Buhler Industries Inc.
Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 Table of Contents Versatile Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Farm King Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Message from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Management Discussion & Financial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Disclosure Controls & Internal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Management's Responsibility for the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 18 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) . . . . 23 Consolidated Statement of Change in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Stock Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 10 Year Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 - 3 - Versatile Introduction In 2023, the Versatile division faced a landscape pressure on our fill rates, impacting our ability to meet filled with uncertainty, yet marked by resilience and customer demands effectively. Nevertheless, proactive adaptability. Despite persistent market challenges measures have been taken to mitigate these factors, and economic headwinds, we remained steadfast in with a concerted effort to improve fill rates and optimize our commitment to customer satisfaction, operational supply chain efficiencies with the goals of ensuring excellence, and strategic growth. timely delivery and satisfying customer expectations. Throughout the year, demand for our products remained remarkably high, a testament to the quality and reliability that customers expect from the Versatile As we look towards the coming year, we anticipate a return to normalcy due to these strategic initiatives and a renewed focus on operational excellence. brand. However, this surge in demand presented its We finished 2023 by welcoming ASKO Holding as a own set of challenges, with our factory struggling to very strong strategic partner. ASKO and their group of keep pace with the increased production requirements. companies bring a deep understanding of agriculture Despite our best efforts, supply chain disruptions and construction equipment manufacturing, among and logistical constraints compounded these issues, other areas. Their strong financial backing and industry requiring proactive measures to ensure timely delivery expertise are set to bolster Versatile as we enter our and to meet customer expectations. next phase, enhancing our confidence as we move Throughout these challenges, Versatile focused into the future. on dealer development and collaboration. Our As we reflect on the trials and triumphs of 2023, Dealer Meeting in Scottsdale, Arizona served as a Versatile stands poised to embrace the challenges and cornerstone event, providing a platform for professional opportunities that lie ahead. With resilience as our development and collaboration. Sessions focused cornerstone, and the strength of both new and long- on best practices for sales and marketing, employee standing partnerships, we are committed to charting a recruitment and retention, and equipment financing, course of sustainable growth and success in the years empowering our dealers with the tools and knowledge to come. needed to thrive in challenging times. Versatile also established a permanent dealer technician training facility at our parts warehouse in West Memphis, Arkansas. This updated facility underscores our dedication to providing comprehensive support and training opportunities for our dealers, enhancing service quality and customer satisfaction. In 2023, we encountered barriers associated with parts procurement, stemming from financial constraints and supply chain disruptions. These constraints exerted Adam Reid Vice President, Sales & Marketing, Versatile - 4 - Farm King Introduction In 2023, Farm King encountered a mix of achievements To assist in overcoming these challenges and achieve and obstacles. Despite sustained consumer demand maximum customer satisfaction, Farm King has the attributed to high equipment demand and escalating additional power of ASKO Holding, including their commodity prices, the division grappled with notable accumulated experience in the manufacturing industry challenges, including disruptions in the supply chain and an enthusiasm to grow in the North American and a shortage of labor. market. To address these challenges, concerted efforts were Our commitment to delivering superior products to made to bolster our workforce through extensive our customers remains unwavering. While we maintain recruitment drives and enhanced training programs. optimism for supply chain improvements, we continue Looking ahead to the coming year, we recognize the importance of strengthening our marketing resources. Plans are underway to invest in expanding our marketing team and enhancing our promotional strategies. By leveraging innovative marketing techniques and optimizing our online presence, we to prioritize timely delivery and product quality, despite the prevailing obstacles. We will actively pursue growth opportunities with our existing dealers and will work to expand our market presence through the establishment of new dealers, reflecting our determination to navigate the evolving landscape. aim to amplify brand visibility and drive customer As we move forward, Farm King remains steadfast in our engagement. Additionally, we are excited to allocate commitment to serving the needs of our customers and additional engineering resources to enhance our stakeholders. We are prepared to face challenges head- current products and develop innovative solutions for on with determination and perseverance, ensuring our the future, reaffirming our dedication to excellence and continued success and growth in the market. customer satisfaction. However, the path forward remains unpredictable, particularly concerning the stability of the supply chain and our capacity to meet escalating demand. Grant Adolph P. Mgr. Chairman of the Board & Chief Operating Officer, Buhler Industries Inc. - 5 - Message from the Chairman I am pleased to announce significant changes that manufacturing and the broader manufacturing mark the beginning of an exciting new phase for the sector. They demonstrate a profound understanding company! After an extensive search, we are excited to and appreciation for our brands, reinforcing their welcome Basak Traktor, a division of ASKO Holding, as commitment to our success. our new majority shareholder. This transition signifies a period of growth, innovation, and expanded horizons for our organization. Looking ahead, ASKO Holding is in growth mode, with plans to expand their global presence. With six factories specializing in agriculture and construction equipment, ASKO Holding has accumulated experience of over 100 components, and complementary products, they bring years; specifically running agricultural and construction invaluable expertise and resources to our organization. machinery factories more than a quarter century. The brands in their portfolio, such as Basak Traktor and MST have individual histories going back to early 1900s. ASKO's group of companies in the agricultural and machinery sector have a sales network of over 40 countries mainly focusing on Europe, Middle East, Africa, CIS and to some extent the far east. With the latest acquisition of two North American companies, Custom Equipment and Buhler Industries, ASKO’s operation and sales network reaches world wide scale. ASKO Holding brings a range of benefits to the table. Primarily, they inject fresh financial resources into our organization, providing stability and propelling our growth ambitions forward. Additionally, their integration with the global supply chain promises In the coming months, we will be actively engaged in market research, assessing the feasibility of introducing select products from the ASKO Holding portfolio into the North American market. This proactive strategy underscores their dedication to identifying new avenues for growth and broadening our market reach. By exploring untapped territories, ASKO Holding aims to expand our offerings, aligning them with the evolving demands of our customers and solidifying our presence in new markets. While the past two years presented challenges, the transition to our new majority shareholder signifies a renewed sense of optimism and collaboration. We are confident that together, we will overcome obstacles and synergies and facilitates access to international markets achieve greater heights. Thank you for your ongoing support and confidence in our vision. as production levels stabilize. Aligned with our key priorities, ASKO Holding is dedicated to resolving the challenges within our supply chain. They recognize the importance of adjusting production to match component availability and prioritizing the reduction of aged component inventory. For 2024, our focus is on implementing strategies to optimize operations and transition to a lean manufacturing model. Moreover, ASKO Holding shares our enthusiasm for agriculture equipment Grant Adolph P. Mgr. Chairman of the Board & Chief Operating Officer, Buhler Industries Inc. - 6 - Management Discussion & Financial Analysis Certain statements made in the following Management’s Discussion and Analysis contain forward-looking statements including, but not limited to, statements concerning possible or assumed future results of operations of Buhler Industries Inc. (the Company). Forward-looking statements represent the Company’s intentions, plans, expectations and beliefs, and are not guarantees of future performance. Such forward-looking statements represent the Company’s current views based on information as at the date of this report. They involve risks, uncertainties and assumptions and the Company’s actual results could differ, which in some cases may be material, from those anticipated in these forward-looking statements. Unless otherwise required by applicable securities law, the Company 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. disclaims any intention or obligation to publicly update Versatile has the claim of being the first North American or revise this information, whether as a result of new manufacturer to mass-produce and market articulated information, future events or otherwise. The Company four-wheel drive tractors. Since Versatile opened more cautions investors not to place undue reliance upon than 50 years ago, the Company has built over 100,000 forward-looking statements. tractors at its plant in Winnipeg, Manitoba, Canada. Currently, the plant builds articulating four-wheel drive tractors from 405 to 620; tracked units from 530 to 620; fixed-frame front-wheel assist tractor models from 175 to 365; as well as a complete line of tillage equipment. Farm King products are manufactured in Morden, Manitoba, Canada. The dealer network of over 1,200 North American locations provides first class service and professional expertise to farmers and customers. Buhler Industries remains committed to continuous product improvement and incorporating new value- added features. That tradition of excellence will continue well into the future. - 7 - Management Discussion & Financial Analysis TEN YEAR HIGHLIGHTS In thousands of Canadian dollars (except per share amounts) PERIOD END 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Revenue Gross profit GP% IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS 325,521 245,676 274,067 311,974 287,984 229,119 249,550 317,178 239,869 238,526 47,730 22,266 21,226 36,153 3,474 10,343 11,685 33,079 34,009 27,655 14.7% 9.1% 7.7% 11.6% 1.2% 4.5% 4.7% 10.4% 14.2% 11.6% Income from operations 22,491 (4,012) (4,668) 9,387 (22,505) (13,631) (10,444) 6,305 11,440 (1,624) As percentage of revenue 7% (2%) (2%) Net earnings 12,458 (5,316) (2,677) 3% 520 (8%) (6%) (4%) 2% 5% (1%) (49,532) (29,489) (25,809) 8,911 (1,031) 7,093 Earnings per share (EPS) 0.50 (0.21) (0.11) 0.02 (1.98) (1.18) (1.03) 0.36 (0.04) 0.28 EBITDA Total assets 24,081 (6,489) 561 7,249 (28,792) 2,075 (14,342) 19,177 7,247 15,871 362,844 339,029 278.415 319,739 290,378 262,604 227,759 224,949 231,611 232,850 Working capital 148,223 130,989 122,974 120,987 81,826 77,592 88,072 84,898 86,732 127,062 Shareholders’ equity 193,274 187,958 185,281 185,801 136,269 106,780 80,971 89,882 88,851 95,944 Book value per share Return on average capital Return on average equity 7.73 6% 7% 7.52 (3%) (3%) 7.41 (1%) (1%) 7.43 5.45 4.27 3.24 0% 0% (31%) (24%) (27%) (31%) (24%) (27%) 3.60 10% 10% 3.55 (1%) (1%) 3.84 7% 8% In this table, IFRS refers to the International Financial Reporting Standards. In 2021 the Company changed its year-end to December 31 and reported results for 15 months. All prior years ended September 30. GENERAL INFORMATION The following discussion and analysis dated March 28, include the accounts of all subsidiaries. The Company 2024 was prepared by management and should be and all its Canadian subsidiaries operate with the read in conjunction with the consolidated financial Canadian dollar as the functional currency. statements prepared in accordance with International Financial Reporting Standards (IFRS). The following discussion and analysis is presented in millions of Canadian dollars. The consolidated financial statements - 8 - Management Discussion & Financial Analysis HIGHLIGHTS REVENUE Revenue for the year was $238.5, down $1.4 from sales of $239.9 in 2022. The Company’s sales were flat when compared to 2022 and 2021 included a fifteen month period due to the accounting change from September 30 to December 31. GROSS PROFIT Gross profit reached $27.7 in the year which is a decrease of $6.3 from the prior year’s $34.0. As a percentage of sales, gross profit was 11.6%, a decrease from the prior year’s 14.2%. Gross profit was lower due to locked in sales pricing and delays in manufacturing as a result of supply chain challenges and inflationary cost on materials. SALES (MILLIONS C$) 2019 2020 2021 2022 2023 GROSS PROFIT (MILLIONS C$) 2019 2020 2021 2022 2023 350 300 250 200 150 100 50 0 35 30 25 20 15 10 5 0 INCOME/(LOSS) FROM OPERATIONS INCOME FROM OPERATIONS (MILLIONS C$) Loss from operations came in at $1.6 compared with an income of $11.4 in the prior year. In 2023 income from operations decreased from prior year by $13.0. Selling and administration expenses were $29.3, up from the prior year’s $22.6 primarily due to financial advisor fees and legal fees incurred in the sale process of Buhler Industries. As a percentage of sales, selling and administration was 12.3%, up from the prior year percentage of 9.4%. 12 9 6 3 0 -3 -6 -9 -12 -15 2019 2020 2021 2022 2023 - 9 - Management Discussion & Financial Analysis INCOME AND COMPREHENSIVE INCOME NET PROFIT (MILLIONS C$) The net profit for the year was $7.1, an increase of $8.1 from the $1.0 loss in the prior year. The significant items that account for this increase is an increase in the gain on disposal of assets of $20.6 due to a sale of land and building, gain from interest income of $1.4 and gain from foreign exchange of $3.5 compared to prior year. This is offset by decreased income from operation of $13.0 and increase in research and development of $4.0. 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 2023 was $15.9, an increase from the prior year of $7.2. 10 5 0 -5 -10 -15 -20 -25 -30 20 15 10 5 0 -5 -10 -15 -20 2019 2020 2021 2022 2023 EBITDA (MILLIONS C$) 2019 2020 2021 2022 2023 WORKING CAPITAL WORKING CAPITAL (MILLIONS C$) Working capital is a measure of the Company's ability to discharge its current obligations by using its current assets. The Company continues to be in a strong position as the working capital at year end was $127.1, an increase from the prior year’s $86.7. Accounting for much of the change were an increase accounts receivable of $2.6, an increase inventory of $6.7 offset by a decrease of accounts payable of $4.0 and a decrease in current bank debt of $26.1. 150 120 90 60 30 0 2019 2020 2021 2022 2023 - 10 - 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 spent $11.4 in 2023 compared to $7.4 in 2022. Management believes this strategy will maintain the Company’s competitive position in the marketplace. (thousands C$) (millions C$) QUARTERLY NET EARNINGS RESULTS NET QUARTERLY INCOME 2019 2020 2021 2022 2023 1st Quarter (4,444) (5,453) (3,815) 394 4,121 2nd Quarter 7,041 (8,460) 436 1,054 16,059 3rd Quarter (1,170) 462 3,759 (2,541) (1,400) 4th Quarter (30,916) (12,358) (743) 5th Quarter - - 9,274 (11,687) 62 - Total (29,489) (25,809) 8,911 (1,031) 7,093 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 5th Quarter 23222120192322212019232221201923222120192322212019 3 2 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 9 1 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 SUMMARY OF QUARTERLY RESULTS Sales for the last quarter of 2023 was $54.8 which is a decrease of $6.8 compared to prior period of 2022. The Company realized a lower income from operations of $10.8 due to lower gross profit of $7.0 and higher selling and administrative expenses of $3.8 due to Buhler Industries sale. Net income in 2023 decreased by $11.7 to $11.6 primarily due to the $10.8 loss on income from operations. During the quarter, Combined Factory Rostselmash Ltd., the majority shareholder of Buhler Industries, sold all of its shares, which accounts for 96.7% of all of the outstanding shares of Buhler Industries, to Basak Tractor, a division of ASKO Holding. - 11 - Management Discussion & Financial Analysis CASH FLOW AND CAPITAL RESOURCES OPERATING ACTIVITIES NET CASH FLOW (MILLIONS C$) Cash for the year was up $26.1 from 2022 coming in at an indebtedness of $1.8 compared to the prior year indebtedness of $27.9. Accounting for the increase in cash was a net profit of $7.1, net proceeds from investing activities of $23.4 and net proceeds from financing activities of $23.6. This was offset by a reduction in non-cash operating activities of $21.4 and a reduction in non-cash working capital of $6.5. INVENTORY TURNS Management continues to work diligently to control the investment in inventory in order to keep a strong cash position. The Company’s inventory turns was maintained at 1.2 in 2023 from 1.2 in 2022. The Company dealt with significant supply-chain disruptions in 2023 that continued from 2021 which negatively impacted the manufacturing and shipment of products. 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 2.0 1.5 1.0 0.5 0.0 2019 2020 2021 2022 2023 INVENTORY TURNS 2019 2020 2021 2022 2023 INVESTING ACTIVITIES ASSET PURCHASES (MILLIONS C$) Cash received during the year for investing activities was $23.3, compared to cash received of $4.2 in 2022. Purchases of property, plant and equipment amounted to $1.5, which were offset by the cash proceeds on the sale of surplus assets of $24.8. In the prior year, purchases of property, plant and equipment was $3.1, offset by the cash proceeds on the sale of intellectual property of $3.2 and surplus assets of $4.1. 5 4 3 2 1 0 2019 2020 2021 2022 2023 - 12 - Management Discussion & Financial Analysis FINANCING ACTIVITIES The Company’s financing activities resulted in an inflow of $23.6 for the year, compared to an outflow of $2.1 in the prior year. During the year the company made mortgage payments of $2.3 and received related party financing of $25.9. In the prior period the Company made mortgage payments of $2.1. 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 a loan of $13.5 and a mortgage of $8.9 in credit facilities. The Company is currently in discussion to increase its credit facilities and is also able to borrow money from its parent company, Basak Tractor, a division of ASKO Holding. 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. The Company currently has a variable interest bank credit facility. Should future cash requirements result in additional debt be taken on, management would evaluate the financing options available at that time and take a course of action that is in the best interests of the Company in the long term. Currently, all of the financing needs of the Company are being met by the bank credit facility, which carries a low rate of variable interest. With respect to foreign exchange, the Company manages risk by use of the natural hedge that exists between the U.S. dollar denominated accounts receivables and accounts payable. Where a large RISKS AND FINANCIAL INSTRUMENTS difference in this hedge is anticipated, forward foreign The Company recognizes that net earnings are exposed to changes in market interest rates, foreign exchange rates, prices of raw materials and risks regarding the financial condition of customers. These market conditions are regularly monitored and actions are taken when appropriate. Despite the methods employed to manage these risks, future fluctuations in interest rates, exchange rates, raw material costs and customers condition can be expected to impact net earnings. exchange contracts may be entered into to mitigate the risk. Purchases of foreign exchange products for the purpose of speculation are not permitted. Transactions are only conducted with certain approved financial institutions. Fluctuations in foreign exchange rates represent a material exposure for the Company's financial results. Hedging programs employed may mitigate a portion of exposures to short-term fluctuations in foreign currency exchange rates. The Company's financial results over the long-term will be affected by sizeable changes in the value of the The Company may enter into fixed-rate debt to Canadian dollar relative to the U.S. dollar. 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 Credit risk arises from cash held with banks and credit exposure to customers, including outstanding accounts receivable. The Company assesses the credit quality of customers, taking into account their financial position, past experience and other factors. Management - 13 - Management Discussion & Financial Analysis regularly monitors customer credit limits, performs recognition. For loans classified under receivables, the credit reviews and, in certain cases, insures accounts Company measures credit risk based on the 12- month receivable balances against credit losses. Nonetheless, expected credit risk if there has not been a significant unexpected deterioration in the financial condition of a increase in credit risk since initial recognition. customer can have a negative impact on net earnings in the case of default. LOOKING FORWARD Increased sales are projected for 2024 as the Company improves problems associated with supply chain issues. The Company has a large backlog of sales and continues to have strong demand for its agricultural machinery and equipment. The Company’s majority shares were acquired by Basak Tractor a wholly-owned subsidiary of 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. ASKO Holding on December 28, 2023. Subsequent to year end, the Company received a loan of $14.4 million IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT from its Basak Tractor and has full support to grow its An integral component of impairment testing is sales from its majority owner. The Company expects to see profitability improvement as a result actions taken early in 2024. In addition, margins are projected to improve in 2024 as a result of operating efficiencies stemming from increased shipments. CRITICAL ACCOUNTING ESTIMATES The Company believes the following accounting estimates are critical to determining and understanding the operating results and the financial position of the Company. EXPECTED CREDIT LOSSES 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 The Company recognizes expected credit losses on cash flows and the appropriate discount rate. The financial assets and changes in such losses, at each recoverable amount is most sensitive to the discount reporting date to reflect changes in credit risk since the rate used for the discounted cash flow model as well as initial recognition of the financial assets. For accounts the expected future cash inflows and the growth rate receivable, the Company applied the simplified used for extrapolation purposes. A change in any of the approach permitted by IFRS 9, under which the lifetime significant assumptions or estimates could result in a expected credit losses must be recognized upon initial material change in the recoverable amount. - 14 - Management Discussion & Financial Analysis CONTINGENCIES AND LITIGATION credit risk on receivables. In general the Company has Should a lawsuit or claim be brought against the Company, management assesses the potential financial exposure of the Company. In assessing any probable losses, the amount of possible insurance recoveries will be projected. The Company accrues such liabilities when a loss becomes probable and the net amount of the loss can reasonably be estimated. Due to the inherent uncertainties relating to the eventual outcome of litigation and potential insurance recovery, certain matters could ultimately be resolved for amounts materially different to provisions or disclosures previously made by the Company. WARRANTY OBLIGATION The Company offers warranties for its sale of equipment. Management estimates the related provision for future warranty claims based on historical warranty claim information, as well as recent trends that might suggest that past cost information may differ from future claims. Factors that could impact the estimated claim information include the success of the Company’s productivity and quality initiatives, as well as parts and labor costs. ECONOMIC CONDITIONS In the context of the COVID-19 pandemic and the related climate of uncertainty, the Company revised some of its most complex estimated and assumptions, including significant judgement areas, used in preparing the consolidated financial statements for the year ended December 31, 2023. The main estimates revised not seen significant impacts from COVID-19 to date other than supply chain challenges. INCOME TAXES Estimation of income taxes includes evaluating the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income. If the assessment of the Company’s ability to utilize the underlying future tax deductions changes, the Company would be required to recognize more or fewer of the tax deductions as assets, which would decrease or increase the income tax expense in the period in which this is determined. The Company makes claims for Scientific Research and Experimental Development (SRED) expenditures which are included in deferred taxes. The amounts recorded are based on the Company's interpretation of the Income Tax Act of Canada provisions which govern the eligibility of SRED costs. The claims may be subject to review by the Canada Revenue Agency (CRA) before refunds are received. Actual collection may be materially different than what is recorded in the financial statements. The Company is subject to taxation in multiple jurisdictions. Significant judgment is required in determining the worldwide provision for taxation. to reflect the impact of COVID-19 pandemic on financial There are many transactions and calculations for which reporting were the determination of whether there was the ultimate tax determination is uncertain during the an indication that assets, CGU’s or groups of CGU’s may ordinary course of business. The Company maintains be impaired, the assumption used in the establishment provisions for uncertain tax positions that it believes of their recoverable amount when an impairment test appropriately reflect its risk with respect to tax matters was deemed necessary, and the assessment of the under active discussion, audit, dispute or appeal with - 15 - Management Discussion & Financial Analysis tax authorities, or which are otherwise considered to involve uncertainty. These provisions for uncertain tax positions are made using management's best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. Management reviews the adequacy of these provisions at each consolidated balance sheet date. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. The operations and organizational structure of the Company are complex, and related tax interpretations, regulations and legislation are continually changing. As a result, there are usually some tax matters in question that result in uncertain tax positions. The Company approaches uncertain tax positions from a liability or exposure perspective. The Company provides for future liabilities in respect of uncertain tax positions where additional tax may become payable in future periods and such provisions are based on management's assessment of exposures. - 16 - Disclosure Controls & Internal Controls DISCLOSURE CONTROLS Management is responsible for establishing and INTERNAL CONTROLS OVER FINANCIAL REPORTING maintaining disclosure controls and procedures in Management is responsible for establishing and order to provide reasonable assurance that material maintaining adequate internal controls over financial information relating to the Company is made known reporting to provide reasonable assurance regarding to them in a timely manner and that information 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 and therefore can only provide reasonable assurance as possibility of human error and the circumvention or to the effectiveness of internal controls over financial overriding of the controls and procedures. Accordingly, reporting, including the possibility of human error even effective disclosure controls and procedures can and the circumvention or overriding of the controls only provide reasonable assurance of achieving their and procedures. Based on management's design and control objectives. Based on management's evaluation testing of the effectiveness of the Company's internal of the design and effectiveness of the Company's controls over financial reporting, the Company's Chief disclosure controls and procedures, the Company's Executive Officer and Chief Financial Officer have Chairman of the Board and Chief Financial Officer have concluded that these controls and procedures are concluded that these controls and procedures are designed and operating effectively as of December 31, 2023 to provide reasonable assurance that the designed and operating effectively as of December 31, 2023 to provide reasonable assurance that the financial information being reported is materially accurate. information being disclosed is recorded, summarized During the period ended December 31, 2023, there and reported as required. 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. - 17 - 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, 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 Baker Tilly HMA LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. 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 includes an internal audit function and an established 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. Grant Adoph P. Mgr. Willy Janzen, CPA, CGA, B.Comm. Chairman of the Board & Chief Operating Officer March 28, 2024 Chief Financial Officer March 28, 2024 - 18 - Management’s Responsibility for the Financial Statements Independent Auditor’s Report To the Shareholders of Buhler Industries Inc.: OPINION We have audited the consolidated financial statements of Buhler Industries Inc. and its subsidiaries (the "Company"), which comprise the consolidated balance sheet as at December 31, 2023, and the consolidated statements of income (loss) and comprehensive income loss, change in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material accounting policy information. the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. VALUATION OF INVENTORY DESCRIPTION OF KEY AUDIT MATTER The provision for obsolescence of inventory requires the application of significant judgement by the Company, particularly in the identification of slow moving and In our opinion, the accompanying consolidated financial obsolete inventory and the quantification of the statements present fairly, in all material respects, the provision to apply to the inventory identified. The consolidated financial position of the Company as discussion on the assessment of the estimate and the at December 31, 2023, and its consolidated financial underlying assumptions in included in Note 4(b) of the performance and its consolidated cash flows for the consolidated financial statements. years then ended in accordance with International Financial Reporting Standards. BASIS FOR OPINION We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of 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: • The information, other than the consolidated financial statements and our auditor’s report thereon, included in the Annual Report, and • 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. - 19 - Independent Auditor’s Report In connection with our audits of the consolidated Those charged with governance are responsible for financial statements, our responsibility is to read the overseeing the Company’s financial reporting process. 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 audits or otherwise appears to be materially misstated. We obtained the Annual Report and the Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard. 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 International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: consolidated financial statements that are free from • Identify and assess the risks of material material misstatement, whether due to fraud or error. misstatement of the consolidated financial In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - 20 - Independent Auditor’s Report • Obtain an understanding of internal control supervision and performance of the group audit. relevant to the audit in order to design We remain solely responsible for our audit opinion. audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. estimates and related disclosures made by We also provide those charged with governance with management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the 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 of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest content of the consolidated financial statements, benefits of such communication. including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, The engagement partner on the audit resulting in this independent auditor's report is Michael Angers. Winnipeg, Manitoba March 28, 2024 Chartered Professional Accountants - 21 - Consolidated Balance Sheet (000's C$) Assets Current Assets As at December 31, As at December 31, 2023 2022 Accounts receivable, net (note 9 and 22) $ 26,009 $ 23,366 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) 82 181,996 4,291 212,378 13,085 - 6 7,381 96 175,312 4,014 202,788 14,416 1,765 5,773 6,869 Total Assets $ 232,850 $ 231,611 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) Advances from related parties (note 9) Total Current Liabilities Deferred income tax liabilities (note 10) Long-term debt (note 13) Advances from related parties (notes 9) Total Liabilities Shareholders’ Equity Share capital (note 14) Retained earnings Total Shareholders' Equity Total Liabilities and Equity Subsequent events (note 23) $ 1,807 71,851 143 8,929 2,586 85,316 22 – 51,568 136,906 30,000 65,944 95,944 $ 27,943 75,854 250 11,244 765 116,056 22 – 26,682 142,760 30,000 58,851 88,851 $ 232,850 $ 231,611 The accompanying notes are an integral part of the consolidated financial statements. Approved on behalf of the board: Allan Stewart Director March 28, 2024 Grant Adolph P. Mgr. Chairman of the Board and Chief Operating Officer March 28, 2024 - 22 - Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) For the year ended December 31 (000’s C$) Revenue, net (note 9 and 17) $ Cost of goods sold (note 9 and 16) Gross Profit Selling & administration expenses Income/(Loss) from Operations (Gain) on disposal of assets 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 2023 238,526 210,871 $ 2022 239,869 205,860 27,655 11.6% 34,009 14.2% 29,279 12.3% (1,624) -0.7% 22,569 9.4% 11,440 4.8% (23,616) (1,490) 6,178 (811) (512) 11,433 (3,035) (74) 5,946 2,653 (337) 7,406 7,194 3.0% (1,119) -0.5% (973) 1,074 101 78 (166) (88) Net Income/(Loss) and Comprehensive Income/(Loss) $ 7,093 3.0% $ (1,031) -0.4% Consolidated Statement of Change in Shareholders’ Equity For the year ended December 31 (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 Income (Loss) per share Basic and fully diluted 2023 30,000 58,851 7,093 65,944 95,944 0.28 $ $ $ 2022 30,000 59,882 (1,031) 58,851 88,851 (0.04) $ $ $ The accompanying notes are an integral part of the consolidated financial statements. - 23 - Consolidated Statement of Cash Flows For the year ended December 31 (000’s C$) Cash provided by (used in) operating activities Net income/(loss) and comprehensive income/(loss) $ 7,093 $ (1,031) 2023 2022 Add (deduct) non-cash items Depreciation of property, plant and equipment (Gain) on disposal of assets (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 intellectual property Financing activities (note 19) Repayment of long-term debt Advances from related party Foreign exchange (loss) gain on bank indebtedness Net cash in the period 2,499 (23,616) (811) 1,074 (512) (14,273) (6,466) (20,739) (1,479) 24,833 - 23,354 (2,315) 25,908 23,593 (72) 26,136 2,420 (3,035) 2,653 (166) (337) 504 (7,712) (7,208) (3,131) 4,141 3,169 4,179 (2,143) – (2,143) (697) (5,869) Bank indebtedness, beginning of period (27,943) (22,074) Bank indebtedness, end of period $ (1,807) $ (27,943) The accompanying notes are an integral part of the consolidated financial statements. - 24 - Notes to Consolidated Financial Statements 1. Basis of Operations (b) Business combinations Buhler Industries Inc. (the Company) was incorporated under the laws Business combinations are accounted for using the acquisition of Canada on February 1, 1994. On March 24, 1994 the Company was method of accounting. The consideration transferred for the listed and posted for trading on the TSX under the stock exchange acquisition of a subsidiary is the fair values of the assets transferred, symbol “BUI”. The address of the registered office is 1260 Clarence the liabilities incurred by the former owners of the acquiree and the Avenue, Winnipeg, Manitoba. The majority shareholder is Başak equity interests issued by the Company. The consideration transferred Traktör Tarim Ziraat Ve Iş Makinalari Sanayi Ticaret A.Ş. (Basak Tractor) includes the fair value of any asset or liability resulting from a and as of year end December 31, 2023 owns 96.7% of all outstanding contingent consideration arrangement. Acquisition costs incurred shares of the Company. Basak Tractor is a wholly-owned subsidiary of are expensed and included in general and administrative expenses. ASKO Holding. The Company, through its subsidiaries and a joint venture, has manufacturing and warehousing facilities in Canada and the United States of America (U.S.). The Company produces farm equipment for sale in Canada, U.S. and overseas. 2. Basis of Presentation Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in accordance with IAS 39 either in the statement of income or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted The Company prepares its consolidated financial statements in for within equity. accordance with International Financial Reporting Standards (IFRS). Identifiable assets acquired and liabilities and contingent liabilities The Company’s functional currency is the Canadian dollar. The assumed in a business combination are measured initially at their fair Canadian dollar is the reporting currency of most the Company’s values at the acquisition date, irrespective of the extent of any non- business, as well as the majority of the Company’s financing is controlling interest. Goodwill is initially measured as the excess of the conducted in Canadian dollars. The consolidated financial statements have been prepared under the historical-cost convention, except that certain financial instruments are stated at their fair value. aggregate of the consideration transferred over the net identifiable assets acquired and liabilities assumed. If this consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income. The consolidated financial statements were approved by the Board of (c) Foreign currency translation Directors on March 28, 2024. Functional and presentation currency 3. Material Accounting Policy Information (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., 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. The Company’s consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency. The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the entity operates. Transaction and balances Transactions in foreign currencies are translated to the respective functional currency of each entity within the consolidated group using the exchange rates in effect at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rates prevailing at the end of the reporting period. Nonmonetary items measured at historical cost in a foreign currency are translated to the functional currency using the exchange rate prevalent at the date of acquisition. Non-monetary items denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate prevalent at the date that the fair value was determined. Foreign currency - 25 - Notes to Consolidated Financial Statements differences arising from translation are recognized in net income, The cost of incentives, if any, are estimated at the inception of a except for exchange differences arising on the translation of financial contract at the amount that is expected to be paid and is recognized instruments qualifying as a cash flow hedge, which are recognized as a reduction to revenue at the time of the sale. If the estimate directly in other comprehensive income (“OCI”). of the incentive changes following the sale to the customer, the (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 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. longer exist or when there is clear evidence of an increase in selling (f) Sales allowances price, the amount of the write-down previously recorded is reversed. The Company grants certain sales incentives to support sales of its (e) Revenue recognition 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. The timing of when the Company transfers the goods to the customer may differ from the timing of the customer’s payment. 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. The expense for new programs is accrued at the inception of the program. The amounts of incentives to be paid are estimated. The determination of sales allowances requires management to make estimates based upon historical data, estimated future market demand for products, field inventory levels, announced incentive programs, competitive pricing Revenues are stated net of discounts, allowances, settlement and interest rates, among other things. 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. (g) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost includes any directly attributable costs, borrowing costs on qualifying construction The Company has determined that the customers from the sale of projects, and the costs of dismantling and removing the items and equipment and parts are generally dealers. Transfer of control, and restoring the site on which they are located. When major components thus related revenue recognition, generally corresponds to when the of an item of property and equipment have different useful lives, they equipment and parts are made available to the customer, based on are accounted for as separate items. Depreciation is calculated using the shipping terms negotiated with customers. Most product is sold the following methods to allocate the cost of assets less their residual FOB Origin, while sales to related parties are shipped FOB Destination. values over their estimated useful lives as follows: Therefore, the Company recognizes revenue at a point in time when control is transferred to the customer at a sale price that the Company expects to receive. For all sales, no significant uncertainty exists surrounding the Buildings Equipment Computer equipment 4 - 5% 20 - 100% 30 - 100% Straight line Declining balance Declining balance purchaser’s obligation to pay for equipment and parts. The Company Depreciation methods, useful lives and residual values are reviewed records appropriate allowance for credit losses. at each reporting date. Assets under construction, assets held for sale and land are not depreciated. - 26 - Notes to Consolidated Financial Statements Leases of property, plant and equipment on terms that provide a that affects neither accounting nor taxable income; and differences contractual right of use are measured at cost, comprised of the initial relating to investments in subsidiaries to the extent that it is probable measurement of the corresponding finance lease payable, lease that they will not reverse in the foreseeable future. Deferred tax is payments made at or before the commencement date and any initial measured at the income tax rates that are expected to be applied direct costs. They are subsequently depreciated on a straight-line basis when the temporary difference reverses, that is, when the asset is and reduced by impairment losses. At year end, the Company had no realized or the liability is settled, based on the income tax laws that right of use assets. have been enacted or substantively enacted at the reporting date. (h) Research and development expenses Deferred tax assets are recognized only to the extent that it is The Company expenses all research and development costs as they probable that future taxable income will be available against which are incurred unless they meet the criteria for deferral in accordance the assets can be utilized. Deferred tax assets are reviewed at each with IAS 38 Intangible Assets. No such development costs have been reporting date and are reduced to the extent that it is no longer deferred to date. 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 (j) Cash/bank indebtedness Cash/bank indebtedness includes cash on hand, bank overdrafts offset when there is a legally enforceable right to offset and when the deferred tax balances relate to the same income tax authority. and bankers acceptances. Bank overdrafts are repayable on demand. (l) Financial instruments Bank overdrafts and bankers acceptances form an integral part of In accordance with IFRS 9 - Financial Instruments, financial assets are the Company’s cash management and are included as a component classified as measured at either amortized cost, fair value through of cash/bank indebtedness for the purpose of the statement of cash other comprehensive income or fair value through profit or loss, flows. (k) Income taxes Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of comprehensive income depending on the business model for managing such financial assets and the asset’s contractual cash flow characteristics. Financial liabilities are classified as measured at amortized cost using the effective interest method. except to the extent that it relates to items recorded directly to equity, The Company’s financial instruments are classified as follows: a) in which case it is recognized directly in equity. Current income tax expense is the expected income tax payable on the taxable income for the period, using income tax rates enacted or substantively enacted in the jurisdictions the Company is required to pay income tax at the reporting date, and any income adjustments to income taxes payable in respect of previous periods. Current income tax expense is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, cash and cash equivalents (bank indebtedness) - fair value through profit and loss, b) accounts receivable - amortized cost, c) advances to related parties - amortized cost, d) accounts payable and accrued liabilities - amortized cost, d) interests in other entities - fair value through profit and loss, e) advances from related parties - amortized cost and f ) long term debt - amortized cost. All financial instruments are included in the consolidated balance sheet and are measured at fair value except loans and receivables and other financial liabilities, which are measured at amortized cost. and by the availability of unused income tax losses. All changes in fair value are recorded to the statement of 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 comprehensive income unless cash flow hedge accounting is used, in which case changes in fair value are recorded in other comprehensive income. the tax bases of assets and liabilities for income taxation purposes. The Company’s policy is not to utilize derivative financial instruments Deferred tax is not recognized for the following temporary timing for trading or speculative purposes. The Company may utilize differences: the initial recognition for both goodwill and assets and derivative instruments in the management of its foreign currency and liabilities in a transaction that is not a business combination and interest rate exposures. - 27 - Notes to Consolidated Financial Statements FVTPL financial instruments are subsequently measured at fair value is the higher of its fair value less costs to sell and its value in use, is and all gains and losses are included in net income in the period estimated in order to determine the extent of the impairment loss. in which they arise. Available-for-sale financial instruments are Where the asset does not generate cash flows that are independent subsequently measured at fair value with revaluation gains and losses from other assets, the Company estimates the recoverable amount included in other comprehensive income until the instrument is of the cash-generating unit (CGU) to which the asset belongs. For 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 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. adversely impacted by fluctuations in foreign exchange rates. The Impairment of financial assets Company may enter into foreign currency forward contracts to manage foreign exchange exposures on accounts receivable expected to be recovered in US dollars. Financial assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be impaired if objective evidence The fair value of each contract is included on the consolidated balance indicates that one or more events have had a negative effect on sheet within derivative financial instrument assets or liabilities, the estimated future cash flows of that asset. An impairment loss is depending on whether the fair value was in an asset or liability calculated as the difference between its carrying amount, and the position. Changes in fair value are recognized in the consolidated present value of the estimated future cash flows discounted at their statement of comprehensive income through gains/losses on foreign original effective interest rate. All impairment losses are recognized in exchange. (n) Comprehensive income the consolidated statement of comprehensive income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. Comprehensive income includes all changes in equity of the Company, except those resulting from investments by shareholders 4. Critical Accounting Estimates and Judgments and dividends paid. Comprehensive income is the total of net The Company makes estimates and assumptions concerning the income and other comprehensive income. Other comprehensive future. The resulting accounting estimates may, by definition, not income comprises revenues, expenses, gains and losses that require equal the actual results. The estimates and assumptions that are recognition, but are excluded from net income. The Company does critical to the determination of carrying value of assets and liabilities not have any items giving rise to other comprehensive income, nor are addressed below. is there any accumulated balance of other comprehensive income. All gains and losses, including those arising from measurement of all financial instruments have been recognized in net income for the year. (o) Product warranties (a) Sales incentives The Company provides certain sales incentives on some sales that may be settled after year end. An estimate of these amounts that may be payable is accrued, but may vary based on the programs in place The Company makes provisions for estimated expenses related at the time of settlement. These have been accrued for in accounts to product warranties at the time products are sold. Management payable and accrued liabilities. establishes these estimates based on historical information on the nature, frequency and average cost of warranty claims. The Company seeks to improve product quality and minimize warranty expenses arising from claims. Warranty costs may differ from those estimated if actual claim rates are higher or lower than historical rates. (p) Impairment Impairment of non-financial assets (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 Tangible assets and definite life intangible assets are reviewed at Company provision ranges from 20% to 30% on selected items. If each balance sheet date to determine whether events or conditions this assumption changed by 10%, the provision would increase or indicate that their carrying amount may not be recoverable. If any decrease by $6.2 million (December 31, 2022 - $5.4 million). such indication exists, the recoverable amount of the asset, which - 28 - Notes to Consolidated Financial Statements (c) Provision for warranty costs consolidated balance sheet date. However, it is possible that at some The Company offers warranties for its sale of equipment. Management future date an additional liability could result from audits by taxing estimates the related provision for future warranty claims based on authorities. Where the final tax outcome of these matters is different historical warranty claim information, as well as recent trends that affect the tax provisions in the period in which such determination is might suggest that past cost information may differ from future claims. made. from the amounts that were initially recorded, such differences will Factors that could impact the estimated claim information include the The operations and organizational structure of the Company are success of the Company’s productivity and quality initiatives, as well as complex, and related tax interpretations, regulations and legislation 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 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. they have a plan that ensures they will ultimately fully utilize these (e) Economic conditions attributes. The Company’s assessment is based upon existing tax In the context of the COVID-19 pandemic and the related climate of laws and estimates of future taxable income. If the assessment of uncertainty, the Company revised some of its most complex estimated the Company’s ability to utilize the underlying future tax deductions and assumptions , including significant judgement areas, used in changes, the Company would be required to recognize more or fewer preparing the consolidated financial statements for the year ended of the tax deductions as assets, which would decrease or increase the December 31, 2023. The main estimates revised to reflect the impact income tax expense in the period in which this is determined. of COVID-19 pandemic on financial reporting were the determination 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 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. recorded in the financial statements. The Company's SRED credits are The Covid-19 pandemic continues to disrupt supply chains and the recorded on the balance sheet after review of the relevant accounting Company’s ability to produce all parts on a timely basis. pronouncements (note 10). (f) Government grants The Company is subject to taxation in multiple jurisdictions. Government assistance that requires payment and that is non-interest Significant judgment is required in determining the worldwide bearing is accounted for at its fair value, based on management’s provision for taxation. There are many transactions and calculations best estimates. The difference between the assistance amount and its for which the ultimate tax determination is uncertain during the fair value is accounted for as a government grant and recognized in ordinary course of business. The Company maintains provisions for income over the period in which the related cost they are intended to uncertain tax positions that it believes appropriately reflect its risk compensate for are recognized. 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 5. Recently Adopted and Future Accounting Pronouncements (a) Recently Adopted Accounting Pronouncements The Company has adopted the following new amendments that could have an impact on the consolidated financial statements. Other than the adoption of these items, the accounting policies applied - 29 - Notes to Consolidated Financial Statements are consistent with those applied in the previous year. Definition of current and the entity’s right to defer settlement is contingent Accounting Estimates - Amendments to IAS 8 - In February 2021, on compliance with future covenants within twelve months. The the IASB issued amendments to, Accounting Policies, Changes in amendments are effective for annual reporting periods beginning Accounting Estimates and Errors (“IAS 8”) in which it introduces a on or after January 1, 2024, and must be applied retrospectively. The definition of ‘accounting estimates’. The amendments clarify the Company is currently assessing the impact of the amendments. 6. Credit Facilities (000’s C$) The Company has a financing facility in the amount of $13,484 (2022 - $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 US. In addition, certain Canadian properties are also secured by CIBC. The Company covenants that the value of its accounts receivable and inventories are not 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 SOFR rates plus stamping fees. At December 31, 2023, the amount drawn on this facility is $13,484, (December 31, 2022 - $41,053). Cash balances of $11,676 have been netted with the facility (December 31, 2022 - $13,110). As of December 31, 2023, the credit agreement has been frozen and is currently under negotiation. 7. Inventories (000's C$) Raw materials Work in process Finished goods 2023 $ 98,525 5,390 78,081 2022 $ 93,270 4,443 77,599 $ 181,996 $ 175,312 During the year, inventories in the amount of $149,955 (2022 - $149,575) were expensed to cost of goods sold, which included net inventory write-downs of $2,143 (2022 - write downs of $1,526). The carrying value of inventories is pledged as security against the Company’s credit facilities. Included in inventories are units sold on consignment being held at dealers locations in the amount of $305 (2022 - $592). distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long as this fact is disclosed. The application of such amendment had no impact on the Company or the consolidated financial statements. Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2 - In February 2021, the IASB issued amendments to Presentation of Financial Statements (“IAS 1”), and Making Materiality Judgements (“IFRS Practice Statement 2”), in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after January 1, 2023, with earlier application permitted. Since the amendments to the IFRS Practice Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an effective date for these amendments is not necessary. The application of such amendment had no impact on the Company or the consolidated financial statement. (b) Future Accounting Pronouncements Amendments to standards that have been issued but are not yet effective up to the date of issuance of these consolidated financial statements, which are likely to have an impact on the Company, are listed below. The Company intends to adopt these amended standards and interpretations, if applicable, when they become effective. IFRS 1, Presentation of Financial Statements – Non-current Liabilities with Covenants – In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. Additional requirement has been introduced to require disclosure when a liability arising from a loan agreement is classified as non- - 30 - 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 Dec. 31, 2021 net book value Additions Disposals Transfer to held for sale Held for sale assets sold 2,282 7,075 - 1,119 (763) (1,304) (130) (543) 596 1,244 4,583 1,950 (116) - - 795 62 (14) - - 14,735 3,131 (2,197) (673) 1,840 Depreciation - (682) (1,490) (248) (2,420) Dec. 31, 2022 net book value Additions Disposals Held for sale assets sold 1,985 6,909 - 312 (849) (1,093) 4,927 1,165 (133) 809 956 - 595 14,416 1 - - 1,478 (2,075) - Depreciation - (605) (1,698) (196) (2,499) Dec. 31, 2023 net book value Recorded as: $1,945 $6,479 $4,261 $400 $13,085 Land Buildings Equipment Computer Equipment Total Accounts receivable from controlling shareholder Accounts payable to controlling shareholder 2023 2022 $ - - $1,097 32 Advances from controlling shareholder 54,154 27,447 Net sales to controlling shareholder Net purchases from controlling shareholder - - $935 2 All transactions with related parties are recorded at the fair value agreed to by the related parties. The advances from the controlling shareholder of $40,945 USD (2022 - $20,265 USD) bears interest at 8.0% (2022 - 5.0%). Amounts are repayable in USD as follows: Due Date January 2024 December 2024 (revised from November 2023) June 2025 June 2028 Accrued interest Total Compensation of Key Management 2023 2022 - - 11,300 8,000 26,000 12,990 1,955 965 $40,945 $20,265 Cost $2,794 $28,975 $53,833 $4,419 $90,021 Key management personnel are those persons having authority and Transfer to held for sale Accumulated depreciation 2022 net book value (809) (956) - - (1,765) responsibility for planning, directing and controlling the activities - (21,110) (48,906) (3,824) (73,840) $1,985 $6,909 $4,927 $595 $14,416 of the Company. The Board of Directors and Executive Committee are key management personnel. The following table details the compensation paid to these key management personnel (note - no amounts were paid for post-retirement benefits nor were there any Cost $ 1,945 $26,722 $49,105 $4,419 $82,101 share based payments): Accumulated depreciation 2023 net book value - (20,243) (44,754) (4,019) (69,016) $1,945 $6,479 $4,261 $400 $13,085 Salaries, fees and short term employee benefits 2023 2022 $5,213 $2,591 The Company reviewed its property, plant and equipment for indicators of impairment. No assets were identified as impaired. Included in property, plant and equipment is $322 of equipment not being depreciated as the assets are not yet in use (2022 - $626). - 31 - Notes to Consolidated Financial Statements 10. Income Taxes (000's C$) Current year Adjustment for prior years Current income tax expense (recovery) Origination and reversal of timing differences Derecognition of deferred tax asset Deferred taxes (recovery) expense Combined Canadian federal and provincial income tax rate Foreign tax rate differences applied to profits (losses) Derecognition of tax credits Adjustments for prior years SR&ED credits earned Non-taxable portion of capital gains Derecognition of deferred tax asset Permanent differences and other Effective income tax rate 2023 $ - (973) $(973) 1,074 1,074 2022 $300 (222) $78 (166) (166) 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 $32,133 in Canada (2022 - $35,285). In the current year, only $6 (2022 - $5,773) has been recorded. The remaining $32,127 will be recognized in future periods when profitability returns in Canada. These losses begin to expire in 2037. Deferred tax assets of $10,120 USD in the US (2022 - $12,529 USD) in 27.0% 27.0% excess of the deferred tax losses are available to be carried forward - - to future periods. Management believes that these assets will be realized in future periods. As a result of losses over the past few (17.0%) (0.2%) (5.6%) (10.9%) 5.7% 2.4% 1.4% (68.2%) (10.0%) 29.8% 10.9% 0% 19.0% 8.5% years, management has decided not to recognize these assets as at December 31, 2023. These assets will be recognized in future periods when profitability returns in the US. These losses begin to expire in 2034. The current value of all SRED claims net of estimated taxes and allowances is $0 (December 31, 2022 - $4,693). The Company's claims for SRED credits for the tax years 2005 - 2011 ($5,506) were challenged and successfully concluded with Canada Revenue Agency (CRA) in Net income taxes paid (recovered) during the year were ($5,559) (2022 2023. – paid $457). The claim for 2005 was reviewed by tax court and won by the Deferred income taxes are recorded to reflect the timing differences Company in 2023. As a result, the Company was able to negotiate arising from deduction of warranty costs for income tax purposes, a settlement for the years 2006 - 2011. The total amount of cash the amounts of depreciation and amortization provided in the year received in 2023 for the years 2005 - 2011 including interest was compared to the allowances deducted for income tax purposes, $7,099. taxable losses carried forward to future periods, expected Scientific The 2023 SRED claim will be filed with CRA prior to any filing Research and Experimental Development (SRED) tax credit claims and deadlines. other temporary timing differences. The following are the components of the deferred tax assets and liabilities recognized by the Company: Deferred income tax assets Property, plant and equipment SRED credits Total Deferred income tax liabilities Property, plant and equipment 2023 $6 - $6 2023 $22 2022 $1,080 4,693 $5,773 2022 $22 Deferred tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The ability to realize the tax benefits of - 32 - Notes to Consolidated Financial Statements 11. Interests in Joint Ventures and Other Entities (000’s C$) 12. Warranty Provision (000’S C$) The Company has a joint venture operating as Bradley Steel Processors The Company generally provides its customers with a warranty on the Inc. and minority interests in other various entities. goods sold. The movement in the provision for warrant costs during The summarized financial information of the Company’s share of the investments in joint ventures and other entities is as follows: the year is as follows: Balance sheet information 2023 2022 Opening balance 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 $7,896 134 $8,030 $648 1 649 7,381 $8,030 $7,113 135 $7,248 $378 1 379 6,869 $7,248 $7,922 $7,519 $675 $512 $17 $32 $170 $462 $337 $12 $34 $127 Warranty accrual (recovery) (net) Effect of exchange rate Closing balance 2023 2022 $10,298 (820) 1 $11,312 (1,018) 4 $9,477 $10,298 The Company’s warranty costs for the year, net of recoveries from suppliers, was $8,010 (2022 - $6,938). 13. Short and Long-Term Debt (000’S C$) The Company’s long-term debt consists of a $15,000 facility with Canadian Imperial Bank of Commerce, secured by a mortgage on the Company’s Winnipeg properties and a guarantee from Export Development Canada. The loan matures on October 31, 2023 and is amortized over 84 months with principal repayments that began February 2021 in the amount of $179 per month. The Company is currently in discussion to renew its long term debt and line of credit. The December 2023 balance is $8,929 (December 2022— $10,715). 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 nil, 2022 - $529 (nil, 2022 - $391 USD) due to The City of Willmar. This amount bears interest at the annual rate of the implicit price deflator 14. Capital Stock and Options (000’s C$) Authorized, an unlimited number of Common Shares. 2023 2022 Shares Shares Issued Class A common 25,000 $30,000 25,000 $30,000 There are no options outstanding as of December 31, 2023 nor December 31, 2022. - 33 - Notes to Consolidated Financial Statements 15. Interest Paid (000’s C$) Bank indebtedness Wholesale financing Long-term debt 2023 $2,473 1,604 2,101 $6,178 2022 $1,807 2,110 2,029 $5,946 Interest expense includes interest on long term, bank indebtedness and wholesale financing. Through an agreement with DLL, the initial wholesale financing interest expense for the dealer is paid by Buhler Industries Inc. to DLL to support a segment of Buhler’s North American dealer network. Under the agreement, dealers have dedicated credit lines with DLL, customized service, and competitive terms that allow them to manage and grow their businesses effectively. The floorplan financing terms and interest costs are variable and may change from time to time. As part of the agreement with DLL, the Company guarantees the repurchase of equipment in certain instances such as 18. Changes in non-cash working capital (000’s C$) Details of changes in financing activities for the year ended December 31, 2023 and December 31, 2022 are as follows: Accounts receivable Inventories Prepaid expenses Accounts payable and accrued liabilities Income taxes receivable/ payable Deferred tax recovery Foreign exchange loss on the above items 2023 $(2,643) (6,685) (277) (2,666) (93) 4,694 1,204 2022 $(4,169) (8,908) 1,788 2,159 469 - 949 $(6,466) $(7,712) 19. Cash Flow Changes from Financing Activities (000’s C$) Details of changes in financing activities for the year ended December 31, 2023 and December 31, 2022 are as follows: dealer bankruptcy. 16. Expenses by Nature (000’s C$) Raw materials and consumables used Depreciation and amortization Personnel expenses Freight 17. Segmented Information (000’s C$) 2023 2022 $179,513 $171,803 2,499 63,468 6,103 2,420 53,824 7,788 $251,583 $235,835 Short-term debt Long-term debt Advances from related parties Total Dec 31, 2021 (12,857) (393) (24,469) (37,719) Cash flows Foreign exchange Non-cash interest Reclassification of debt 2,143 (1) - (529) - (26) (110) 529 - (1,726) (1,252) 2,143 (1,753) (1,362) - - 2023 Dec 31, 2022 $(11,244) $ - $(27,447) $(38,691) Canada U.S. Other Cash flows 2,315 Revenue $100,985 $126.245 $11,296 Foreign exchange Property, plant, and equipment 11,261 1,824 - Non-cash interest 2022 Related Party - - - - - - - - 539 2,315 539 (1,338) (1,338) (25,908) (25,908) Canada U.S. Other Dec 31, 2023 $(8,929) $ - $(54,154) $(63,083) Revenue $90,576 $139,010 $8,331 Property, plant, and equipment Assets Held for Sale 12,057 1,096 2,359 669 - - 20. Capital Management The Company’s fundamental objectives in managing capital are to maintain financial flexibility in order to preserve its ability to meet CIS is the Commonwealth of Independent States, including Russia and financial obligations, ensure adequate liquidity and financial flexibility Kazakhstan. 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. - 34 - Notes to Consolidated Financial Statements The Company defines its capital as cash, bank indebtedness, shareholders’ equity, longterm debt, advances from related parties, net of any cash and cash equivalents. The Company’s financial strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to respond to changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the Company may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, raise debt (secured, unsecured, convertible and/or other types of available debt instruments), enter into hedging arrangements and refinance existing debt with different characteristics, amongst others. The Company constantly monitors and assesses its financial performance and economic conditions in order to ensure that its net debt levels are prudent. 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. 2022 Financial Asset/ Liability Classification Carried at cost/ Amortized cost Fair value Bank indebtedness Amortized cost $(27,943) Accounts receivable Amortized cost 23,366 Interest in other entities FVTPL 41 Accounts payable and accured liabilities Current portion of long-term debt Amortized cost (75,854) Amortized cost (11,244) Long term debt Amortized cost - Advances from related parties Amortized cost (27,447) Financial instruments includes bank indebtedness, accounts receivable, advances to related parties, financial instruments, long There are no externally imposed capital restrictions on the Company. term receivables, interests in other entities not subject to significant There were no changes in the Company’s approach to capital management during the year. 21. Financial Instruments (000’s C$) influence, accounts payable and accrued liabilities, advances from related parties and long term debt. Except for the long term receivables, interests in other entities and long term debt, the carrying 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. 2023 Financial Asset/ Liability Classification Carried at cost/ Amortized cost Fair value Bank indebtedness Amortized cost $(1,807) Accounts receivable Amortized cost 26,009 Interest in other entities FVTPL 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 level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows: 41 Accounts payable and accured liabilities Current portion of long-term debt Amortized cost (71,851) Level 1 – fair value measurements that reflect unadjusted, quoted prices in active markets for identical assets and liabilities that the Amortized cost (8,929) Company has the ability to access at the measurement date. Long term debt Amortized cost - Level 2 – fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or Advances from related parties Amortized cost (54,154) liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in inactive markets, inputs that - 35 - Notes to Consolidated Financial Statements are observable that are not prices (such as interest rates and credit to the Company would result in a $169 (December 31, 2022 - $172) risks) and inputs that are derived from or corroborated by observable decrease/increase in net earnings. market data. The fair values of interest in other entities are disclosed at fair value based on a level 2 classification. Commodity Price Risk Level 3 – fair value measurements using significant non-market observable inputs. These include valuations for assets and liabilities that are derived using data, some or all of which is not market observable data, including assumptions about risk. The Company does not have any financial instruments measured at fair values based on level 3 inputs. 22. Financial Risk Management (000’s C$) 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. 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 The Canadian dollar is the Company’s functional currency. The Company operates primarily in Canada and the United States. The reporting currency of the Company is Canadian dollars, whereas the functional currency for operations in the United States and sales to the CIS region are the U.S. dollar. Fluctuations in the exchange rate Risk management is primarily the responsibility of the Company’s between the U.S. dollar and Canadian dollar will affect the Company’s corporate finance function. Significant risks are regularly monitored reported results. However, the impact of changes in foreign exchange and actions are taken, when appropriate, according to the Company’s rates on the Company’s reported results differ over time depending approved policies, established for that purpose. In addition, as on whether the Company is generating a net cash inflow or outflow of required, these risks are reviewed with the Company’s Board of Canadian dollars. This is largely dependent on the Company’s revenue Directors. Interest Rate Risk The Company’s interest rate risk arises from its variable rate bank indebtedness, wholesale financing and long term debt. The long-term debt is at a very low rate, and therefore carries minimal interest rate risk. As the bank indebtedness is all variable rate, the Company is exposed to a certain level of interest rate risk. Management feels that these risks are manageable as the interest rate on this debt is near the prime interest rate and therefore has not entered into any instruments to mitigate this risk. Based on the level of bank indebtedness outstanding at December 31, 2023, a 1% increase/decrease in the rate mix by currency as operating costs denominated in Canadian dollars have been relatively stable. In addition, translation differences arise when foreign currency monetary assets and liabilities are translated at foreign exchange rates that change over time. These foreign exchange gains and losses are recorded in revenues. As a result of the Company’s U.S. dollar net monetary position within the Canadian dollar reporting currency operations through to December 31, 2023, a one-cent strengthening/ weakening in the year-end foreign exchange rate from Canadian dollars to U.S. dollars would have decreased/ increased net earnings by $315 (2022 - $213). being charged to the Company would result in a $18 (December 31, The Company’s exposure to foreign currency risk reported in U.S. 2022 - $279) decrease/increase. dollars was as follows: As the mortgage financing is all variable rate, the Company is exposed to a certain level of interest rate risk. Based on the level of mortgage Accounts receivable financing outstanding at December 31, 2023, a 1% increase/decrease to the Company would result in a $89 (December 31, 2022 - $107) Accounts payable and other accrued liabilities 2023 2022 $9,256 $9,219 (17,989) (16,916) decrease/increase in net earnings. Advances from related party (40,945) (20,265) As the wholesale financing is all variable rate, the Company is exposed to a certain level of interest rate risk. Based on the level of wholesale financing outstanding at December 31, 2023, a 1% increase/decrease Long term debt - (391) $(49,678) $(28,353) - 36 - Notes to Consolidated Financial Statements The Company is partially insulated from large foreign exchange gains Credit Risk and losses by virtue of its mix of cash inflows and outflows in U.S. Financial instruments which potentially subject the Company to credit dollars. Gains and losses generated by fluctuations in the exchange risk and concentrations of credit risk consist principally of accounts rates used to translate U.S. dollar assets are offset by similar gains receivable. Management has assessed that the credit risk associated and losses on U.S. dollar liabilities. The Company also uses forward with accounts receivable is mitigated by the credit agreements contracts to further mitigate these fluctuations when the natural the Company has in place including personal guarantees from the hedges are forecasted to be insufficient. counterparties. As at December 31, 2023, the Company had no U.S. to Canadian dollar foreign currency forward contracts (December 31, 2022 - $nil). Fair value adjustments are recognized within (gain) loss on foreign exchange in the consolidated statement of comprehensive income. Liquidity Risk The maximum exposure to the risk of credit for accounts receivable corresponds to their book value. Historically, the Company has experienced nominal bad debts as a result of the security agreements in place that allow the Company to recover goods from dealers that has not been paid for as well as personal guarantees. For the year to date, the Company recorded a bad debt recovery of $24 (2022 - Investments to drive growth can require significant financial resources. expense of $261). 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 is currently in discussion to secure a new credit facility and long term debt. Actual bank funding may differ as the result of margin availability subject to meeting certain accounts receivable and inventory covenants. As at December 31, 2023 the Company had access to $23,230 (December 31, 2022 - $49,952), subject to compliance to covenants in the credit facility (Note 6). The Company manages its liquidity risk by forecasting cash flows and determining if the credit facilities in place are adequate or if additional financing would be required. The 2023 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: 2024 2025 2026 2027 2028 Post 2028 Total Bank indebtedness 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 income and loss within selling & 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 & administration expenses. The following table sets out the aging details of the Company’s accounts receivable balances outstanding based on the status of the receivable in relation to when the receivable was due and payable and related allowance for doubtful accounts: 2023 2022 Current - neither impaired nor past due $25,285 $22,146 Not impaired but past the due date; Within 30 days 31-60 days Over 60 days 288 350 86 604 71 1,827 26,009 24,648 $1,807 $ - $ - $ - $ - $ - $1,807 Accounts payable and accrued liabilities Less: Allowance for doubtful accounts - (1,282) Total receivables, net $26,009 $23,366 71,851 - 2,586 34,388 - - - - Due to related parties 2,143 2,143 2,143 - 17,180 Long-term debt 357 2,143 Total $78,387 $36,531 $2,143 $2,143 $17,537 - - - - 71,851 54,154 8,929 The following table details the continuity of the allowance for doubtful accounts: 2023 2022 Balance, beginning of period $(1,282) $(935) Provisions for the period, net of recoveries 24 (261) $136,741 Uncollectible amounts written off (recovered) Foreign exchange impact Balance, end of period 1,268 (10) (89) 3 $- $(1,282) - 37 - Notes to Consolidated Financial Statements 23. Subsequent Events a) The Company appointed Zafer Ozbalaban as President of Buhler Industries Inc. in January 2024. (b) The Company received additional advances from its majority owner, Basak Tractor, a wholly owned subsidiary of ASKO Holding. The Company received $7.7 million USD in January 2024 and $3.0 million USD in February 2024. - 38 - Company Information Audit Committee Ossama AbouZeid - Audit Chairman Allan L .V . Stewart Arda Akarsu 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 Baker Tilly HMA LLP Winnipeg, Manitoba Annual Meeting The annual meeting of shareholders will be held on June 19, 2024, 11:00 AM at 1260 Clarence Avenue, Winnipeg, Manitoba Directors NAME Grant Adolph P .Mgr Zafer Ozbalaban Levent Kiroglu Ossama AbouZeid Allan Stewart B .A, LL . B . Ismail Konukoglu Arda Akarsu OFFICE Director/Chairman of the Board PRINCIPAL OCCUPATION Chief Operating Officer, Buhler lndustries lnc . Director Director President - Buhler Industries Inc . Senior Executive Board Member - ASKO Holding Director/Audit Chairman NXT Partners – Partner/Consultant Director Director Director Lawer, Thompson Dorfman Sweatman LLP Strategic Business Development - ASKO Holding Executive Committee Member - ASKO Holding 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 - Farm King 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 Mike Silva 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 As at December 31, 2023 - 39 - Stock Data Buhler (excl. dividends) compared with TSX Index 1994 to December 31, 2023 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 2 2 0 2 3 2 0 2 Daily Closing Price Opened March 25, 1994 at $1.05 Closed December 31, 2023 at $2.44 4 9 - r a M 5 9 - n a J 5 9 - t c O 6 9 - g u A 7 9 - y a M 8 9 - r a M 9 9 - n a J 9 9 - t c O 0 0 - g u A 1 0 - y a M 2 0 - r a M 2 0 - c e D 3 0 - t c O 4 0 - l u J 5 0 - y a M 6 0 - b e F 6 0 - c e D 7 0 - p e S 8 0 - l u J 9 0 - y a M 0 1 - b e F 0 1 - c e D 1 1 - p e S 2 1 - l u J 3 1 - r p A 4 1 - b e F 4 1 - v o N 5 1 - p e S 6 1 - l u J 7 1 - r p A 8 1 - b e F 8 1 - v o N 9 1 - p e S 0 2 - n u J 1 2 - r p A 2 2 - b e F 2 2 - v o N 3 2 - p e S 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 Yearend 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 High Low Close Trading Vol. (000’ s) 2.10 1.60 1.98 2.54 4.25 3.25 3.74 3.75 5.50 5.92 7.30 7.63 7.60 7.25 6.90 6.34 6.00 6.50 5.69 7.25 7.30 6.50 6.00 5.00 4.89 3.98 3.89 3.89 3.29 2.79 1.05 1.10 1.37 1.70 2.45 2.35 2.70 3.00 3.48 5.20 5.48 7.00 4.35 5.30 5.00 4.75 5.15 5.20 5.04 5.20 5.51 4.40 4.40 4.14 3.53 2.6 2.25 2.20 1.51 1.88 1.40 1.45 1.66 2.39 3.05 3.06 3.57 3.60 5.25 5.57 7.20 7.35 5.60 6.90 5.40 5.25 5.81 5.60 5.35 6.40 5.51 5.70 4.40 4.45 3.60 3.73 2.50 2.96 1.93 2.44 1,311 867 1,927 3,015 4,134 2,274 1,092 2,800 1,836 1,321 5,024 1,703 3,010 5,637 2,138 745 1,996 684 1,245 897 1,037 603 344 116 123 141 115 199 98 273 - 40 - 10 Year Summary SUMMARY OF OPERATIONS Reported standards utilized 2014 IFRS 2015 IFRS 2016 IFRS 2017 IFRS 2018 IFRS 2019 IFRS 2020 IFRS 2021 IFRS 2022 IFRS 2023 IFRS In thousands of Canadian dollars (except per share amounts) 325,501 245,676 274,067 311,974 287,984 229,119 277,791 223,410 252,841 275,821 284,510 218,776 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 47,730 25,239 22,491 (401) (314) 3,741 (3,497) (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) (24,542) 9,539 19,057 1,267 520 (49,532) (29,489) (25,809) 4,799 385 - - - - - 943 1,096 - - - - - - (26,032) (37,722) (22,682) (6,807) 4,639 3,216 2,785 2,963 - - - Reduction of long-term debt 3,191 4,968 2,642 Dividends paid Net cash flow - - - 17,871 (633) 1,230 4,219 (46,225) Net cash (bank indebtedness) (51,715) (52,830) (20,452) (12,553) (37,254) BALANCE SHEET SUMMARY Cash, receivables and prepaid expenses 102,473 80,555 73,680 73,983 63,884 67,331 Inventory Total current assets Total assets 213,089 201,463 142,372 180,911 171,612 165,631 315,562 282,018 216,052 254,894 235,496 232,962 362,844 339,029 278,415 319,739 290,378 262,604 227,759 53,295 146,931 200,226 Total current liabilities 167,339 151,029 93,078 133,907 153,670 155,370 112,154 Total short and long-term debt 6,857 2,669 - - 401 411 414 Total liabilities 169,570 151,071 93,134 133,938 154,109 155,824 146,788 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 Gross margin (% of revenue) Selling & Admin. (% of revenue) EBITDA (% of revenue) Net earnings (% of revenue) Return on average capital Return on average equity 193,274 187,958 185,281 185,801 136,269 106,780 25.0 25.0 25.0 25.0 25.0 25.0 148,223 130,989 122,974 120,987 81,826 77,592 13.02 0.96 5.7 0.73 0.50 11.06 0.71 - 5.51 7.73 1.9 0.3 1.5 14.7% 8% 7% 4% 6% 7% 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 0.29 15.3 0.13 0.02 (41.09) 213.94 0.05 - 4.40 7.41 2.3 0.1 1.5 7.7% 9% 0% (1%) (1%) (1%) 0.17 - 4.45 7.43 1.9 0.1 1.7 11.6% 9% 2% 0% 0% 0% - 41 - 11.52 (1.15) (3.1) (1.30) (1.98) (1.82) (1.85) - 3.60 5.45 1.5 0.3 1.6 1.2% 9% (10.0%) (17%) (31%) (31%) 9.16 0.08 44.9 (0.08) (1.18) (3.16) (1.04) - 3.73 4.27 1.5 0.4 1.3 4.5% 10% 1% (13%) (24%) (24%) 80,971 25.0 88,072 9.98 (0.57) (3.9) (0.71) (1.03) (2.19) (0.91) - 2.26 3.24 1.8 0.1 1.5 4.7% 9% (5.7%) (10%) (27%) (27%) 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) - (11,671) (22,074) 28,660 166,404 195,064 224,949 110,166 13,250 135,067 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% 239,869 205,860 34,009 22,569 11,440 (3,035) (74) 5,946 2,653 (337) 7,406 (1,119) (88) (1,031) 238,526 210,871 27,655 29,279 (1,624) (23,616) (1,490) 6,178 (811) (512) 11,433 7,194 101 7,093 (3,131) (1,479) - - 2,143 (2,315) - 1,389 (27,943) 27,476 175,312 202,788 - 9,592 (1,807) 30,382 181,996 212,378 231,611 232,850 116,056 11,244 85,316 8,929 142,760 136,906 88,851 25.0 95,944 25.0 86,732 127,062 9.59 0.29 6.7 0.19 (0.04) (48.25) 0.06 - 1.93 3.55 1.8 0.4 1.2 14.2% 9.4% 3% 0% (1%) (1%) 9.54 0.63 3.9 0.48 0.28 8.71 0.38 - 2.44 3.84 2.5 0.1 1.2 11.6% 12.3% 6.7% 3% 7% 8% 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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