepaid expenses 79,849 85,491 102,473 80,555 73,680 73,983 63,884 67,331 131,703 153,325 213,089 201,463 142,372 180,911 171,612 165,631 211,552 238,816 315,562 282,018 216,052 254,894 235,496 232,962 250,755 283,403 362,844 339,029 278,415 319,739 290,378 262,604 227,759 224,949 78,624 11,746 89,830 97,451 167,339 151,029 93,078 133,907 153,670 155,370 146,326 110,166 9,607 6,857 2,669 - - 401 411 414 13,250 102,587 169,570 151,071 93,134 133,938 154,109 155,824 146,788 135,067 53,295 146,931 200,226 28,661 166,404 195,064 160,925 180,816 193,274 187,958 185,281 185,801 136,269 106,780 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 132,928 141,365 148,223 130,989 122,974 120,987 81,826 77,592 14.45 13.61 13.02 1.10 4.9 0.90 0.65 8.17 0.85 - 5.35 6.44 2.7 0.1 2.4 1.41 4.5 1.23 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) (24.81) (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 0.27 16.6 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%) (16%) (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% 1% (13%) (10%) (24%) Gross margin (% of revenue) 15.4% 16.9% 14.7% Selling & Admin. (% of revenue) EBITDA (% of revenue) Net earnings (% of revenue) Return on average capital Return on average equity 6% 8% 5% 10% 11% 7% 10% 6% 11% 12% 8% 7% 4% 6% 13% 80,971 25.0 88,072 9.98 (0.57) (4.4) (0.69) (1.03) (2.42) 1.23 - 2.51 3.24 1.8 0.4 1.5 4.7% 9% (6)% (10%) (27%) (27%) 89,882 25.0 84,898 12.69 0.77 3.9 0.66 0.36 8.30 0.47 - 2.96 3.60 1.8 0.4 1.8 10.4% 8% 6% 3% 10% 10% 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 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 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 

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